We get caught in this funk where we want everything that corporate has, but we don’t want to be corporate. We just want people to stick to their word, for things to go smoothly, the arrangement to go well, but then we don’t do what we need to get there.
Corporate doesn’t do friendly handshakes; they do contracts. Corporate doesn’t say, “Oh, no worries. Pay me your rent next week.” They say, “Your rent is due, or you’re evicted.”
The issue is we’re not willing to have those difficult conversations. We want to be loosey-goosey without too many regulations or feel too businessy. But then we want to have our money and for our partnerships and arrangements go well, but here’s the deal: it doesn’t go both ways. The reasons why corporations (and even some small brick-and-mortar businesses) are multimillion-dollar organizations is because they don’t do the friendly handshake deals. Everything is finite, or it’s not.
As a salon owner, managing a brick-and-mortar business, you will have to have difficult financial conversations like those multimillion-dollar corporations. The sooner you can learn to navigate these conversations, the more secure your business and the happier you will be.
How to use return on investment to increase retention
ROI, or return on investment, is essentially what it sounds like: the resources you make back from what you spend. Think of it as if you’re going to pay $10,000 for a class, you know you’ll get $20,000 back after that education.
But there’s an additional risk because it’s chancy investing in people who can change their mind.
And that can make the salon owner feel heartbroken, vulnerable, and reluctant to do more to support their stylists because they feel like they’ll constantly come out a loser, right?
But, salon owners, listen up: in a good business deal, both sides win. If somebody loses or you feel like you lost, it was a bad deal.
For changes to be made in the industry, it takes both sides. If you sit down and honestly talk with your stylists to create a good business deal for both of you, it will build up your culture and your team’s loyalty.
There’s a difference between loyalty and staying somewhere out of fear. You shouldn’t want stylists to stay from fear, but because of mutual respect.
Don’t share your financial troubles
When you own your own salon, you know that everything might go great…until something goes wrong. It can be as small as a date changing due to circumstances totally out of your control.
Let’s say an educator changes their date because they can’t fly out. There’s nothing you can do, and you feel like that’s okay to share with your team, right? But if you need to cancel a class because the water heater goes out, you might feel like explaining to your team what happened.
Think again.
You should have a certain level of transparency as an owner, but you should never talk about money troubles. Think of owning a salon as a parent/child dynamic.
There are ways to explain things like this without airing dirty laundry. Maybe you think they should understand, but they won’t.
As a child, hearing your parents bicker about money is scary. You might not totally understand what’s going on, just that money was tight, and it’s scary. How could it not be? If the leader is scared, everybody below the leader should be scared. That’s why never ever should your team know if you are in financial trouble.
Even with transparency, even if you’re making shifts that make logical sense, your stylists shouldn’t know that. Make up a story – the class couldn’t be done, the educator couldn’t get a flight out – and don’t say anything about budget because it goes back to that primal instinct. It makes people nervous and you will lose staff.
Look for the mutual investment on education
The better your stylists are, the better your salon is. If a stylist wants to learn this specific thing, decide together whether it would be a great thing to bring into the salon. So if a stylist wants to learn a specialized balayage technique you both believe in, and that lots of other stylists want to be educated on, that’s a mutually beneficial investment.
Have a conversation about what benefits this education can bring not only her but the salon. Is she willing and has time in her schedule to teach other stylists this technique? Will it boost both her and your businesses?
If you both see the mutual investment in it, the commission split until funds are repaid, or no-cost training should all be on paper, contractually done. This can’t be just a handshake. Figure out a way to make it work.
Should you adjust commissions after the fact?
Let’s say you are going with an arrangement where you, the salon owner, fund the education, and your stylist will pay you back by teaching classes. Maybe the money from the classes would run through the salon, and the salon would keep the entire portion until everything had been paid back.
This stylist has taught classes to both existing staff and maybe sells tickets to bring in other outsiders with a 50/50 revenue share. Soon the class is paid for, and the stylist has done their part, maybe even created a surplus.
The stylist wants her paycheck, but that same month the roof sprung a leak, and you need to repair it.
This is where it gets tricky. You have to come up with this additional money to pay for something you didn’t even know would happen. You might feel like your back is against a corner and you don’t have the money to pay your stylist, right?
But it comes back to transparency. It might be tempting to tell her that you appreciate her work, but you realized you’re giving too much and don’t have the funds to pull it off, but you can’t. You have to pay her what she’s owed, even if it comes out of your service revenue.
Your stylists and educators don’t need to know about your financial troubles, right? Because when you share your troubles with that stylist, you can no longer say it’s only your issue to figure out. You’ve included her. You cannot have it both ways. If you tell her that the commission percentage must change or you don’t have the money to pay her, she is a part of the financial conversation.
How to see both perspectives
Following our example, let’s say that stylist you paid to train now wants to strike out on her own. She’s not doing it to be disrespectful; she feels financially insecure in the partnership. Look at it from her perspective: you both were excited, you agreed upon something, and she did her end of the deal. Now she should get her money, and you say there was a leaky roof and you have to figure out a way to pay her from your own service dollars, oh, and also you have to shift the commission percentage.
Can you see how that doesn’t feel so great? She thought you had this agreement, but now you have money trouble so she realizes she probably should do this on her own. It’s a security measure for her.
Moving forward, have a written contract, so if a stylist chooses to leave the salon before the contract is repaid, it is now legally binding. They have to reimburse you before they can be released from their lease.
How to break down a commission split
Are there any salon owners still paying their stylists 50% commission? Yeah, your salon will not make it on that. There’s not enough margin to do it.
Stylists, if you think that’s crazy and you won’t work for less than 50%, definitely don’t be a booth renter because there are very few booth renters who make more than 50% profit.
If there wasn’t enough margin from the start, the challenge becomes you’ve already promised your stylist one thing, so when you renege on that, it doesn’t feel good.
What you can do is be honest and say we are paying you so much that there’s no profit left for us, but you trust in her and know she’ll treat this program properly. But any educators we choose to bring in moving forward will only make 30% commission, but hers will stay the same.
Why? You promised her something, and if you say do the same work, but get paid less for it, it’ll be a no.
And if you think you do the same work and make less, that’s what you chose to do as an owner. Your financial troubles are not theirs. You take on that burden. You can’t pass that along, and it’s tough.
How to pay your educators
If you have a former stylist-turned-educator or even an in-house stylist who wants to teach, let her. Imagine if she became a phenomenal balayage educator; you would get so many new stylists from it and your salon reputation would bloom.
Sit down and have a candid conversation. Let her know what your rental rates are. It costs money to host classes, and that’s something you take on as an owner. It can’t be a friendly handshake because you’re professionals.
Being a salon owner is one of the hardest jobs on the planet, so hopefully this has been helpful. Learn how to have frank, financial conversations, and watch everything else fall into place.