Salon Owner's Blog

VOIP Phone Update

2012-01-20T10:28:00.002-05:00

Readers asked for a follow-up on the VOIP phones we put in our two locations. Here's the configuration we ultimately went with...

Cost of VOIP System -

One-time charges - 6 CISCO 303 IP Phones @ $100 each = $600

Monthly charges - DSL Lines (2) at location 1 - $100

Cable Internet location 2 $75

Vocalocity Bill $180

Total Monthly $355

Previous Monthly Cost

Location 1 - 4 phone lines $100

Cable internet service $75

Location 2 - 3 phones lines $70

Cable internet service $75

Total monthly cost $320

We thought our cost would come out a bit lower, but we needed to add a second DSL line at one location because we needed more bandwidth. So we are now paying about $35 more per month for service, but here are the advantages:

System is set up so when our main number is dialed ALL phones ring at both locations. This allows both front desks to be fully productive, decreases wait times and improves customer service.
Location to location dialing by extension - employees transfer calls between locations and easily communicate with each other regardless of location.
Paging to either location or both
Transferring calls to land lines or cell phones not on the system - ie if I am not at work, front desk can transfer a call to my cell phone.
Easy to manage on hold messages, busy greetings, etc.
Nifty reporting features available on line. Want to know how many incoming calls you had Christmas week? Just run a simple report. (I did this...it was over 700 calls).
Numerous options that are free or inexpensive - automated call attendant, voice mail, ringing multiple phones at once, ring a certain number of times then try a different extension, call queues (call goes into a queue and gets transferred to first person available to take it)

Things I didn't know when we started:

The VOIP people make it sound like everything is pretty much plug and play as long as you use one of their "approved" and "supported" modems, but it's just not that simple. Fortunately we knew a phone guy well-versed in VOIP phones and CISCO equipment and he was able to configure everything for us. It did take some tweaking to get it right. Until that point, we had some quality issues - spotty audio quality, dropping calls, etc - bad stuff. I'd say we spent $300-$500 in consulting fees to get it all working properly. That included having him come back out after we added the second DSL line and route the traffic so that phones go over one modem and data goes over the other - it's nothing we could have done on our own. I would not go into this without having that resource in your contact list.
VOIP phones just don't work like land line phones. Location 1 used to have 4 lines that would roll over. Line 1 would ring first, if busy then line 2 would ring etc. If you put line 2 on hold on one handset you could pick line 2 up from any other handset. Not so with VOIP phones. Keep in mind that we only have ONE phone number now. It can ring to as many lines as we have available on phones (ie we have 6 three-line phones so theoretically we can handle 18 calls at once with just that one phone number). So with a VOIP phone if you put a line on hold it can only be picked back up on that one handset. If you want to pick it up elsewhere you need to get a little fancier. There are ways to do it - it just won't be what you are used to. This was a big surprise to us and I worried that if my breakroom picked up a call and put it on hold for front desk the caller would be "lost" and never picked up. I found out later that if I had chosen a different model phone (a pricier one) my phone guy could have programmed it all so it would work just like a traditional phone system.

If you decide to go this route:

IP phones require a certain amount of "up" speed (versus download speed). Test your internet connection and share the results with your phone provider to make sure it's adequate. Inadequate speed with result in poor call quality. Test by going to www.speedtest.net. Speeds will be faster with cable than DSL.
I recommend www.vocalocity.com. They are our provider for hosted IP phone service and we've found them to be helpful, reliable and reasonably priced. My only complaint is that, as I said, they over-simplified things a bit so I did not understand the difficulties of set-up or the nuances of the system (like the on-hold situation). If you use them, please tell them Fritz's Salon referred you - they might send us a toaster or something.
Have a back-up plan in case internet goes out. In our case, we have two locations so if internet is down at one, the other location just takes all the calls. With one location you can set it up so that calls automatically route to the phones of your choice (ie. cell phone) so you don't miss calls.
IP phones plug into a data jack, not a phone jack so make sure you are wired for it. You can use one data jack for a phone and computer. The phone plugs into the wall and the computer plugs into the back of the phone.
Find a local phone expert who can consult with you. If I had spent more time talking with our guy before having him come in to configure what I had already purchased, we probably would have made some different choices.
Don't cancel your local phone service until your phone number port is finalized. We dropped all our lines except the main line, which we forwarded to our Vocalocity main number. Once we were satisfied that the set-up would work for us, we arranged to port that main number to vocalocity. When the port was completed we cancelled our service with our old phone company.

VOIP Phones

2011-08-07T15:52:00.004-04:00

We are looking at making a radical change in our phone systems! Right now one of our locations has a Nortel phone system and the other location has a series of 4-line Panasonic phones. We really don't have any problems with the phones, we'd just like to have more flexibility.

We have two locations, but one published phone number. Clients call our main number and can book with either location. That's great for the client, but it puts the entire phone burden on one location. Meanwhile, the other receptionist is twiddling her thumbs and trying to stay busy. During times of high call volume, we require a second person on phones at the Location 1, while we are already paying someone with plenty of idle time at Location 2.

At Location 1 we have 3 voice lines and a fax line that cost us a total of $100 per month. At Location 2 we have 3 voice lines, one of which serves double-duty as a fax line ($80 per month). Keep in mind Location 2 does not have a published number. We only keep that many lines at Location 2 so they can handle the call volume if Location 1 needs to transfer all calls to them for some reason.

In my ideal world, a client would call our main number and it would ring at both front desks simultaneously. It would be like instantly doubling my phone coverage.

So I called a phone guy who recommended a Toshiba VOIP phone system. VOIP is Voice Over Internet Protocol. It's been around for a while, but it's now becoming much more common and is reliable enough for a business to use. In the scenario he recommended we would have a phone "system" at Location 1. Location 1 could have "normal" phones or IP phones. Location 2 would have IP phones, which means they connect via the internet not through regular phone lines. This obviously requires reliable internet. Location 1 would still have phones with no internet, but Location 2 would not have phones if either location lost internet connectivity.

The way around the internet risk is to bring in a second internet connection to provide redundancy. Right now we have cable ($75 per month per location). We would bring a DSL line into each location for about $45 per month each. A certain type of router would direct traffic across both connections. If one connection failed, everything would flow over the other one seamlessly.

The beauty of the system is that you can route incoming calls wherever you want. When a client calls the main number, we can make it ring on any of the phones at either location simultaneously. Sweet! Then he told me the price. It was upwards of $6,000! That is so far out of my price range it's not even funny!

A client told me about another option. It's called Hosted VOIP and it basically gives you all the benefits of a VOIP system but you are using a system on the cloud. I'm working with a company called Aptela (www.aptela.com) on this scenario (ask for Jonathan). In this case, we don't have a "system" installed at either of our locations. We are connected via the internet to Aptela. We would port our main phone number to them, install IP phones at both locations, and we would configure the service so all incoming calls ring to both front desks. What does this cost, you ask? The cost ranges from $15 per phone per month to $25 per phone per month. The $25 gives you unlimited outgoing calls (all the plans give you unlimited incoming). If you have a phone that will have very low outgoing call volume (like the breakroom, since everyone uses their own cellphone), you can do a $15 plan where you pay 2.5 cents per outgoing minute.

So we need 4 front desk phones (2 per location), 2 break room phones, and 2 office phones. The front desk and one office phone will be $25 each and the other 3 will be $15. Total per month $170. For another $5 I can add a fax line that will send the faxes directly to my email account. This replaces my entire phone bill at each location. Instead of paying for 7 phone lines, I just port over my main line and my fax line. The call volume VOIP can handle is only limited by the type of phone (we will get 3-line phones so each phone can handle 3 calls at a time - all coming in on the same phone number) and your bandwidth.

Bandwidth is important with VOIP. They tell me you need 80kb of up-speed per call. You can test your connection at www.speedtest.net. The broadband service we have now is 6 meg download speed and 1 meg upload speed. So if we want to handle 6 simultaneous calls we need 480kb of up-speed (80kb x 6 calls). 1 meg is 1,000 kb so we should be in good shape.

The risk of Hosted VOIP - reliability is my biggest concern. Reliability of our internet for one - if a location loses internet they lose phones. Of course, chances are the other location would still have internet so they could handle the phones, but for a single location this would be a problem. I'm also concerned about the reliability of the host. We've researched different hosted VOIP solutions on line and feel like Aptela is a good choice.

What if everything goes wrong anyway? My Aptela rep suggests that we set up Call Continuity before anything ever goes wrong. If Aptela has an outage and none of our calls are coming through, we basically implement Unconditional Call Forwarding and forward all incoming calls to another number like a cell phone that does not rely on internet. We could also do this if we lost internet at both locations.

Our plan is to have redundant internet at each location. So all in, I will be spending a little more than I am now. My phone bills will go down from $180 to $175 but I'll pay an additional $90 to get redundant internet in each location. Net difference is $85 a month. I think this is well-worth it considering what it means from a staffing perspective. I will automatically have double-coverage on phones so I won't need to staff up Location 1 to handle high call volume. My 2 front desks will just share all the calls. And I could get away without redundant internet - that's just me being extra cautious. (Our salon management system also runs on the cloud so no internet means no appointment book. Given the dual risk of phones and appointment book I'll spring for the $85).

This solution will require me to purchase new phones - we need IP phones. Aptela sells them for $89, so since I need 8 phones I've got some start-up costs, but it's a lot less than $6k and it's a good productivity solution.

Reply for Poor Stylist

2011-08-02T09:10:00.004-04:00

Poor Stylist wants to know if her pay is fair. With 6 mos experience she makes 40% commission but is not making minimum wage. Meanwhile she works the front desk and cleans while an assistant makes more money being paid hourly.

Poor Stylist, this is a loaded question and I can't really answer it, but I can offer some advice.

I would definitely like to see you earning significantly more than minimum wage even this early in your career. Your salon owner probably established this pay method because she sees it as low risk for her (no revenue, no pay) and she doesn't risk overextending herself. Of course she does risk losing an employee that she trained.

My recommendation is that you set up a meeting with your employer. It needs to be a time when you won't be interrupted by phones or appointments, so after work or before the salon opens may be best. You might want to meet on neutral territory like a coffee house. Tell your boss you want to discuss your future and career with her salon. Before you meet, spend some time thinking about what YOU really want out of your career. Of course you want money, but look beyond that. You don't want this conversation with your boss to focus only on money. It should focus on what the two of you can do together to make the salon busier, therefore making you busier. It's ok for money to come up - but my guess is she can't afford to pay your more, which is why you are making so little. (I can't help but wonder why she is paying an assistant when you are there idle - perhaps you should be assisting in your down time).

You need to determine if you are on the same page with the owner. Maybe her understanding was that she would train you but after that you would find your own clients and build your own book. It sounds like you are expecting the salon to bring clients to you. Neither way is wrong - you just need to be in agreement.

Remember that this is a business meeting, so do your best to be professional and try not to get emotional. The two of you have a problem that you need to solve together. Pointing fingers, blaming others and acting defensive is counter-productive.

The tone of the meeting will probably be a good indication of whether you have a future with this salon. If your owner genuinely wants to get you busy I think that will be evident. On the other hand, if she really doesn't care about growing the salon and helping you succeed, I think you will know. If that's the case, be grateful for what she taught you, but move on.

Team Problem-Solving

2011-07-28T22:24:00.005-04:00

Every now and then a salon gets in a funk. Growth slows down or business may even contract. More idle time creates more drama in the break room (you know what they say about idle hands...). It's tempting to bark out instructions to everyone on what they need to do differently to turn things around, but it's rarely successful when it's just an order from the top. I recommend addressing the issue in a staff meeting and asking the team how to fix it.

I can hear the rebuttals now..."I've tried that before and it didn't work..." I've heard this from many owners before and want to offer a process that may work better for you.

Owner complaint - They came up with a bunch of ideas that I know won't work or they cost too much money to implement.

Solution - OK, this happens a lot. You put together a group of your best stylists and ask them "What do we need to do to make our salon better?" Invariably they will throw out suggestions like "advertise more, remodel, pass out coupons, etc." Meanwhile as an owner, you're reluctant to keep tossing money at the problem. Your team means well, but they don't have a solid enough grasp of the business side of things to be helpful. You're going to have to lead them a little more to get the good ideas flowing. And remember, even if you know what needs to be done, it's better if you can lead them to the idea because then they will own it and make it happen. Try starting with an exercise. Ask them "Describe to me the ideal guest experience. The experience that will make them want to come back and tell all their friends." Write down all their answers. Working from their list you will have a road map for great client service. For example you may end up with a list that includes:

-Phone is answered promptly and cheerfully

-Receptionist is competent and friendly when booking

-Client receives a confirmation call the day before visit

-Client is greeted promptly upon entering salon and is offered a beverage

-Technician greets client by name and leads them to chair

and so on...

How many of these things do we do ALL THE TIME, WITH EVERY SINGLE GUEST? Identify where you may be failing your clients. Ask them which of these things can we start doing better immediately? Get a commitment. Have someone make a poster with the Ideal Guest Experience outlined. Put it in the breakroom for everyone to see. Talk about it daily in huddle.

This procedure works for a variety of issues. Recently in one of our salons we were going through a period of negativity...people nitpicking at each other, talking behind backs, etc. It was affecting morale and had to stop. Our manager brought up at huddle once or twice that we needed to quit being gossipy but the problem continued. We used a variation of the exercise above to get the group back on track.

At our staff meeting we gave each person 3 brightly colored post-it notes and a marker. We asked them to list the top three things that they want out of their work environment. What are the 3 most important things to you? When they were done we asked someone to share their notes and put them on a poster board. Respect, Fun, Busy. We made a separate column for each idea and had anyone with similar post-its to add theirs below the first ones. We kept adding post-it's until they were all on the poster board. There were a few dominant themes like fun, friendship, respect, teamwork. Only one person mentioned money as a top 3 item.

With all the answers in front of them, lined up by theme, we asked them what actions or inactions could prevent us from having the environment they just described. This got the discussion flowing. Our bitchy, gossipy ways were keeping us from having the work environment we want. How will we get it back? We talked about how it's everyone's responsibility to create the environment we want. It's not enough to not gossip - you also need to not tolerate gossip from others. We talked about dispute resolution rather than airing out grievances in the breakroom. The meeting was a breath of fresh air and our environment is no longer negative and toxic.

The key to getting your team to solve their own problems is to creatively lead them to their own answer. Think about the outcome you want (busier salon, less negativity, etc.) and work backwards from there to craft the exercise that will lead your team to solve the problem. You'll be surprised at their creativity and how much knowledge comes from a group versus one individual.

Running a 2-location business

2011-07-28T22:00:00.002-04:00

Obviously you can't be two places at one time, so how do you manage a two-location business? Well, you don't do it alone. Our success relies on a team of leaders, each with specific responsibilities, but supported by the group.

Each of our salons has a Stylist Manager who is the direct supervisor of the stylists in her location. Previously we had a Spa Manager who supervised the spa staff at both locations, however, with her recent departure, the stylist managers have taken on the additional team members.

In addition to the two stylist managers, we have a Director of Operations and the owner. The Director of Ops manages the front desk team (at both locations), does all purchasing of retail and professional supplies, manages the schedule (days off, etc.). As owner, I handle bookkeeping and finances, technology, marketing and strategic planning.

Each manager conducts one on one conversations with their team on a regular basis. One location conducts them every month, the other has decided to go every two months. As owner, I have one on ones with the management team but also with each employee at least 4 times per year. If a team member is having a 1 on 1 with me, they will not have one with their direct supervisor that month. Having 1 on 1's directly with the owner allows each person a chance to communicate directly with me and to discuss any issues they may have with other managers. Of course, we have an open door policy and team members are encouraged to come to us with issues as they arise, but the formality of scheduled 1 on 1's ensures we will have regular time with each of our team members.

The four members of the management group meet each week for two hours. Our meetings cover personnel issues, upcoming leaves, future training or meeting agendas, necessary purchases, incentives or contests, compensation, monthly specials, etc. The group acts as a sounding board for a manager who has a particular personnel issue to deal with. Together we will form a strategy for dealing with a particular problem. Sometimes the stylist manager or DOO will deal with the issue alone, other times we will tag team and talk with someone together, or an issue will be escalated to the owner - it all depends on the situation and our desired outcome. The regular meetings and support of the fellow managers has helped each of us become more effective in our roles, and helps to hold us accountable for our particular responsibilities.

It's important to note that these meetings are not an opportunity for the owner to preach or push down decisions. The four of us work as a team to run the business. I truly want and respect their opinions often defer to their wisdom. Too many times an owner will assemble a management group in name only, but they are actually closed to new ideas generated by the group.

If you don't want the entire burden of running the salon on your shoulders, you must assemble a group of trusted team members and work with them.

