Intro:
Do you feel like you were meant to have a kick-ass career as a hairstylist, 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 hairstylists, and this is the Thriving Stylist podcast.
Britt:
What is up? And welcome back to the Thriving Stylist podcast. I’m your host, Brit Seva, and today we’re going to talk about is it time to raise your rent or change your salon strategy? I think this one is very timely because we are living at this very interesting crossroads in the industry where the cost of doing everything is going up. The cost to buy a bottle of color is going up. The cost to rent your space is going up. Whether you’re a booth renter or a studio suite owner or a salon owner, everything is just getting more expensive. Our utilities are more expensive, all the things. And so, often, we as the business owner say, “Okay, well, listen, if the cost of me doing my business goes up, I can’t just eat that cost. Somebody else has to help me pay for it.”
So even if you’re an independent stylist and you’re listening to this, often when the cost of our business goes up, what do we think? Got to pass it on to the customer, right? I can’t just eat this inflation. Someone else is going to have to help me with it. Now, in the most ideal world, yes, but in our industry, pricing and profit margin isn’t necessarily going to be able to be reactive. So whenever we raise a price, raise the price of booth rent, raise the price of studio suite rent, raise the cost to get a haircut with us, when we raise prices because our overhead is increased, that’s called a reactive pricing decision. You’re reacting to an external factor to ensure that your business can stay operating. Totally understand why you’re doing it, but I want to take a step back here and look at why often salon owners get themselves into a bind when they try to raise the rent or continue to increase their profit margin. And we’re going to do this by deep diving into a DM I received.
So to the owner who sent me this DM, have no fears. I’m going to keep you completely anonymous, but I’m going to read you this owner’s business reality in full. I’m going to share with you the calculations of exactly what she should be charging for rent. We’re going to look at exactly what she is charging for rent. We’re going to analyze her marketing funnel and so much more. I think you’re going to absolutely love this.
Let me start with the initial DM. This owner DMed me and said, “Hi, Britt. Not sure you have time to answer this, but I need some advice. I’m getting ready to re-sign another five-year lease on my salon space, and the price is jumping about 15% due to property taxes skyrocketing in the last few years in my state. I currently increase my renters at 3.5% every year, but a 15% jump would be a big jump.” Of course it would. That’s four times as much as they’re anticipating their rent is going to increase. “My lease wouldn’t start until the end of next June. So I have plenty of time to notify my renters and see what the competitive pricing for renters and suites in the area are. But my question is, how do we go about raising them so I don’t eat all that cost as everything goes up? Thanks in advance.”
And what I love about this is to this owner, you are asking me this with nine months to make a change. She doesn’t have to re-sign this lease for a whole nother three more seasons, Q4, Q1, Q2 of 2025. Then she’s got to decide if she wants to sign or not. So she’s asking this question and starting to think this way while there is still a runway for her to make changes to her business, and that’s so genius.
I said, “I’d love to help you with this. Can you give me some more details?” And I asked for the insights as to what her business looks like today. So I needed to know how many chairs were available, how many of them were rented, what her current rental rate was and what her overhead was for her business. So she shared all of that with me, and I’m going to break it down for you as well.
She says, “I have six chairs and two additional rooms. So could be a room for an esthetician, could be a studio suite room. Just think of it as like six chairs and then two additional spaces where somebody could work. Right now I have three full-time stylists, including me, two part-time, a nail tech and an esthetician. So I have two chairs open. I get new stylists out of school interested in working for me all the time, but we don’t have enough walk-in clientele to build them up, so I don’t usually try to hire girls right out of school. I don’t think I’ve ever used your booth rental calculator. Where in my portal could I find that?” So I had asked her, I said, “Have you ever run yourself through our booth rental rate calculator?”
We have a tool that I’m actually going to verbally walk this person through right this second, but we have a tool within the Thriving Leadership portal that would allow us to loan owner to price themselves perfectly for their market so that your booths do fill and you know that you’re priced competitively, but in a way that people are actually going to want to work for you and all the things. So I’m going to run this person through that calculator.
And then I said, “Thank you for sharing all this information.” Before you raise the rent, I think we need to take a step back on this one because while I understand that this owner is like, “My cost of doing business is going up 15%,” it does not automatically mean you get to pass that cost along to your booth renters, and this owner knows this and this is why she’s asking the question.
So what I did for and foremost is I ran her numbers through our booth rental rate calculator. So if you’re in Thriving Leadership, this is in your portal. If you’re not yet, it’s certainly available to you if you join. The first question that the calculator takes into is, how many total styling stations are in your salon? This owner mentioned six stations and basically two suites, right? So I said eight total. Then the next question is, how many days a week is your salon open? I’ll be candid, I didn’t have that information. This owner didn’t tell me how many days a week they’re open. So I assumed five, I think that’s the industry average. Then she shared all of the overhead of her business, and I’m going to rattle that off to you. And what I need you to know is that I have taken all of these numbers that she’s given me and put them into the calculator.
