ASK THE EXPERT
AMY MARTIN DUARTE, CPA
P: Why should small business
owners invest in an
accountant?
MD: There is a common
conception that Certified Public
Accountants can only prepare
tax returns or perform audits,
but there are so many other
services CPAs excel at that are
overlooked—from operations,
management, budgeting,
financing, accounting systems
design and implementation,
payroll, as well as marketing.
CPAs typically have seen it all
with a variety of businesses
and can advise on a multitude
of issues.
Of course, it’s extremely
important to speak with a CPA
regarding tax status of your small
business to make sure the best
entity selection is made to
maximize the owner’s goals.
CONTINUED
4 Common Mistakes
Small Business Spas
Should Avoid
S
mall business spas also tend not to prepare yearly
budgets. This is a necessity in any small business
where profit margins are small. Small spas that don’t
have a yearly “game plan” just fly by the seat of their pants
and tend to not have a handle on various items. Here are a
few mistakes I see small spas making that you should
constantly be aware of:
RETAIL INVENTORY Make sure you stock up on items that sell
quickly, and don’t place big orders for items that are slow to
turn, even if there’s a cost savings to bulk ordering.
BACK BAR PROCESS Be sure to have a professional back bar
process in place. Technicians may be using way too much in
the back bar and effectively lowering profit margins.
Enforce portion control and create incentives for
department leads in this cost control area.
GIFT CARDS Many spas do not account for gift cards correctly
and have no idea of what their liability is in regards to these
P: What affect will the new U.S.
tax laws have on small business spas?
MD: If a small business spa is a corporation, they should
really sit down with their CPA to discuss future tax impli-
cations. The corporate tax rate went from a tiered tax to
a flat 21 percent, which has limited tax planning oppor-
tunities. Depending on the spa’s net profit they could go
from paying 15 percent to 21 percent.
If a small business spa is an S-Corporation or
Partnership, odds are the new law will be good for them
as there is a 20 percent ordinary business income
deduction that did not exist in the past for pass-thru
entities. That means if the owner is actively working in
the spa they can get a 20 percent write-off on the pass
thru income they receive from the business. Hire and
have good professionals working with you—attorneys,
bankers, accountants and insurance brokers. These
individuals will be the key to your long-term success. n
66
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May 2018
debts.
RAISING PRICES Typically, small spas who aren’t making
money raise their prices, but don’t analyze or change
commission structure for employees. For example, a facial
costs $100 and technician commission is 40 percent, that
would leave $60 for professional supplies used for the facial
and fixed and variable general and administrative expenses.
Say professional product costs increase and the spa changes
the facial cost to $125 but doesn’t change commission
structure to a flat rate vs. flat percentage. The technician
actually gets paid more and instead of $25 increase the spa
expects, they only net a $15 increase. The technician gets a
$10 raise per treatment as well as a tip base increase as
clients will now tip in $125 vs. $100. The only person who
really wins out is the technician. Be sure that’s the win you
were going for before making these decisions.