Hello all, long time redditor and thankful for all the help and camaraderie over the years. (made this account to keep it separate from personal)
I have a business with 15 employees in California and suffice to say, wages keep going up and the price we can charge for services has repeatedly hit the ceiling and does not project to get back to breakeven. Rent keeps going up, inventory and inflation effects us, and the services we offer are competitive with competition, but we have been bleeding money for 9 months now and I don’t really know how much more can be handled if nothing improves. Been open for over 7 years but the pandemic unfortunately emptied savings and more impactfully changed the playing field. This is for a salon and staff are employees whom do not rent.
All that being said, the lease no longer has a personal guarantee but there is a couple more years on the lease left. Every month staying open is losing money, but less than just shutting down if lease obligations continue.
I will be reaching out to professional help regarding this but was wondering if this lovely community sub has advice, tips, warnings regarding this.
The following information is details that may or may not be helpful:
!Bills piling up, credit cards maxed, rent is 1.5 months behind now, PPP+PPP2 achieved, waiting on ERTC funds, cash basis accounting.!<
!(rough numbers below, all monthly)!<
!Prior to pandemic; rent $6.5k, rev $45k, payroll $25k, expenses $5k 2023; rent $8k, rev $35k, payroll $25k, expenses $8k !<
!When ERTC comes we will have liquid to survive longer but there is no current projection that shows breaking even again. This business requires that staff are skilled and do not jump ship but their options to work under the table elsewhere is high and I don’t necessarily blame them for choosing that path. Our rent is higher than competitors but usually resulted in higher client throughput but this hasn’t been the case post-pandemic.!<
I am living in constant terror and everything is gaining interest with no end in sight.
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I might not be able to help but I’m in so cal and am happy to commiserate and just listen if you need.
15 employees for a salon is massive. Your labor cost is over 50% which is unsustainable. I’m trying to picture what a salon with 15 staff looks like and I’m having a hard time.
Run the numbers with what 35% labor cost would look like. Then be honest about your operating hours.
If you use a point of sale you should be able to see trends. If you have staff on shift but not cutting hair you have to make cuts (pun not intended).
You likely have a ton of inefficiencies. Maybe lack of systems. For example if you have x1 front counter person and x1 person cleaning shop you would want to automate bookings via online and combine the two roles.
Hard to say exactly without actually seeing your operation.
I completely agree that is unsustainable. Most are part time working no more than 20 hours a week. The labor cost is honestly consistent with industry and california. The key is that minimum wage + employer taxes is roughly $23/hr. Then commission of 25% after a sales goal is hit brings it to $23-50 an hour depending on staff. Your comment gives me a great insight to moving that target goal for the commission to begin though.
Numbers with 35% labor cost hits breakeven, but I already cannot retain staff due to their job portability and almost all industry locally offering ~50% pay of services rendered.
Most instrumental thing is potentially getting rid of front desk staff, I worry though that the business simply will not be operational but times are tough and this is probably the way.