So this owner pays $3,372 a month for rent and utilities, $250 a month for a social media manager, $320 a month for a cleaner, $239 a month for salon amenities, $518 a month for retail and back bar, credit card fees are $28.62. So overhead to run the salon is $4,720 a month. Then currently, retail income is just over a thousand dollars a month, and then booth rental income is $5,186 a month. So this salon is running profitable. What I did is I entered in all of those real expenses into the booth rental rate calculator, and then we take a look at demand and interest in working for the space. And this is the critical key piece that makes our tool and our calculator different than the rest.
Often, when a booth rental salon owner is trying to determine their booth rental rates, all they do is they look at the overhead and they say, “Okay, it costs X amount of dollars to run the business. I have this many chairs. I take X amount of dollars divided by the number of chairs. This needs to be the rate to cover my expenses.” Yes, but that’s in its simplest form, and what often happens is sometimes a business owner is running their salon at a higher rate than they can afford. What if this owner was like, “Well, we’re going to do luxury amenities, so we’re going to spend $1,000 a month on luxury amenities.” She actually can’t just pass that cost along to her renters because some renters are going to be like, “I don’t want to have gold flakes in the lattes that I serve.” And if this owner says, “Well, that’s just what we do here,” that’s fine, but she’s going to have a really hard time finding renters who are willing to pay an extra $30 a week for gold flakes in the lattes, right?
So the reason why our calculator takes into account demand is because it’s a really good indicator to me as a business coach as to if this salon is being run efficiently and effectively or if there are blind spots that we need to solve. So when I asked this salon owner what they’re currently charging in rent, they said, “Full-time is $251 a week. Part-time is $172 a week.” That is a challenge because based on the realities of how this business is operating, their overhead and the reality that not all stations are currently booked, right? This salon owner said that they have six people working for them, eight stations total, so two are empty. When we take that into account, the full-time rental rate that this salon owner should be marketing her salon at is $169 a week, and currently she says that she’s charging $251 a week. So essentially she’s above market rate. When we look at the part-time rate, she said $172 per week. My calculator is saying for four days a week, it would be $145. For three-day week, it would be $115.
Now, why would my calculator be pricing this owner lower? Because the way that I see booth rental salons as a whole is the goal is always to have all the booths rented for multiple reasons. One, it’s always going to produce the most predictability in your business. If you have six-eighths, which is three-fourths of your salon rented, as soon as one stylist leaves, you start to become vulnerable. So the goal is to always have all of the stations rented all the time with a wait list to come and work for you. Every stylist anywhere wants to work for the place that other people want to work, right? We always want to be where the other people are. It’s always nerve wracking when you go into a salon and you’re considering working there and it doesn’t seem like other people really want to be there. You’re like, “Do I really want to be at this place other people don’t want to be at?” Versus when you go and you’re applying to work at a salon and you’re like, “Man, this place is popping. This place is in demand. People want to be here,” it starts to be more desirable to be there yourself. So these rates are aggressive with the intention of filling all the stations.
Now, as soon as this salon owner has all of their stations fully booked, that full-time rental rate goes up to $186. Now, as soon as the stations are fully booked and the salon is providing five referrals a month, now we’re at $203 full time. As soon as the stations are fully booked, and the salon is providing stylists 10 referrals a month, now we’re at $236 for the full-time rate. As soon as all stations are full, 10 new guests a month, and there’s a wait list to work at the salon, now we’re at $304 full-time.
The reason why I wanted to do this podcast episode is I think often as a salon owner we’re like, “My cost of doing business has gone up. I’ve got to pass this along to the stylist.” I truly believe to this owner, and I know this is going to be tricky to hear, if you raise your rates, I think there’s a high probability that people will leave, and that makes me nervous for you. And I think that at this moment, we’re tackling the wrong issue. As we look at my cost of doing business has gone up, I’ve got to pass that along, the real thing we need to focus on is getting those last two chairs full and creating more demand to work for you.
So when I ran these numbers and I was like, “Holy cow, this person might actually be a bit overpriced for their market already, and now they’re about to incur higher cost,” I always look at, how do we make this salon more desirable so that we can create profit margin for the salon owner more interested in demand in working for them?
I took a look at your marketing funnel. Few things I noticed. First of all, there’s several different aspects to this business, and I want to be as transparent with all my listeners as possible without giving away the identity of this owner. So please keep in mind I’m dancing around a little bit here. So this business owner, the salon owner, runs her own clientele. Then she’s got people who work in her booth rental salon. Then there’s a spa aesthetics side to this business as well. So there’s multiple channels. To this owner, I have to tell you, I really struggled to find your overall salon’s social media presence, and I really tried. I did a Google Maps search. It was very difficult to find representation of your salon as a whole. I did find representation of the spa portion of the business. I found representation of you and your existing clientele, but not the salon as a whole. That in and of itself is going to make it very challenging for you to hire incredible beauty professionals who want to work for you.
