Hellen Ward: F*%ked up… but fixed it!
As part of a new series here on the HUB, we’re asking salon and barber shop owners to get real with us about a mistake they’ve made in their business and the steps they took to secure a solution. This month we spoke to Hellen Ward, co-founder of the newly formed SEA (Salon Employers Association) and director of Richard Ward Hair and Metrospa. This is what she shared with us…
THE F*%K-UP
We started the company in 1992, 30 years ago, when I left my role as General Manager of Harrods Hair and Beauty Salon, Barber Shop, and children’s salon, which even then had an annual turnover exceeding £4million. I thought I was completely familiar with the finances of running a salon, and while this may have been true to an extent, I was used to working for a huge company whose accounts department did the number crunching and just sent me reports to scan. I knew the percentages inside out, but I didn’t have to compile the figures for myself. I had a huge team of administrative support and managers, so my role was to look at the performance, not calculate the data.
Fast forward to having the salon keys in my hand, and it was a different story. There was me and a receptionist, Julie (still with us – now our General Manager) and we couldn’t afford anyone to help us. A few months in, and our accountant gave me and Richard a stark warning. We had PAYE/Inland Revenue liabilities to meet – and no money to meet them with. I’d been working out the payroll incorrectly. I’d been calculating the team’s take-home pay as a percentage of the turnover. But that’s not what it costs the company to meet the payroll. What I thought was an in-line payroll percentage was in fact sky high.
THE FIX
My accountant explained that it’s the gross pay (the sum at the top of the payslip, not the bottom) that is the real cost to the business, and to that you must add Employers NI to get the true liability. Many salons make this simple mistake, and calculate their payroll bill as a percentage of their gross turnover, when it should be worked out on the money the salon takes net of VAT. A simple miscalculation like this can be the difference (in the slim margin) between success or failure.
Now, when I lecture, educate, or write, I never tire of spelling out the mistake I made, sharing what this payroll cost should track at (between 50-60 per cent, depending on your brand positioning and price point). A simple error, and a common one, my accountant assured me. But for me, a mistake I am determined no salon owner should ever make again, and one I was lucky to say I fixed – just in time.