Intro: Do you feel like you were meant to have a kick-ass career as a hair stylist? Like you got into this industry to make big things happen?
Maybe you’re struggling to build a solid base and want some stability. Maybe you know social media is important, but it feels like a waste of time because you aren’t seeing any results. Maybe you’ve already had some amazing success but are craving more. Maybe you’re ready to truly enjoy the freedom and flexibility this industry has to offer.
Cutting and coloring skills will only get you so far, but to build a lifelong career as a wealthy stylist, it takes business skills and a serious marketing strategy. When you’re ready to quit just working in your business and start working on it, join us here, where we share real success stories from real stylists.
I’m Britt Seva, social media and marketing strategist just for hair stylists, and this is the Thriving Stylist Podcast.
Britt Seva: What is up you guys and welcome back to the Thriving Stylist Podcast. I’m your host Britt Seva, really excited to talk today about Venmo.
This is not my first time talking about alternative payment methods in the salon. We talked about Venmo, PayPal, checks, cash, credit cards way back in Episode 95, so almost a hundred episodes ago.
I think it’s worth talking about again, one, because I know I have a lot of new listeners. Welcome to the show, and you may not have caught that episode. Two, we’re seeing some massive shifts around what I call alternative payment methods and I think it’s really important to be really smart about your money in our industry.
It’s funny–I say it with a chuckle because we’re all in this industry to make money. Yet the irony is often we do things that make us really irresponsible with the money that we’re earning. It is irresponsible to not understand the complexities and legalities of any kind of payment processing system that we’re using, whether it be a check…
Do you even know the legalities around a check? What if a check bounces, do you know how to handle that? Go back to episode 95 and I’ll explain it to you. But I know a lot of you were like, checks? Who even accepts checks anymore? If you don’t, that’s totally fine.
But a lot of us are doing things like avoiding credit card processing. Why? Because we don’t have to pay the fees. Credit card fees suck. Fees in general suck, and so we’re always trying to keep as much of our profit as we can, myself included. I want to protect that margin.
That’s why a few years ago it started to become popular for stylists, salon owners, beauty professionals in general to accept payments by Venmo, PayPal, Zelle, all of these other apps that became available because it almost felt like doing transactions on the underground. It was almost like virtual cash, and so we started using these apps that way.
Unfortunately, that’s not how they were meant to be used and doing things in the underground only works for so long. As I reported back in Episode 95 well over a year ago, 18 months or so ago, the bubble burst on that actually quite some time ago. I think our industry just didn’t realize it. I tried to bring awareness to it way back then. I want to bring that awareness to the forefront again because on July 20, [2021], there was a huge policy change for the Venmo app specifically.
I think this is a perfect time and talking point to bring up payment methods, what we’re choosing, why we’re choosing them, and some of the things that you should be really scared about when you’re using anything besides, honestly, credit cards and cash. To me, those are going to be the most streamlined, straightforward, foolproof methods of payment. There are many others but because they are so complex, I personally think that they honestly offer a lot more bad than good.
I still want you to make your own personal choice though. I’m not anti-Venmo. I’m not anti-PayPal. I’m not anti any of these things. But I am pro doing business legally and above board. Why? Not because I’m anti you keeping as much of the cash you make as possible. I am pro profit margin, so don’t get that twisted. But because when you do things that are in the underground I’m going to call it, you should expect funky results.
There is a reason why there are rules and regulations around things. For me as a business coach, I always feel the rub when stylists want to be more well-respected. They want professionalism, they want to have clients respect their time, value them, not try and negotiate prices, accept our worth, and respect our profession and all that we do.
We want all that, but then we also want to not have to pay taxes and to avoid all of the legal and above board things. To me, we can’t have it both ways. There is a reason why the average income of stylists nationwide is still reported to be under $30,000 a year, which I say again with a laugh because we all know, everybody in this room listening to this, knows that’s not accurate. But what is accurate is that we’re still having stylists and salon professionals who don’t report all of their income to the degree that likely 2/3 of their income sometimes is going unreported.
It causes challenges with things like cosmetology school funding. It causes issues if you ever choose to open a salon. This is speaking from personal experience. If you ever choose to open a salon, it is seen as one of the riskiest businesses for anybody to try and open.
