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 weren’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 Seva: What is up? Welcome back to the Thriving Stylist podcast. I’m your host, Britt Seva, and I want to talk about Stylist Compensation methods that work today. When I started in the industry in 2007, it was like every salon was either booth rental or commission, and the structures were super simple. Now, 15, 18, whatever years later, things have gotten so much more complicated. Laws have changed, salon structures have changed. Salon suites became a really popular model. They were just at their infancy when I joined the industry.
Because of that, trends have changed. A whole new generation of stylists has come into the market, right? I’m a millennial, so there were certain things that we were looking for when it came to compensation. Gen Z has really flipped the script on that, and people are much more aware of things like retirement savings. The way that social media has educated people and awareness of everything has just really shifted over the years.
One of the things that I think has been slow to adapt is looking at compensation in the industry. What I thought would be fun is to just kind of open up a broad conversation around compensation structures in the industry, options that are available, what you maybe should consider, what I think is trending, and just kind of dig in a little bit. First of all, this one’s going to be for those who are employees or who are salon owners who have employees. We’re not going to talk about booth rental rates on this one.
I do have trainings on that and Thriving Stylist Method if you’re eager to get in there and start learning, but I really want to talk about if you have employee-based stylists, how to compensate them. I believe, correct me if I’m wrong on this, but I made a list of five and a half, I guess, different ways to pay employee-based stylists in the industry today, which is pretty wild. There’s not a lot of, when you look at other industries, there’s not all of these gajillion different ways to pay people.
Our industry is extremely unique. There’s always been classification issues in our industry, because essentially, everyone got in this industry to be self-made. I think that that’s something like a tie that binds, and what I think is really interesting is in our industry, when you are an employee-based stylist, a commission stylist, your salon owner is still looking to you to build your book of business. Yes, you may receive a paycheck from somebody else, but there is still this expectation of, “Yeah, but you build the book of clients,” versus, I’m trying to think back to the last few times I was an employee.
When I worked at the Ritz-Carlton in Half Moon Bay, I was in weddings and special events. I wasn’t expected to cold call brides. Clients were calling in, the business was coming to me. I was just expected to manage it. That was my responsibility. I was a dance teacher growing up when I was a kid. That was one of my very first jobs. I did ballet until I was 18. One of the job opportunity was to teach the, we call them the littles, like the babies.
I didn’t have to find families with kids who wanted to take dance classes. As an employee, I just showed up and did the work. In our industry, if you want to have a job to do, you’re supposed to go out and find clients, whether you’re independent or a stylist. Now, I do think, this is a message for the salon owners in the room. I hear a lot of salon owners saying like, “Ugh, the studio suites industry is killing team-based salons.”
I totally disagree. I think that the industry and the expectation of being a salon owner has evolved, and salon owners are just taking a little bit of time to catch up to what stylists expect of them. I think that’s actually what’s happened. When I joined the industry in 2007, I always say, I was willing to lick the floors if a salon was willing to give me a job. I found a great salon, and I would’ve stood on my head for six hours if that’s what they wanted me to do. Stylists today are just simply not built like that.
Opportunities are much more in abundance, and because there are so many different ways to work and so many other opportunities, stylists are very rightfully so asking salon owners, “What have you done for me lately?” Simply providing a place and space for stylists to do hair is just not enough anymore, because they can go to a studio suite if they just want to do hair. If I’m going to work for you as an employee, you in turn owe me something. That’s the piece that’s really hard, and I totally understand that.
I totally understand that. I have 16 employees who work for me. I know how hard it is. I also know they only work for me because they’re hoping I give them something in return. Otherwise, they would take a job somewhere else. We as salon owners need to be providing a good chunk of clients to our stylists if we expect them to stay working for us, amongst other things.
The reason I want to speak to that is because I think having a competitive compensation model is more important today than ever, because it has to be so good that clients would prefer to work for you than work independently on their own and have full financial control. It has to be so good that it has to outweigh that. We say things like, “Yeah, but they want to be a part of a team?” I don’t know. How good is your team? I’ve met some salon teams that are phenomenal, like dream teams, incredible cultures, great leadership is great, and I met some salon teams that are, to be honest, rocky at best.
Yeah, they all show up and they work together, but there’s lots of tension and lots of issues, and it’s kind of like they’re only there because they can’t afford to be anywhere else. No, no one wants to be a part of that team. They’re just there trying to get through the day. Let’s unpack the compensation models, but what I want you to understand is, this is extremely important, extremely important. If your compensation model isn’t enticing, you’re going to have a hard time hiring, and then doubly hard time sustaining people.
Okay, so the first compensation model that I think exists in our industry is a fixed commission compensation model, meaning if you work at Siva Salon, you make 50% commission. Everybody makes 50%. That’s a fixed commission model. I think that model is massively dying out. Oh, by the way, caveat, I’m not talking about 10-99 stylists at all in this podcast. If there is a 10-99 involved and a commission split, that is going to be an illegal form of employment. I cannot coach you on that.
