This is the second post of a 4 part series on InSPAration Management’s blog to learn strategies on gaining financial health. In the last post, we discussed having a spa budget and knowing the breakdown of where all of your money is being distributed. Included was a financial assessment useful in determining your financial status and where you needed improvements. After understanding this portion, focus on step 2 to get closer to financial health. 2. Your P & L Statement The Profit and Loss Statement is your monthly report card. This allows you to see your financial ratios and ensure they are aligned. There are 4 important financial ratios to measure: a. Operating Expenses b. Product Cost c. Compensation Cost d. Profits Operating spa expenses and compensation are the biggest two expenses for a business. In most cases, we find that the compensation ratio is too high. To be profitable, your compensation ratio cannot exceed 40% of your overall budget. For example, for each dollar that comes into your business, you can afford to pay $.40 towards compensation. If your compensation cost is more than that, then you are at risk of having an unhealthy business. If your spa compensation costs are high and your profits are low, check out the InSPAration Management VPG ComPlan Overview below to address these challenges and restructure a model that will help regain your financial foundation! Still having financial issues at your spa? Please leave a comment or question below so we can help you!