Good luck going to a bank and getting financing. Good luck signing a corporate lease with a really smart, professional leasing company because salons have gotta be in the top 10 of riskiest businesses; not because they’re actually risky, but because so much goes unreported. It’s such a cash heavy business still.
If we want our industry to level up overall, and I’m gonna keep it 100, if we want to make more money, we should start claiming more money. That’s my take on it. I don’t love paying taxes. It’s not my favorite thing to do. Like I said, protecting the margin and protecting what I take home is always at the forefront of my mind.
But I want to talk with you about the risks of using things like Venmo in a way that they aren’t intended to be used. I just want to offer some encouraging words around the idea of, but what if we run it like a real business? What if we legitimize? Let me get to the nut of what I’m talking about, and then we’ll go there a little bit.
As of July 20th, [2021], Venmo’s terms of service have changed. They’re adding in a byline and a feature that allows for buyers, meaning the client sitting in your chair would be the buyer, to click a button if their Venmo purchase was used for goods or services versus cash transfer to a friend.
The way Venmo was intended to be used is if you go out to dinner with a group of eight people, instead of having to ask the waiter to split the check eight ways, you can pay for everything and everybody at the table can Venmo you the cash. That’s the concept. That’s how it was intended to be used. Friends and family.
It started to be used for business, so they added this “For Business” feature to it, which is great. However, a lot of us, instead of just embracing the Venmo for business, we continued using it through a personal account, but allowing guests in our chair to pay us that way, give us tips that way, all of these things.
Venmo realized that was happening. They offered a Venmo for Business option. Shockingly, a lot of people didn’t opt into it. They were like, well, why would I pay the fee? Which is currently at 1.9% plus 10 cents for every transaction. Why would I pay that when I can pay nothing? I mean, logically it’s like, why would I pay something when I can pay nothing? You’re going to choose the nothing, and I totally get it.
So here’s the rub. For years, if you were doing that–using a Venmo not for business account to collect funds for goods and services, meaning the hair we do behind the chair, the retail, we sell, stuff like that–Venmo was fully within their rights to hold your money. You might be thinking like, yeah, yeah, whatever ‘within their rights’.
No, no. I know stylists who this has personally happened to. Go ahead and check your Venmo statements, friends. I’ll share on my Instagram story when stylists started DMing me and saying, oh my gosh, I didn’t even realize this was happening because it happened a year and a half ago, when I talked about this before. They’re within their rights to hold your funds if they even so much as suspect they’re for goods or services. It’s in their terms. I’m actually going to read it to you right now so that you know I’m not just making this up.
This is under the section that says “Actions we may take if you engage in any restricted activities”: If we believe (so not ‘if we can prove’)–if we believe that you’ve engaged in any restricted activities (which are included in exactly what I just explained, like accepting money for goods and services). If we believe you’ve engaged in that, we may take a number of actions to protect ourselves (meaning Venmo), our customers (meaning your clients), and others at any time at our sole discretion.
They hold all the cards. They also hold your money and they’re not FDIC insured, meaning if the company goes bankrupt, you are likely to be SOL or you might have to take a settlement depending on how the bankruptcy shakes out. But it’s not the same as doing things through a credit card that’s run through a bank that’s FDIC insured, or doing a straight cash transaction. It’s a bit of a riskier form. They hold all the cards and all the chips.
The actions we may take include, but are not limited to, the following: terminating your user agreement, meaning banning you from Venmo or PayPal. Do you guys know that Venmo and PayPal are both owned by eBay? So they are different services, but this is the reason why they have allowed the same rules. Kind of like how Facebook owns Instagram, same deal.
They can refuse to provide Venmo PayPal services to you in the future. Limit your access to their software systems, networks, anything operated by Venmo, the parent company, or PayPal. They can restrict your ability to send money or make bank transfers. That is point #3. They can restrict you from transferring money to your own bank account through Venmo.
Then we get to point #4: hold money in your Venmo account for up to 180 days–that’s six months–if reasonably needed to protect against the risk of liability, or if you violated acceptable use policy. Then it goes on to say they can suspend your account, they can take legal action, all of these things.
Those aren’t empty threats. I know that they’re not empty because I know stylists who have experienced this. Then I got more DMs about stylists who have experienced this when I shared this 18 months ago. What happens is often, like I talked about at the start of this episode, we want to make the money. We want to be smart with the money, but we’re not really watching the money.