If you want advice on how to run a pricing structure like that, I would contact a local employment attorney. That is illegal to the best of my knowledge and understanding, from every financial advisor I’ve spoken to. I’m not talking about anything with a 10-99 involved. I’m talking about a true W-2 employee kind of relationship, okay? Fixed commission, everybody makes the same.
Pros, it’s very simple, and there’s full compensation transparency. I’m making 50%, and Suzy who works next door to me is also making 50%. The cons is there’s no growth path. The only way for me to make more money as a stylist is to raise my prices and see a higher volume. That is a very dated way of doing business in the industry. When I joined the industry in 2007, it was like, “Oh, great, you want to make more money? Double book yourself, triple book yourself, hire an assistant, and raise your prices.”
That is just not the way we scale business in this industry anymore. It’s very dated way of looking at it. The growth path that is possible with other methods just isn’t there. There is potential profit loss as well. I remember one of the very first salons I coached back in 2012 when I started coaching, had a fixed commission model. Oh, my gosh, that was one of the most intimidating salons I ever had to coach, because I could see they were drowning in their commissions.
I told them, I said, “We got to find a way to soften these commissions.” They were like, “We can’t. If we reduce the stylist commission, we’ll have a walkout.” I understood that. If you were a stylist and I came to you and I was like, “Hi, we’re going to cut your commission by 10%,” why would you stay working here? The salon had created this fixed compensation model that they simply couldn’t sustain, very dangerous. The third con is that budget isn’t taken into consideration.
I find that with fixed compensation models, they’re generally fear-based. The salon owner is like, “Okay, what commission do I have to offer so that stylists will want to work for me?” I get it. It makes sense, because the stylist does have to make a wage that makes sense for them, but there’s other ways to accomplish that.
Okay, so then the next compensation model I want to talk about is more like benchmark commission. If you’re a stylist who’s doing $2,000 in services a month and $200 in retail, then your commission is 38%. If you’re a stylist who does $3,000 a month in sales and $300 in retail, then you can make 39%. If you’re a stylist who does $5,000 a month in services, and $500 a month in retail, you can make 40%, and on and on and on like that. The more you make, the more you produce, the higher your split is. Very common model.
Pros, again, it’s super simple, and there is a clear financial growth path with that, right? Like sell more, do more, produce more, make more. It’s pretty clear on that one. The cons is there’s almost always a cap. If any salon is running a model like that, does anybody ever make 70% commission? I don’t see a lot of that. I usually see, and then it caps out at 48%, because I can’t afford to pay more than that. It’s not true. The reason why salons get to a place where they can’t afford to pay more to that is because the structure they’re running is simply too limited.
I get it. I get it. If you’re a stylist and you’re listening to this and you’re like, “I’m going to go fight for a 70% commission,” your salon simply may not be able to afford it, and I totally and completely understand that, but that’s one of the problems with these benchmark based systems is that a cap usually does come into play. My other big issue with benchmark based commission systems is that I believe today, success comes in multiple forms, and systems like this don’t celebrate that.
Benchmark based commission systems are based solely on sales. Here’s the thing too is it’s not usually just sales. It’s like pre-booking, volume of clients, retail sales. It’s like a gajillion different benchmarks in order to make a higher commission split, but we see some stylists today who are working two days a week, bringing in $10,000 a month. Why is a stylist who’s doing 120 grand a year working two days a week being punished and making a lower commission split because somebody else is working five days a week, producing $400,000 a month?
The math doesn’t math on that. Those two people should be making the same commission split, but in a lot of benchmark based structures, that’s not how that would shake out. I don’t think it allows for the individualism that would need to be in place for everyone to be celebrated on their own individual growth path. The other thing is that the hoops that have to be jumped through, I think, are dated. Back to the same thing I just said, I think success comes in many forms and varieties today.
I think that those benchmark based commission structures just don’t allow the fluid flexibility that I think that stylists today are seeking. When we see stylists who are demanding more schedule flexibility, freedom of services that they offer, there’s just, the benchmark based structure is a little too rigid for that.
Okay, I’m interrupting this episode because our friends at SalonCentric came in so big this year for our Hairstylist Appreciation Month, and I want to make sure we get you registered. Hairstylist Appreciation Month giveaway number one is an all-inclusive package to Redken Symposium in Nashville, Tennessee 2024. Y’all, I am talking airfare, hotel accommodations, and your event ticket completely covered. This is so generous, and I am beyond thankful that SalonCentric is offering this to all of our Thriving Stylist fans.
