Saturday, January 10, 2009

Recession Proof Business?

To those of you who follow my blog, I apologize for the extended silence. I will try to be more consistent.

Many times I've heard people in the salon business say that this is a "recession-proof business." I don't buy it. Yes, people will still need haircuts, but "recession-proof" implies that our businesses will not be affected by the country's current financial situation and that's not realistic. A salon owner that is not preparing for tough times may very well find themselves in a world of hurt down the line.

There are many ways we can be negatively affected by the economy. One subtle change is client's stretching the time between visits. They may usually come in every 4 weeks but now come in every 5 weeks. Sounds insignificant, but that one week shift reduces revenue from that client by 30 percent (10 visits per year instead of 13). Other guests may cut back on chemical services or switch to a color that requires less maintenance. Some clients may opt for a lower price service (ie. cut with no shampoo), or quit purchasing professional products. Still others may leave for a lower cost provider.

My management team and I have decided to take a very pro-active approach to the economy. We are taking a very defensive stance from an expense standpoint. We are not making any unnecessary purchases. We're economizing where we can.

Like all salons, technician pay is our largest expense. We've noticed that our productivity is slipping, particularly at certains times of the day. We have adjusted by reducing our hours for sale at those times. Because we are not a commission-based salon (all employees are paid hourly), we have the flexibility to control cost this way. We cut about 50 hours per week out of our stylist schedules. We did our best to spread the cuts across the board so no individual would be disproportionately affected. Most schedules were reduced about 4 hours per week. All of this was done with the blessing of our team who agreed that it is better to cut back a little from everyone than to lose a stylist. We feel like the downturn will be temporary, so reducing the number of stylists would be short-sighted.

We also looked at our front desk schedules. We had built in a certain amount of shift overlap when our volume was higher. Given our current reality we decided to eliminate most of the overlap. That removed several hours out of the desk schedule.

Finally, we resolved a staffing problem that we had let go on for too long. One of our front desk employees had been on probation for a variety of performance issues. We terminated her and filled her hours with a two existing employees. Our esthetician's productivity rate has not been at an acceptable level so we put her at the desk 2 days per week and will have her in her treatment room 3 days. This lets us use a valuable resource more effectively. We also pur our scheduling/inventory manager on the desk for some extra shifts. This will create issues as far as her regular workload, but the rest of the management team is willing to chip in and help cover things.

Our business remains profitable and we have some stockpiled cash so we expect to weather the economic storm. Owners who do not closely monitor their business, however, may be caught off-guard and unprepared.


  1. The Team-Based Concept is very appealing to me. I am relocating and adding skin-care to my service offerings. I don't want to get stuck in a "commision coffin" during a recession. Any suggestions you have are appreciated.

  2. Cindy, are you paying your Esthetician that does front desk part time the same hourly rate she earns as service provider or you have her paid a special admin rate?