Staying profitable in the beauty and wellness business requires strategic financial thinking and resilience, especially in a challenging economic landscape like Nigeria’s. With rising operational costs and fierce competition, salon and spa owners need to focus on smart money management while continuously adapting to market changes. 

During a panel session at Beauty Connect Africa 2024 hosted by Splice, three industry professionals shared powerful insights on how salons and spas can manage their finances, ensure smooth operations, and grow even when times are tough.

The experts:

• Tayo Alakija, Founder and CEO, Tayo Cuts
• Itunuoluwa Umar-Lawal, Founder and CEO, Dermaspace
• Bolanle Tyson, Lead of SME Products, Sterling Bank

4 ways to stay profitable in your beauty business

These professionals offer four strategies for beauty and wellness brands to take control and stay profitable in your salon or spa business all year round.

#1. Resilience: How to manage cash flow during slow periods and economic uncertainties

i. You don’t have to always follow trends. While it’s necessary to keep up with beauty and wellness industry trends, you don’t have to follow all of them. Itunuoluwa Umar-Lawal, who has been running Dermaspace for five years, notes that avoiding unnecessary trends will help you stay as lean as possible, ultimately maintaining profitability.

Instead of wasting time and resources chasing unprofitable trends or buying fancy equipment you don’t need, she suggests capitalising on non-busy days to promote offers (e.g., lunch-break promo for people who come from the office at a particular time). 

ii. Free periods can be an opportunity. Free periods in your salon or spa can either be a loss or an opportunity. The Founder of Tayo Cuts, Tayo Alakija, says free or slow periods are opportunities to slow down, create content, improve marketing efforts, and “plan for busy days as well.”

She advises business owners and managers to leverage free periods to plan intentionally and take more control of the business processes. Alakija added that beauty businesses could also use the opportunity to train their team on customer service, trendy techniques, and new techniques. 

#2. Vigilance: How to avoid common financial mistakes

i. Don’t hire more staff than you need. Retaining too many staff can impact your profit because you’d have to pay people who don‘t contribute much to growing your business. Itunuoluwa Umar-Lawal of Dermaspace explains that she keeps part-time employees who come in only on busy periods when the full-time staff can’t handle everything.

“This way, I’m not paying full salaries which can significantly eat into your revenue,” she added. You can you Splice management tool to handle staff schedules efficiently. See the image below:

ii. Buy only what you need. Many beauty business owners expand their costs unnecessarily by investing in “gadgets and equipment that they don’t necessarily use,” consequently having substantial amounts tied up in things that don’t make money for the salon or spa.

From her more than half a decade of building Dermaspace, Itunuoluwa Umar-Lawal believes that it’s not enough to buy tools just because other beauty and wellness businesses are using them; it has to have utility for your salon or spa. Otherwise, they’re useless.

#3. Financing: How to go about securing loans for business expansion while maintaining financial health

i. Understand your business needs. You need to ask yourself if you need a loan at this point in your business. Bolanle Tyson, who leads SME Products at Sterling Bank, advises beauty business owners to explore multiple financing options, especially given the prevailing commercial rates for loans.

“We have a lot of intervention funds and grant schemes for businesses to take advantage of.” She highlighted that through a recent partnership between Sterling Bank and the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), businesses in Nigeria looking for favourable credit options can access up to ₦5 billion loan facility offering a single-digit interest rate of 9%.

ii. Ensure you’re creditworthy. Engage your accountant and keep your books, no matter how small your business may be. Itunuoluwa Umar-Lawal, who’s pro-credit and encourages all small and medium business owners to utilise it where necessary, explains that your books help show the bank that “this is what we’ve been doing and this is why helped x amount of money.” if there’s no history for the bank to see, they may not feel confident about giving you that loan. 

#4. Margin: The most important financial metric for tracking profitability 

i. Expenses must be less than revenue. The whole point of doing business, whether in the beauty and wellness industry or another sector, is to turn a profit. “For instance, if somebody comes in for a facial and it costs ₦30,000. When you see that money in your account, not everything is for you,” Itunuoluwa Umar-Lawal explains.

The reason, according to her, is because it costs something to do that facials — from product salary to utility and rent. So, after all the costs of doing business have been deducted and there’s enough left to save and pay salary, “for me, that’s how I measure profitability, money left in the bank after all the expenses have been covered.” 

ii.   Maintain positive cash flow. Bolanle Tyson explains that there are five Cs of credit — character, capacity, capital, collateral, and conditions. When banks assess whether to offer a loan to your business, one of the primary factors they consider is cash flow, along with the other four Cs.

Cash flow shows a lender how well your beauty business manages its income and expenses and whether it consistently has enough liquidity to cover its operating costs. A strong, positive cash flow signals the bank that your business is reliable, capable of repaying loans, and ready for growth.

Conclusion

Staying profitable in the beauty business requires a combination of financial discipline, strategic planning, and adaptability. By managing cash flow during slow periods, avoiding unnecessary expenses, exploring smart financing options, and tracking key financial metrics like margins, beauty and wellness businesses can thrive even in tough economic times.