The best part is that they’re offering not just one, but two packages. We are randomly selecting winners from all eligible entries. Get in on this one. There’s no reason not to. If that wasn’t good enough, both of the winners will get a chance to work backstage with the one and only Sandvia during the event. This is truly a once in a lifetime experience. We’re not done yet, because SalonCentric isn’t done with their incredible giveaways.
Prize package number two, SalonCentric has partnered with Salon Interactive, which if you don’t know, they’re the industry’s premier online retail sales company. If you don’t already use and love them, I’m sure you’ve heard about them. I’ve talked about them here on the show, and they are truly the go-to resource for stylists who want to sell retail without stocking it in the salon.
Several winners will be randomly chosen to win a one-hour call with the head of marketing for Salon Interactive, plus three months of free marketing tools and an extra 5% commission boost, taking the Stylist Retail Sales Commission from 25% to 30% on all sales through the system for a limited time. Could it get any better than this? This is amazing. How do we get you signed up? You can head to ThrivingStylist.com/SalonCentricGiveaway to enter to win, and view the contest rules and details. Good luck, and I cannot wait to see who our lucky winners are. Again, ThrivingStylist.com/SalonCentricGiveaway to enter to win. Now, back to the episode.
Then there’s the base plus bonus structure, so making an hourly rate plus a bonus. Often the bonus is team-based, so team productivity. If the team overall does well, then there’s a bonus pool that can be split. I want to start by saying, I am very open to hourly based pay. I think a lot of people are like, “I don’t want to be paid hourly.” Hourly is freaking amazing. My husband worked with San Francisco Fire Department, and they pay their employees hourly. His hourly rate was so sexy.
It’s not like he was making $17 an hour, he was making a lot per hour. I think hourly wage gets a bad name because when we think hourly pay, we think minimum wage. If anybody in this room was making 70 or $80 an hour as an employee, you’d probably be pretty okay with that. When I say hourly pay, I love hourly pay. I think it’s predictable, I think it’s clean for everybody. When you go into my program, Thriving Leadership, hourly pay is one of the models that I suggest, but if you had a high producing stylist, I don’t understand why.
You couldn’t be paying them $170 an hour as an hourly rate. Hourly pay is not a four-letter word. It can be a really good thing. It’s just a structural term. I’m a big fan of hourly pay. I want to say that from the jump. One of the things I’m a little iffy on is hourly plus a team split bonus. One of the common models for this is a company called Strategies, and they have a team-based pay model, and a lot of people really love it, really love it. I pulled up their website and I just pulled a couple of quotes from it. This is directly from their site.
Business-based pay models are about all team members driving the company’s productivity rate just their own. It’s all for one, one for all. We’re in this together, we’re working towards shared goals, and that’s something I can definitely get behind. Everyone is responsible for every, this is interesting, this is a quote from their website, everyone is responsible for every hour available for sale. Every single person on the team is responsible for every hour available on everybody else’s schedule, in every column on the company’s appointment book.
I thought that was really fascinating, where it’s like, “We are a collective. Everyone is in charge of making sure that everybody else succeeds,” so kind of like that rising tide lifts all boats things. Keep that in mind for just a moment. When they explain, this was in the FAQ section, if you were a stylist who was previously paid on, let’s say, fixed rate commission, and your team shifted to this compensation, it is safe proof.
What it says is each service provider’s new hourly rate on team-based pay is based on the average gross pay earned over the previous six months, then divided by the scheduled hours per pay period, with a minor increase based on a number of factors, added in to arrive at the new team-based pay hourly rate. That rate is then multiplied by that employee’s scheduled hours to arrive at a projected new paycheck. It’s safe proof to ensure that at the initial inception of this new model, no service provider is going to instantly be making less money.
The hourly rate that’s determined is based on their productivity over the last six months. It’s not meant to cheat a stylist at all, which is great. Pros, payroll is more or less fixed, which is really nice for a salon owner. There’s that predictability there. You know how many team members you have, how much their hourly is going to be. It’s not like, “Wow, Nathaniel did $5,000 more in services than we were expecting, and now we have to pay him more.” Very predictable.
Because it’s hourly, there’s less fluctuation, and you only pay more if the team overall does really well. If Matthew does really well, but the rest of the team does really crummy, Matthew’s overage floats the rest of the team doing crummy. Can you see how as I say that, there is an innate issue that comes up? Here’s the cons. A system like this rewards a certain sect of the industry, so new stylists, mid-range stylists do really well in this model.
If you have an A player like somebody who’s literally doing 300, 400, $500,000 a year in services, and then you have several stylists who are up and coming, that person is working extremely hard to float the salon’s goals. If there’s underperformers that cause a really high performer to not achieve their bonus, it’s hard for me to imagine that there wouldn’t be some resentment there. Then it’s like, “Do you need to have a subsidiary way to bonus the high achiever?” Then there’s this adaptation to it.
