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How Employee-Based Salons Will Endure Rental & Suites

January 25, 2016 | By Neil Ducoff | 2 Comments

There are those in our industry who believe that the popularity of booth rental and suites is going to mark the end of days for employee-based salons. Sorry, but this is not the case. Is there a decline in the number of salons? Yes … a few percentage points … but nothing worthy of saying employee-based salons are done for. Still, this kind of fear-based rhetoric is certainly enough to send needless chills down a salon owner’s spine and have them questioning the viability of their once predominant business model.

Booth rental has been around for decades and has most definitely penetrated almost every market. The emergence of salon suites and suite franchises solidifies the booth rental model’s place in the salon industry. However, with all due respect, much of the mass advertising for the “suite opportunity” is half-baked and misleading. Why? Because the suite business model is about getting stylists to sign multi-year leases.

Markets change, business models come and go … but to survive and thrive, independent salons must adapt. To truly succeed and endure – salons must become innovative and distinctive brands that deliver truly extraordinary technical skills and customer service at a level that’s often discussed, but rarely delivered.

Now, more than ever, it’s time for independent salons to get their innovative game on.

I’ve been in the salon industry since 1970. If there is one constant … it’s that stylists will come and go. Stylists are employees and that’s what many employees do … move on. In contrast, owners are in it for the long haul, simply because their personal guarantee is on leases and bank loans.

BUT, the ugly part of the beauty business is the manner in which many stylists choose to come and go. The unofficial rule is for stylists to find a busy salon that provides advanced education, build a clientele … and then take that clientele to a better commission deal at another salon … or set up camp as a booth or suite renter. Why? Because it’s damn near impossible to rent booth or suite and go it alone without the cash flow of a full book.

Fact is, that “full book” came at the expense of a salon that invested the time, money, training and clients to create that full book … only to have it all disappear. Departing stylists feel entitled to leave with “their” clients. On the other side, owners feel violated, abused and ripped off.

The “I’m leaving with MY clients” scenario has been playing out in salons for eternity, because the traditional salon business model is designed to produce that outcome. Change the “build stylist followings and columns on the appointment book” business model, and salon owners can change the outcome … and stop the madness. If the salon business model doesn’t change and upgrade to something more sophisticated, booth rental and suites will pick away at traditional salons until there is nothing left but the bones of what was once a great industry.

Here are my No-Compromise thoughts on what employee-based salons must do to remain the kind of vital, dynamic, profitable business model that can endure far beyond a business model that rents stations and suites to individual stylists:

  • Client retention YES … Request rate NO: For decades, I’ve been preaching the power of tracking and driving salon client retention versus tracking and encouraging individual request rates. Request rate screams “I/me/mine” thinking. Salon (not individual) first-time and existing client retention rates communicate “we/us/the team/the salon.” If your idea of a viable, secure and enduring salon business model is to build individual stylist followings … then don’t complain when stylists leave with the clientele you told them to build. A business model that places the skills of the entire salon at the disposal of each and every client makes a dramatic professional statement. If a client only wants one stylist … so be it. But you know all too well that the traditional request-rate driven salon model trains clients to be loyal to one stylist. So much so, many clients would rather go to another salon than have “their” stylist see them in another chair. This is not how to grow a salon brand.
  • Salon Productivity Rate drives career opportunities: A true team-based salon business model places extreme emphasis on driving and maintaining the salon’s productivity rate first. Salon productivity rates of 80%+ translate into growth opportunities for all team members. The traditional commission/build your following model is about individual productivity rates. It builds in inefficiency with booked-solid stylists and waiting lists while talented stylists are waiting for something to do. Growing columns on the appointment book cannot compete with a business model and a team focused on filling all the columns on the appointment book.
  • “I/me/mine” pay versus “Team-Based Pay”: Commission is all about “I/me/mine” pay, based on a percentage of what one stylist’s hands can generate. Commission is about growing individuals. Commission is about client ownership. Commission is all about the money. Always has been – always will be. There is NOTHING about Team-Based Pay that is designed to cut a stylist’s pay or hold back their income earning potential. In fact, the focus of TBP is quite the opposite. Why? Because TBP rewards overall performance and behavior that is enhanced by individual performance in a team-based culture. If the team increases annual total service and retail revenues by $100,000 … that allocates an additional $30,000 to $35,000 to service payroll. That’s money for raises … even for fully-booked stylists. That’s money for new hires. If the salon drives up its productivity rate and doesn’t need to hire more stylists … then the entire allocation goes to raises – based on performance and behavior. It just makes sense. RELATED: Download this free Team-Based Pay White Paper report to learn how this powerful system works, and how it’s helped thousands of salons and spas drive massive growth.
  • Owners need to step up and lead at a higher level: The business acumen of owners is terribly behind the times. Owners still struggle to embrace the “numbers” side of the business. Owners will embrace the latest products and technical skills in a heartbeat … but hold fast to the old commission/build your following model with a death grip. Leading at a higher level demands a commitment to developing business, leadership and financial skills with the same passion as the artistic and creative side. Business and leadership skill building shouldn’t be feared. Just like technical, it’s a process. Embrace it.

I love the salon industry. I’ve been coaching owners back from the brink of disaster my entire career. My company, Strategies, has been teaching a Team-Based Model for over twenty-two years and has the examples, testimonials and stats to prove how amazing it works. The new salon model is different and exciting. It has new systems, rules and accountabilities. For those who embrace booth rental and suites, you have much to learn too, as your path is not a paved easy street. There is a business model to fit those that embrace independence … and there will always be a salon model for those that embrace true, dynamic and authentic team-based cultures.

Learn more about the pay program that combats the lure of rental and suites. Download the Team-Based Pay White Paper.

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Please share your thoughts with me about today’s Monday Morning Wake-Up in the comments below.

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

Categories: Leadership , Monday Morning Wake-Up , Team-Based Pay , Uncategorized

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Comments

  1. I have found this more true, now, than ever before. Our benefit package is very attractive, which appeals to some people. I recently hired a former booth renter who moved here from another state. In a discussion with several stylists I was explaining that we offer X in dollars + benefits. Not in our salon but others you can choose your X to be all dollars, but in the end the result will be the same portion no matter how it is divided.

    I also made a statement that I cannot compete with those who do not report their income. Unreported cash in the pocket I cannot compete with. New employee agreed that she NEVER reported all of her income, just the credit card amounts.

    So, I do believe this will be the only way we can compete is through controlled payroll which also includes benefits, one of which won’t be breaking the law.

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