Response to Comment by tbarbone

2010-09-21T15:30:00.003-04:00

You are so right that if you are unsure of a change like this you are doomed to fail. That's why we worked with Strategies consultants to educate us and the team and help us through the switch. On their website www.strategies.com you can order Neil's white paper on Team Based Pay that explains it much better than I can.

In answer to your specific questions - in our Bonus Bucket system, yes, we only paid out bonus when $100,000 in sales was hit. There are other methods you can use - choose the one that makes the most sense to you (there's a blog post on options).

My team determines the eligibility criteria. They chose - 1)must be in dress code every day 2) cannot have had an unplanned absenses during the bonus period 3) Must be on time daily. As far as PLANNED absenses go, our plan allows bonus to be paid at a reduced rate if someone is out for part of the bonus period.

Our individual targets are not used for bonus purposes but come into play when we give raises out. We earn raises together as a team, but they are allocated out based on individual merit. Individual goals/targets are things like prebook rate, new and repeat client retention, retail, etc.

We have been on TBP since October 2007 and I am still a big fan. When the economy tanked we suffered less because we could control our cost more (we cut back our hours for sale by about 15% to more closely match demand - after 2 months of this we were back to normal scheduling). In commission salons, stylists were fighting over clients because it was the only way they would get paid. My people knew they would be paid (although maybe for 4 hours less per week) and they maintained the high level of service our clients expect.

My technicians make more than they did before, but payroll cost as a % of sales is less than it was before.

I have no divas. Everyone has to pull their weight or they will not get a raise.

More stability for technicians. Since January 2009 we have had 8 babies!!!! My technicians take maternity leave knowing their regular clients are in good hands. We pay maternity leave because with the clients still coming in we can afford to pay the technician. When she returns, she gets her regular rate of pay just like before - she doesn't take a step back in compensation like she would on commission because some clients chose to stick with another stylist.

Greatest obstacles -

1) fear of change - yours and theirs

2) divas already in the business that don't want to have an even playing field

3) mentality in the industry that these are MY clients, not OUR clients and that the technician OWNS the client

4)lack of trust - if they don't trust you as a leader they will think you are just trying to rip them off. When we switched, they weren't so sure if they should trust me. They do trust me now. (the nay-sayers left a long time ago).

5) The process NEVER ENDS. You are always educating, coaching, reinforcing, reminding.

Cindy

Partnerships

2010-05-06T17:43:00.003-04:00

A reader asked for my opinion on going into business as a partnership. I have not been part of a business partnership (except with my husband) but my feeling is that it's a great way to end a friendship.

Now I'm just assuming that the reader was considering doing business with a friend, which may not be correct, but my guess is that is usually the case with salon partnerships. Here are some of the pitfalls...

One of you feels like you are doing more work than the other
You don't agree on spending
One partner wants out - remaining partner needs to buy them out
One partner goes through a divorce and soon-t0-be ex wants a share of the business
Things don't go as well as you planned and you start finger-pointing
Things don't go as well as you planned and the partner with the deepest pockets is putting money in to keep things going
One partner doesn't follow the rules that apply to everyone else and it creates issues in the salon

You're not going to agree on everything. So when you disagree, how do you decide what to do? A partnership is like a marriage - it's not to be taken lightly. If you do decide to enter into a partnership make sure you:

Have a written agreement that covers each partner's responsibilities (financial responsibilities and work responsibilities)
Include in the agreement what will happen if one of you wants out of the partnership (Can you sell to anyone? Does remaining partner get right of first refusal? How do you value the business? How will payment be made?)

You really need to sit down together and talk through the absolute worst case scenarios and decide how you will handle them before you go into this. If you move forward, make time for regular (weekly?) partnership meetings so you are both full aware of what is going on in your business.

Expansion - Site selection / Lease negotiation

2010-05-06T17:34:00.004-04:00

When you're looking for space for your salon there are so many things to consider!

1. How do you choose a location? - I'm no expert on this but here are some things to think about. Who are your clients? The landlord or leasing agent should be able to provide you with demographic information about the area you're considering. It will show you things like the population within a 1, 3 or 5 mile radius of the location. You'll get male/female breakdowns, along with household income etc. For a salon, I think you need to concentrate on the 1 and 3 mile radius. You're probably not going to pick up many clients from 5 miles away. Get similar demographic information for locations of existing, successful salons that are similar to you. See if your demographics are similar to theirs. For instance, if a salon you'd like to emulate, has 30,000 households within 3 miles, and your potential location has 15,000 households within 3 miles, you might want to rethink this location. Perhaps it's an up-and-coming area and the population density just isn't there yet.

Pay attention to the surrounding businesses, how much traffic drives by daily, how visible your signage will be from the road. Are there zoning restrictions that will prevent you from putting up the signage you want? Is there ample parking for clients and staff?

2. Should you use a commercial real estate broker? - If you find a space you think you like, you can call the number in the window and work with the landlord or leasing agent directly. If you do this, however, remember that the agent is not working for you! They work for the building owner. If you choose to obtain your own broker, they will be paid by the landlord, much like a residential realtor gets a commission from the seller when you buy a house.

So the big question is, can you get a better deal for yourself if the owner doesn't have the added cost of paying your commercial broker? Well, I guess that depends on how good you are at negotiating! When we were scouting locations for our new salon, we used a broker. He provided demographic data for us on our existing location and on several areas we were considering so we could decide if the locations made sense. When we chose a location, he handled all the negotiations and kept the process moving. If we hadn't had him, I think the process would have dragged on a lot longer, and we probably would have paid too much. I also liked having someone who works with commercial real estate for a living involved. He knew which lease provisions were pretty much standard, and which ones we had some negotiation room on.

3. Renovations - unless you're moving into a space previously occupied by a salon, you're probably going to need to do some renovations. Often the renovations are entirely your cost. Sometimes the landlord will give you an "allowance" to pay for part of your finish work. The allowance may be a fixed amount, or it may be an amount per square foot of space. So if you're going to rent 1,000 sf of space, the owner may offer you a $10 per sf allowance, or $10,000 toward your renovations. Generally you will need to pay out that amount, then submit a request for reimbursement. Your landlord may agree to pay directly to your contractor upon submission of proper documentation. Sometimes the space you want comes as a "vanilla box" with drywall, drop ceiling, some ceiling fixtures and concrete floor and you are responsible for the full cost. A commercial real estate broker can tell you what is typical in your area. Instead of an allowance, the landlord may give you free or reduced rent for a certain amount of time.

Keep in mind that renovations can be very expensive. If you want to do some of the work yourself, make sure your lease allows that (they may require all work be done by licensed contractors). Talk to a few contractors BEFORE you sign the lease and get budget numbers for what you want to have done. Plumbing and electrical will break you if you're not careful. Don't sign a lease without knowing what you're in for on the reno.

4. Building Codes - We ran into some unexpected costs on our renovation and hopefully I can save someone else that problem. We moved into a small strip-mall type building with four separate units. Local building codes had changed since the last renovation of the space was done and we found out after the ceiling was torn out that additional fire barriers needed to be installed from the tops of the walls up to the roof. Until the building inspector came in we had no idea this needed to be done and it actually had nothing to do with our specific renovations. But because renovations were going on, the building had to be brought up to current code. Make sure your lease covers this in some way. You want it to state that any work required to bring the building up to code will be paid for by the owner.

5. Additional costs - Also before you sign your lease, make sure you have in writing all the known repairs that the owner is going to do at his cost. In our case, the owner agreed to put in 2 new HVAC units. I wish I also had them take care of some items I noticed but didn't bother to speak up about because I thought it was petty. The back door to our space didn't close easily and it ended up that it had to be replaced. There were also a couple of windows with the thermal seal broken (so they were foggy), and some other windows where the tinting material was damaged or peeled. Since I didn't have any of those items in my lease, it was my responsibility to fix them. That added up to a couple thousand dollars of stupid tax.

6. When rent starts - Your rent doesn't necessarily have to start as soon as you sign the lease. In our case, our lease said that we would start paying rent 120 days from the date we signed the lease, or the date we opened for business, whichever was sooner. That gave us 4 months to get our renovations done before we had to start paying rent (and we needed every bit of it).

Don't assume that you can get your renovations done quickly. I strongly recommend that you choose your contractor before the lease is even signed and try to be ready to go because it ALWAYS takes longer than you think it will.

7. Type of Lease - there are two primary types of commercial lease. One is called a Triple net lease (NNN) and the other is a simple lease. With a simple lease, you pay rent and personal utilities (probably) and that's it. The landlord pays for property taxes, insurance on the building, utilities for common areas, property manager fees, maintenance costs (like snow removal, landscaping, roof repairs). It is truly simple and you know what to expect.

The other type of lease is probably what you'll run into if you're in a shopping center. With a NNN lease, all those "other" costs I mentioned above are shared by the tenants according to how much space they have. For instance, at one of our locations we have 2.4% of the leaseable space of the whole shopping center, so we pay 2.4% of those costs. Our monthly rent payment is made up of "rent" and an estimate for those other costs. At the end of the year, the property accountants compare the estimated costs to the actual costs and we either get a bill for our share of the deficit or a check for the overage. One year we got a bill that was as big as a full month's rent - they had screwed up the estimates and everyone underpaid. Believe me, there were some unhappy tenants in that center, but we had no choice but to pay. They seem to be better at estimating now.

There's nothing wrong with either of these lease types - just know what you are getting. You don't want to plan on paying one amount for rent, then find out that you have to pay common charges on top of it. If it is NNN, ask the owner for documentation of what their prior adjustments were, so you'll know if their estimate is likely to be reasonable.

8. Personal guarantees - As a small business owner, you pretty much have to personally guarantee everything. Your lease will probably be no different. If you can negotiate out of a personal guarantee, go for it. If you are investing a fair amount in renovations, you have a better chance of getting out of the guarantee because if you default on the lease, the owner is getting the benefit of all your renovations. Make sure you point that out to them. If you can't get out of the guarantee entirely, ask them to have the guarantee expire after a couple of years. So if you have a 5 year lease with a 5 year renewal option, maybe they'll drop the guarantee after 2 or 3 years.

9. Lease Term - Your financial advisor may suggest differently, but I suggest you stick with an initial lease term of no more than 5 years. Make sure it includes an option to renew, especially if you're going to be investing in renovations.

Expansion - Choosing a Location

2010-05-06T17:09:00.002-04:00

Choosing a location for an expansion is probably easier than for a start-up. I wasn't involved in the business when the original location was founded, so I missed out on that fun. For #2 we had the advantage of having lots of data from location #1.

Since we are computerized (go Millennium!) we were able to take a good look at our clients and where they live (granted, for some clients their work address is more relevant, but we used what we had). My awesome husband took the data extract from Millennium and plotted all our clients on a map (I'll find out what software he used to do that and include that information in a comment later). We could see where they live in relation to our first location and proposed new locations.

We coupled this with demographic information we received from our commercial real estate broker. For instance, from the demographic data we could tell that in zip code XXXXX there are 15,000 men, aged 18-55 with household income over $50,000. Based on our client data, we could see that in that zip code we have 750 clients, or 5% market share.

We looked at all the surrounding zip codes in this way and noticed (not surprisingly) that we had higher market share in areas very close to the salon (5+%), and it dropped as you got farther away (1% or less).

We looked at areas of the county that have similar demographics to our current location (how big is the market for our services in a 1, 3, or 5 mile radius of the store) and chose an area that has similar potential, making sure the locations weren't too close together.

Eventually we settled on a location that has great street visibility, a lot of traffic driving by, similar demographics to our original location, very little market overlap with our existing location, much more convenient for folks who work downtown, and had affordable rent and ample parking.

I know that entrepreneurs like to make decisions on "gut" but I would strongly urge you do to some research before selecting a location for your business. Two years ago we seriously considered putting a salon downtown but after analyzing the demographics we felt it wasn't feasible. Our research showed that we would need a full 10% market share (assuming our market share was daytime population of men within a 6 minute walk of the proposed downtown location). My gut told me there are tons of guys downtown and it has to work, but the numbers said otherwise. I'll never know what could have been if we had built out downtown, but I went into this deal with much greater confidence of our success because I know the market is there. Now I just have to get them all to come to my new place!

General Update - Expansion!

2010-05-06T17:05:00.003-04:00

My salon expanded to a second location last year so I spent much of 2009 getting that going. We did major renovations on our new space and faced a lot of challenges so I will begin a series of posts on the expansion and try to share a little of what I learned through the process.

The new salon opened September 28, 2009 and is doing well, but it is still not quite cash flowing (so close!). We are doing significant advertising, which is a big cash outflow, but we've decided to continue on the current marketing track for now, even though it's pricey.

Follow-up on employee termination

2010-05-06T16:57:00.004-04:00

I just got an email from Frank, a new reader of my blog. He has inspired me to post more often.

An update on the immediate prior post (which was over 9 months ago)...

Yes, firing that employee was a great thing to do. BUT, I should not have listened to my managers on the timing. The former employee filed for unemployment and in spite of performance write-ups, etc. she won unemployment benefits. We appealed and lost. It's frustrating that she is collecting on our account when she was terminated for cause, but the Commonwealth of Ky does not see it that way. In my state, apparently it has to be pretty much spelled out in black and white for them..."if you do [state infraction] again, you will be fired." Then they do it and you terminate them IMMEDIATELY. (If you don't terminate them immediately you are "accepting" the behavior so if you fire them after a delay, it's no longer termination for cause. What a bunch of crap!

Meanwhile, the former employee is working, but she's booth rental somewhere so she's not claiming any income and is still collecting on our account. Kentucky does not investigate unemployment fraud. If they did, I wonder how much we could help the budget problems we're having!

Anyway, the moral of the story is document, document, document (which I thought we had done). Spell it out clearly enough that he or she understands their job is at risk, then follow through promptly when they repeat the behavior. Disclaimer: your state may be different and I am by no means an expert in this area!

No Excuses!

2009-06-03T19:34:00.002-04:00

When I'm faced with an uncomfortable task I sometimes have the tendency to procrastinate. Of course, at the time I don't identify it as procrastination - I have perfectly good reasons why I should wait!

I'm ashamed to say that for almost five years I've made excuses not to terminate a problem employee. I have documentation going back to 2005 where we discussed the areas she needed to work on. On some level I've always known she had to go. But there was always a reason to keep her. Here are some of my rationalizations:

we'll be short-staffed without her

she's a talented stylists (we can fix her)

I like her

we've had so many changes lately it will freak the team out

she's so-and-so's best friend and that would put her at risk of leaving too

I could go on...

So two of my managers just came from a leadership class with a to-do list. Number one on the list was "Terminate Becky-Lou" (not her real name - duh). I was ready for them with reasons why it was not a good time to do it. They held their ground. I terminated her. Whew! It's like clean, fresh breeze just blew through the salon! We're not experiencing noticeable client loss and the rest of the team is a lot happier.

Two lessons -

QUIT PROCRASTINATING!
Develop leaders in your salon and value their opinions

Attacking the Goal

2009-06-01T15:35:00.002-04:00

As a Team Based Pay salon, each month we have a sales goal. When we reach our sales goal, we pay a team bonus to any team member who is eligible.

This past Saturday was the last business day of the month and that morning we found ourselves slightly behind goal. We needed a kick-butt day to reach achieve bonus. Adding to the challenge, we only had 6 stylists in, and our esthetician was on vacation. To meet goal, they had to sell $450 more than was on the book so far.

This was a defining moment for our team. They could take the attitude that we can't control whether we meet goal, or they could decide to take action to make it happen. They decided to make it happen.

They initiated a contest for retail sales and upselling - one point each -whoever has the most points at the end of the day gets $25. Then they made it happen. They called clients who had been on a waiting list in the past week and got the massage therapists booked up. They made product recommendations and offered additional services at a discount. By the end of the day they had smashed the goal by $330.

More importantly, they proved to themselves that they have control over whether we meet goal or not. You can sit around and wait for the phone to ring or you can attack it.

...I need to go and write some bonus checks!

Indenpendent Contractor or Employee?

2009-03-04T19:59:00.004-05:00

A reader left a comment asking if the salon owner should be withholding taxes from her commission-based paycheck. That's a great question and deserves a blog entry all to itself.

Many employers/salon-owners believe it is their decision whether or not to withhold taxes from a worker's pay. They believe if they call you a "contractor" instead of an "employee" they are OK to not pay the taxes. The IRS, however, looks at things a little differently. The IRS's website has a whole section on Independent Contractor versus Employee. Go to www.irs.gov and search on "independent contractor or employee" for more information. The general rule is that if a business exercises a certain amount of control over the worker, they are a legal employee (subject to payroll taxes) no matter what the employer says. The IRS looks at three areas to make the determination:

1) Behavioral

2) Financial

3) Type of relationship

Behavioral refers to how you perform your job. How much control does the salon owner have over the performance of your work? Do you set your own hours, or do you have a schedule you are required to maintain? Are you required to use certain products or tools, or are you free to choose? Are there certain procedures you are to follow when performing the work or are you determining how the service is performed?

