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Why Salon/Spa Employees Leave for Suites or Booth Rental

January 27, 2020 | By Neil Ducoff | 7 Comments

I began my career in the salon industry in 1970. Back then, booth rental was more of an oddity found mostly in the Midwest and Southern California.

Back then, the prevailing salon business model was as follows:

  • Hire a stylist
  • Give them some clients
  • Pay them a commission (at the time, it was 50% to 60% or higher)
  • Tell them to build “their” request rate to build “their” clientele
  • Raise their prices when they’re booked solid (sometimes increase commission rate with prices)
  • Offer little-to-no employment benefits
  • Get pissed when they leave with “their” clients

The salon game was simple. Fill enough chairs with busy stylists and, by all appearances, you had a successful salon.

Owners that picked a commission rate below 50% had a better chance of creating profit than those that picked 50% or higher.

Enter the “Product Cost Deduction”

As the cost of rent, products, equipment, insurance, etc., increased, many owners started implementing “product cost deductions” from each stylist’s gross service sales and paying commission on the balance.

  • No matter how cleverly disguised or justified, product cost deductions is a tactic to lower commission.
  • In reality, implementing product cost deductions is really a pay conversion.
  • Many salons suffered turnover and stylist walkouts.

Lack of Leadership and Systems

The vast majority of owners started as, or continue to be, service providers. The challenge is that leading a labor-intensive business like a salon or spa, is vastly more complex than most owners realize.

To truly succeed and endure, a salon/spa must be systematized in every possible area of customer contact, employee performance, and the execution of work — especially teamwork.

FACT 1: Systems cannot exist without leadership.

FACT 2: Leadership cannot exist when the leader is afraid employees will leave if they don’t like a new system or change initiative — even if that system or change will help the company perform better.

FACT 3: If nothing changes, there is no opportunity for employees that want to advance their career. Resentment builds. The culture gets contaminated. Employees leave.

Building a Brand vs. Independent Suites and Booth Rental

FACT: If your salon or spa is clinging to the antiquated business model of building individuals and paying commission, you are essentially growing the independents that suites and booth rental want.

Once suite franchises entered the industry in mass, they glorified “going independent” by easily attacking employee-based salons/spas with the following:

  • “Why build someone else’s business when you can build your own?”
  • “Why put up with all the drama?”
  • “Why take a percent of your sales when you can keep 100%?” This is only true if you don’t pay rent, buy products, pay for insurance, credit card processing, and of course, income taxes.
  • “Why work a set schedule and follow a bunch of rules when you can do what you want?” In this business, if your hands aren’t working on a client, you’re not making money.

Building a salon/spa brand requires, leadership, systems, structure and a level of teamwork that is diametrically opposite of building individuals that are paid on piecework alone. Commission IS piecework. Piecework (I/me/mine) and teamwork (we) don’t mix. Period.

Building a brand means building client loyalty to your salon/spa and all it stands for. It means every team member puts the needs of every client first. It means the coordinated delivery of customer service. It means all employees are skill certified.

Building a brand means that all employees know and understand the monthly service and retail goals of the salon/spa. Daily huddles and scoreboards are non-negotiable.

Building a brand means income and career growth for employees. A strong brand is financially healthy and able to offer raises for individual performance and team bonus for team performance. A strong brand can offer benefits that most salons/spas cannot afford.

The Bottom Line

Employees leave salons and spas for suites or booth rental because they see little difference between coming to work and doing “their” clients to get paid a piece of what they do, and servicing “their” clients in a suite or booth in hopes of getting a much bigger piece.

  • Employees leave to be independent because they feel stuck in a salon/spa that isn’t going anywhere. No exciting growth initiatives.
  • They leave because owners are disengaged.
  • They leave because owners are more about the money they bring in.
  • They leave because of drama and funky cultures.
  • They leave because of a lack of transparency and double standards.
  • They leave because they don’t feel like they’re part of something special.

Here’s my challenge to you: The battle line between employee-based salons and independents was drawn long ago.

