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Financial Statements for Dog Groomers
Being a groomer can be physically demanding. It can be mentally challenging, you are working with live animals, challenging people, and it is an art all at the same time. You have specialized training, the right demeanor, and you love what you do. That doesn't mean that anyone taught you how to stay on top of business financials. Just "having an idea" of what's going on in a revolving bank account isn't going to cut it anymore.
Look, working out of one bank account without any financial statements means your business is going to continue to kind of limp along. Just like knowing your personal finances helps you make smart decisions, being familiar with your business's financial statements allows you to manage and grow your business effectively. Lets get started by looking at financial statements for dog groomers. We're going to look at the Balance Sheet, the Profit and Loss (P&L) Statement, and the Cash Flow Statement. Being able to easily produce and read these statements can be a big step in taking your business acumen to the next level.
The Balance Sheet: Snapshot of Your Business's Health
The Balance Sheet provides a snapshot of your business's financial health at a specific point in time.
What does your business own? (assets)
What does your business owe? (liabilities)
What is left over for you? (owner's equity)
You should be able to press a button in your accounting software and almost instantly be able to get the big picture.
Components of a Balance Sheet:
Assets: Assets include cash on hand and all of your grooming tools. Make sure to include your van or trailer, grooming and bathing supplies, and even cleaning supplies.
Liabilities: These are obligations your business must pay. This can be rent or vehicle loans, credit cards, or accounts payable. Accounts payable could likely be something like a u-line account.
Owner’s Equity: This represents your ownership stake in the business after all liabilities have been subtracted from assets. It's essentially what you would have left if you sold all your assets and paid off all your debts.
Decision-Making with a Balance Sheet:
Investing in Equipment: If your assets are high, it might be a good time to invest in new grooming tools or a more reliable vehicle.
Debt Management: With a clear view of your liabilities, you can decide if it's a good time to pay down debt or if you can afford to take on additional loans for expansion.
Assessing Financial Health: A healthy balance sheet indicates a stable business. With a clear view of your balance sheet, you can make business decisions quicker, more confidently, and with less stress.
The Profit and Loss (P&L) Statement: Your Business's Report Card
The P&L Statement is also known as the Income Statement. With it you can have laser focus on your income and expenses and calculate a lot of useful financial ratios. Your profit and loss statement shows you the journey that your money takes all the way from gross revenue to net income. It details how much money you made (revenue) and how much you spent (expenses), ultimately showing your profit or loss.
Components of a P&L Statement:
Revenue: This is the income from your services. For a groomer, revenue will mainly include fees for bathing/grooming services, but you may also sell some kind of merch.
Expenses: These are the costs incurred in providing your services, such as fuel, grooming supplies, and marketing costs.
Net Profit or Loss: This is the difference between your total revenue and total expenses. A positive number indicates a profit, while a negative number indicates a loss.
Decision-Making with a P&L Statement:
Pricing Adjustments: If your P&L shows low profitability, it might be time to adjust your service prices.
Expense Management: Identify high expenses that could be reduced. For instance, if fuel costs are high, you might optimize your route planning.
Profitability Analysis: Regularly reviewing your P&L will help you make informed strategic decisions.
The Cash Flow Statement: Tracking Money Movement
Don't sleep on this one. The Cash Flow Statement, as the name might imply, is all about actual cash flows. This means it doesn't show things like the value of things you own. it shows how cash flows in and out of your business over a specific time. It's divided into three sections: operating activities, investing activities, and financing activities. This statement helps you understand your liquidity and ensures you have enough cash to cover your obligations.
Components of a Cash Flow Statement:
Operating Activities: Cash flow from operations covers things like buying supplies, paying salaries, paying taxes, and any other operational expenses. Note: this does not include vehicle loans.
Investing Activities: People often default to thinking about the stock market when they hear the word investing, but it also refers to things like purchasing or selling equipment.
Financing Activities: This is where you would see something like a grooming van if you don't have investors.
Decision-Making with a Cash Flow Statement:
Budgeting: Because the cash flow statement only counts money on hand or actual payments made, it is a great way to measure how cash is actually being handled.
Investment Planning: Knowing your cash position helps you decide when to invest in new tools, marketing, or other growth opportunities.
Managing Cash Gaps: If your cash flow statement shows frequent shortages, you can take steps to improve liquidity, such as extending terms with suppliers, control overhead, or increase revenue.
Practical Application for Mobile Dog Groomers
Let’s consider a mobile dog groomer named Sarah. Here’s how Sarah might use these financial statements to make informed decisions:
Balance Sheet: Sarah reviews her balance sheet and sees she has significant assets in the form of equipment and a well-maintained van. She notices her liabilities are relatively low, so she decides it’s a good time to upgrade her grooming tools and expand her service area.
P&L Statement: Sarah’s P&L shows her revenue has been steady, but her expenses have been creeping up, particularly in supplies and fuel. She decides to adjust her service prices slightly to cover these rising costs and looks for more cost-effective products.
Cash Flow Statement: Sarah’s cash flow statement indicates that while she generally has a positive cash flow, there are certain months that tend to have low bookings. To manage this, she starts offering promotions during slower months to boost bookings and maintains a cash reserve to cover expenses during these periods.
Conclusion
If your not currently using financial statements to make business decisions, I think it is a great place to start. Once you are set up in a way to use them easily, they can actually turn into a time saver and I expect you will have a lot more confidence. You need to know your numbers in order to make informed decisions. Your going to want to have these numbers tight if:
You want to be able to sell the business one day
You have growth goals for your business
Or you just don't want to be caught off guard
Remember, knowing your business numbers is just as important as knowing your personal finances. And just like your personal financial planning, start with having a plan on where you want to be - the decisions you make today will make a lot more sense and have more purpose.