Financial - Contractors are free to offer their services to the community at large. They often advertise and promote their own business. They also have an opportunity for profit or loss. Do you go out and find your own clients, or does the salon owner advertise on behalf of the salon? Do you control your own client data or does the salon?

Type of relationship - An independent contractor relationship is generally for a specific period of time or for a specific project. If a worker is hired with the expectation that the relationship will continue indenfinately, this is a sign of an employee/employer relationship.

OK, so now you may have a good idea whether you are, in the eyes of the IRS, an employee or an independent contractor. Why should you care and why should the salon owner care?

Employee Perspective - An independent contractor is responsible for their own taxes. You receive your gross pay and must be disciplined enough to put some of that money away so it will available at tax time. You may also need to make estimated payments during the year to avoid penalties. You are considered self-employed so you can deduct from that gross income any business expenses (business cards, advertising, license, etc.). In addition to paying income taxes on the net profits of the business, you also must pay Self-Employment Tax. This is a tax of 15.3% on top of the income tax. (It's actually 7.65% of employee social security tax + 7.65% for the employer's share of social security tax - since you are self-employed you pay both halves of the social security tax).

Salon-Owner Perspective - The salon owner is calling you an independent contractor for two reasons - 1) she doesn't want the bother of withholding and paying in taxes and 2) she doesn't want the financial burden of paying the employer share of social security (not to mention unemployment tax, worker's compensation insurance, etc). If the IRS catches up with a business that is paying people as independent contractors instead of as employees, it can be a fatal blow to the business, not to mention the owner's personal finances. The IRS can go after the owner PERSONALLY for the unpaid taxes. As a salon owner, this is not a risk I would take. All it takes is one disgruntled former worker to open an IRS investigation.

Now, in defense of the salon owner - the writer did not mention what her commission % is. It may be that the owner is paying a really high commission so the worker can pay in all the taxes and come out about the same. Meanwhile the owner saves a lot of time and trouble. That will not save her from the IRS if they come calling. But if an owner is paying a crazy-high commission already, the salon will not be able to afford payroll taxes on top of that. If she converts you to employee status and starts withholding taxes, you need to expect a cut in the commission rate so the salon can remain financially healthy. It's bad for everyone if the salon isn't financially viable.

If you think you are an employee in the eyes of the IRS and should have taxes taken out, you may want to print out this post and show it to your salon owner. Misclassifying employees as contractors is a HUGE financial risk on the owner's part. If she is concerned about the hassles of payroll (and who isn't) she can hire a payroll service to handle everything. I use Advanced Payroll Service (www.advancedpayroll.com) and love them. Other services are Paychex and ADP. Many bookkeepers and accountants also offer payroll services for a reasonable rate. APS is responsible for all the tax filings related to my payroll, they generate the W-2's annually, and they handle the new hire reporting required by my state. I pay about $75 per pay period (every 2 weeks)for about 18 employees. That rate includes some extras like direct deposit and delivery so it could be whittled down if necessary.

By the way, the salon owner is also required to withhold taxes on your tips, and again, the owner can be held liable if this is not done.

My advice for salon owners - don't play with fire. If you don't know if you are paying your workers appropriately, talk to your accountant or bookkeeper. If you should classify your workers as employees, just do it - yes, it's a hassle, but not half the hassle of having the IRS breathing down your neck.

You Can't Save Them All

2009-01-10T21:23:00.003-05:00

My team is pretty close-knit. We like each other and many of the "young folks" spend a lot of time together outside of work. When one person is going through a tough time, the others are there to support them. We've seen staff through break-ups, miscarriages, divorce, unhealthy relationships, death and more. Unfortunately, you can't save them all.

We have a stylist with us now who is clearly in an emotionally abusive relationship. Several of us have spoken to her about it. Girls who have been in abusive relationships have shared their stories and noted the similarities. We've promised her support if she chooses to leave him. She went with him to California after Christmas to meet his family and she came back engaged. He is in the army and is relocating to another state in two weeks. She is going with him. We are her only support system and he is succeeding in isolating her from us. The salon is in mourning for her because we can't help her. She's a beautiful, smart, funny, lovely girl and she's totally under his control. I told her that I will send her a plane ticket home if she's ever ready, but beyond that I don't know what else we can do.

If anyone has suggestions for us, please post them.

Recession Proof Business?

2009-01-10T20:51:00.004-05:00

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.

Employee Evaluations

2008-08-23T18:54:00.002-04:00

My leadership group decided that we will do performance evaluations two times per year, August and February. Performance evaluations are not to be confused with a pay review - in these meetings we will not discuss pay or make pay adjustments. The closest we will come is by discussing the actions a team member can take that will lead to as big a pay increase as possible when salon goals are met and we are giving raises.

These discussions are important because it's a chance to sit down with someone, one on one, and discuss their career and the salon's expectations. There's nothing worse than a situation where an employee thinks they deserve a big raise and you think their performance is sub-par. It's important that they understand what is expected and what they need to do to further their career and their income.

Reaching a Milestone

2008-08-23T18:44:00.002-04:00

For as long as I've owned my salon I have wanted to offer benefits to my team. Unfortunately, the money just wasn't there.

If you have read my blog you probably know that about a year ago my salon converted to Team Based Pay. TBP takes the focus off the individual and puts it on the salon. Everyone working toward a common goal leads to salon growth and more security for everyone. I'm thrilled to say that I just implemented a paid maternity leave policy! (I know my friends in Canada are required by law to provide paid leave, but in the States the vast majority of salons do not offer benefits.)

Currently two team members are expecting. One works the front desk, the other is our busiest stylist. Today another stylist announced that she, too, is expecting! All of us are thrilled for our expectant colleagues and I know we can meet the challenge of taking care of all our guests while they are out AND paying them while they're gone.

This is a huge milestone for my salon. Everyone has worked hard to implement the systems that drive salon growth and this is a significant reward for that hard work!

Developing Leaders

2008-08-13T14:25:00.002-04:00

There's a lot to think about when you are considering adding a location. Real estate, contractors, financing, furniture and equipment, hiring staff...

It would be easy to overlook one of the most important elements - once you have your new location who's going to run it? Do you have the leaders necessary to grow and expand? When we asked ourselves this question, the answer was "no." We have several people with a lot of potential, but we don't have anyone who is ready to step into a leadership role.

Back in the old days of our salon, that didn't seem to matter. If a salon manager was needed, someone was told the job was theirs. No job description, no clear expectations, no guidance - the company survived, but it certainly didn't thrive. That is a mistake we will not repeat. To support our growth, we are conducting a Leadership Development Series of classes. Anyone who is interested in learning more about leadership and salon management may attend. We meet weekly for one hour (although bi-weekly for 2 hours would probably be better). Since we've never done this before we are, to some extent, making it up as we go. So far our curriculum is:

Trust - Based on the book The Speed of Trust.
Cash Flow - Understanding the cash flow of the salon
Culture and No Compromise Leadership - What culture do we need to achieve our vision and our mission? Is that the culture we have?
Four Business Outcomes - Productivity, Profitability, Staff Retention, Client Service (1 week on each)
Coaching and Employee evaluations - how to mentor and coach in a positive way
Difficult conversations - How to have effective conversations about performance
Team Based Pay - What it is and why we do it

So far the classes have been well-attended. When we are ready to expand our management team, interested employees will need to apply for the positions and go through an interview process. It's important to us that our leaders not only know what we do, but why we do it. They need to understand our vision for the company and how we are going to achieve it.

Response to Nail Salon Comment...

2008-07-14T22:22:00.002-04:00

Justin,
You will almost certainly need a license to open a nail salon whether or not you are a technician.
Check with the state's Cosmetology Board for more information. http://www.bcsbc.com/pennsylvania_state_cosmetology_b.htm

Before opening a nail salon I would be cautious of a couple of things. First of all, make sure there is an adequate labor pool in your area. Even if cosmetologists (hairdressers) are licensed to do manicures (as they are in my state), you may have a hard time finding people to work in a nail salon. Prices tend to be low which means you have to do higher volume to make good money.

Second, what type of salon do you want? Are you envisioning a high-end, lower volume salon, or a lower cost/high volume salon. Many salon/spas are finding that their nail services are their lowest margin service because they have to price the services to be competitive in the marketplace. For example, in my salon we try to price services at about $60-$70 per hour. A 30 minute haircut is priced at $32-$34, right in that range. A one-hour massage is $75 (but takes 70 minutes of time). Because of the market for nail services, our 50-minute pedicure is only $45 and our 30-minute manicure is just $25. We offer the services because they are expected in a spa, but they are low-margin services.

In our city (and most others, I think), there is an abundance of low cost nail salons. Many of them lack atmosphere and the level of client service you expect from a fine spa, but they provide a quality service at a darn good price. Even I find my self stopping in to one of the Asian nail spas for a quick manicure instead of booking an appointment at a fine spa.

Good luck!

Scheduling Issues

2008-06-05T23:41:00.003-04:00

Our Salon Manager, who is also a stylist, is responsible for preparing the schedule for all our technicians. Our salon has never had a full-time manager - it's always been someone who is also behind the chair. The prior manager (before I owned the salon) took advantage of her scheduling responsibilities by giving herself every Saturday off and cutting back to four days a week. You can imagine how that went over with the troops - nothing like leading by example!

Our current manager has scheduling policies to follow to assist in preparing the schedule. She also has certain staffing requirements she tries to maintain (like a minimum number of stylists on a Saturday). In spite of policies and good intentions, there are still sometimes issues with the schedule. Any time you have someone with their own column in the book preparing the schedule it leaves you open for criticism.

We've decided to tackle this issue (and others) by moving our lead front desk person into an administrative position. In addition to supervising the front desk, she will be responsible for scheduling (with input from the salon mgr). Since the administrator has no skin in the game, she can be more impartial than a technician could be. Plus it frees up my salon manager to work more closely with the team instead of being cooped up in the office trying to figure out how to staff Saturdays and vacations.

Our goal here is to put people in positions that best utilize their strengths. My salon manager is a people-person. She is a great coach and motivator. She catches people doing something well and praises them. She addresses little issues before they become big issues. The person we are shifting from the Front Desk is a great administrator. She is organized and thorough and very task-oriented. Putting people in positions where they can excel is one thing we can do to help our business succeed and grow.

Booking Order

2008-05-24T23:31:00.002-04:00

Every salon needs to determine how to assign non-request appointments and walk-ins. In our salon we always work across the book left to right. Once a month we change the booking order based on our retention reports.

We decided that New Client Retention is the basis on which we want to allocate non-requests. We want the individuals with the highest New Client Retention to get appointments first because they have the best chance of keeping them coming back.

Our staff likes this methodology because everyone gets a chance to be on the left side of the book. Booking by seniority can be frustrating to the newer stylists, plus the long-timer may get lax and not put forth her best effort to keep guests coming back.

To calculate New Client Retention, our software looks at all the guests coming in for the first time in a particular month, then it looks forward 90 days to see how many of them returned. So when we set up our appointment book for June, we will be looking at February new clients to see how many of them returned in March, April, or May.

By the way, if you switch to a method like this, the old-timers may not like it, but it will light a fire under them. And remember, if they don't have the passion anymore - if they aren't interested in growing the business - then maybe you've outgrown them.

Revenue Per Hour

2008-05-24T23:11:00.003-04:00

We're working with our new Strategies coach and we've been focusing on Revenue per Hour. That's not a figure I've paid much attention to in the past, but I'm taking a closer look now. Fortunately, our salon software (Millennium by Harms Software) does a great job of tracking metrics that are important to our business.

Revenue per Hour (RPH) can be confusing. Most of us probably thing of RPH in terms of what our prices are. If my haircut costs $50 and I do two haircuts in an hour, then my RPH is $100. Well, that would be true if you were 100% productive, but in the real world that rarely happens. So actually:

Revenue per Hour = Revenue
---------------------------
Hours available for sale

So in a one chair salon, if my revenue for the day was $750 and I worked 10 hours, the revenue per hour is $75.

Revenue per hour doesn't have much meaning until you compare it to Cost per Hour. I can calculate that the same way - by taking all my costs and dividing them by the hours I have for sale. If my cost per hour is higher than my revenue per hour, we've got a problem! (For the most useful results, omit retail revenue and retail cost from your calculations. The result will be Service Revenue per Hour and Cost of Providing One Hour of Service).

When you know these two numbers you can make better decisions for your business.

If RPH is too low it could be an indication that your prices are too low. Alternately, it could be a sign that you are overstaffed - too much unproductive time will push down your RPH.

Knowing your revenue per hour can also be useful when dealing with compensation issues. If a technician requests a raise, you can evaluate their RPH and the salon's Cost per Hour to determine if an increase is warranted.

Expanding the Business

2008-05-24T23:01:00.002-04:00

I've considered a second location for a long time, but I think I may be close to taking the leap. I feel like a downtown location would be very successful for us. I found a space that has potential and will get a proposal from the leasing agent next week. To keep costs down I will go with significantly less space than I have with my main location. We have 2750 sf which includes 8 stations, 3 treatment rooms, one mani and one pedi. The space is not efficiently used at all so I think with proper planning we can do very well in a much smaller space. I'm only looking for a single treatment room so that will cut down our space needs.

Stay tuned for more! I'll blog on the pitfalls of second locations as I fall into them!

Is the customer always right?

2008-05-14T21:50:00.003-04:00

So is the customer always right? That is the mantra of customer service after all. But let's be honest...sometimes the customer is not right. Sometimes he's an abusive, obnoxious jerk.

We had a client treat a salon coordinator rudely on the phone, then berate her to other employees when he came in for his appointment. He actually said she is a complete idiot and must be a crackhead. He was obnoxious and made everyone uncomfortable.

I apologize for our shortcomings. We did drop the ball in one area. But I went on to tell him that it is inappropriate for him to come in and call her an idiot and a crackhead. He said with disbelief, "Are YOU chastising ME?"

Long story short, he might not want to be our client anymore.

No one likes to piss off a client. If he can be civil, he's welcome to return. If he can't, I can live with that. The most significant thing to come from this incident isn't that we may have lost a client. The most important thing is that my staff knows that I will stick up for them. Some jerk can't come in and treat them like crap and have management coddle them and apologize for things we never did wrong.

Your team needs to know that you've got their back. They need to know that how they are treated is important to you. They need to know that it doesn't always come down to dollars.

I'm talking about an extreme case here - we definately do our share of coddling. But don't expect your staff to put up with verbal abuse. There are plenty of nice clients out there - we can afford to lose the occassional jerk.

Raises on the Way!

2008-05-14T21:34:00.002-04:00

We will soon experience one of the great things about Team Based Pay. Next month I will be giving out raises. We have met our salon goals and I have a cash flow plan, so I know we can afford to commit to the higher pay rates. The team has worked hard to reach this point and I'm happy to be able to reward them.

Now the good part - we will be rewarding the most deserving team members! Raises will be based on merit, not on sales. Here's what I mean...

On May 1 we raised some of our prices. Our 1-hr massage price went up $5. If we were still a commission salon, that would have meant instant raise to my massage therapists. One of those therapists has been with us about 3 months. When a therapist is just out of school we give them more recovery time between services than our usual time standards. Three months later, she still requires extra long rest time between services. We also have massage enhancements that may be added to any massage. They cost $15 - $20 and are a great way to get average ticket up. She has been trained on all the enhancements, but is still not competent enough with them that we can add them to her service menu. Now, this woman is a great massage therapist and a nice person--but she doesn't deserve a raise. She needs to be performing ALL our services within our time standards.

On the other hand, I have an Esthetician who has been with us one year. We are a men's salon and when we hired her we really didn't have a skincare practice. She's very good, but still runs only about 50% productivity. When she is not scheduled to do a service, she is behind the front desk helping the salon coordinators. She is one of the best we have for getting clients to pre-book. She is always helpful, never idle. This girl deserves a raise - not because her service sales are great - we're still building that business. She deserves a raise because she makes so many great contributions to the success of our salon.

If my esthetician was paid on commission do you think she would be as eager to help out behind the desk? After all, she would only be getting paid for the time she was doing a service. Team Based Pay allows me to reward the most deserving people. I will be rewarding the behaviors I want repeated.

Marketing in a Box

2008-04-29T21:21:00.002-04:00

When Carol Phillips, a salon consultant, visisted our salon in January, she spoke about telling your story throughout the salon. What she means by this is that you have a consistent way to get your message across. Say you're doing a Mother's Day promotion (which we wouldn't do since we're a men's salon, but it's a good example), we would maybe print out a sign and put it by the front desk, set up a nice display, and remind all the stylists to talk to their clients about the promotion. We might even have little 4x6 frames at the stations.

