Passion fuels beauty and wellness businesses. But don’t let the day-to-day take away from the financial tasks necessary to keep the doors open. 

It’s totally normal to feel overwhelmed by the numbers. The good news is that you might be surprised at just how easy they are to track with the right method.

Start with a small business profit and loss statement (P&L) to determine whether your business is profitable and sustainable in the long run. It breaks down income and expenses, giving you clarity where it counts.  

What Is a Profit and Loss Statement?

A P&L is a detailed report that sums up a business’s financial performance. It explains finances – more specifically, profits and losses – over a certain period of time, often three or 12 months (quarterly or annually). Think of a P&L as a company’s report card that shows how much money it made and spent.

Regular P&Ls track how you’re doing financially. This provides the information needed to make smart decisions and achieve the growth you deserve. For example, if you run a nail salon, the P&L shows if you’re earning enough from manicures, pedicures, and other nail services to cover expenses and pay you and your staff. 

Reviewing your P&L helps show if you’re making a profit. If not, you may need to cut costs, like reducing staff, buying more affordable supplies, or even increasing service prices to maximize earnings. 

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5 Elements of a Profit and Loss Report 

If you want to grow and hit a six-figure income, a P&L is your new best friend. Let’s break these reports down and learn more about why they matter:  

1. Revenue 

Revenue is all the money you earn from services and product sales before subtracting expenses. For example, if you run a hair salon, revenue includes money from haircuts, up-dos, and selling retail products.

Tracking revenue tells you how much money is coming into your business and from where. This helps you pinpoint which services or products are top earners. With this info, you can prioritize those offerings.  

2. Cost of Goods Sold (COGS) 

COGS refers to the direct costs of offering a product or service – for example, the products you use while giving a massage. Remove this figure from the revenue to determine the gross profit from business sales (which we’ll discuss in a second).

Here are a few examples of what’s included in COGS for different beauty and wellness businesses: 

• Hair salon: Hair dye, shampoos, conditioners, and styling products 
• Spa: Facial masks, serums, and other skincare products
• Nail salon: Shellac polishes, gel nail products, and acrylic nails

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3. Expenses 

Expenses are the ongoing costs associated with operating a business, like rent and utilities. 

If you own a gym, operating expenses include cleaning supplies, trainer salaries, and new gym equipment. Track expenses down to the nickel. Where you can cut costs might surprise you.

4. Gross Profit 

Gross profit is the amount left after covering the costs of services, labor, and products. This figure is vital because it determines the profitability of your core business activities – and when you know how much money comes in, you know how much to save or spend.

For example, if you run a spa, COGS includes the cost of massage oils. If you have a $30 massage oil in inventory and sell it for $80, you’ve made $80 in revenue. When you subtract the COGS for the massage oil, which is $30, you’re left with a $50 gross profit.  

On a larger scale, if a spa’s total monthly revenue is $25,000 and its total monthly COGS is $10,000, its gross profit is $15,000. 

5. Net Profit or Loss 

Net profit or loss is the amount of money left after deducting expenses (apart from COGS) from gross profit. This figure tells you how much the company has made or lost overall, depending on the numbers. If you’re in the negatives (a loss), you know that something needs to change.

For example, if a gym's gross profit is $20,000 and expenses are $15,500, its net profit is $500. If a salon’s gross profit is $10,000 and costs are $12,000, its net loss is $2,000. 

If you want to do a deep dive into your beauty or wellness business’s finances, check out GlossGenius's Reports and Analytics feature. This helps you track expenses with in-depth reports that show precisely how you’re doing, where you’re heading, and what you need to change with just a few taps. 

How To Create a Profit and Loss Statement in 9 Steps 

To write a P&L for your small beauty or wellness business, you can do it on pen and paper but if you’re comfortable with spreadsheets, we’d recommend this method for easier calculations and lower potential of human error. When you have your blank canvas ready to go, follow these steps, plus handy calculations: 

1. Choose a Period 

Pick a timeframe to analyze – most companies choose monthly, annually, or quarterly. If you have investors or an accountant that you meet with on a certain cadence, it’s probably worthwhile to make sure your P&L statement is ready for those meetings.

