The call to halve the rate of VAT to 10% within the Hair and Beauty industry has gained significant traction, thanks to the remarkable efforts spearheaded by the Salon Employer Association and supported by influential figures like Errol Doughlas and Hellen Ward. Although this effort is valiant, and a reduction in VAT would be a welcomed boost to our industry, should salon owners rely on external factors out of their control to improve the long-term commercial viability of their business?

The International Monetary Fund (IMF) has recently "advised the UK against further tax cuts", as it launched its latest assessment of the world economy. Can the government risk slashing VAT for one segment of the economy without expecting a backlash from others still required to pay 20% VAT? In my view, relying on a government handout could give false hopes to those on the brink. Relying on a factor outside their control, instead of taking action on factors they can control, could be the final nail. It’s like waiting to win the lotto to make your business a success. Not a viable plan.

Don’t get me wrong, if (and it’s a big “IF”) the industry is granted a reduction in the rate of VAT, it would, of course, have a positive impact on all salons’ cash flow. Instead of pinning hopes on external factors, there's immense value in focusing on aspects within your control.

Increasing rebooking rates, implementing strategic pricing adjustments, and introducing appointment deposits are actionable steps that would have a greater impact on the long-term commercial viability regardless of VAT reduction. It's concerning how many salon owners overlook the importance of actively monitoring and improving their team's rebooking rates. I’m flabbergasted every time a team leader tells me ”They’ll just call or book online when they’re ready” when speaking about rebooking clients.

If all salon owners/managers would closely monitor & share their team’s rebooking rates every week and be as dedicated to their team’s commercial IQ as they are to their technical abilities, our industry would be in a very different place today. Allowing your teams to acquire the knowledge as to “why” it is so important to rebook a minimum of 7 out of 10 clients and practising the correct communication skills needed to achieve a minimum rate of 70% rebooking alone would have a greater impact than a 10% rate cut in VAT. Combine a 70% rebooking rate with the introduction of deposits in all salons across the UK and a campaign to educate the consumer as to why salon deposits are necessary within our industry and we’ve just started taking the long-term commercial viability of our industry into our own hands instead of relying on government interventions.

As an automatic consequence of having a minimum of 7 out of 10 clients rebooked, the salon takes control of the visit frequency, minimising the number of clients needed to be “fully booked” and it regulates the cash flow. All things within each salon owner’s control.

If your business has fallen behind with its VAT bills, PAYE payments or both, the worst thing to do is to bury your head in the sand. Hoping your business will experience a sudden increase in revenue to pay back the outstanding amounts can only lead to unwanted stress making it increasingly difficult to manage your team in the best way you can. My recommendation is to be realistic with your projections, calculate VAT on gross revenue at 20% long into the future and call HMRC to set up a realistic payment plan.

In conclusion, while a VAT reduction would undoubtedly provide temporary relief, sustainable industry growth necessitates a proactive approach focused on internal optimisations. If you require assistance implementing these strategies, do not hesitate to contact us.

Warm regards,
Steven Gunnip
Founder & CEO of Savvy Salon Club