If we did it Carol's way, we would have coordinated marketing pieces throughout the salon: shelf talkers by the retail products, counter promotions, wall posters, mirror clings, website changes and maybe something for the client to pick up and take with them. Everything would be professionally designed and printed. Carol's company (www.encompassone.com) does this for salons. They consult with you to prepare a promotion calendar for the year, then mail you a box of promotional materials at the appropriate time. Of course you get to approve all the artwork prior to completion.

I love the idea, but it's a little pricey for me. (I think it was in the $1,500 per month range, with a one year commitment plus a set-up fee).

Whether this is a service you can afford or not, you can still learn from it. Tell your story, front to back, professionally and consistently. Maybe there is a local printer that can do the artwork and printing for you for a lot less. Maybe you can trade salon services for graphic design and printing.

No Compromise

2008-04-29T21:14:00.002-04:00

Neil Ducoff, founder of Strategies, preaches "no compromise leadership." That doesn't mean that we become maniacal tyrants who always have to be right. It means we don't ever compromise what matters most - our values.

At my salon we value client service, so we will not compromise on things like absenteism and lateness. Of course, we try to coach people if they slip up, but if there is an on-going issue we cut them loose. Unfortunately I had to practice my no compromise leadership this week and let our new stylist go. It was an expensive decision to make -she had just completed the training program. Keeping her, though, would have cost us more in client dissastisfaction and the morale issues that arise in a salon when someone is not carrying their weight.

One of my colleagues in our Strategies class goes by the mantra "Hire slowly, Fire quickly." Well, we do generally hire slowly and that should lead to a better match, but this time we made the wrong call. Live and learn...

Meeting Follow-up

2008-04-02T22:30:00.003-04:00

Well, I survived our meeting (see previous entry if you need to catch up). We had what I consider to be a pretty positive meeting. The general theme is that my team wants more communication from the management team.

We all know that communication is the key to--well, everything. And honestly I thought we were doing a pretty good job. But the tribe has spoken and we have not been doing as well as I thought.

I used to do a monthly newsletter to update everyone on what's going on. I quit doing that when I started working in the salon full time and quit my other job. I figured that with me being onsite we wouldn't have the need for a newsletter. Oddly enough, one of the suggestions Monday was to bring back the newsletter. So today I spent some time putting together what I thought would be a mini-newsletter. When I started typing I thought it would be a single page. by the time I got through all the updates I had three full pages. I guess I had more to say than I realized!

Hopefully we're getting back on track. I think the big lesson is you can never let up. It takes constant effort to get things going well and keep them that way.

Brutal Meeting!

2008-03-30T21:52:00.002-04:00

Our last Monday meeting was so brutal it's taken me a week to be able to blog about it. We have been on Team Based Pay for six months. At the time we converted everyone from commission to hourly, we promised to revisit pay at the end of six months. Provided the salon was meeting goals, we would be able to make some pay increases.

Well, we have grown a lot, but not as much as our goals. Furthermore, our key ratio for determining if we could pay raises is below our goal. We want our Cost of Sales to be 55% or lower before we give raises. Eventually that figure will be 50%, but for now we are trying to get to 55%.

The team has worked very hard. The moves we have made created more business so everyone is busier than they were six months ago. In spite of that, we're still around 57 or 58% COS.

My team felt blind-sided when they learned that there would be no raises. That caught me off-guard because it was no secret that we have missed our revenue goals. All of this was communicated at the Monday meeting preceeding the "brutal" one.

So that's the background...here's the story...

The team totally reamed me and my manager. They were vicious - even personal. They were particularly hard on the salon manager, but I think she was just the easier target for them - I know they were really directing it at both of us.

At one point, one of the massage therapists placed the blame for missed goals on us (they were all working hard, so if we still didn't make goal it must be our fault) and wanted to know who holds us accountable. She said the salon manager should have been working extra hours to get revenue up and that owners and managers should be available 24/7 for everyone.

They were like an angry mob. Once it got started it just wouldn't stop. One person says she gets passed around from me to the manager when she has a question (only true when she tries to play "mom" against "dad"). Another says whenever she brings forward an idea it is squashed (totally untrue - she later retracted when we spoke privately). Another complains that we don't have insurance and a pension plan. It became a huge bitch session (and "bitch" can be either a verb or a noun in that sentence).

It was an awful, awful meeting.

During the meeting I did not respond to any of their allegations. I knew they needed to vent and didn't want to appear defensive. (I later found out my failure to react during the meeting pissed them off too).

So where are we now? Well, clearly there is a morale issue so I can't just ignore it. And there were some valid points made during the meeting, particularly who holds management accountable.

So tomorrow's Monday meeting is all about management accountability. We are going to discuss what everyone thinks are management's most important roles and who should perform them (manager or owner). We'll discuss what they need from mgt to be happy and successful in their careers. We'll talk about how to measure the performance of management. In doing that we'll create somewhat of a job description for the management team.

After last Monday a big part of me wanted to just chuck it all. Another part wanted to tell them to quit whining and suck it up. But I do care about the business and I care about each of them. It's important to me that we work together and not be a dysfunctional family. So we're going to move forward, positively and see what we can create together.

Wish me luck.

Update on the Hair Max Laser Comb

2008-03-27T08:46:00.004-04:00

A reader asked me to report back on the success of the Laser Comb. The Laser Comb is FDA approved to regrow hair. We purchased one and sent it home with one of our massage therapists for her husband's use. He used it as directed for three months and reported his findings.

The before and after pictures clearly show an increase in the amount of hair! Our subject reported that it was easy to use (he kept the comb by his favorite TV-watching chair) and he was happy with the results. His wife also used it and noticed thickening of her hair. I'll try to get his before and after pics posted.

The unit retails for $545.

Some manufacturers of laser combs also have salon versions so you can sell packages of salon treatments. We are researching the various options. One idea we came up with is to have a program where a client can rent a laser comb for a three month period. At the end of the three months, a portion of the rent could apply to purchase.

You can learn more about the Hair Max Laser Comb at www.lasercomb.net.

Recruiting Strategies

2008-03-27T08:26:00.002-04:00

We're in a hiring slump at my salon. We need two new stylists but we're just not seeing any good candidates. We brought on an apprentice in January but after about three weeks we cut her loose for poor attendance. When you're short-handed it's tempting to take on anyone just to get a body behind a chair. That will backfire every time! We're forcing ourselves to be patient and wait for the right candidate.

So how do you find a good stylist? We want ours fresh out of school so we send job postings to all the local schools. We also try to schedule times to speak at the various schools. Generally we try to put together a program that will be interesting to the students and that is different from what they get every day at school. Sometimes we'll do a men's cutting class since they don't do as much men's work in school. We encourage students to shadow with us for a few hours to get a feel for our salon. We also conduct tours for the students periodically.

Once we get a candidate in the door, we want as many of our team to meet with him or her as possible. Fit is critical - even more so than technical ability. Technical skills, we can teach, but a person either fits our culture or they don't. We will have a minimum of two interviews, one of them a technical interview where they will cut a mannequin head.

It's a long process that surprises some of the candidates - they are not used to a salon being so selective. Even though we are struggling with staffing right now we are confident that being selective brings the best long-term results.

Building a Team Culture

2008-03-14T21:08:00.003-04:00

It's difficult to create a team culture in an industry that has historically been "all about me". We like to say that it's all about our client, but if we're honest, it's been all about the hairdresser. The stylist is concerned with having that client in HER (or his) chair. When stylists are infighting over clients, the clients pick up on it and it's bad for everyone! Even the newest stylists, right out of school, share the "me" mentality as they try to build "their" book.

We ran into this recently with our newest stylist. She would try to steer clients checking out to prebook with her instead of their regular stylist. Of course, we want them to feel comfortable booking with anyone, but we don't ever want them to feel pressured.

Our front desk team picked up on this, took her aside and gently showed her the error of her ways. She's a young, sweet, enthusiastic but naive girl. They made her think about how the other stylists would feel if they learned that she was trying to steer clients away from them - how would that affect her relationship with her peers. And they reminded her that in a team based salon the important thing is that the client come back to the salon - not to a particular person. She now understands how her personal "marketing" could make a client feel uncomfortable.

I'm pleased with how they handled it - professionally and discretely - and optimistic that it will have the desired result.

Stormy Weather

2008-03-13T12:38:00.003-04:00

Before I owned my own business I loved snow days! The kids would be home from school and we would hibernate inside for a couple of days. Now that I'm a business owner I look at those storms differently! I worry about whether we should close up early so everyone can get home safely. I worry that our clients won't understand if we close early. I worry that the staff will get mad if we don't close early...

Well, Louisville was stuck in the storm that hit last week and we did not open up on Saturday. We had 90 appointments on the book that had to be rescheduled. That hurt. In the salon business you sell time. And once the time passes you never get it back -it's like spoiled milk. So we closed for the day. The staff came back Monday well-rested after enjoying a couple of days snowed in. We're way behind on our monthly goal (as you would expect) but hopefully we'll be able to make that up.

In the days and hours leading up to the big storm I was stressed out worrying about what to do. You don't want to call things off too early and then find out it was for nothing. Likewise you don't want to wait until the last minute when things are already bad. Once I made the call, though, I was finally able to enjoy the snow day. It was a beautiful sight and we had a nice time taking the dogs out in the snow. Sometimes you have to take a deep breath, make the call, and remind yourself it's just money.

Cash Flow Plan, continued

2008-02-28T17:29:00.006-05:00

I'm going to spend more time talking about the cash flow plan because it's so important! This post will deal with how to estimate your revenue.

Your service sales can be summarized by multiplying the number of clients you see in a month by the average service ticket. For example, if you see 700 clients a month and your average service ticket is $50, your service revenue would be $35,000. To have service revenue higher than $35,000 you need to see more than 700 clients, or have a higher average ticket, or both.

So how can you get your number of clients up? Two main ways:

1. Prebooking
2. Client retention

Prebooking - book your clients next appointment before they leave the salon. This will keep them coming in regularly and prevent them stretching out appointments. They will also look better because they are coming in when they need the cut, not two weeks after that! See the post from 10-27-07 for more information on prebooking.

Client retention - each month some clients are choosing not to return in the future. Sometimes this is unavoidable (ie. relocation). Other times, a client service issue is driving them away. Find ways to keep a greater percentage of your clients and revenues will rise. I'll write more on client retention strategies later.

How can you get your average service ticket higher? When was your last price increase? If it's been more than a year, you are probably overdue. Owners hesitate to raise prices but it's part of doing business! Other strategies - do you have any add-on services to sell? How many of your clients could use a brow wax that can ad $10 or $15 to their ticket? What percentage of your clients have color? Do you offer nail services? Does your client need a polish change? How about creating a higher end service...cut and color with a mini-facial while the color processes. The key is that average service ticket does not go up on its own! You need to know what your average ticket is, know what you want it to be, and take action to get it there.

Retail revenue works the same way. Your salon has an average retail ticket and you want to increase it. For clients who already purchase retail you can employ the Noah's Arc strategy - 2 by 2. Purchase one for home and one for the gym; one for the master bath, one for the kids' bath; one for home and one for travel. For guests who do not buy retail is it because you are not making recommendations to them? Asking "So do you need anything else?" as you walk them to the receptionist is not going to generate sales. Do your clients know what products you are using on them and why? (I'm using the XXX shampoo on you because it will prevent your color from fading and give your hair a great shine).

Again, the key is to know where you are, know where you want to be, and have a strategy for getting there. Set a goal, share it with the team, track your progress, and party like rock stars when you hit your goal!

Cash Flow Plan

2008-02-27T21:54:00.002-05:00

A reader asked me to explain the cash flow plan and how it has affected my business.

A lot of business owners don't prepare financial reports for their business. They run the business by the checkbook - if there's money in the bank I must be doing ok. Or maybe you have a tax bill at the end of the year and wonder "how could I owe taxes - I have no money!"

Well the first important point is understanding that CASH does not equal PROFIT. They are two different things. Who cares if the tax man says you made money if you've got no cash? Without cash you can't pay employees, suppliers, etc. Basically, cash is king. A cash flow plan lets you decide in advance what you are going to do with the money coming into your business.

My cash flow plan starts with what I expect the business to do in sales for the month for Service and Retail. Some of those sales won't be paid for with cash, the'll be paid with gift certificates. So I also include gift certificate sales and redemptions in my plan.

On the outgoing side, I have cash outflows in two different sections:

1. Direct expenses are costs directly associated with providing a service. For example, technician pay, cost of retail products, and backbar cost.

2. Administrative expenses are everything else. Rent, front desk payroll, owner/manager pay, insurance, utilities, etc.

As the month goes on, if I see that my sales are going to be less than my plan called for, I take a look at my controllable costs and decide whether I'm still going to do everything in the plan. Of course, some things aren't an option! I still have to pay the salaries, the rent and utilities, etc. But I don't necessarily need to buy a new manicure table or an iphone if my sales are down.

Having a cash flow plan accomplishes a couple of important things:

1. It makes you set goals. You have to set a revenue goal in order to build your plan. Then you take action to help make the plan happen. My whole team knows our goal and we work together to meet it. We have a daily scoreboard so everyone always knows where we stand.

2. You manage your cash responsibly because you don't blindly spend money.

How has it helped me and my business? Having goals that are shared with the team gives everyone a sense of ownership. Instead of just coming in to work everyday and doing the same old thing, the team has a goal and a purpose. Our sales increase because we're paying attention to them. Basically, I'm running my business instead of it running me.

Preparing a cash flow plan is difficult if you don't have a history working with numbers, but it's worth the effort! Being a business owner takes different skills than being a hairdresser. You can't just step out from behind the chair and expect to know how to run the business side of things!

Most salons are either just barely profitable or not profitable at all. You beat the odds by having a plan.

Comments

2008-02-20T20:24:00.003-05:00

My blog has been getting a lot of comments lately and I want to thank everyone who takes the time to contribute!

As salon owners we are our own greatest resource! Let's share ideas and help each other be successful!

Too Much Too Fast?

2008-02-20T19:59:00.002-05:00

Last May my salon manager and I attended a Salon Incubator put on by Strategies Consulting Group. We returned to the salon full of ideas and eager to make some changes. Since that time we have (among other things)

converted the salon to Team Based Pay
created a cash flow plan
set goals
communicated goals and got team involved in achieving them
focused on pre-booking, retail, upselling and sharing clients

Overall, the results have been excellent. Sales for 2007 were 20% higher than 2006 and we've had a significant increase in profitability.

But it hasn't been without its challenges! Focusing on factors that propel salon growth have a direct impact on our clients. It's scary to change how you do things because you don't want to scare off your clients who like you as you are. I mention this because today a long time client told our salon manager that some of the changes make him uncomfortable. So do we stop focusing on what makes the salon grow so we don't upset the apple cart? Or do we let some clients drop off and replace them with clients who do want to pre-book, experience multiple services and purchase professional products?

For us I think the answer is somewhere in between. We will still focus on growth drivers. But we need to do it carefully so as not to appear pushy. I do know that we cannot stop moving forward, although we may do it a little slower. Most salons in the U.S. are marginally profitable, at best. Owning a salon is too much work, too much responsibility, too much risk to just barely get by. We must see ourselves as business people and treat our salons like a business in order to thrive.

Another one Bites the Dust

2008-01-28T19:13:00.000-05:00

Well we lost a second stylist. When the first one left she indicated that someone else was on the cusp. We tried to save her, but in hindsight, her leaving was the best thing for us all.

A few interesting things have happened since then...

We began calling each client that had appointments booked with this stylist. In most cases we were able to keep his appointment time the same, just moved to a new stylist. Many of the clients agreed to the change...a few cancelled and said they were following her. Interestingly, several indicated they had already received a letter directly from the stylist announcing her departure and telling them where to find her. This means, not only did she use confidential client information belonging to the company for her own personal gain--she did it while she still worked for us. Now honestly, that is probably not that uncommon in this business, but it is unethical. In the long run, it actually made her look pretty bad to some of the clients. We are taking the high road, just telling them that she wanted more flexibility than we could offer and we wish her the best. When asked, we would honestly tell the client that we just found out she was leaving on Friday (the same day most of them received the letters). They can put two and two together...we don't need to spell it out!

There was one particular client that I chose to call personally (our Salon Coordinator made most of the calls). This client is a long-time, multi-service client who comes in religiously every two weeks. Of course, he had already received a letter so he knew she was leaving. He told me that he was planning on trying the new place out - the owner is his neighbor, plus he is very comfortable with that stylist. I replied that we certainly understand that, but will still be here if he ever wants to come back in, even for a visit - we'd love to see him anytime.