So when I talk to stylists and I say, “What is it that you’re looking for as you’re looking for a salon to work at?” they will say, “I want a salon with an established presence. I want a salon that does have great reviews. I want a salon that does have a great website. I want a salon that does have a strong social media presence.” When I looked at the spa side of your business, one of the accounts I saw has a total of, I think it’s 16 social media posts total. So that in and of itself… And listen, I know social media is hard, but it looks like you’re paying a social media manager. We would need to see that really evolve and develop in order to have a higher ticket on our booth rental rate. The other thing I noticed is there is no website yet, or certainly none that I could find. It wasn’t linked to any of the social media profiles. And in a Google search, I wasn’t able to find it either.
So what I believe actually needs to happen is I would like you to spend the next three to six months working on your marketing funnel, and I have lots of free podcasts on the marketing funnel, but here’s something that can be a misunderstanding too. Even as a booth rental salon owner, you have to have a marketing funnel. We’ve reached this really interesting crossroads in the industry where the studio suite space has become such a viable option. And I know there’s this narrative of the studio suites are stealing all of our stylists. Well, no, but stylists have come to realize if they’re going to have to do all the work themselves, why not just do it for themselves? If they’re going to work commission or booth rent, they want the owner of that salon to provide something for them that they cannot provide for themselves. And yes, it can be team and camaraderie, which is, I think, what a lot of salon owners rest their hat on. And there’s a tons of intrinsic value to that. So I’m not saying that that doesn’t matter. It matters a lot. And there’s a lot of stylists who don’t want to work alone, and a lot of clients who prefer not to be in a solo suite environment. So all of that makes sense, but it has to be more.
And in a recent poll I did, stylists were saying they expected their salon owner to be providing 35% of their clientele, and I think that that’s fair. So knowing that the average stylist, when they have a full book of business, has somewhere between 120 and 150 clients in their book of business, you as the salon should be providing about three new guests a month to that stylist. And so you would need to have your own marketing funnel to make that possible. If you were to spend the next three to six months working on your marketing funnel, A, it would be much more desirable to work for you, B, you’re going to start to attract more clients to your business, which is a win in an up and ups for everybody. Everybody in the building is going to win on that, and C, it does set you up to have this, what feels like a necessary rental rate increase coming up in 2025.
The reason I wanted to really dive into this is I think so often when we’re a business owner, whether you be a studio suite stylist right now, a commissioned stylist, a booth renter, we just look at surface level challenges and seek the surface level solution. I actually don’t think the problem for this salon owner is that her rent is about to go up, the cost of leasing her space has got to go up. That is a challenge, no doubt about it, but I don’t think the question in truth is, how do I raise the rent for my stylist without them being upset? I think the actual challenge is, how do we create more desirability in your business? And desirability on both sides, desire to work for you and with you and desire to be a part of your clientele because if we can increase that, what I call the demand margin. This is going into perceived value. But if we can increase that demand margin, you’re going to win on both sides.
Who wouldn’t want to work for a salon where there is a massive influx of clients who were dying to be a part of that brand and of that business? You even openly said, “We do have a lot of stylists who want to come in and work for us, but because we cannot feed them clientele, they’re not going to work here.” You know what the challenge is. Often when I coach salon owners in this situation, the resistance is, “I know it’s going to take a lot of work for me to create more clientele flow for my business. Is there an easier way?” And the challenge is, for the next five years in our industry, probably from now until 2029, I’m going to say no. That’s the way to win as a salon owner is to generate a great deal of clientele for your stylist because if you are taking that on, they’re going to be very inclined to stay working for you.
You are providing business for them in a time where it has become harder to attract business. And I do think that this can become the upper hand of booth rental salons, commission salons, whatever, is if you are able to develop a really highly desirable brand, if you are able to create an incredible marketing funnel, if you’re able to create a retention funnel that provides a next level guest experience that people aren’t finding other places, you will win.
And so to this owner who’s at this crossroads of, yes, the cost of doing business is going up for all of us, I invite this owner and everybody to take a step back and zoom out for a minute and say, “Am I doing everything to run the best, most profitable, most well-marketed business that I possibly can or am my cruise controlling on the marketing funnel side of things and now I’ve got this challenge that I’m hoping money can solve?” Money’s not going to solve this one. Marketing and really looking at what it’s going to take to create high desirability in your space is going to be the solution here.
I’ve got tons and tons of resources here on the podcast to help this owner through. And to any other owners who have questions in the same vein, please as always, feel free to leave me a rating or review here on iTunes, and I would be happy to serve you up some incredible advice on the flip side. As I was like to say, so much love, happy business building, and I’ll see you on next one.
