The Future of the Salon & Spa Industry

March 5, 2018 | By Neil Ducoff | 17 Comments

I’m writing this Monday Morning Wake-Up for the industry I have served and loved for over 45 years.

I’m writing this for all the employee-based salon/spa owners that have embraced what we teach and coach at Strategies.

I’m writing this for all the owners and industry leaders that say, “Team-Based Pay is too controversial,” even though we have almost 25 years of data and success stories that say it works.

I’m writing this for the next generation of salon/spa owners with dreams of building their own wildly successful companies.

Where the Industry is Today

If there was one word to describe where employee-based salons and spas are today, that word would be “uncertainty.”

Never in my all my years have I seen so many owners so concerned about the future of their businesses. If you’re one of them, you have every right to be.

  • The rise of suites and suite franchises is being built on the blood, sweat and tears of owners who spend years growing service providers into high revenue producers.
  • Owners reporting they just had employee walkouts are damn near an everyday occurrence.
  • Owners that are tired and beat up with turnover, debt and trying to be profitable are looking at booth rental or getting out entirely.
  • Professional retail products being sold on Amazon and other retail outlets like Ulta Beauty. The days of “Professional Only” are gone.

My intent is not to forecast gloom and doom for the industry and employee-based salons/spas.

My intent is to deliver a “Wake-Up Call” to ALL employee-based salon/spa owners to respond to the dynamic and dramatic forces of change that have been taking place. And to respond in a major way.

NOTE: This Wake-Up Call is for all our Team-Based Pay salons and spas too. Team-Based Pay allows great things to happen when leaders are fully engaged. The “set it and forget it” business model DOES NOT exist. It’s time to step up your business game. Your big advantage is the solid TBP foundation you already have in place.

Everything is changing so fast. The big question is, changing into what?

Where the Industry is Going

The standard approach to opening and building a salon/spa business is a relic from a bygone era that no longer exists.

Employee-based salon/spa owners CANNOT stay hunkered down and wait for “the way things were” times to return. They, and I mean you, must create a new, better and more prosperous future built on a rock-solid business model.

With all that being said, here is the future of the salon/spa industry that I see and what you need to do to be part of it:

