courtesy of Stephanie Mitchell of SunnyStorm Marketing featuring Kenesha Coleman
There’s nothing worse than hustling all year only to find out that you calculated your taxes wrong and didn’t budget correctly for your tax bill. My hope is that this specific kind of stress (because honestly, you’ve got enough other things to worry about!) will be a thing of the past.
Kenesha Coleman is a certified CPA who specializes in helping beauty professionals sail through tax season easily and affordably. Over 13 years of tax and accounting experience, Kenesha has distilled the most important lessons for all professionals to know - from how to budget properly on a daily basis, to how to find the best accountant for you.
From grad school (graduating with both a BA and an MA in accounting) Kenesha was hired by the IRS - a huge shock to her system, but also where her origin story begins.
“[I was] auditing small, mid, large size businesses. And I really, really fell in love with tax at that point. Cuz the training is really good and they throw you right in. Right. So I'm like 22 sitting right across from like the CFOs of Fortune 500s.”
Kenesha decided to strike out on her own by starting her own accounting agency, after she tried working for a few different agencies but still couldn’t find a good fit for herself.
Kenesha has a really strong set of values and beliefs that guided her career decision. “I started my own accounting firm called common tax. We exclusively serve beauty entrepreneurs. I wanted to democratize that access to that information to save on taxes.”
“[It] shouldn't just be for which folks and multinational corporations - [tax help] should be for everybody. So I really wanted to…make it available for the small business owner.”
As for why Kenesha chose the beauty industry, again her reason was really thoughtful and speaks to her character (and it’s a great reminder for all of us in the beauty industry!).
“I specifically niche in beauty because I just have an organic appreciation for that industry. I know how certain beauty professionals [have] helped me along with…enhancing my beauty, self love and the fact that…when we go get a haircut or get professional makeup or…we have this glowing skin from this regimen recommended by our esthetician…we feel good. And when we feel good, we move through life a lot differently and make better choices.”
“I like to remind beauty entrepreneurs [that] what you do is not all vanity. It really does have this intangible internal effect on people.”
Budget for the beauty professional . .
Often, we learn how to budget when we have to put out a financial fire, but Kenesha has some sage advice to share on how to prevent that by writing yourself a personal and professional budget, and staying within it whenever possible.
“I always say [that] when it comes to money, it's not by happenstance. You cannot manage what you aren't tracking. That's where the budget and the bookkeeping comes in.”
“Before [you] can even [start] budgeting for a business, you have to have one set for your personal life. I always get the question from beauty entrepreneurs, ‘What can I pay myself?’
“I throw that question back at them. What do you need to take care of yourself? [Because] those have to be aligned. So before you try to think, ‘What is the money I could pull out of my business for myself? [It] has to be based on what you actually need. And you don't know that until you do your personal budget.”
If you’ve never written a personal budget before, Kenesha says that the obvious place to start is to look at your daily, weekly, monthly cost of living, and then figure out how you can save money for your future, as well - both for a rainy day, and also to enjoy your life.
“[Your] personal budget obviously should include all the bills and things that cost to sustain yourself. I want folks to remember two things: add on a layer for savings, and add on a layer for play money. We're human. We wanna work hard, play hard. So don't forget that part either.”
Kenesha says that once you’ve calculated your personal budget plus your savings goal, you can move onto your business budget. “Once you have that amount, that's gonna be the beginning of your net profit goal from your business. [You want to ask yourself, based on your net revenue,] ‘How much of that do I wanna bring home for myself? And if that percentage is 50%, 40%, that's how you're going to build your business budget, working backwards.”
If you want to figure out if you’re budgeting properly based on averages, Kenesha shares some benchmarks for measuring your beauty business against.
“Salon benchmarks are small. The average salon makes under a million, [and] their net profit percentage is 15%. The gross profit and the gross profit formula is all the revenue you make, minus all of the expenses directly related to what it takes for you to provide the service or the product. That percentage for the beauty industry is 40%. Use those as benchmarks to just compare how you're doing to your peers in the industry. But if your goals exceed that, (which they should) great. Stick to [your] goal if it exceeds that, but those are the minimums. If you're falling below that you've got some work to do. If you're performing above that, good for you. Lean in, lean more into what's working.”
Depending on what entity you’re under, which country or state you live in, and how much you make every month, you will have different goals in terms of tax deductions, but in general, Kenesha says that you should plan to deduct 20-25% of your net profit for taxes.
But above all, Kenesha says that the single best practice you can do on a monthly basis to set yourself up well when it comes to tax season is to do your own bookkeeping.
“I get new clients [that have] never done bookkeeping before. And [the] first time they see a financial statement for their business, they [realize] they're spending…2000 a month on meals, on Starbucks or Panera or something. Or they realize they're spending so much money in certain areas - they forgot that they subscribe to [something] and they don't even use it, but they're still subscribed. So we are able to cut expenses really quickly, because they can see it on paper and they know it is there and they know they don't need it. So we cut it. That is a very simple and easy way to boost profit by double digits. It's by analyzing the financial statement and cutting costs where you don't need it or aren't using it.”