Later that day, he called back and scheduled with another stylist. When he came in for his appointment, he told that stylist the reason he came back to us is because I was extremely professional when I called, I did not bad-mouth the stylist, and I respected his decision to leave. Before he left the salon that night, he pre-booked appointments for the rest of the year. We consider this a huge win because this is one client that I'm sure she thought she would keep. Actually he was dishing out the gossip, telling us that the departing stylist told him she expected to take 95% of her clients with her! OK if there are any stylists out there reading this, let me just tell you that is an unrealistic number. Departing stylists always overestimate the number of clients they expect to follow them. The average is probably in the 60-70% range, not the 80-90% the stylists expect.

So that's the big news for the week! I feel like the remaining stylists (8 on the floor and one in training) make a great team. The two that left really were kind of a divisive force. We will have a short-term decline in sales without them, but in the long run we'll be in a better place.

One last note - when a stylist leaves our salon, we always tell any client who asks where they can find her. Our goal is to serve the client and if that is what the client wants, we deliver. So there really was no reason for this stylist to steal our data, call our clients, burn a bridge, and appear unprofessional to the clients.

Sales Training

2008-01-17T22:37:00.000-05:00

We brought in a retail sales expert Monday to do a class on Sales Killers and Sales Builders. The class was conducted by Carol Phillips of Encompass One. Carol is an expert on retailing in the salon and spa business.

I knew that Carol would be consulting with us on retailing in general (placement of products, lines carried, retail displays, etc.) but she was more thorough than I expected! Carol walked through our salon with a fresh eye and offered advice on everything from signage to sanitation. She is an expert on branding and had several ideas on how to "tell our story" throughout the salon. For instance, she pointed out that our massage therapy rooms are not "branded" in any way. Aside from the therapist's business cards, there is nothing with our logo anywhere in the room. She recommended a paint color change in our manicure room, sound system upgrades in our spa and artwork changes throughout.

I must admit, some of it was hard to hear! It was all constructive criticism (and that is what we paid her for!), but you hate to hear someone call your baby ugly! Actually I appreciate her honesty and insight and feel like implementing some of her ideas will make us even better.

Leadership Training

2008-01-10T21:45:00.000-05:00

My salon manager and I just returned from a 3 day leadership training session with Strategies in Connecticut. We meet with the same group quarterly for additional training. It's great to catch up with other salon owners from around the country, dealing with many of the same issues. Most of the salons are already team-based pay; others are in the process of converting.

We spend a lot of time this session on Leadership and Coaching Techniques and the distinction between Managing and Leading. You MANAGE systems, you LEAD people. It sounds simple, or even unimportant, but it seems that each attendee has a lightbulb moment when they start to see the difference and the importance.

I realized that I've been doing a lot of things wrong! For example, I have a team member who, in spite of my telling how much I appreciate her, feels unappreciated. I feel like she feels unappreciated every time she doesn't get her way. I do appreciate her, so the problem must lie with her, right? Well it occurs to me during this class that not once have I asked her what "appreciation" looks like to her. I'm appreciating her in my own way, but it is not how she wants to be appreciated. Our old conversation might have gone something like this:

"I feel like you don't appreciate me."
"But I do, I think you're great. We're really lucky to have you on board."

If we had that conversation today my reply would be:

"What can I do to show my appreciation? What does appreciation look like to you...describe it to me."

My original answer was defensive. I basically told her she was wrong. I'm sure she felt really appreciated (and listened to) after that! We both left the conversation frustrated.

I will be trying to put what I learned into practice and hopefull I will have much more productive conversations with my team!

Personnel Losses

2008-01-10T21:29:00.000-05:00

It's not uncommon for a salon to experience some staff losses after a conversion to Team-Based Pay. We knew it was a distinct possibility yet hoped that we could help our team see the possibilities that TBP brings.

In the past two weeks we have lost two employees. One, a talented massage therapist, is starting her own practice. She offered about three weeks notice, which we accpeted, and her last day will be January 25th. Our second loss took place today. An experienced stylist who has struggled with the changes gave notice today. In her case, we actually asked her to leave at the end of the day rather than stay on two weeks. She has been extremely negative lately, has attempted to recruit others to leave with her, and has discussed her departure with some clients. I will not have her poisoning the remaining team for the next two weeks. It was an emotional day for the team, but I hope they will flourish with the negativity gone.

We have been told that a third person may also be leaving but she has not quit yet. While I know the salon will be fine even if we lose an additional person, I hope we can save her. She is high maintenance in her own way, but all in all she is very professional and an asset to the company. It would be an emotional blow to the team if she left.

Our challenge now is keeping the remaining team motivated. We have had very low turnover at our salon so the younger ones are not used to seeing people go! This does open up some opportunity for them and we'll try to help them see that. Meanwhile, we have one new stylist who has just completed her skills certification and another starting soon. We're considering hiring a third, as well. The new staff have never worked in a commission environment so it should be easier for them to embrace our culture.

Whew!

2007-12-27T22:22:00.000-05:00

The holiday rush is over! It was an intense couple of weeks! We had our two biggest sales days ever, back-to-back on December 20th and 21st. Our retail sales were on fire. The eShave luxury shaving line we recently took on was flying off the shelves. I only wish we had stocked more! We closed at 2pm on Christmas Eve and by then we were all exhausted. I'm seriously considering being closed on December 26 next year to give everyone two days off in a row. The day after Christmas tends to be a little slower anyway.

Our gift card sales were strong and should keep things hopping in the spa for the next couple of months.

I will be taking next week off for a quick vacation with the family before the kids go back to school, then I will be in CT for a few days for another training session with Strategies. When I get back I'm sure I'll be full of ideas and, hopefully, energy!

I hope you all had a wonderful holiday season!

Sharing Clients

2007-12-18T22:25:00.000-05:00

From the time they are in school hairdressers are taught to build up a book of business so they will have the stablity of a steady income stream. Unfortunately, that can lead to a bunch of little mini-businesses within a salon, instead of everyone working together as one business. Stylists take pride in their waiting list - it's a badge of honor to have people unable to get an appointment. Great for the ego, but not so good for the salon. The salon needs those people coming in NOW, when they want the cut, not next week. Chances are there are stylists who are only 50% productive who could take care of these clients on waiting lists and keep the guests' frequency of visit high.

When we were a commission salon, our pay system actually encouraged stylists to hoard clients. Now that we are a team-based pay salon, stylists are being compensated based on salon goals, not individual production, so it's to their benefit to encourage their clients to see someone else if they are booked. Easier said than done...

This has been the biggest challenge so far of our conversion. The stylists blame it on the clients (they want to see me, they don't want to see someone else). I contend that we created that attitude and we can change it, but only if the stylists really want it to happen. My stylists will tell a client it's ok for them to see someone else, but if we don't deliver the message properly, they won't believe it.

The other day a guest was running late so he could not keep his appt with his regular stylist. I moved him to someone else and told the original stylist this was a big opportunity for her to express that it's ok for him to see someone else. I encouraged her greet him warmly when he was in the other stylist's chair. Tell him "Hi, Tony! It's good to see you. I'm so glad Tamara could take care of you today, she'll do a great job." So what did she do when he walked in? She said, "Hi Tony". That's it! How do you think that client felt? Did he feel like it's ok for him to be in another chair? Heck no! He thinks that his regular stylist is annoyed at him for not waiting for her.

This is so obvious to me and I don't know what I'm doing wrong that keeps my team from following through on this! I think it comes down to ego. It feels good to have people want YOU and it hurts a little to see them happy with someone else. This will continue to be a big challenge for us in the coming months.

Any ideas out there on how to tackle this one? I'd love to hear them!

Company Christmas Party

2007-12-17T20:59:00.000-05:00

We had our company Christmas party Saturday night. Last year we went to a nice restaurant and enjoyed a great meal and a few bottles of wine. This year I gave my party planners a budget and they decided to have the party in the private room of a local Irish Pub. We enjoyed a meal of traditional pub fare (Shepherds Pie, Fish and Chips, etc.) and plenty of libations. I left at 11:00 but I'm told the party went on until 1 or 2 a.m. (Everyone had a designated driver to get them home safely).

There were a couple of things about Saturday night that stand out for me.

One of our stylists gave a toast saying that a year ago she was in a bad place (unhealthy relationship) and if not for the support of her girls she would not be the happy, strong woman she is today.

Later one of our salon coordinators gathered everyone together for a "huddle". We huddle every day at the salon to discuss our goals and update everyone on sales figures, promotions, upselling opportunities, etc. When we started huddles, everyone thought we were nuts (and sometimes they still do). Well, she had our server bring a piece of paper and a marker and she drew a partially filled wine glass to represent progress to our goal.

"Come on everyone, huddle!! Now so far tonight we have spent $567 and our goal is to spend $800. That means we need to spend $233 more. Now everyone needs to do their part to help us meet our goal!"

Needless to say, everyone was willing to down a few more drinks to get us to the $800. They passed around the huddle sheet for everyone to sign and sent it home with me. They want me to frame it.

To me, these two things say something very special about our salon. First of all, we provide a caring supportive environment for our team. We help each other become stronger. Second, while we've made a lot of changes this year that have been sometimes overwhelming to our team, they've got a sense of humor and at some level they see the value in what we're doing.

I can't repeat any of the other toasts of the evening...just trust me when I say a good time was had by all! Happy Holidays!

On-Line Gift Certificates

2007-12-10T20:48:00.000-05:00

Last year was the first year we offered Gift Card Sales online. It was a big success and I expect that we'll sell even more via the internet this year as consumers become more aware.

This year we've taken it a step further. We've signed on with a company called SpaBoom (www.spaboom.com) to sell online instant printable gift certificates. Today we got our first SpaBoom order! The client gets a link that allows them to print out a customized gift card complete with their personalized message. We get an email telling us we have an order so I know to log into their website and run a report giving me the credit card information that we will process manually in-house. We tell SpaBoom how to number the gift certificates so there will be no conflicts with our plastic cards.

I'm anxious to see how SpaBoom comes into play as Christmas gets closer. They are up and running 24/7 so people can get those last minute gifts on Christmas Day if necessary!

Communication, Communication, Communication

2007-12-06T20:58:00.000-05:00

I've been frustrated with my salon manager lately. We arranged her schedule so she would spend less time behind the chair and have a big chunk of time every afternoon for management duties. Things should have been getting better, but instead I felt like less was being accomplished. We had an employee quit but her schedule was still in the appointment book. Employees had volunteered to pick up some extra hours but those weren't in the appointment book. We needed to hire but recent applicants had not been contacted for interviews. What the heck was she doing?

My frustration built. I vented to my husband who was shocked to hear anything but glowing praise about her. Frustration is a dangerous thing--sometimes it leads us to do very stupid things! I was tempted to call her out on this--why isn't this done, why isn't that done? I knew that was the wrong approach but I wasn't sure what to do to fix the situation.

After much thought, I decided if she wasn't working on what I want her to work on maybe it's because I never made clear what her priorities should be. She did not have a job description and we never sat down and identified the absolutely most important parts of her job. I asked her to think about it and write down the five things she thinks are most important for her as manager. Then I asked her to write down five things she currently does that she thinks she should not be doing. I did the same. We met the next day for lunch outside the salon where we would not be interrupted.

Our Top Five lists were actually very similar. We agreed that her priorities should be:

Scheduling - proactively managing the schedule to maximize productivity
Recruiting
Staff management, employee reviews
Motivate, coach, energize the team
Oversee technical training
Handling complaints of a technical nature (ie. cut or color)

OK, I know that's six, but that's what our two lists of five morphed into.

Things she should not do:

Vendor management, salon improvements, maintenance issues
Complaints of a non-technical nature (ie. basic client service)
Development of retail program (a project she had taken on)

We left the meeting with a great to do list (for each of us), a standing weekly meeting out of the salon, and feeling of relief that we're on the right track. As it turns out, she had been feeling ineffective, and was frustrated at the lack of direction she was getting from me. We had not been communicating and we were paying the price.

That was one week ago today and I'm happy to say we are both energized and we're making things happen!

Saturday Saga Continued...

2007-12-04T11:50:00.001-05:00

After listening to our team at last Monday's meeting, discussing with my manager, and emailing our business coach, I actually changed my position on the Saturday deal. Last week I was opposed to a "seniority-based" approach to Saturdays off. I argued that it creates an
"entitlement" attitude and the benefit may go to someone who is less deserving than someone with less seniority. Well, I actually still have those concerns, but I have been convinced that our Saturday policy should be seniority based anyway.

Our manager pointed out that making Saturdays something that can be earned month by month may create unhealthy competition and resentment. We do a lot of fun competitions within the salon (retail contests, upselling, etc.) but not everything needs to be a competition. She argued that Saturdays should be a benefit we offer in appreciate for years of service. As to the concern that someone undeserving will get the days off - if they're undeserving, why are they still working there!? Point taken.

Our business coach Larry urged us to look for a compromise. I really didn't think one existed, but I heeded his advice and looked closer and I think I found one.

Finally, my team members who had the most to gain from a new policy said that all they wanted was a path to earn more Saturdays over time. They just wanted to know that they would eventually have more than 12 Saturdays off a year (hopefully sooner, rather than later).

The plan we decided on in yesterday's meeting is truly a compromise. My three stylists who have more Saturdays off than the rest of the team (and more seniority) are giving up some of their days. This will allow us to adequately staff our Saturdays and implement a seniority based schedule that provides other stylists with additional days as they complete each year of service.

Of course , not everyone is happy, but I feel good about this solution and hope that any hard feelings (or hurt feelings) will be resolved quickly.

Another Manic Monday!

2007-11-26T21:35:00.000-05:00

It's Monday and that means another Monday meeting! Our topic today - Saturdays off.

When we purchased our salon we inherited a Saturday problem. And instead of fixing it, we made it worse! We had one employee who worked no Saturdays. Why? Because she used to manage the salon and gave herself that benefit. She was no longer manager when we took over, but we did not push the Saturday issue. The salon was just barely profitable and she was the biggest producer. So we looked the other way (fyi - bad idea).

We also inherited a pay plan that allowed staff to earn additional Saturdays off. (All stylists received one Saturday off per month - already pretty generous in this business). So we ended up with one stylist working no Saturdays and two stylists working every other Saturday.

The manager would staff Saturdays as well as she could, given that she had to provide all these days off. That meant we spent several Saturdays under-staffed.

Fast-forward a couple of years and business is booming. We have 10 stylist and 8 chairs. Based on our Saturday history our current goal is to have 7 stylists on Saturday. But when you do the math, it just doesn't work. You start with 10 but one works no Saturdays, so you're down to 9. Two people work every other Saturday so we get one each week but we're missing the other. That leaves us just 7 people to fill the other 6 chairs. Oh, and each of those 7 is supposed to be off one Saturday a month. Well, unless there are 7 Saturdays in a month we either sacrifice our staffing goal or don't give everyone their day off. In the past, it's been the staffing goal that has been sacrificed. We have averaged 6.2 sylists per Saturday over the past several months.

Well those days are over, baby! We will no longer sacrifice company goals and client service. Which brings us to our Monday meeting, talking about the big elephant in the room that everyone keeps ignoring - the disparity in Saturdays off.

We first broached this subject last week in a rather emotional meeting. The stylists with all the Saturdays off were defensive and the other staff were generally too shy or intimidated to tell the others the current way is not fair. I committed to coming up with three options to share with them. We reviewed those options today and I was pleased that more people spoke up. Two of the three options I put before them require our zero-Saturday girl to work at least 26 Saturdays a month. Needless to say, she was not pleased.

Based on the feedback from the meeting I'm making some revisions with the goal of choosing a policy and making it official in next week's meeting. There is a very real possibility that we will lose one or two people over this, but I will not back down on our salon goals, nor will I let two employees hold the salon hostage. It may make the present a little rough, but it will make for a brighter future!

Be strong and don't compromise your values!

Happy Thanksgiving

2007-11-22T11:11:00.000-05:00

Three years ago I was getting up each day and going to a job I hated. I was doing exactly what I didn't want my kids to grow up and do...work only for the money. I knew things had to change.

I'm now out of the corporate world and doing something I love. Every day I'm thankful for my great team, our wonderful clients, and my fantastic husband who fully supported me taking the leap to business ownership.

Happy Thanksgiving! Follow your dreams!

Monday Meeting - Time Off Policy

2007-11-20T20:42:00.000-05:00

This week we tackled a very sensitive issue. We're re-writing our vacation and sick pay policies. As a part of our commitment to the staff to communicate more openly, we are discussing this as a group in our Monday (voluntary) leadership meetings. I drafted a new policy for discussion purposes, which was our starting point for the conversation.

One of the first changes I want to make is to eliminate the distinction between vacation and sick pay. Currently, we have vacation pay and sick pay. Those who do not use their sick days do not get paid for the unused days. I actually have one full-time employee who has been with us for almost three years who has never had a sick day. Another has had just two sick days in three years. Under the new policy we will have "paid time off" that can be used for vacation or sick days. Unused days will be paid in the first pay period of the new calendar year. I didn't have to sell this idea at all - everyone was totally on board with the change.