  • The future looks extraordinary BUT: The employee-based salon/spa business game will be more competitive in three significant ways. First, fewer employee-based salons means smarter and stiffer competition for new clients and the retention of existing clients. Second, independents (booth renters and suites) have discovered the power of social media and collectively are a worthy competitive foe. Third, employee retention must be renamed “Long-Term Career Engagement.” Predatory is the only word to describe the industry’s approach to recruiting talent. And the “busier” a service provider is, the more susceptible they become to a predator attack. If your employment package doesn’t include a dynamic culture, career and technical training and advancement, REAL employee benefits, high trust and integrity, your best people will be vulnerable to predators.
  • The half-baked and naive will continue to struggle: The simplistic days of running a “mom and pop” business are long gone. The days of picking, choosing and ignoring which systems, labor laws, income tax reporting, “tip income reporting” is the employee’s problem, come and go as you please, “I hate numbers” indifference, quarterly performance reviews once a year, treating 1099s as employees and thinking you avoided payroll tax, paying cash “under the table”, and a host of absolutely unacceptable and compromising business practices are gone. Our industry will become recognized as “Professional” when the half-baked and naive get their business house in order or disappear.
  • Suites will sour: Thanks to franchising, suites will overbuild forcing lease rates to drop. Suites are already dealing with their own turnover challenges. Suites will remain part of the salon/spa landscape, but growth will slow. This in no way signals to employee-based salons/spas that suite facility owners will lessen their predatory attempts to lure your best employees to sign a lease. In fact, suites will recruit more aggressively.
  • Professional product makers need to step UP or step out: I’m not picking on any one specific professional product manufacturer. Amazon, the internet, the Ulta’s, and corporate acquisitions have transformed the nature of professional product retailing to the point where the term “Salon Professional” is so watered down, it’s damn near meaningless. Professional product manufacturers must decide which side of the professional/consumer fence they want to play on. Those that see financial gain in the consumer market, get it over with and leave the industry. You won’t be the first to do so. Those who want to truly “partner” with the salons and spas that support, use and sell their products need to be a PARTNER in every sense of the word. Be exclusive. Live exclusive. Give back and respect the loyalty and passion that employee-based salon/spa owners have given to grow your companies. Be a partner. Be professional. Why? Because professional product manufacturers are making private label and building a salon/spa’s own brand a viable alternative.
  • Next evolution of Professional customer service: With the utmost respect, employee-based salons and spas have barely scratched the surface of what creating extraordinary customer service experiences is all about. Consistent execution at all levels is the foundation of world-class service. Inconsistency feeds mediocrity. Any owner that says, “But we’re doing it all,” needs to take a brutally unfiltered look in every customer contact point in every nook and cranny. You’re better off giving your company an eight and striving to get better, then thinking you’re a perfect ten. You’re not and don’t want to be. FACT: No half-baked salon/spa or collection of suites can deliver the customer service experiences that a structured and disciplined employee-based salon/spa can. Embrace systems, structure and discipline and you’ll see client retention rates soar.
  • Next evolution of technical/creative skills: Sassoon became “Sassoon” because he was a relentless perfectionist. He demanded excellence. He created a culture of discipline. The result is a culture built on pride and the pursuit to be the best. Excellence happens by design, not by chance or accident. The salon/spa of the future has a comprehensive internal training program that all employees participate in — no matter what their level of experience or years in the industry. If your salon/spa is not pushing the boundaries of acquiring and mastering advanced technical skills, you have work to do. Besides, hasn’t “being the best” always been your vision?
  • If you don’t like numbers — don’t own a salon/spa: Your Profit & Loss Statement and Balance Sheet are your company’s scorecards. Your Cash-Flow Projection is your revenue goal plan and expense If anything you just read is displeasing to you, don’t be an owner. If you’re always fighting cash flow and hoping for profit, it’s time to fall in love with your numbers. If you don’t care about the tools that create financial success, the future could care less whether your business survives or not. Got it?
  • Grow your company and brand first: For 25 years, Strategies’ battle cry has been to grow a rock-solid company and powerful brand first. Why? Because a rock-solid company and powerful brand provide the resources and structure to attract and grow great people and talent. The whole concept of growing “columns on the appointment book” and individual clientele building creates a seriously unstable foundation where clients are loyal to an individual — not your company and brand. To succeed in the future, all of the skills of your company are available to each and every client. Read the next bullet.
  • Rethink the appointment book: Would you use your appointment book differently if the names at the top of the columns were replaced by “expertise and levels of expertise” for specific services? Would you book clients differently? Would you be able to have better and more specific consultations with new and existing clients? Would your overall productivity rate (hours available for sale versus hours sold) dramatically improve? Would this approach give your company a distinct point of difference in your marketplace? Today, in its most basic form, the salon/spa appointment book is about individual “clientele building” — not company and brand building. Walk-outs devastate salons and spas. The traditional approach to using the appointment book plays a role in that devastation. The future is about building a company that can take extraordinary care of its customers and employees. Got it?
  • Commission needs to go away: I’ve been standing and preaching on my Team-Based Pay soapbox for almost five decades. Commission is essentially pay based on piecework. It’s about growing individuals. It’s about clientele building. It’s about paying top dollar for the wrong behavior and performance. It’s about not having any control over your largest expense — service payroll. Commission is a variable hourly rate. California is leading the charge on addressing commission pay inequities with AB 1513, and more recently AB 490, both targeting compensation for downtime/rest time. In the future, should other states look behind the commission pay curtain, things can, and will, get ugly. FACT: Team-Based Pay salons and spas are unaffected by these laws because all time at work is compensated. It’s time to question the viability of commission before the future arrives.
  • “We” will replace “me”: Employee-based salons have always been about creating “we” cultures. However, the antiquated and “generally accepted” approach to growing a salon/spa business simply, methodically and effortlessly has created “me” cultures. The only way to truly create a “we” culture is to thoroughly and completely change the business model. Those that do will be prepared for the future.

Here’s my challenge to you: Do not brush off any of my preceding points and predictions. It’s time to make the best and right decisions for your company’s future. It’s time to get excited about the future of employee-based salons and spas … not to fear change.

This is not a sales pitch for Team-Based Pay, it is a shot across the bow of every salon and spa in the industry to question long-standing thinking and approaches.

The future is about change to seize new opportunities. Resisting change is clinging to status quo.

No Compromise!

Want a proven plan to put everything you’ve read in this post into action? The best place to start is the Strategies Incubator Seminar. Click here for details and upcoming dates.

Categories: Leadership

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  1. Most salon owners I’m sure were stylist that built up a clientele at another salon and walked out on that owner with stylist to start their own business. It’s a dog eat dog business. It’s funny how stylists leave a salon where their charging 60 to 70 for a haircut and go to suites to charge 35 cause their now competing with 30 40 other stylists. It’s a dog eat dog eat world too in suites just to make the same money where we had it made cause the owners did everything for us. The only difference now is that they can work in shorts and flip flops and bring their kids cause the baby sitter called in sick.

