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Booth Rental & Suites Are Not a Cancer, They Are an Outcome

February 22, 2016 | By Neil Ducoff | No Comments

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Owners of employee-based salons often refer to booth rental and suites as the cancer of the industry.

I used to think that way too, but not anymore.

For owners, it’s an emotional subject because they invest time and resources in training, developing and building the clientele of their service providers. When a busy employee leaves and takes their clients with them … the hole it leaves in the business and its cash flow really hurts.

In many ways, building up service providers only to have them leave with “their” clients seems like the definition of insanity. Yet, just like a duck shoot at a carnival, the process continues to repeat itself.

If you take all the emotions out of it, booth rental and suites is nothing even remotely close to being a “cancer” … it is an outcome.

In fact, it’s more of a consequence of:

  1. The traditional salon/spa business model that is based on individual request rates, individual clientele building and commission pay, and…
  2. The level of business acumen of salon owners. I mean no disrespect to owners as my life’s work has been devoted to helping owners master leadership, financial and business skills.

Here is the easiest way I can explain why booth rental and suites is an outcome and consequence of the traditional model: If you have a busy salon/spa, is it busy because of client loyalty to your business and its brand … or is it busy because most of the columns on the appointment book are filled with clients that request and are loyal to the names at the top of those columns? If you know your best employees could leave tomorrow with “their” clients … it is a consequence of your business model. Got it?

On Strategies’ Salon & Spa Business Idea Exchange Facebook discussion group, it is common to read posts stating that every owner will eventually experience a walkout. There are no words to describe how dysfunctional and self-defeating this thinking is. No one opens a salon/spa to be a glutton for punishment … but, too often, it is the case. The good news is that it doesn’t have to be.

Solution: change the business model and you change the outcome … and eliminate the consequence.

  • If an employee would rather work alone in a booth or suite than be a member of your company’s team … it is your business model that is producing the outcome and getting pummeled by the consequence.
  • Your business model must change because booth rental is not going away and suite franchises will continue to sell to buyers with dreams of collecting steady rent checks.

There are reasons that individuals choose to leave an employee-based business for booth rental or suites. Here are the primary reasons and strategies to address them:

  • You told them to build “their” clientele: You told them to grow their request rates. You rewarded them with higher prices and commissions. You taught them how to double book and use assistants rather than fill time in other columns. You make it all about individual columns on the appointment book. You grew your consequence. Solution: Team Service is about everyone being responsible for every hour that’s available for sale … on the entire appointment book. Everyone should be obsessed about the “white space” … not just owners. Building a dynamic Team-Based business is about everyone pulling in the same direction – not in different directions.
  • You already treat them like independent contractors: The traditional salon/spa business is designed to treat service providers like independent contractors. That’s why many stylists, estheticians, massage therapists and nail techs view employee-based salons/spas as a place to build their clientele. They’re simply playing the game your business model gave them. Here are some examples of how the traditional model treats employees as independent contractors:
    • You pay them a percentage commission on services – which is essentially piece work. Translation: You only want to pay service providers when their hands are busy working on clients. That’s also the reason service providers feel they’re only paid when working on clients and “on their own time” when they’re not.
    • Product cost deductions and service charges are a smoke and mirror tactic to lower commission rates. You take it off the top and pay commission on the balance. Why not just multiply the top number by a lower commission rate and tell it like it is? The math is easy. The problem isn’t product or assistant costs … the problem is your commission rate(s) are too high.
    • Too many owners don’t pay for mandatory meetings and training. That’s a violation of Labor Law.
    • Paid education: If your company promises its customers high quality, you’ve got to educate your employees. But if your policy is “I’ll pay half if you pay half,” you’re feeding independent contractor thinking.
    • And then there is the “TIP” controversy. Owners don’t want to pay taxes on tips … but IRS law states “Tips are income earned at work.” Owners also don’t want tips on credit cards. I understand the cost … but this practice drags clients into the “who’s going to take the hit” debate.
  • Come on already … it IS about how you pay: Most of you are probably tired of hearing my argument that commission is an “I/me/mine” pay system. “I/me/mine” is independent contractor thinking and behavior through and through. If you pay 45% commission … they want 50%. Pay 50% commission … they want 55%. That’s the nature of commission pay. It’s always about “who’s going to take the hit.” And if there is performance and behavior you don’t want in your business – your commission system keeps on paying for it.
    • I regularly hear owners say, “I don’t believe in Team-Based Pay.” Huh?!? You own a company and you don’t believe in something that’s “Team Based”?!? Well, there sure is a lot of talk in the industry about teamwork and culture. Team-Based Pay is the most advanced and effective pay, performance and culture-building compensation in the industry. Period. RELATED: Download our free Team-Based Pay White Paper report here, and learn about the salon/spa pay program that motivates staff to stay and grow the business…not just their followings.
  • Autopilot leadership doesn’t work: There is no such thing as “set it and forget it” in business. Employees need leadership. Employees need feedback, encouragement, coaching, compassion and, when necessary, discipline. Employees need performance reviews. Employees need to be heard. Employees want to be treated fairly. Employees desire to work in a financially secure business … not one that exists in a perpetual cash crisis. All this IS the work of leadership. They don’t teach this stuff in cosmetology school. (For what it’s worth, they don’t teach this stuff in medical or law school either.)

There is a better way.

Please share your thoughts with me in the comments below.

Pass this e-mail on to your business colleagues, managers and friends. They will appreciate it.

Categories: Compensation , Monday Morning Wake-Up , Uncategorized

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