The second significant change I want to make is to award the paid time off in "hours" not days. We have team members who work short shifts like four hours, and others who work ten hours a day. When time off is granted in terms of "days" it's confusing to determine just how much paid time off someone gets. Basically, we'll be converting days of paid time off to hours for ease of administration. For example, full time employee who earns 5 days of paid time off per year will actually be awarded 40 hours of paid time off (5 days x 8 hours per day). Part-timers will get less paid time off, based upon how many hours they regularly work. For example, 5 days of paid time off for a part-timer may be 30 hours per year (5 days x 6 hours per day). It took some explaining to get everyone on board with this concept, but once I managed to explain it properly everyone was in agreement.

Our plan is to offer 8 paid days off after one year of service. The next step is to figure out how people can earn more than the 8 days (which is basically replacing 5 vacation days and 2 sick days + an extra). The jury is still out on this one. Some want to base it soley on years of service. Others want to make it something that is earned by more than just sticking around. My biggest concern is making it something the company can afford to pay! Most of our team members have been with us for at least two years, so we could be taking on a sizable commitment.

We adjourned the meeting without a final policy. We'll continue next Monday. I'm very pleased at the participation we're getting for our voluntary Monday meetings, and equally pleased at how fair and balanced the group is as a whole. There's always the fear when you open things up to the team like this, that they will be very one-sided. But they've been very good about balancing what they want with what makes sense to the business.

It may take a few more weeks to get this policy finalized but when we do, it will be the product of the team so I'm sure we'll have the buy-in to make it a success.

First Team Bonus!!!

2007-11-18T22:22:00.001-05:00

We have filled our first Team Bonus Bucket! It's a great milestone for our company.

Out of 16 employees, only five were eligible for a share of the bonus. Everyone else had at least one unplanned absence and the team decided that any unplanned absences would make them ineligible for bonus. For those who earned the bonus, it's a nice sum since it's being split only five ways. Hopefully it will be a nice incentive for everyone to work toward.

It took us from October 1 to November 17 to fill the first bucket. We're trying to fill the second bucket by the end of the year.

Benefit of Team-Based Pay...Benefits

2007-11-18T21:45:00.000-05:00

One of the greatest benefits I'm hoping to gain from our conversion to Team-Based Pay is employee benefits for our team! Right now we offer paid vacation and sick pay, but beyond that there is nothing. No pension, no medical insurance, no dental plan, no maternity leave...

With Team-Based Pay these things become a distinct possibility. We're not there yet, but I can see them in our future. I have several young, newly married women working for me and I can see a baby boom coming. With team-based pay, we can afford to pay maternity leave, as long as we can keep sales up. You should have seen their faces light up when I told them this is possible!

The key is "training" our clients to come in anyway when their favorite stylist isn't available. If they decide to wait it out of get their hair cut elsewhere when their stylist is on leave, our numbers will drop off and the money isn't there for maternity leave. But if our stylists can convince them that 1) it's OK for them to see someone else and 2) we WANT them to see someone else, then we can keep the sales up and afford the benefit.

This may be just the carrot we need to get everyone fully on-board with TBP.

Giving Credit where Credit is Due

2007-11-14T19:07:00.000-05:00

To jump start our retail we have split the salon into teams and started a retail contest. Everyone is on a team, whether they are Front Desk or a Technician. The contests really do fire people up and get those competitive juices flowing, but it also creates a problem...

When a sale is a team effort, who gets credit? Tonight a stylist introduced a product line to a client then walked him up to the front desk and left him with the Salon Coordinator to close the deal. She had another client waiting and had to move on. The client ended up purchasing over $160 of luxury shaving products. And, of course, the stylist and salon coordinator are on different teams for the contest. Who gets credit? We're not a commission salon, but if we were that would be another question - who earns the commission?

It's hard to play like ONE team, when you subdivide into smaller teams. I think we're going to have to go with some type of dual credit for contest purposes. I'm going to take this one to the team at the Monday meeting and see what they think.

Salon Today 200

2007-11-12T23:03:00.000-05:00

We just got notified that we will be included in the Salon Today 200 list of the 200 fastest growing salons in the US! We are in the $500,000 to $2,000,000 sales category. Promotional packages come out in December and we'll be listed in the January issue of Salon Today Magazine!

We are so proud!! We'll need to think about how to leverage this good news and turn it into even more growth!

Monday Leadership Meeting

2007-11-07T22:15:00.000-05:00

Our second Leadership Meeting was this week. Again, we had great turnout.

We finalized our Bonus Qualifiers after some great discussion. Team members are eligible for team bonus if:
1) They were on time every day
2) They had no unplanned absences (sick days)
3) They attended daily huddles and mandatory meetings
4) They were in dress code daily
5) They had no more than one planned absence in the bonus period

The challenge in all of this is getting people to think of getting the bonus as a reward, versus thinking of it as a punishment if they are ineligible. For example, we are not trying to punish people for having a sick day. Sick days happen. Funerals happen. Accidents happen. There are legitimate reasons why people miss work. But when someone misses work - regardless of the reason - it affects our ability to meet the needs of our clients.

Life Lessons from a Wise Woman

2007-11-03T18:14:00.000-04:00

I attended the funeral of my 94 year-old grandmother Saturday. My grandmother was widowed unexpectedly in 1958 and left to raise 12 children, with limited resources. She was an extraordinary woman who inspired many. At the reception following the funeral many of her children and grandchildren spoke of their memories of her. One of my aunts told this story.

As a young girl of 8 or 9, Teri was harrassed relentlessly by her six brothers to stop biting her nails. They went to their mother in hopes she would tell Teri to stop. Instead, my grandmother told them to leave her alone. "She can stop, and she will when she's ready." This simple comment told my aunt her mother believed in her. It gave her the confidence to quit biting her nails on her own.

Teri recalled this lesson many times in her life. When she was tempted to make excuses for herself she was reminded that she has a choice and she controls her own destiny. This is what my grandmother did - she made people believe in themselves.

Out of the Comfort Zone...

2007-11-01T22:00:00.001-04:00

I've been trying to step out of my comfort zone lately. I taped a square on the floor of my office with masking tape to symbolize my comfort zone. Whenever I look at it I am reminded that I need to step out of the box.

A hairdresser's styling station is her comfort zone. We're asking our team to try a lot of new things. To help things along a little, we decided to give everyone a push out of their comfort zone--we reassigned all the stations.

Our reasoning? Every day our stylists are going to the same place and doing the same thing. Now that they're in a new place, it will be easier to try new things!

We were actually surprised at how well received the change was! Starting Monday our stylists will have new neighbors which will give everyone a chance to learn and grow.

Goals

2007-10-31T22:12:00.000-04:00

We've only been setting salon revenue goals for about the past 5 months. Getting everyone engaged in the business and working toward the goals is a difficult process that takes time. As I looked at the final numbers for October tonight, I found myself frustrated that we missed our revenue goal by a pretty significant amount (8%).

But then I brought up a spreadsheet I keep that shows key data from 2004 forward. As I looked over the historical information I was reminded how far we've come. And I was reminded that we don't have to do it all in 6 months. This is a marathon, not a sprint; a crock pot, not a microwave. I need to keep it all in perspective and keep heading the right direction.

Sick Days

2007-10-30T21:33:00.000-04:00

We've had a rough month for sick days. It seems like almost everyone was out for at least one day. I get very frustrated with the absenteism. I do believe that most of it is legitimate, but every now and then I wonder how sick some people really are when they don't come in. I mean, there are different levels of sick - some you should tough out for the sake of your clients and the salon. Other times, you belong home.

Years ago I worked for a hateful woman at a company where youI always felt guilty if I missed work for any reason. I just got the feeling that she didn't really believe that I (or the kids) were sick. I resented her for that and I don't want to be that person - but sometimes I see her in me (shudder).

I've been blessed with healthy kids. Before yesterday, my son hadn't missed a day of school since 1998. My daughter has missed maybe 2 days this millennium. So I think maybe I forgot what it's like to have a sick kid at home. I'd forgotten the guilt of not being able to work, or feeling like you're letting someone down. I'd forgotten the guilt of feeling like you're not taking proper care of your child because you're worrying about work.

My son is still fighting a fever. I sent him to school today but that may have been a mistake and we may both be home again tomorrow. When I do go back to the salon, it will be with renewed empathy for sick employees and their families.

Our First Leadership Meeting

2007-10-30T21:14:00.000-04:00

Monday morning I got a call from the Salon Coordinator who was scheduled to open the shop. She was covered in hives and couldn't come in so I had to rush out to run the desk. Meanwhile, my 16 year old son was home from school with a 102 degree fever so I was stressed about leaving him alone. I called my Front Desk Manager who said she would shower and come in and we would cover the desk with unbooked technicians as needed.

But as luck would have it, Monday was the day of our inaugural leadership meeting. The meetings are totally voluntary and present an opportunity for anyone who's interested to have a say management of the business. So I missed the first one! Our Salon Manager Liz was there along with about six employees, which is pretty good turn-out I think. I'm still waiting to be fully briefed, but Liz left me a VM saying she thought it went great and she saw real signs of us being a true team!

One thing I know they covered was booking order - the column order we use in our appointment book for distributing the non-request clients. In the past booking order was based purely on sales. Since individual sales numbers are not a salon "growth factor" we don't want to continue booking on that basis. We've decided to switch to new client retention as a basis. Our new client retention (for stylists) runs about 37%-48% depending on the month. The average for all salons is about 30% so we are consistently better than average, but our goal is a very aggressive 60%. Our new priority for booking gives everyone a chance to be in that coveted left-hand column and will be added incentive to give every new guest that ultimate experience.

I'm sorry that I missed the first meeting, but at the same time, I wonder if maybe me not being there made it easier for them to step up and and be leaders.

Disaster Recovery

2007-10-28T13:23:00.001-04:00

I used to work for a large corporation and every so often we would have "disaster drills' where they would cut all systems over to the back-up servers and see if we could still function.

As a small business owner I understand that I should have a disaster plan but I really don't. I've figured a few things out but there's a lot of unfinished business.

Things I've done or kind of /sort of know what to do about:

I know if we have a phone outage I can forward all our lines to a cell phone. I found a good phone system guy, he's familiar with our equipment, and will come running when and if something bad happens.
I get daily backups of our salon system but they are not offsite so if there is a fire, we're screwed. (To do - find an online archive service)
I have maintenance contracts on my HVAC which gives us priority repair service
My HVAC guys are also plumbers who have inspected my hot water heater and told me they can have us up and running again within 6 hours if our hot water heater dies (and it's pretty old)
I have employee phone numbers in my cell phone
I can change our salon voice mail message from any phone

What I don't have taken care of:

I don't have a battery backup for my server. No excuse. They only cost about $80 so shame on me. If we get a power blip, the server reboots and it slows things down greatly at the salon.
I don't have an offsite back up of my salon system - inexcusable.
I don't regularly back up my quickbooks and when I do it's on a flash drive that I carry around in my purse.

Actually now that I've written it down, it doesn't seem so overwhelming. I think I'll go buy a battery backup today and search for an archive service.

Communication is Key

2007-10-28T00:17:00.001-04:00

At our last team meeting it was brought up that our employees felt that we (my manager Liz and I) had not effectively communicated upcoming changes to them. The result, they said, was a lot of worry and rumors about what would happen. I've tried to take that to heart and communicate more often and more openly. We had a great opportunity to practice that this week.

We have a stylist who has been with us for about six months. She has decided to quit and go back to college. When she told me this, she said she could stay until Thanksgiving or Christmas - either was ok with her. Of course, we want her to stay through Christmas because we'll need all hands on deck. The kicker was that she wants the Saturday after Thanksgiving off. Well no one in our salon gets that Saturday off so it had the potential to become a big deal. Liz and I totally diagreed on how to handle this.

My view: The clients come first. And what's best for them is that we are fully staffed through the holidays. I said give her the day off and explain to the rest of the staff why we made that decision.

Manager's View: Other employees will think she is getting preferential treatment. It will affect morale. She would rather let the stylist quit effective Thanksgiving.

So there we stood in the office, both of us feeling very strongly about our positions. I was prepared to back down because I don't believe in tying my manager's hands. If she felt that strongly about it (and she knows the team well) I would support her. We decided to think on it and get together later.

Then it hit me - communication is the key. And not just telling them what we're doing and why, why not let them help make the decision. Liz and I discussed it and decided to take it to the team. She started by approaching the toughest nut to crack. She explained that Ashley was leaving and if she left at T'Giving we would be short-handed which would make it harder for us to take care of clients and meet our goals. The response caught us off guard. She said "First of all, I don't care if she takes the Saturday off. That's no big deal. But if you're worried about December, I'll pick up her Monday hours." Another stylist offered to take her Wednesday hours.

With one simple conversation we showed that we trust our team and respect their opinions, and we covered half the deaprting employees hours!

If we hadn't taken this to the team we would have been forcing our decision on them instead of letting them own it. And even if we explained our logic, the decision would never have the same level of support that we have now.

These little triumphs fire us up so much!

Insurance

2007-10-28T00:13:00.001-04:00

I found out recently that my business liability insurance covers my hairdressers but not my massage therapists! Ack! I had my agent look for coverage and it's ridiculously expensive. He recommending buying coverage through the AMTA, which is what we will do.

The moral of the story is to understand what coverage you have and what you don't have. Fortunately we did not have a claim situation so we were not harmed by this coverage gap. I try to meet with my agent once a year to have him explain what is covered under my policies. And I call him whenever I have a question.

Right now Southern California is experiencing wildfires that are destroying business, or at least closing them down temporarily. If a catastrophe like that happened to you (fire, flood, hurricane) what coverage would you have? Don't overlook coverage that provides loss of income in the event you have to evacuate or are displaced for some reason.

Ask lots of questions and if your agent seems impatient or just wants you to trust that they have provided you with everything you need, find a new agent. Ultimately it's you who pays the price if you don't have the coverage you need so make sure you understand it.

Referral Program

2007-10-27T22:31:00.000-04:00

Had a great idea at the salon today! A gentleman came in for a haircut and he brought with him his 8th grade daughter. She said that a lot of the boys in her class come to our salon. While she was waiting for him she got on her cellphone and talked and talked and talked. That got me thinking...

We are a men's salon. And it's hard to get guys to talk about where they get their hair cut. But girls - they can talk. So I told Gillian that I'd like to talk to her before her dad gets done. I told her about the rewards program we'll be starting soon and how her dad will be able to earn points and cash them in on services. I told her I was now thinking about having a rewards program for women - after all, they are more likely to refer men to us than other men! So for every friend of Gillian's who comes into our place she will get 1,000 points. When she gets 5,000 points we will send her a gift card for $25 to a popular mall (the award was her idea). For rewards I'm thinking:
5,000 $25
10,000 $60
15,000 $120
20,000 $200
If one woman or girl sends me 20 new clients in a year, I'm only too happy to give her a $200 gift card. So, thanks to Gillian we will be kicking off our Rewards for Her program at the same time we roll out our program for the guys.

New Retail Ideas

2007-10-27T22:16:00.000-04:00

We're always on the look-out for new products to retail in our salon. A client recently approached us with an interesting idea. He has been using a Laser Comb that is actually FDA approved to regrow hair. Sounds too good to be true - but FDA approved? So we're looking into it. He is interested in distributing the comb through salons so we are in the investigatory phase of this endeavor. We ordered one of the combs ($500-ish) and have the husband of one of our massage therapists beta testing it. He will be logging his usage and we'll compare before and after photos. We'll know more in about 12 weeks...

Another client has approached us about tooth whitening. Tooth whitening in a salon? He says he's cleared it with our state dental board that it is not practicing dentistry. It's a system that uses some type of tray and gel and a $7,000 light. He was proposing providing the light for our use and sharing revenue for some length of time. I'm not sure this fits in with what we do, but then again, we are in the beauty industry.

There is one new line that we just added. We brought on luxury shaving line eShave (www.eshave.com). It's a beautiful line of razors, shaving brushes and stands, plus great creams and lotions. We're hopeful that it will do well during the holidays. I brought home a starter kit to have my husband try shaving with a brush for the first time. He loves it! You get a much closer shave using a shaving brush than with regular shaving cream applied with the fingers.

About 18 months ago we added Dermalogica (www.dermalogica.com) skincare to our product line up. Prior to that we did not have a skin care line. I'd say we've been moderately successful with the Derm line - definately more so since we brought on an esthetician full-time. She's a retailing machine!

Have a great retail idea? Let's hear it!

Leadership

2007-10-27T22:03:00.000-04:00

We're trying to identify leaders in our salon. Now that we are Team Based Pay (TBP) everyone needs to quit thinking about only their own column in the appointment book and start thinking of the goals of the entire salon. Together we can accomplish so much more, and we will all benefit. We need people to step up in the salon and set a good example. To live team based pay; to help motivate people to work the systems.

