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Owning an Employee-Based Salon or Spa
July 18, 2016 | By Neil Ducoff | No Comments
There are many voices that say, “Commission salon/spas are a thing of the past.”
What I don’t understand is why “commission” … a method of compensation … is used to describe an employee-based business.
The voices predicting the demise of commission salon/spas mostly come from those involved in booth rental and suites (independents that rent and those that need to rent space). Ads for suites all tout the same theme …
“Be your own boss.”
Yes, suites are the new shiny thing and getting lots of attention, but they target the talent at employee-based salons/spas to fill those suites.
Commission salon/spas are easy targets because the hook is: “Why make 40% or 50% when you can keep it all?”
Anyone with a morsel of financial knowledge knows that there is no such thing as “keeping it all” for independent service providers when you’re now responsible for…
- Product costs
- Self-employment taxes
Commissions’ inherent problem…
In many ways, I hope commission salon/spas are becoming a thing of the past.
Because commission is an antiquated method of compensation that feeds the independent contractor mentality. It’s all about “build your own book” … and owners are shocked when a service provider leaves with that “book of clients” they were told to build.
Commission salon/spas are easy targets…
Commission salon/spas are, by design, easy targets for rental and suites because the hook is making a bigger piece of the service revenue a pair of hands produces. Sprinkle on a little “owners are making all the money off your hard work” and renting a chair or suite sounds pretty good.
- Freedom to work your own schedule is secondary. However, to make a decent living doing salon/spa services, there’s no getting away from putting in the hours.
Owning an employee-based salon/spa is an honor … not a curse…
Its pains me to see owners questioning their decision to own a salon or spa. Without question, being a business owner is hard work … especially in the predatory salon/spa industry where staff walkouts are almost expected.
The definition of insanity is hanging on to a compensation model that feeds staff turnover and the devastation of staff walk-outs simply because service providers want a bigger piece of what they bring in.
FACT: Each side of the commission relationship always wants a bigger piece. Pay 50 percent and they want 55 or 60 percent. Pay a profit crushing 60 percent and they want 70.
As the owner of an employee-based salon/spa:
- You provide jobs and career opportunities.
- You create an inclusive and supportive culture.
- You invest in training new talent and keep your masters masterful.
- You coach employees … and hold them accountable to salon/spa standards … to help them grow and realize their full potential.
- You build and maintain magnificent facilities for customers and staff.
- You create and promote your brand to attract new clients and retain loyal clients.
- You provide the internal support so that service providers can focus on delivering their best work.
- You provide front desk and guest services support.
- You purchase the best professional-use products for staff to use.
- You keep the retail shelves well stocked.
- You provide employee benefits like holiday and vacation pay … I hope more owners learn to budget in retirement funds and health insurance.
As an owner, you bet everything on your vision of growing a dynamic business with amazingly talented staff doing extraordinary work. To realize this vision, most owners give until it hurts. They do their very best to do it right.
Sometimes they miss.
Sometimes they make dumb decisions.
Sometimes they have to say, “No.”
And sometimes they just screw up.
Guess what? We all do.
When all is said and done … every owner wants to create the best opportunity for each and every employee … and their company. To do that, the business must be profitable. Profit ensures sustainability and reinvestment. It doesn’t mean the owner is taking suitcases of cash home. This is a lesson every salon/spa owner quickly learns. That’s why there are performance expectations, rules and structure.
Take a hard look at your business model…
If you’re one of those commission salon/spas in the crosshairs of booth rental and suites, you would be prudent to examine how vulnerable your pay method is to the appeal of rental and suites. When it distills down to where service providers service “their clients” and what piece they get … you must question your current commission business model.
For over 40 years, I’ve listened to the “I don’t believe in Team-Based Pay” and “I’ll lose staff if I change” arguments and excuses. Do you believe in “teamwork”? Then why not learn a business model built on teamwork. What if Team-Based Pay was worth believing in and that it could help you create the business and culture you’ve been seeking?
If your fear of changing your pay method is that you’ll lose staff … that’s what’s happening already as your employees and your hard-fought customer list relocate to rental or suites. Strategies has been doing Team-Based Pay conversions for over 22 years…
…there are no mass walkouts.
And, the employees that do decide to leave weren’t truly engaged in your business and had one foot out the door for a long time.
Here’s my challenge to you: Put your defense shields down and put aside your assumptions of what you think the Team-Based Pay business model really is. It is massively more than just “hourly pay.” You need a different business model that can stand up to the appeal of rental and suites. Yes, it’s a huge decision and it requires new knowledge, systems and leadership skills. You owe it to your business to understand that there is a better way.