Vocabulary The following terms should be reviewed and understood before proceeding with the information that follows. They help clarify the various Salon Management concepts that follow. Many times, terms have a unique definition for business which may be vastly different from the common use of the word. Some of the terms are taken directly from Texas Cosmetology Laws and Rules. Again, they have a particular meaning related to the Salon Business. Accounts payable Bills that are due to be paid. Accounts receivable Monies owed to the salon. Advertising A form of communication used to persuade an audience (viewers, readers or listeners) to take some action with respect to products and services offered in the salon. Allocation of money Simply put, a budget. It is essential to plan your spending wisely. Board means the Board of Cosmetology. Board of Directors The governing body of a Corporation. Body wrapping means a treatment program that uses herbal wraps for the purposes of cleansing and beautifying the skin of the body, but does not include: (a) The application of oils, lotions, or other fluids to the body, except fluids contained in presoaked materials used in the wraps; or (b) Manipulation of the body’s superficial tissue, other than that arising from compression emanating from the wrap materials. Break-even point That point when profits and expenses are equal.

Building Alteration Remodeling. This often requires local permits and inspections. Be sure to check with local authorities before undertaking a salon remodel. Business Cards A small card printed with one's name, professional occupation, company position, business address, etc. Business interruption insurance Buying motives Reasons people buy. Effective sales requires you understand people’s needs and wants in order to effectively sell them products and services. Capital assets Major items owned. Could include salon chairs and equipment. Classified advertising Typically, newspaper advertising by a particular category such as “services”. Close a sale To finalize or come to an agreement that a client will make a purchase of a product or service. Commission A percentage paid for services rendered or products sold. Consumption supplies Those supplies used in the process of rendering a service. Note: Consumption supplies are treated differently for tax purposes so proper recordkeeping is essential. Co-operative advertising Advertising where someone else (often a product manufacturer) pays for a portion of your advertising costs. Cosmetologist Means a person who is licensed to engage in the practice of cosmetology in this state under the authority of Texas law. Cosmetology

The mechanical or chemical treatment of the head, face, and scalp for aesthetic rather than medical purposes, including, but not limited to, hair shampooing, hair cutting, hair arranging, hair coloring, permanent waving, and hair relaxing for compensation. This term also includes performing hair removal, including wax treatments, manicures, pedicures, and skin care services. Demographics Statistical data relating to the population and particular groups within it. Could include average age, sex, and income level. Department Means the Department of Business and Professional Regulation. Depreciation A term used in accounting, economics and finance to spread the cost of an asset over the span of several years. Diplomacy Simply put, tact. A quality that is essential when dealing with people. EBIT A bookkeeping term meaning Earnings Before Interest and Taxes. Empathy The capacity to recognize and, to some extent, share feelings (such as sadness or happiness) that are being experienced by another. A requirement for dealing with people. Equity An accounting term referring to the value of an ownership interest in property. Expenses Costs related to operating your business. F.I.C.A Federal Insurance Contributions Act. Also known as Social Security. Fiscal year The calendar range of 12 months that sets the start and end of your financial year.

(Note: this is not always January to December). Fixed costs Costs that remain the same each month. Rent is often fixed whereas electricity is usually varied each month. Form SS-4 Federal tax form used to determine Fringe benefits Incentives offered to employees such as sick days, paid vacations and bonuses for achieving certain goals. Goodwill A business term representing the total amount of clientele. Often used as a factor for determining the sale price of a salon. Gross income Income before expenses. Gross margin The amount of profit beyond the expense of the product. Hair braiding The weaving or interweaving of natural human hair for compensation without cutting, coloring, permanent waving, relaxing, removing, or chemical treatment and does not include the use of hair extensions or wefts. Hair wrapping The wrapping of manufactured materials around a strand or strands of human hair, for compensation, without cutting, coloring, permanent waving, relaxing, removing, weaving, chemically treating, braiding, using hair extensions, or performing any other service defined as cosmetology. Income tax Monies paid on income earned. Note: Texas does not have a State personal income tax. There is however, a corporate income tax. Installment plan A method of payment where the payments are spread out over a period of time.

