Formula for Profitability
Profitability is the result of your income exceeding your expenses. So it makes sense that, to be profitable, you must manage both your income and your expenses. Part of your business plan should include a financial plan in which you list your anticipated expenses and your anticipated sources of income.
Categorize your expenses according to those which you have no control over (such as rent and taxes) and those that you can manage (such as supplies and advertising). Some expenses you can control to some degree but not totally, such as utilities.
The main income of your business is probably from clients. You can increase this portion of your income by attracting more clients or by increasing your rates. Of course, you will have to judge whether increased rates will result in losing some of your clients. Another source of income could be from selling merchandise or providing workshops, which can be profitable if the expense of doing so is not greater than what you sell. Learn to optimize your income by attracting and retaining clients at an optimal cost per client. Through trial and error you will learn which advertising and promotional techniques work best for your business.
Know Your Profitability Targets
You should have a clear understanding of the minimum income and the maximum expenses you need to maintain each month in order to be profitable. Some practitioners keep a chart on hand of their totals each month so they know where they need to adjust. This tool doesn't have to be complicated:
|Month||# of Clients|
(must be > ___)
(must be > $___)
(must be < $___)
|January|| || || |
|February|| || || |
|March|| || || |
Adjust Before It's Too Late
By maintaining this type of chart, you have an easy, at-a-glance resource that shows you the financial health of your business. Other, more formal, financial reports can provide better financial detail that will help you manage your business, but this quick chart can serve as an early indicator of profitability.
Baseline Success Measures
When you first start playing around with the numbers to estimate your breakeven point, you may be surprised to find how much easier projecting expenses is than projecting what your revenue (in massage fees and merchandise) might be. Once you have operated your business for a number of months, you should be able to state with confidence, "I need to sell $200 worth of merchandise and give 15 massages a week to breakeven," or whatever the break-even numbers are for your business. Knowing these numbers off the top of your head will help you mentally gauge on a week-to-week basis whether you are meeting your financial goals or not.