I understand why we do this. If you don’t know this, if you are a salon owner, the most profitable salon owners have high achievers, mid-range achievers, and low achievers. A salon that just has low achievers cannot turn a profit margin. They’re usually running in the red. A salon that has mid-range achievers can turn profit and can do really well. A salon that has very high achievers gets to do the really exciting things, like have assistants, and really upscale amenities, bonus programs, big trips for the salon team.
It’s not because they’re gouging or ripping off the high performers, it’s simply because there’s more money in circulation, and the cashflow is more predictable and stronger. There’s also an established and clear growth path and plan. There’s just all of these things that come into play. It’s not about gouging the high performer, but it’s simply because opportunities become available when you have a more dynamic team.
The challenge for me is that what happens when, for several quarters, your mid and low-range people just can’t seem to pull it off, can’t seem to afford to hit the goals? At what point does the high performer get resentful, and then what’s the backlash to that? I think in order to run a system like that, where it’s truly all for one, one for all, the leader has to be very diligent in who they hire and who they fire.
You can’t keep someone around who’s trying their best but can’t quite pull it off, because they’re dragging the entire team down. It’s like, you’re only as good as your weakest link. Man, you got to be cutting the weak links off as soon as they show their face. Really, really careful on that one. I think that it could work, so long as you’re a strong leader who’s willing to really stand in your morals on that.
Then we have the profit-based. Profit for profit is what I coach to in Thriving Leadership. What I like about profit for profit is that there’s unlimited growth potential, there’s no commission caps, the stylist always keeps the lion’s share. There’s an 80% profit of profit, meaning that the stylist keeps 80%, and the salon keeps 20. There’s a 75%, meaning the stylist keeps 75, the salon owner keeps 25, and then there’s a 70, where the stylist makes 70, and the salon owner keeps 30.
No matter how you do it, the stylist is always making the most, but the salon is always making profit. There’s no running in the red, so everybody’s protected, but there’s no accusation of, “The salon is taking all of my money,” because no matter what split the salon chooses, the stylist always makes the most, and it’s always based on profit. It’s not just based on arbitrary, “We’re burning through color, our overhead is too high, we can’t afford this.”
The profit leads the way. Cost of goods is taken into consideration, budget is considered and well-thought through in this model. The cons are, it’s really tricky when you’re starting off, because a salon’s expenses at the beginning are really different than what they evolve to be as the team grows. You have to kind of massage it a little bit once you start. Then as things adapt and change, as cost goes up, again, you have to run the business like a business.
Right now, for me, when my business has ebbs and flows, I sit with my leaders and I’m like, “Where are we going to cut budget?” We’ve never cut budget on payroll, not one time. We’ve always found other ways to do it.Having a profit of profit model, which is essentially what I run, it forces us to make sure the team is always well taken care of, and to make really great profit-based decisions on the business, with the team never suffering.
No team member has ever accused me of stealing their money, or I’m the one being greedy and keeping all the money in this business. Never. I think this model really safe proofs that. The other con is that as your budget changes, payroll suggestions will too, but that’s true of any method. If you have a fixed commission model, and all of a sudden, you move into a new building, you’re in the same boat as you would be with this model.
Now, the last model I want to talk about is profit of profit plus profit share. Like I said, profit of profit is what I just spoke about. It’s what I teach to in my Thriving Leadership program. You could do that plus a KPI bonus share, meaning that your high performers based on individual achievement could potentially make more, could potentially be promoted. It’s more of a traditional way of looking at compensation.
I think one of the things we do it a lot in our industry is we consider our industry to be so special and so unique, and everyone’s a special snowflake, and we need our own models, and nobody understands us, and we have to do things our own way. If we would incorporate more normal, widely accepted business practices into our industry, accounting gets easier, profit margin gets more abundant, things get a little bit cleaner and a little bit more simple.
What I invite you to do with this podcast is just think to yourself like questions to ask. Is your pricing structure the way it is, simply because it’s easy, or is there other logic to it? Two, is it allowing for you to have profit? Three, is it motivating to your team? Four, is it celebrating your high achievers? I think those are the things that are really, really important to consider.
If your pay structure does all of those things, if it ain’t broke, don’t fix it. What you got is a good thing going. Even use this as a catalyst to talk to your team about and say, “How do you feel about our structure?” By the way, everyone’s going to say they want to make more money, and I totally understand that.
You say, “Yep, I want to make more money too. That’s what this is all about, is figuring out how I can make everybody here feel celebrated, seen, heard, appreciated, valued, how to make sure every stylist on this team knows that they are being fed and taken care of before I am as the owner, and making sure that everybody really feels like they’re compensated more than fairly, that they’re motivated by their compensation, and that they’re motivated in a modern way that encourages growth and employee retention.”
I hope more than anything, this episode’s got your wheels turning, and as I always like to say, so much love, happy business building, and I’ll see you on the next one.