The problem is that the old salon/spa business model of building individuals and paying piecework (commission) has barely changed.

FACT: Commission-based salons and spas are fighting the war of employee retention with the very weapons that create the independents suites and booth rental want.

Suites and booth rental want “service providers with followings” because they have the ability to pay rent. And that’s exactly what the old business model creates — service providers with followings.

I’ve been teaching Team-Based Pay (TBP) since the late 70s and for over 26 years at Strategies. If it didn’t work, I would have stopped long ago. We wouldn’t have started our Team-Based Pay Conference six years ago. We wouldn’t have any owners entering our annual TBP Awards.

My big mistake was calling it “Team-Based Pay” because “changing pay” is scary for many owners. 

I should have called it the “Team-Based Business Model” because that’s exactly what TBP is — a business model for building a strong brand.

The Team-Based Business Model is leadership and systems driven. It requires the owner/leader to commit to a collection of best business practices. It requires the owner/leader to be fiscally responsible. It requires the owner/leader to be transparent and trustworthy. It requires the owner/leader do what’s best for the company, its employees and its customers.

The Team-Based Business Model works. It builds strong salon/spa brands capable of standing up to the lure of suites and booth rental — if the owner/leader fully embraces it.

If you think you know the Team-Based Business Model, but never researched it — you don’t.

If you think you’ll lose staff — you don’t understand the integrity of the conversion process. If you’re losing employees now, your company is telling you it’s time to rethink your business model.

Download the free Team-Based Pay Fact Sheet here.

Categories: Staff Retention

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Comments

  1. Great article, Neil! I started as a hairdresser 39 years ago. Fortunately my first job was as a shampoo assistant and earned tips. I learned immediately that the business model was broken for most independent salons. I then worked for Glemby International, the largest salon chain in the world at the time. There I learned that there were well run businesses that paid people fair wages; hourly and commission. I watched people fight over “my client” and competing with co-workers and stealing business records, etc. I learned that the service business didn’t serve its people this way.

    I opened my first salon, worked independently, hired an apprentice and discovered that 2 people working as a team could serve more people than two people working as individuals. My apprentice and I hired an assistant and we blew it out of the water. We merged with another salon and our team fell apart as we all started working strictly on commission as individuals and stopped being served by each other and the business. The business competing with its people the people competing with the business and the employees competing with each other over the people we were supposed to be serving.

    I decided “that’s just the way it’s done” and went along with it since that was the model I saw everywhere. The end of the story is 30 years ago, I opened a salon with a compensation system based on “we all do better when we all do better”. We called our way of working together, “Teamworks”. We hired and trained the best beauty school students we could find, many of them have been on our team for 20-30 years. We were the only salon I knew of in 1990 that paid great wages, benefits like vacations, sick time, medical, dental and eyeglass insurance, 401k and profit sharing. I stole the idea of the model from a friends law practice. Why couldn’t salon professionals be treated like any other professional? The answer is you’d have to learn to be an ethical business owner.

    Neil, you leadership has sometimes been the only voice for team based compensation. Strategies continues to lead salons out of what I call the morass of ego based businesses and into businesses organized around elevating what it means to be a salon professional in a business designed to serve people that serve people. Call it Team Based Pay, Teamworks or anything else for that matter. Educating salon professionals in financial literacy and ethical business practices is needed now more than ever. Thanks for the courage it takes to “think different” and contribute new ideas to people.

  2. I had done 1 year of coaching with strategies 10 year a go. So I am familiar with your business model. But but screw around and didn’t have the guts to follow through. Now I’m just like everyone else with struggling staff issues, not being able to attract new stylists and the sad thing is that I have two businesses in great locations that have plenty of customers with not enough staff to service them. Ugg!!!!!

    1. It’s never too late, John! We’re here if you need us, and we’d welcome the opportunity to work together again!

  3. Best article I’ver read in a while…so dead on. Thank you Neil for nailing this one. Love the new name for what you do…messaging is everything and this is a huge step forward for Strategies. Love you guys!

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