In this episode of the Independent Stylist podcast, host Jennifer Kenny discusses the importance of understanding profitability for business owners in the beauty industry.
She emphasizes the need for financial literacy and outlines the three key profit margins:
- Cost of Goods Sold (COGS)
- Operating Profit Margin
- Net Profit Margin
Jennifer also highlights the benefits of using QuickBooks to track these metrics and make informed decisions about pricing and services.
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Takeaways
- Profitability is crucial for running a successful business.
- Understanding your numbers is essential before making pricing changes.
- COGS represents the total cost of products used in services.
- Aim for a COGS profit margin of at least 80%.
- Operating profit margin is what's left after business expenses.
- QuickBooks can provide real-time insights into your profit margins.
- Net profit margin is your take-home pay after all expenses and taxes.
- Set aside 20-30% of income for taxes to avoid surprises.
- Categorizing services in QuickBooks helps identify profitable offerings.
- Focus on services that maximize your time and profit.
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