  2. This!!!!!!!!!!>>>>>>>> Our industry will become recognized as “Professional” when the half-baked and naive get their business house in order or disappear.
    Changing the industry one professional and one salon at a time all to make a giant team in the industry!

    1. So very true. People open salons on a shoe string budget wipe out your salon by taking stylists and 6 months later go out of business and wanting to come back while salon owners have wiped out credit cards or life savings to stay afloat.

  3. Great post. I’d say this is one of the best and I agree 1000000%!
    Neil I always love that you tell it like it is. So much value in your words. Bravo my friend!

  4. Wow! Your words are very refreshing. I agree 100% with everything you say here. I have actively been speaking out about these issues with supply houses, educators, manufacturers, etc & it seems like everyone is pretending nothing is happening. There is a tsunami coming to this industry & no one is looking at the sea.
    In the current suite style independent model the only person making money is the landlord. These businesses only value proposition is rent/price. As market saturation increases, prices go down & it all becomes a sh#t show.
    Schools will be forced to close when they cant prove that their students claim enough income to pay students loans back. Gainful employment & the tax evasion mindset in this industry does not mix well.
    Major manufacturers like the L’Oreal umbrella going both a. direct to the consumer thru their ecommerce, bypassing hair salons; and b. giving Amazon exclusivity to distribute their professional products! I met with VP for Redken, Pureology & LP who told me to my face that this would not happen, just a few months before they did it.
    Salons across the country have invested in marketing & educating clients on these manufacturers’ products, to now find themselves competing against them? How backwards is this? This is a short term profits mindset for these manufacturers…& they will eventually feel the backslash, along with dilution of their profits. More people needs to talk about this…Thank you for doing it!!
    I run a commission salon. I am an engineer who fell in love with the industry before realizing what I had signed up for by owning a hair salon, so I kept innovating to beat the odds of failure. After 6 years running it, and understanding the numbers behind it, I agree that the traditional commission model is not sustainable. I look forward to learning more about your approach.
    Thank you!

    1. Hi Armando,
      Thank you for sharing your thoughts. Look into our 4-day Incubator Course to learn more about the Strategies Business Model and Team-Based Pay. Here’s the link: https://strategies.com/seminar/strategies-incubator-seminar-4-18/
      There is also a Team-Based Pay link on our website in the main menu bar. http://www.strategies.com. AND, this October 21-22, we’ll be doing our 5th annual Team-Based Pay Conference in San Antonio, TX. It’s the largest gathering of TBP salons/spa and a great venue to learn and network with fellow owners.
      Thanks again for sharing your thoughts.

  5. Another masterpiece Neil!

    If it’s any consolation, some California salons that have been effectively forced into converting from commission to hourly are apparently loving it! At a recent conference in Long Beach, a few AVEDA salon owners voiced their rebuke to a mega star speaker and steadfast commission proponent. These owners and their staff are starting to see the wisdom in operating a commission-free business. Now their challenge is to foster a culture where people can grow and propser.

    My feeling and sincere hope is that as an industry, we will go full circle and witness the come back of bonafide salons. Superior client experience and satisfaction will reward the die hard believers in the end.

    1. Hi Rod,
      Appreciate having “masterpiece” attached to this MMWU. Also appreciate the update on ISSE Long Beach. The best change strategy is to lead it or adapt quickly and decisively to it. The worst change strategy is to resist or ignore it. In the end, change happens. Change wins. Change can take a business to extraordinary places … or be an effective wrecking ball. I hate to see any business wrecked because of stubbornness and close mindedness.
      Thanks for believing and trusting in Strategies.

  6. Neil, spot on! I did a workshop recently in a cosmetology school recently on the changes you just described. Immediately afterward a student rushes up to me, gives me a great big hug, and hands me $1, and says “wow! That was worth the buck!”
    Now, the point of the story is this: as a student, that $1 has way more value then you think. She’s broke, in school, could have spent that buck on smokes, food, drink, shoes, amazon….she didn’t. She chose to spend it on me. And wasn’t because of the details of the message. It was the experience in her world, that her future is relevant, needed, and will be despartly be seeking individuals who collaborate as a team to delight.
    Keep the message strong. Our industry is being assulted.

    1. Much appreciated Marc. Thanks for sharing your student story. What a perfect analogy of what’s going on.
      No Compromise! It’s more important than ever. – Neil


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