Our business coach from Stategies shared something he did in his own salon when they converted to TBP. He had a voluntary weekly leadership meeting to discuss salon issues. We're going to follow his example and have our first leadership meeting scheduled for this Monday! (I need to figure out what we're going to talk about). The meeting is totally optional and will be paid time. My hope is that these meetings will empower the team and make them feel like they have a say in what we do and how we do it.

Recruiting

2007-10-27T21:40:00.000-04:00

How do you recruit new stylists? Do you look for experienced technicians with a book of business or do you want them straight out of school? At our salon we have decided that we want them fresh out of school. When we've hired experienced stylists/massage therapists we've found that it was difficult for them to adapt to our corporate culture. It's especially difficult if they came from a contractor situation versus an employee situation.

We hired a massage therapist who had worked independently for some time. During the 18 months she was at our salon she never really belonged and she never accepted our culture. We expect our massage therapists to be just as much a part of the salon as the stylists. If there's hair to sweep, grab a broom; if there are towels to fold, get folding. She had the attitude that if she wasn't doing a massage she wasn't getting paid therefore she could just sit around. It never should have taken us 18 months to let her go. We held on too long because we didn't have anyone to replace her.

The main massage school in our area is just awful when it comes to helping us find people. They will not let us talk to their students. All they offer is a three ring binder that we can put a job posting in. Fortunately a local college recently added a Massage Therapy program. We have hooked up with them and will be getting an intern Monday! We will have her for 10 hours per week for five weeks, then she graduates and hopefully we hire her! We are optimistic that this new program will become a feeder system for our massage therapist needs.

For stylists we have a great relationship with one of the local beauty schools. We visit them about twice a year and do a class for their students. We open the floor for questions and invite the students to shadow with us. All of our hires for the past two years have come from the same school.

One thing I've always thought about, but never done, is hosting an open house for students. I think it would be fun to invite them over one evening for refreshments and a tour. It would be a good chance for them to get to know us a little bit.

Now that we have our Massage Therapy recruiting situation under control I'd have to say that front desk is the most difficult position to recruit for. Fortunately I have a fantastic front desk now but it wasn't always that way! About this time last year I let go two of my three front desk people. I had one replacement lined up, but I ended up working the other hours myself until we made a hire. It was well worth it. My front desk sucked! I wasn't going to go through another holiday season with sour-pusses behind the desk. They were chasing people away.

I'm a little concerned now that one of my front desk people will leave. She's in nursing school and is only working about six hours a week. I think even that may be too much along with school. Trying to find someone to work just six hours a week may be even harder than finding a full-timer! Hopefully she'll stick with us or I'll be up there behind the desk again!

Merchant Services

2007-10-27T21:31:00.001-04:00

If your salon takes credit cards (and don't we all) it's important to pay attention to credit card processing fees. If you take a look at your monthly statement you'll see that there are about a million different rates. You pay one rate for a debit card, another for a regular credit card, another for an affinity (rewards) credit card and the list goes on. You pay more if the card number is manually entered than if it is swiped. There are per transaction fees and % fees.

If you're happy with the service your credit card processor provides, you should at least contact them once a year for a rate review. Every time I do that I get a rate decrease.

If you're in the market for a new processor there are a couple things to beware of:

Know whether your old equipment will work (and whether you own it or are renting it). The equipment is expensive!
Make sure the processor you go with is reputable and you know when they will fund. My vendor puts the money in my bank account next day. Some may take two days or more. I've heard of salons getting into serious cash flow problems because their credit card transactions had not funded yet.

Salon Websites and Search Engines

2007-10-27T21:12:00.000-04:00

Our salon has had a website for several years. We occassionally look at the statistics from our ISP to see how many hits we're getting (I don't do this nearly as often as I should). We've noticed that over the past couple of years we've gotten a lot more traffic. We're also showing up higher in the search results. If you google our city name and "men's salon" we are right at the top. That's a far cry from three years ago when we were buried pages and pages back.

A little over a year ago I was signed up with City Search to be a sponsored link. It got us at the top of their listings and we paid $1 per click on our link. I set our upper limit at $150 a month and had an online offer to track use. We were always billed the full $150. After several months we had only seen one or two of the offer coupons coming in (it was 20% off first visit) so I terminated the city search contract. They tried to scare me into staying with them by saying that we would drop in the search results, but fortunately that hasn't happend. We are way down the list within city search, but on a google search we're up there.

Back when we purchased the salon my husband, who has an IT background, was in charge of improving our search engine rankings. He did a great job, but of course, now when I ask him what he did, he can't remember! I do remember that he signed us up with Google and Yahoo - I think there's some way you register your business. I remember that he was entering our hours of business, etc. There are even some ratings out there on us.

I also try to get us linked to as many other websites as possible. If we advertise on the radio or TV, I always try to get a link on their page. The more sites you're linked to the higher your ranking will be.

There are services out there that offer to "optimize" your site and improve your rankings. If anyone reading this has used a service like that I'd like to learn about it.

We find that a lot of our new guests found us on the internet so I think it's definately worth the effort to improve and monitor search rankings.

The Power of Pre-Booking

2007-10-27T19:13:00.000-04:00

Pre-booking a client's next appointment before they leave the salon is the most effective way to increase frequency of visits and therefore, sales. We know this, so we make it part of our procedure to always ask if guests if they would like to book their next appointment. We were feeling pretty good about ourselves when we got our prebooking up to 18% from virtually none. The other 82% would say "I can't, I never know my schedule."

Our business coach from Strategies came to town to do a class for us. We talked about the importance of prebooking and the next day he promised to buy us all Starbucks if we prebooked 50%. Prior to that day our best prebooking rate was 24%. I admit - I thought he was nuts. There was no way we could prebook 50%. After the first two guests of the day checked out we were 0 for 2. My salon coordinator looked dejected. Then our coach told her to go back up front and book appointments for the guests who were currently in the styling chair. When they check out tell them, "Since the holidays are coming up I took the liberty of booking your next appointment for you. Let us know if this time doesn't work for you." I was mortified. She came back a few minutes later..."2 for 2!" We prebooked 79% that day. I had my coffee with a side order of crow.

Since that time we have changed our confirmation procedures to two days in advance instead of one. We still had a sharp increase in no-shows. The beauty of it though is that even with the no shows we were busier than we'd been in months! We've settled in to about a 55% prebook rate. Since our book is more full, those who choose not to prebook are finding it more difficult to see their preferred stylist. We figure it's just a matter of time before we win them over.

The holidays are a perfect time to start a pro-active prebooking program. There's a built-in excuse! We've shared this story with other salons in our coaching program and they have all had similar results. Try it and let us know how it works!

Advertising and Marketing

2007-10-27T09:53:00.001-04:00

There is no end to the advertising opportunities that salon owners are constantly bombarded with. Yellow pages, local papers, newsletters, shopping carts, billboards, bus shelters, direct mail, magazine ads, specialty calendars, tv, radio...it's enough to drive a person crazy. I'm going to talk about some of the things we've tried and the results we saw. Keep in mind, I'm no marketing expert. Managing the marketing budget has been a big challenge for me because I have no background in it and there are so many salespeople wanting a piece of me.

One of the problems with advertising is it's difficult to tell if it's actually working. Just because you put an ad on the radio doesn't mean people will come running through your door. But just because they are not running through the door doesn't mean it's not working. They may remember you when they are ready to switch salons. So you may be gaining name recognition and reputation even if you are not seeing new clients. We are now advertising less than in the past because we are getting many clients through referrals. I believe that the advertising we did in the past helped get us to this point.

Direct Mail - The thought of direct mail makes me cringe. I hate junk mail! But the former owner of my salon (and founder) discovered that very targeted direct mail can be quite effective. The piece we have had historical success with is what we call a "new mover" ad. We send out a piece monthly to people who have purchased a home in surrounding zip codes. We do not mail to apartment dwellers because we are on the high end price-wise. The piece is a very professional tri-fold that offers a free haircut to the recipient. This was an expensive program to run. We would order a year's worth of "shells" at approximately $0.16 each, then each month the direct mail company would prepare the list, do the mailing and bill us for postage. Our monthly costs runs about $400 to $700 depending on how many new movers there are on the list. Since we were a commission salon until recently we also had the commission cost of providing the service because the stylists would receive full commission for the service. Direct mail costs alone cost us about $6,000 per year and we gave away another $5,000-$6,000 in services for which we had to pay our employees.

After we took over the salon we continued this program and just recently decided to discontinue it. We are finding that most of our new guests are coming from referrals now so this program is too expensive to continue. For a newer salon without referral-power, however, it's something to look at.

We did another direct mail piece last year called a "like prospect" mailing. The direct mail company takes a dump of your client database and runs it through their systems to find households that meet the demographic of your clientele. We paid $0.50 a piece (including postage) for a nice mailer that sent a $10 gift card to prospects. I think about 7,500 went out and my gut feeling is it wasn't worth it. Unfortunately with my old salon system it was difficult to track effectiveness of an ad campaign. Given the cost, though, I don't anticipate doing this again.

Yellow Pages - Have you noticed how the Yellow Pages sales people always seem to drop in that your competitor is taking out a 1/2 page ad? They try to scare you into purchasing some ridiculously expensive ad for fear that all the new clients will go down the street. At our salon we ask every new client how they heard about us. I actually made it a required field so they have to collect this information. In three years we have had 3 people - THREE - say phone book. A couple of years ago I did experiment and purchase a big ole ad for about $3,000 per year. It was right at deadline time and they still had half the inside cover available and were selling it for a fraction of retail (which of course we know is a made-up number). Anyway, we tried it and noticed absolutely no difference in our phone activity or new client traffic. I think now we take a bold listing in the real yellow pages and a free listing in the copy-cats. Cost is still about $360 a year. My advice - don't let them scare you. Pass on the big ad.

Newspaper - This is one we haven't tried. We are a single location salon and the newspaper is soooo expensive because you have so much reach. The trouble is we would be reaching people on the other end of town that would never come all the way out to see us for a haircut.

Magazines - Our town has a couple of local magazines. One of them is a glossy, classy high end magazine that takes subscribers. The others are freebies you can pick up at Panera - one catering just to women, the other about health and fitness. The only time I have advertised in these in when we have been featured in them. For the health and fitness magazine, when the owner came to try to sell me an ad for their Men's Health issue, I offered to write an article on men's skin care. Since they were kind enough to publish it and we got some great PR, I also purchased a small ad but it cost me $400! We didn't get much traffic from the ad but I think we got our name in front of a lot of women who may be buying their guys gift cards for Christmas this year. The classy glossy magazine named us Top Spa for Men in the city so we were actually featured with a nice article and photo. This just happened recently (October 07 issue) and we are definately seeing some traffic from this exposure. To go along with the great PR from being named top spa, I purchased ads in the Oct., Nov. and Dec. issues. The ad in the spa issue was 1/4 page and I'll have 1/6 page in the gift guide section of the Nov and Dec issues. This is a first for us so we don't know yet how effective it will be. I'll let you know!

Radio - We've done a fair amount of radio in the past. We would typically do some ads for one week before Christmas, Valentine's Day and Father's Day. Often we would also pay an extra $400 or so to have a live remote at our salon. We would have someone from the morning show of a station popular with females come out to broadcast live. We never got much foot traffic, but we would see an uptick in gift card sales. Usually we would run a special for "their listeners only" offering 10% off gift card purchases that day only. Sometimes we were also able to go down to the station the morning of the remote and do a quick on-air interview during the morning drive. This year we are not going to do the radio, but I do think it has helped us to get our name out there.

TV - We did some TV spots last year on our local cable shopping channel. This is one of those cases where I can't link specific new clients to the program, but I think it got us a lot of familiarity. My employees tell me that three years ago (when we bought the salon) if they told someone where they worked, the reply would be "where?" We just had no name recognition. Now when they tell someone where they work, they get instant recognition. These TV spots cost us about $400 per week and we had to commit to 13 weeks. They didn't have to run consecutively so we were able to run some before Christmas and save some for Valentine's Day and Father's Day. I'm not sure if I would do it again, but I have no regrets.

This holiday season we're thinking of sponsoring a local talk tv show one day. We will partner with other businesses in our shopping center so the cost is minimal. It probably won't translate into instant sales, but it will keep our name out there. Plus another benefit of the TV and radio advertising is that it is very visible to the employees. It's important for them to feel like we are promoting the business.

Calendars - There is a business in our town that puts out a local calendar that is distributed to households free of charge. It has vintage photographs and includes a lot of local events. It also carries advertising and coupons which is how they manage to send them out to households for free. We put a coupon on the bottom of three months a couple of years ago. Our hope was to attract new business, but this was totally misguided on my part. Virtually all of the coupons that came in were used by existing clients. In hindsight, I think "duh". We are an upscale salon and it's not likely that we're going to attract new business from a coupon on the bottom of a calendar - I mean we're not SuperCuts (no offense, SuperCuts - it's just a different market). So that is one that doesn't work for us, but might be great for a more value-based salon.

Charity Auctions - This one isn't technically advertising, but it's something we do a lot of. I think every charity in town that is having a silent auction knows to ask us for a donation. We never donate cash - always a gift card. We ususally do a $50 gift card and we send it with a nice glossy flier and a service menu. It puts our name in front of a lot of people as they check out the auction items and it helps the community. Often the requests come from our clients for a charity they support, so it's also goodwill with our clients. It's a good way to get your name out there.

New Kid on the Block

2007-10-27T09:45:00.000-04:00

Our salon has 17 employees, all women. They're a very close-knit group. They socialize a lot outside of work and consider each other family. The tricky part is bringing in a new employee. It's just such a close-knit group, it's hard for the new kid to feel accepted. Sometimes I think the existing employees are really unfair to the new girl, finding fault with everything. Maybe they feel threatened - I really don't know.

If other salon owners or managers have experienced this and have some advice to offer, I'd love to hear it! We're getting ready to hire someone and I want to do everything in my power to make it work.

Dealing with Conflict

2007-10-27T09:36:00.000-04:00

I don't like conflict. So I guess I really have no business owning a salon/spa with 17 employees because there's bound to be conflict! It's a struggle for me every time I have to have one of those hard conversations. If I walk through the salon and notice that no one has swept the floor, yet everyone is sitting in the break room, my first impulse is to sweep the floor myself, say nothing, and grumble to myself about why no one swept.

I've learned a lot from watching my salon manager in action. She's very good about pointing out those things without it ever becoming a big deal. Since she stays on top of small issues, they don't become big issues. Have a stylist that has been late two days in a row? She will talk to them immediately about punctuality, reminding them how important it is. Usually the problem is solved. Of course sometimes it's not and then you eventually get to do the really hard conversation - the "we think it would be better if you found a different job" conversation.

We all have our comfort zone and we all need to step out of it from time to time. For me, I have to constantly remind myself to face conflict head-on. Just take a deep breath and do it. I'm always glad I did.

Client Rewards Programs

2007-10-27T08:38:00.001-04:00

My team has been saying for years that we should do something nice for our clients. I agree - we all know it's easier to keep a client than to get a new one. So why do we put so much effort into getting clients then do nothing special for our current clients? Years ago, before I owned the salon, they used to give clients a travel size shampoo for their birthday. I always thought that sounded kind of cheap. Some employees have suggested a frequent guest program where you get your 10th haircut free. Again, I love the idea of rewarding our guests, but haircutting is our major source of income. If I give away every 10th cut, am I not just giving away about 10% of our revenue? At the time that was suggested we were still a commission salon and you know the stylist would still expect to be paid for that free cut. It just wasn't an affordable, practical idea.

Our new salon software supports rewards programs so we are looking at implementing one in the next couple of months. Our software assumes that points convert to dollars at the rate you specify - for example 100 points = $1. We select the ways points can be earned, then they can be redeemed just like cash for any product or service. That brings up the old problem of me not wanting to discount my core business, haircutting. I don't want people earning points then not paying for their haircut. I want them to spend the points on something else. So we're designing ours a little differently but it will still work with our software. Here's what we've come up with:

Points can be earned by:
Referring a new client...........................1,000 points
Prebooking your next appointment.......200 points
Trying a new class of service...................500 points

These are all behaviors we want repeated so we will reward them.

Instead of points being redeemable for anything, we have a list of reward they can spend their points on:
500 points - shoe shine or travel size shampoo
1,500 points - 8 oz shampoo
3,000 points - manicure or grey blend (we are a men's salon)
4,500 points - 30 minute massage, facial or pedicure
7,000 points - 60 minute massage
10,000 points - 90 minute massage

Note that no where am I hurting my cash flow by letting them pay for haircuts with points. My hope is that having a list of awards will get my clients working towards a goal. If they are just spending the points as they go, they never set their eye on a prize and work towards it. I want someone to think "If I refer 10 people I can get a free 90 minute massage - I can do that."