Typically, payments are monthly and usually include an interest charge. Insurance Promise of reimbursement in the case of loss; paid to people or companies so concerned about hazards that they have made prepayments to an insurance company. Interest expense A cost for borrowing money. Inventory Supplies on-hand. This would include both retail and consumption supplies. Inventory turnover Pertains to the amount of times per year a product is sold. It is a measure of how well the product is received by the clients. Investment capital Money used for investment in the business. Lease A contract to rent a place or thing. Liabilities Items on which you still owe money. Low traffic area A business location not frequented by very much people traffic. Malpractice insurance An insurance which protects you against accidents that occur while treating a client. Marketing Anything you do to favorably promote your business. Markup The difference between the sale price of an item and its actual cost. Middleman An agent acting as a salesperson between the manufacturer and the end user. Misrepresentation Falsifying the truth about a product or service. Mortgage A loan on real estate. MSDS

Material Safety Data Sheets which list the warnings and cautions for potentially dangerous products. Net profit Profit after all expenses have been paid. Net worth The financial worth of an individual or business after all liabilities have been subtracted from the assets. O.S.H.A. Occupational Safety & Health Association regulates safety in the workplace. Objections (buying objections) Reasons consumers give for not wanting to buy a product or service. Overhead Business related expenses. Would include but not limited to heat, light, rent, phone, insurance advertising etc. Overselling Pushing too hard to sell a product which someone may not need or want.

Payroll burden The anticipated cost of the current payroll. Petty cash Cash kept on-hand for small unexpected purchases. Photography studio salon Means an establishment where the hairarranging services and the application of cosmetic products are performed solely for the purpose of preparing the model or client for the photographic session without shampooing, cutting, coloring, permanent waving, relaxing, or removing of hair or performing any other service defined as cosmetology. Pilferage Stealing. Often a major expense when proper business practices are not followed. Premises liability insurance Insurance which covers you for accidents that may occur on your property. Product Sales Commission A percentage of the sale price paid to the person selling the product. Profit-and-loss statement Used in accounting to show all income and expense sources and whether or not a profit or loss was generated. Promissory note A written agreement whereby you promise to pay a given amount of money within a certain time-frame. Proprietor The owner of a business. Renting a chair/booth Operating as an independent contractor who pays rent to the owner of the salon for the use of the chair/booth. The independent contractor is responsible for their own taxes and recordkeeping and receives no wage or salary from the owner. Retail supplies Supplies which are purchased exclusively for resale to clients.

Retained earnings Money which remains in the business account for future investment. Sales tax A state & (sometimes county) tax levied on the sale of products. Currently, services in the salon are not subject to sales tax. Shampooing means the washing of the hair with soap and water or with a special preparation, or applying hair tonics. Skin care services Means the treatment of the skin of the body, other than the head, face, and scalp, by the use of a sponge, brush, cloth, or similar device to apply or remove a chemical preparation or other substance, except that chemical peels may be removed by peeling an applied preparation from the skin by hand. Skin care services must be performed by a licensed cosmetologist or facial specialist within a licensed cosmetology or specialty salon, and such services may not involve massage, as defined in s. 480.033(3), through manipulation of the superficial tissue. Social Security A federal tax designed to provide for retirement. It is the responsibility of both the employer and the employee to pay this tax. Specialist Any person holding a specialty registration in one or more of the specialties registered under Texas cosmetology laws. Target market Represents the type of customers you hope to attract to your salon. Men, women, children, white collar, upper income etc. Telemarketing Using the telephone to promote your business. Unemployment insurance Intended to provide income for employees during times of layoff.

Utility expense Business expenses related to heating, cooling, electric, water and sewer. Withholding taxes Taxes subtracted from an employee’s gross pay and deposited with the appropriate agency for payment.