Behind the turnover, the profit margin

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Did he turn crazy ? Not so much when you look closer. Because beyond the turnover, there is something more important: the profit margin, that is to say the money which really stays in the pocket of the salon in the end of the day without charges and expenses.

Let's take the example of this salon which was so excited to see its turnover increasing from year to year. « I really did well to hire a new colleague » the manager says to herself/himself. And then comes the time of the balance sheet with the accountant and, catastrophe, the accountant announces that the profit margin decreased.
He/she could change his/her accountant but it would be a bad idea because this is what the accountant is going to explain to the manager of the salon :
« It is true that your turnover increased. But the problem is that you hired another person. She/he may have contributed in increasing the turnover but not sufficiently to cover the additional wages charges resulting from her/his recruitment. Consequently, a part of your profits covered the wages of your new colleague ».

You can see it clearly through that example, an increase of the turnover is sometimes not sufficient to absorb extra charges,, whether it is about the staff (the most important post of the salon) or other posts which might have increased (charges by the backers, increase of the cost of the providers of products, insurances, etc…).
Other example, this hairdresser who saw her turnover decreasing for the first time in 10 years. Panic and anxiety while waiting the presentation of the balance sheet by the accountant. "In any case, that was predictable with my partner who broke her legs at the ski and had to stop working during six months", the hairdresser thinks with a certain logic. However, in front of her accountant, the first words of her accountant are: "CONGRATULATION ! Your profits increased."

What she didn't expect is that even if the absence of her colleague was not good for her turnover, a double process happened:
On the one hand, a part of the wages of our unlucky skier had been covered by the health assurance (reducing that way the wage share of the salon during a part of the year) and on the other hand, the rest of the team did big efforts to make up for a part of the turnover missing. For the anecdote, the exceptional bonus that our hairdresser gave to her colleagues to thank them for their commitment was really appreciated and reinforced the motivation of each one during the following months. The turnover of the salon was at its peak since its opening…

Let us make no mistake, generally, the growth of the turnover is healthy, important and necessary because it means solidity which reassures both the manager and his/her team but also the banker and the providers.
But what's most important is the maintenance, and if possible, the growth of the salon profits because we do speak now about profits. These profits make the manager rich but they also guarantee to the company to have reserves in case of an unexpected event, to invest in the training of the colleagues o to renovate the salon and to guarantee the longevity of the company.

Preserving the profitability of the salon implies to control the level of the expenses, to adjust the workforce and to maintain a productiveness of each colleague at a sufficient level.