We're planning to roll this out in November and run it through December 2008. Points will expire March 31, 2009 so we don't have a long-term liability out there.

Best and Worst Vendors

2007-10-26T23:27:00.002-04:00

My Favorite Vendors -

Strategies (http://www.strategies.com/) - Strategies does consulting with salons and spas. They have walked us through our Team Based Pay conversion and we continue to use their coaching services and take classes. They totally rock. If you want to grow your salon, talk to Strategies.
Live, Love, Be (http://www.livelovebe.com/) - Need a little inspiration? This site and store is run by Eric and Keri Manuel and their three kids. Sign up for a daily inspirational message, get a livelovebe.com email address, or shop in their store for a variety of inspiring products. You will always feel a little better (maybe a lot) after visiting their site.
Starbucks - OK I know people want to think they are an evil corporate coffee empire. Maybe they are. But their customer service is just so darn good! I could send my team into a starbucks just to observe the customer service as a training exercise. Location after location their service is consistently good. And if they drop the ball, they make it right. Case in point - my husband and I hit a Starbucks one night and ordered two beverages. The cashier thought her coworker made both drinks but actually she only made one. When they noticed me waiting around they realized their mistake. Without hesitation, she handed me a card apologizing and offering me a complimentary beverage on my next visit. Now first of all, I wasn't mad or even irritated. They didn't need to do anything except apologize for the delay. Second, the card they gave me offered any free beverage - they didn't just offer a small coffee - it was any beverage, any size - nice. They took what could have been a minor annoyance for me and turned me into a walking, talking advertisement for their service.
Harms Software (http://www.harms-software.com/) - Harms is the creator of Millennium salon management software. John Harms and his team know the business and know what it takes to make it grow. Their software does everything you need an appointment book to do plus gives you analytic tools to help you run the business. They've also got a great on-line community where users can share tips and ask questions.
Swipe-it (http://www.swipeit.com/) -Our supplier for the barcoded gift cards that we sell (way cheaper than the company Harms endorses - sorry John). The quality is great. Samples I received from some other providers had rough edges where it looked like they were punched out - the little tabs stayed on. I thought that looked cheap. The cards that Larry at Swipe-it provided us with are smooth and professional. They also designed a custom gift-card holder for us. We did have a slight billing error and I'm expecting a refund check from Swipe-it. If I have to keep after them for it I'll have to drop them to the other list!

My Least Favorite Vendors - As a general rule I think customer service has declined over the past several years to the point that we are desensitized to poor customer service. We have become satisfied with mediocrity because at least it's not bad. Well to make it on my Worst Vendor List you've got to be pretty darn bad. Of course these are my opinions and others may have had better experiences with these folks.

ADP - Automatic Data Processing - That's right, the payroll guys. They do a great job processing payroll and taking care of the taxes. I like not having to worry about filing and payments, etc. But I recently found out that I was paying for a service I didn't need (or want) so my processing was costing me about double what it should. OK, shame on me for not understanding what I was paying for. But here's why they are on the worst vendor list: My invoice from ADP has two sections, each with a fee. One section says something about payroll processing, the other says something about enhanced tax service. The way the invoice is written it appears that in order to have them do the tax work you need to have the enhanced tax service, which costs almost as much as the processing. WRONG. Tax services are actually included in the processing fee. The "enhanced" tax service includes a bunch of other crap that I have never used and never wanted. When I figured this out (after being told by another salon owner that I am paying way too much) I asked my ADP rep about it and he said "This happens all the time." To me this implies that ADP makes a habit of selling services people don't want or need in order to inflate their billings. Again, SHAME ON ME for not paying closer attention, but shame on ADP for taking advantage. If you use ADP to process your payroll, take a close look at your bill and know what you have.
Wimex Beauty Supply - In the past we ordered a variety of supplies from Wimex but we will never use them again. We ordered an 8 in 1 facial machine. After a month or so the galvanic quit working. We called them repeatedly for weeks trying to get resolution. They would promise to return calls but never did. They promised to send out a new galvanic machine for us to attach to the base, but they never did. We got the total run-around. Finally they sent us an entirely new machine. Same problem. OK so could it be us? Maybe our esthetician doesn't know what she's doing. Are we going to have to eat some crow? We call Wimex and ask for technical support. With both machines she has to press so hard to get the galvanic current working that she is almost bruising us. I get a nice person on the phone who says they will get a machine out of the warehouse, set it up and work with us over the phone. She will call back in one hour. That was four weeks ago. So I still have a second 8 in 1 machine and it's huge box in my office waiting to be shipped back. Neither machine works as we think they should. They came with absolutely no operating instructions. This company has among the worse customer service I have ever experienced. Deal with them at your own risk.

Bonus Qualifiers

2007-10-26T23:27:00.001-04:00

So we're in our first month of Team Based Pay which means we are also working towards our first Team Bonus. It's exciting, challenging and scary all at the same time. To see how our bonus plan is designed see my post on Team Bonus. This post discusses how to distibute the money. We decided to go to the team and let them help figure this one out.

The tricky part to all of this is thinking in positive terms -what does someone need to do to earn part of the bonus. Not, what behavior will get someone kicked out of the bonus pool. I'm trying hard to communicate only in positive terms. One of the hurdles we've run into in determining our bonus qualifiers is that we get caught up on whose fault something is. For example, if someone is late for work because there is an accident on the highway, it's not their fault. So shouldn't they still be eligible for bonus? If someone is out sick because they have the flu or a concussion, or whatever, it's NOT THEIR FAULT, so shouldn't they still be in the bonus? If they're not eligible for bonus and it wasn't their fault, then it's just NOT FAIR.

My opinion on this has evolved on this issue and I'm leaning towards "it doesn't matter whose fault it is." If I keep the Client's needs first then I have to acknowledge that it doesn't matter whose fault it is. To the client who has to be rescheduled, fault doesn't matter - it's still an inconvenience and a client service failure on our part.

So I think where we'll end up is that being on time every day and being at work every scheduled day is a requirement to earn a full share of bonus. We will also have requirements regarding dress code and meeting attendance.

The last tricky item is Planned Absences - vacations, etc. In some salons to be eligible for bonus you have to work every scheduled day which means if you are gone for vacation you are ineligible for bonus. I don't like that idea because I feel that vacations are so important to our sanity and make better employees. But I acknowledge that if they are not there, they are not contributing to the success of the business while htey are gone. I think my team is leaning towards allowing someone to participate in bonus, but at a lower level. If they would ususally get a full share of bonus, they might only get a half share.

As far as pay-outs, we are distributing ours based on hours worked. A full-timer will get a full share whereas someone working less than 15 hours will get a 1/4 share and so on.

The key is to make sure the team looks at bonus as an extra they have an opportunity to earn - not something they have already earned that you take away as punishment.

Team Bonus

2007-10-26T22:53:00.000-04:00

As a Team-Based Pay salon, we work together toward team goals. We hit the goal, we pay a bonus to everyone who qualifies. There are as many ways to design a bonus plan as there are salons. Here are a few options:

Sales-Based - Set a sales target for the month (for the whole salon). If the goal is met, pay a certain percentage out (ie. 1%) in bonus. Advantage - easy to explain, easy to monitor. Disadvantage - just because you have sales doesn't mean you had a profit.
Gross Profit Based - Gross profit is what's left after you pay to provide the service itself. If you take your sales and subtract your technician pay, backbar expense and cost of retail products you're left with your gross profit. Set a Gross Profit Goal for the salon for the month. If it's hit, pay a certain percentage out in bonus. Since you're dealing with a smaller number than sales, you would pay out a larger percentage (ie. 3% or 5%). Advantage - "safer" than sales since it accounts for some expenses. Disadvantage - more difficult to explain to staff, requires good record-keeping, still doesn't necessarily mean you had a profit.
Profit-Based - Same as above except you set your target on profit - sales less all expenses. Advantage - This is the safest because if you are not profitable you don't pay bonus. Disadvantage - If your team (or you) don't have a good understanding of the bookkeeping side of things, this would be difficult. Also, there needs to be a certain amount of trust between the team and the owner for this to work or the employees may think the owner is "cooking the books" to avoid paying bonus.
Buckets - any of the above methods can be used in a bucket bonus system instead of using monthly goals. With a monthly goal, at the end of the month the team has either earned a bonus or they haven't. With the bucket system, you set a bonus target and as soon as it hits (no matter how long it takes) the bonus pays. We decided to start with a Bucket system for our first bonus plan.

Here's how our plan works (sales amts are hypothetical, bonus %'s are real):

In spite of the draw-backs explained above, we decided to use Sales for our Bonus Buckets. We chose sales because we are new to Team-Based Pay and my employees aren't used to thinking about Gross Profit or Profit, but they are familiar with sales. Eventually we will switch to a Gross Profit based bonus and ultimately we will pay on Profit. But for now we are going with the most simple - Sales. Fortunately we are in a position of profitability, so I am confident that we can afford to pay the bonus.

Each of our bonus buckets holds $100,000 of sales. When we hit the $100,000 mark, we will pay a 1% bonus to the team. The bonus % gets progressively larger as we fill more buckets in a year, as follows:

Buckets 1 and 2 - 1%

Buckets 3 and 4 - 1.5%

Buckets 5 and 6 - 2%

Buckets 7 and 8 - 4%

Buckets 9 and beyond - 6%

A bonus plan like this offers a lot of incentive to team members. Pre-booking, upselling and retail sales all take on more importance as we try to fill the buckets quickly so we make it to the big-bonus buckets 9 and beyond. Our sales goals are set aggressively enough that in order to make it to the top buckets we need to grow the business. That's the only way I could afford to pay 6% of sales! Those are sales that would not take place without everyone working together.

Since we just converted to Team-Based Pay in October 2007 we are currently filling our first bucket. I'll keep you posted!

Watch for a later post on how the bonus gets distributed!

Technology

2007-10-26T22:16:00.000-04:00

OK, I have a blog, so obviously I'm not totally afraid of technology. I can't imagine running our salon with a paper appointment book! It would be difficult enough to manage just the appointments, but getting the statistics and measures you need to make good business decisions would be darn near impossible.

At my salon we converted to Millennium Software by Harms (www.harms-software.com). It's not cheap - actually I think it's the most expensive one out there. But there's a reason for that! It gives us everything we need to run the business well.

There are a bunch of options out there for salon software and frankly I think they all have a great appointment book. If that's all you're looking for, go with something inexpensive - maybe one of the softwares you can rent like Elite or Salonbiz. But I would challenge you to look beyond the appointment book at the other things a great system can do for you. Some features to look for and why you want them:

Retention reports (by employee, dept, or salon and in summary or detail by client) - Wondering if you should buy an ad in a local magazine or advertise on the radio for the holidays? If your new client retention rate is 20% you're throwing your money away--80% of the new guests to walk through your door are NEVER COMING BACK!

Inventory management and reports - Which products did you sell the most of? Which did you sell the least of? How many of each item should you stock? What do you need to order today? All of these questions can be answered with a good inventory management system.

Cash Flow Projections - OK this one is really cool. Millennium will look at all the appointments on your book for some period (today, this week, next month, etc.) and add up the prices for all those services so you'll know the amount of sales on your book already. Not cool enough? It also tells you how much of that total is for clients with outstanding gift cards so you'll know how much will be paid in cash versus gift card.

Gift Cards - Gotta love the gift cards! Isn't December great?! A lot of systems also manage your gift cards for you so you can run reports on the amount outstanding. One thing I love about our software is since it tracks the gift card by recipient, when that guest comes in it provides an indicator that this guest has a gift card to use. We also use barcoded gift cards so it's quick and easy to sell them (we got ours from www.swipe-it.com - great price $0.20 each for 2,000, plus we ordered custom designed holders for $0.40 each).

Prebooking - One of the best ways to make a salon more profitable is to prebook your clients! Book their next appointment (or 2 or 3) before they walk out the door. OK, bear with me, because I'm an accountant I'm going to show you the numbers.

Let's say your salon has 1,000 clients and your average ticket is $50. If each client comes in 6 times per year your sales will be $300,000 (1,000 x $50 x 6). At 6 visits per year, that means each client is coming in about every 8.6 weeks (52 weeks / 6). Now, let's say you start pre-booking clients before they leave the salon. But instead of booking them 8.6 weeks out, you are booking their next appointment 6 weeks out. Now they're coming in 8 times per year. What happened to salon sales? Now it's $400,000 (1,000 x $50 x 8). That's a 33% increase in sales WITHOUT ADDING A SINGLE NEW CLIENT!!!

A software that will track pre-booking and frequency of visits will pay for itself. Why do you need to track it, instead of just doing it? If you can track it you can reward it. We can see our pre-booking rate by employee so we know who is encouraging their clients to pre-book and who isn't. And since we're on Team-Based Pay, we can reward those who are meeting their pre-booking goal.

These are just a few of my favorite technology tools. More to come later...

How to Pay your Technicians

2007-10-26T21:46:00.000-04:00

There are 3 primary ways to compensate hairdressers:

Booth Rental
Commission
Hourly/Salary

Booth Rental - If you own a booth rental salon you are really a landlord not a salon owner. Each technician pays for their station at an agreed upon rate (daily, weekly, etc.). Often they are responsible for booking their own appointments and marketing their services. They may pay a fee for backbar supplies, provide their own, or it may be included in their rent. The trouble with owning a booth rental salon is you get all the headaches of salon ownership without the rewards. Each technician is actually their own business and that is where their loyalty lies. You have no ability to control pricing, quality, hours worked, customer service...basically you have no control! The only bright spot would be that since renters are not employees they are responsible for their own taxes.

Commission - Commissioned stylists are generally employees of the salon. Since they are employees you do gain a good deal of control over your business. You can implement policies and procedures that need to be followed, you can disclipline when necessary. You are making the work schedule, managing the appointment book, determining services offered and pricing, etc. Of course you also are running a payroll, accounting for tips, hiring, firing, mediating squabbles. Commission rates vary greatly, but usually what I hear is in the 42% to 60% range (but at 60% the salon cannot be profitable). In some ways commission is a hybrid of booth rental and salary salons. While the technicians are employees, they are also paid entirely on the sales they bring to the business so they act like little one-person businesses. This creates huge obstacles to salon growth and profitability because there is no incentive for teamwork.

Hourly/Salary - In a salon where the technicians are paid hourly or on salary the salon owner has the ability to reward the employees who most deserve it. How many of us have experienced the situation where a stylist is rude to co-workers and other stylists' clients, and never picks up a broom or folds towels but still gets a big raise just because her prices went up! Talk about rewarding bad behavior! On the flip side, we all know great stylists whose earnings are capped out because they are at the highest commission tier. In an hourly/salary based salon you can still reward these people!

When we bought our salon it was a combination of Hourly and Commission. When we hired a new stylist she would be hourly. After she met certain criteria (retail % at a certain level and request rate at a certain level) she would convert to a 45% commission. Our commission scale topped out at 50% and we had two awesome stylists who were capped out. One of them is also our salon manager and since she was paid on commission she couldn't afford to spend less time behind the chair to manage. The other was getting burned out after years in the business and wanted to spend more time training others, but she also couldn't afford to give up the time behind the chair because we were only paying them for one thing --sales.

Earlier this month (after much thought and analysis!) we converted to Team-Based Pay (TBP). Every commissioned employee was converted to an hourly rate that is higher than what they were making on commission. It's a huge deal when you change someone's comp. And it's scary for me as a salon owner because I know I'm committing to pay them for every hour they are in the salon whether we're busy or not. There's a lot more to TBP than just converting your payroll - it's a way of life! I'll talk about our Team-Based Pay journey a lot on this blog!

Taking That First Big Step...

2007-10-26T21:23:00.000-04:00

About 4 years ago I was working as a CPA in the finance department of a large corporation. Corporate hell! My husband and I concocted an exit strategy/5-year plan to escape corporate life forever. Our plan included running our own business - what business? We had no idea.

We started checking listings on business broker websites and found a business that caught our eye--an upscale salon & spa owned by an absentee owner. Perfect! We wanted to take the plunge without either of us having to quit our jobs right away and this business was already run by a manager. Never having worked retail, I liked the idea of a service business and felt like customer service was something I already understood. With my accounting background, surely I could handle the financial aspects of the business. So we put together a business plan, took out an SBA loan and became entrepreneurs!

And that's where the fun begins...

Of course, all of you who are salon owners already know how naive we were! We've owned the salon for almost 3 years now and I left my corporate job about 18 months ago to work in the salon full-time. It's incredibly challenging, but far more rewarding than my old job. We've made a lot of mistakes, but we've done a lot right, too. That's what this blog is about...the trials and tribulations of owning a salon.