You are happy with whatever lands in your Venmo account. You withdrawal whatever’s there whenever you do into your checking account, and that’s it. But if you’re not looking at the reporting, you have no idea what Venmo’s kept, held, or chosen not to distribute to you.
When I did this episode, a year and a half ago, I had a bridal stylist. This one broke my heart because we all know how much money you could make on a wedding day: $1,200, $2,000, $4,000 in a day. She was a bridal stylist and she was like, the amount of money I’ve lost from accepting Venmo payments that Venmo now refuses to give me because they’re saying it was goods and services, not friends and family… thousands of dollars. It wasn’t like she lost an $80 haircut. It was massive.
This is why I talk about actually keeping an eye on your money, not just being like, oh cool. I got $600 in the Venmo. That’s great. Are you looking at the reports? Do you know that this hasn’t already happened to you? How are you certain? Then what are you doing to prevent it from happening in the future?
When we look at Venmo’s new policy, I’ve seen a few ways of tackling this. Let’s call it like it is because some of you might want to go this route, so let’s just talk about it. Some of you are like, that’s ridiculous. I need to keep as much as I can keep. I can’t keep paying all these fees. It’s crazy.
Then we start to do things like, you know what? You’re going to have your clients pay you through Venmo, but using emojis or writing “thanks for dinner,” or “grocery refund” or whatever in the notes. Then we think we’re going to get away with it. With this policy change, Venmo is drawing a line in the sand. They are a massive corporation. Us as individual sole proprietors versus massive corporation–they’re likely going to win this battle.
If you’re somebody who’s getting 15, 20, 30 Venmo transactions a week, you’re probably already on the radar. With this policy change, there’s a likelihood they’re going to be coming for you. They’re going to be enforcing this policy bigger.
What will happen is, if a guest comes into your business and they click that Venmo button that says that it was for goods or services, immediately that 1.9% plus 10 cents goes to you as the seller. That’s immediately going to go to your account. I know that we’re trying to protect that, and we’re saying like, don’t! When you’re here in my chair, don’t push the button. That’s fine. But it doesn’t prevent Venmo from looking.
Now, there is another policy that Venmo added that I think is worth sharing as well. It says you acknowledge that we may make certain reports to state and federal tax authorities regarding transactions that we process. They’re saying, you’re accepting as soon as you use Venmo–you can’t just be like, well, I’m not going to agree to that. If you’re using Venmo, you agree to it. This is their user terms and agreements.
They’re saying we reserve the right to go to the state and federal IRS with anything that we want to, essentially. They’re saying, for example, PayPal is required to report to the IRS the total amount of payments for goods and services you receive each calendar year. If you receive more than $20,000 in payments for goods and services and process more than 200 transactions involving goods or services in the same calendar year.
Have you checked your Venmo lately? Do you know what they’ve already chosen to classify as goods and services, even though you and your mind are classifying it as friends and family? They could go to the IRS. Then if you are not able to, let’s say… let’s talk about the worst case scenario. I know that we are so terrified of paying transaction fees, myself included. I pay thousands of dollars in transaction fees every year. I hate it, but it’s part of the business I’ve chosen.
We so want to avoid this 1.9% plus 10 cents that we would actually risk and audit for it. To me, the audit is like my enemy. That is the worst case scenario, not because I’m doing anything shady, but because of the work that would be required. Has anybody been through an audit? I’ve not personally, but I’ve watched friends go through it and it is emotionally, physically, mentally so draining. It is not what you want to be doing. So if Venmo does decide to send you to the state or federal tax board, what are you going to do? That’s the worst case scenario; you’ve got a nightmare on your hands.
So to me, when we’re looking at it, is it annoying to have to do the 1.9% and 10 cents? Yeah. That’s definitely not ideal. It’s also a tax deduction. When you’re paying those fees, you can write it off against your taxes, which is good. We’re always looking for those deductions. When we look at deductions, they can actually lower our tax bracket depending on how low it gets you in the tax bracket, which the more money, the better. So we look at it that way too. But if it gets you lower in the tax bracket, you might actually end up saving more money.