It’s worth noting that these periods help track financial trends differently. For example, a quarterly P&L demonstrates how sales shift according to the seasons. A salon might earn significantly more from bleaching services like balayage in the summer than in the winter. 

2. Gather Financial Records  

Collect invoices, receipts, and sales reports from that period. Gathering all financial records makes sure the P&L statement is as accurate as possible and reflects the actual state of your finances. 

To make this process easier, save receipts for services and retail sales throughout the period you’re reporting for. A simple way to do this is using a folder, but a lot of accounting services automatically do it for you. With the GlossGenius Financial Management tools, you can track regular expenses, including rent, utilities, and supply costs, plus payroll, retail sales, and appointment revenue, all in one place.

3. Calculate Revenue 

Add up all the money you made in the period, including income from services and product sales. For example, if you’re creating a quarterly P&L and your massage spa earned $15,000 from massages and $10,000 from product sales, the total revenue would be $25,000.  

Revenue = Service Income + Product Sales 

4. Determine COGS

Calculate how much it costs to provide services and products over the chosen period. These figures should include supplies and materials. 

If you own a hair salon and you spent $3,000 on retail products to sell, $500 on hair color, and $2,000 on products like shampoos and conditioners over the past three months, the COGS for a quarterly P&L is $5,500. 

COGS = Cost of Materials + Cost of Supplies

5. Calculate Gross Profit  

Subtract the COGS from total revenue to determine how much income you made after covering the costs of services and products. For example, if total revenue is $25,000 and COGS is $7,000, the gross profit is $18,000.

Gross Profit = Total Revenue − Total COGS 

6. Categorize and List Expenses 

List and add up operating expenses, like rent, staff salaries, and marketing, for the reporting period. If your massage spa’s monthly expenses are $1,500 for rent, $300 for utilities, $4,000 for salaries, and $750 for marketing, the total operating expenses for a quarterly period are $19,650. 

7. Calculate Your Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)

Calculate the EBITDA by subtracting total expenses from gross profit. If your gross profit is $30,000 and total costs are $12,000, your EBITDA is $18,000. 

EBITDA = Gross Profit – Total Expenses 

8. Calculate Interest, Taxes, Depreciation, and Amortization 

List any additional costs, including interest on loans, taxes, depreciation of equipment, and amortization of intangible assets, over the reporting period. Subtract these numbers from your EBITDA.

Depreciation happens when an asset, like a barber chair, becomes less useful and valuable over time. For example, a barber chair has an expected useful life of seven years. If you bought one for $1,500, divide $1,500 by seven to get an annual depreciation of $214.28, or $17.85 per month. Do this for every item in your barbershop that depreciates in value.  

Amortization gradually reduces the cost of an intangible asset over its useful life, like a salon software license that costs $1,200. If the salon software is useful for three years, you would amortize this cost at $400 per year or $33.33 monthly. 

9. Determine Net Income

Subtract the interest, taxes, depreciation, and amortization from EBITDA to get net income – the actual profit your beauty or wellness business made. An EBITDA of $4,500 and additional costs of $500 leave a net income of $4,000. 

Net Income = EBITDA – (Interest + Taxes + Depreciation + Amortization) 

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Profit and Loss Statement Example 

Use this sample profit and loss statement as inspiration. See instructions to download the sheet to start your own profit and loss statement if you’d like as well. We put some starter formulas so totals, EBITDA, and net profit will be calculated for you!

Yours Truly Salon & Spa - Profit and Loss Statement - January–March 2024

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Manage Your Finances With GlossGenius 

Accurate P&Ls give you the information needed to master your finances and grow your business. Want to take it to the next level? Use GlossGenius’ all-in-one platform. 

GlossGenius offers fantastic features tailored for small companies, including comprehensive Finance tools like expense management and reporting and seamless Payment processing. You’ll have all the necessary information for an error-free P&L. Plus, our built-in Payroll system is the best in beauty and wellness, letting you pay employees in three simple steps.

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Trust GlossGenius to help you handle the financial details while you cater to clients – the heart of your business. Join us today with a free 14-day trial.