You have to look at things like that smart, like a business owner does. Like somebody who runs a legitimate business, like I know you all want to does. They don’t say, that’s so annoying. I had to pay an extra $6 in Venmo fees today. They say, my goodness, how blessed am I that I did $600 in services today, sold X amount of retail, and I’m on my way to do more.
For me, when we look at the annoyance of, I have to now pay more credit card fees, more transaction fees, I say I don’t want that to be a personal hit against you. I don’t want you to lose money in this. That’s never my game. Instead, I want to show you how to earn more. That’s what my coaching is all about.
It almost irks me a little bit when I hear people say work smarter, not harder. I take a look at what their concept of work smarter is and I’m like, how on the earth is that smarter at all?
I actually mean it when I say work smarter, not harder. I am pro you working less, but working in the correct way so that you are generating more profit. Those transaction fees or whatever are just simply a blip because you have increased your income so much to take care of it.
Some of the solutions that I’ve seen as far as people who are frustrated with these Venmo additional transaction fees are saying, so you need to pass that onto your guests. Expect your client to pay that $1.50 transaction fee. Or just raise your prices.
If the transaction fee is really going to make such an impact on you, which we’re talking about probably less than $10 a day for most people–which $50 a week is some money. I want the $50 a week, so I get it. But if we’re sweating that 1.9%, it’s likely time for some kind of price increase.
If our margins are so tight that the 1.9% is going to make us or break us, we need to actually take a bigger look at our business model as a whole and ask ourselves, what can we do so that the 1.9% is like, oh, that’s annoying, but whatever, it’s a tax write-off and I’ve got it? My margin protects me in that. For me, that’s going to be the smarter way to do it.
This is the direction business is heading. I want you to think of what our industry looked like 50 years ago, and I’m not 50 years old so I wasn’t around then. But I was born in the 80s, so let’s look at the industry in the eighties.
It wasn’t an underground industry, but it was still kind of like mom and pop. You know what I mean? It was checks. It was cash. It definitely wasn’t a credit card business. It was like, you go to the same salon as your five aunties go to and everybody kind of goes to the same place and it’s your local shop. That was just 30 years ago, you guys.
The way our industry is evolving, it is becoming more professional. We want it to, but we can’t say that we want it to be more professional; we can’t say we want to be respected the way that doctors, lawyers, and dentists are; we can’t say we want to be able to earn our true value, but then say I’m not going to pay a 1.9% transaction fee. We have to meet in the middle on that.
I tend to believe that not just our industry, but business as a whole, we have to make the lead and then the consumer catches up. We’re setting the tone and the tempo. When we say pay me on Venmo, but can you pay with emojis and decline goods and services. Decline it, decline it. Just pretend like we’re friends.
Okay, so then you’re setting the tone in your relationship with your clients that you’re friends. Then if you are friends, I don’t feel bad bailing out on you. I’m probably going to no-show next time because something came up and I can’t make it to the appointment.
If you want your clients to respect you and send you referrals and tip you 20% and not bat an eye when you have a price increase and cheer you on as you grow your business and refine your market, you have to treat your business as a business. The other thing is I don’t want Venmo keeping your money. I don’t want you to be one of those unfortunate people where you do try and fight the system and the system wins in the end.
I shared with you a little bit ago in the podcast corporation versus small business doesn’t usually end well for the small business. I’m pro small business. I am pro your profit. I am pro you more money. I share this message with you in that vein of, I would prefer you shift to the Venmo for business. Hang with me here. I will show you how to increase your income. We have Thrivers who double and triple their income in one year.
Let’s just make you more money so that the 1.9% isn’t even an issue. Let’s have you run a business where if the IRS comes knocking, it’s not a problem for you. Let’s have you run a business where you are leveling up the industry overall. Let’s have you run a business where if one day you do want to open your own shop or you need to apply for a $75K loan to expand the shop you have, any bank is willing to fund you because you can prove you’re worth it. That’s where I’m coming from on this one.
I hope this has made some sense. I hope that you actually support Venmo for business. I’m not anti Venmo. I’m not anti PayPal. I’m not anti any of it. I am pro you running your business in the best way possible to eliminate the headaches and increase the profit as much as we can.
I also encourage you to go back and listen to Episode 95. We talked about this and all kinds of other methods in detail and I think it’s worth a listen. As always you guys, so much love, happy business building, and I’ll see you on the next one.
