The Devil is in the Details
With the prospects of a “recession” ahead of us, we offer the following as a conversation starter for all of our readers:
Many leading salons have strategies in common to drive long term success. As the old saying goes, “the devil is in the details” and successful salons know this – focusing relentlessly on driving out expense wherever possible while constantly finding ways to increase per client revenue.
On the income side of the equation, we hear most often about expanded service offerings to capitalize on trends (i.e. everything from hair straightening to eyelash extensions and anti aging services). On the other hand, many caution that when adding services, be sure to evaluate every menu item and consider dropping low profit services that eat up valuable time that could be spent on targeted high profit niche offering.
Most importantly, successful salons view every client as an opportunity to increase revenue. Maximizing per client revenue (i.e. getting the most out of add on services and retail sales in the chair and/or at the front desk) is a core principle shared by success minded salons.
Market leaders are also looking outside the industry for ideas to build revenue. Target is pioneer in mixing value pricing strategies with premium names (think Martha Stewart and Isaac Mizrahi) with a luxury cache to their product mix. Add to that Target’s marketing strategies (youth focused and “hip” in spite of a core audience that some define as anything) and you have a new take on growing retail sales.
Leading retailers often use the time customers spend “checking out” to increase sales by offering “impulse purchases” that can add profits. And with profit margins thin, it’s these kinds of strategies that are often separating success from failure.
Finally, successful salons are almost always successful retailers who focus on effective inventory control, strong display and in-salon promotion skills, ongoing staff training, and effective retail sales incentive plans.
On the expense side, successful salons are continually looking for methods of reducing costs. They track back bar efficiency (think color!), labor costs, and other overhead to reduce expenses wherever possible. They are masters at lease negotiations and aren’t afraid to look into long term contracts for opportunities to renegotiate when the time is right.
Expense management is about constantly managing the bottom line and keeping to – or beating – the budget (and yes, successful salons create annual budgets – and sue them all year long). It’s about savings a dollar here and a dollar there to create incremental savings all year long. Key areas include bank charges, credit card fees, utility charges, and towel and cleaning services – for starters. No line in the budget is immune from consideration.
Expense management is also about controlling the cost of labor – the number one expense on every salons budget. With commissions creeping up nationally, this is an important area of consideration – one that successful salons manage with effective communication – and counseling – so that staff understands the big picture as it relates to compensation.
Overall, the ideas shared above apply in good times and bad. If we have learned only one thing from our conversations, it is that you must keep you eye on your profit and loss statement at all times. Attention to detail matters – and can make the difference between success and failure, now perhaps more then ever.
To comment on this posting, click on the “comments” link below. If there is no comments link below, click here and then click on the comments link that will be below this paragraph.
January 29th, 2008 at 12:03 pm
I’ve heard from sales reps in Beverly Hills that the salons are empty during what would be peak times for earnings, lately.How would a salon owner in a prime commercial market earn money when his expenses are already through the roof? Buy GOLD?
January 29th, 2008 at 9:18 pm
So much of this is correct but most salons really don’t get the power of customer-centric marketing.
The comment copied below from the article is so right and yet so overlooked.
Most importantly, successful salons view every client as an opportunity to increase revenue. Maximizing per client revenue (i.e. getting the most out of add on services and retail sales in the chair and/or at the front desk) is a core principle shared by success minded salons.
Salon owners need to develop a BLUE OCEAN strategy to make their competition irrevelant. Just compare salon and spa menus. They all look alike.
Do they understand ORGANIC Growth. They talk about growing their business but do they really?
Marketing is about touching people to influence their next decision.
Let’s see some examples of how salons do it and how they make their competition irrevelant.
January 30th, 2008 at 8:47 am
This article is so right on target. Most salons throw product on the shelves without any thought of placement or marketing straegies. If s salon doesn’t have the resources to hire help in marketing to begin with there are so many avenues to research. I started by studing product placement in my local grocery store. Where they placed name brands compared to their brands. Where they placed essential items compared to impulse. What was at the check out counter. It changed the future of my salon.
March 5th, 2008 at 8:43 am
I am a stylist in a new salon and spa. We are located off the beaten path, this was to own and renovate a house so we wouldn’t have to pay astronomical retail store prices.
I work for a woman who has never owned a salon before and who is desperately trying everything to help us pick up business. She is beyond frugal in trying to keep expenses low. She is doing some advertising in some local coupon magazines. We have done two rounds of direct marketing by selling packages at severely discounted prices to get people in the door. She says she can’t afford to pay more than $7/hr for a full time receptionist, we think that is why we can’t hire someone “good” for our first impression. There was no planning for retail display so it is just up on shelves where ever there is room for a standing shelf. Furthermore, when I try to discuss things with her, no matter what my approach is, I have tried sugestions, I have asked her about reading publications etc., she is defensive, doesn’t see a way to change things etc. But I have always heard that retail is where the “add-on” money is. I worked at a department store in an upscale salon and I sold $3-500.00 a week in retail, because we had 10 lines. I can barely sell $100 here because there are no choices. We have 2 brands…how do I reach my boss? Someone please help me with some suggestions.
March 9th, 2008 at 12:22 pm
Dawn, what a great post for our blog. Hoping more will jump in and offer their thoughts.
It’s hard to pass judgement without being in the salon (and even then it is not so easy). You dont say if the owner is an experienced salon professional herself. Without knowing much, we’d share the following based on what we have learned over the years from nca members:
1. You can get a great receptionist for $7 an hour if you hire smart - AND consider incentive pay based on sales so she can increase those wages if she performs. Key is finding a ’sales minded’ receptionist who is good with the detail, can keep the area ‘together’ and also loves to sell.
2. Look for role models and borrow their display ideas. is there a local salon that is a great retailer? Look for salons such as aveda concept, Paul Mitchell Signature or Redken salons - these are retail focused businesses. See what they do and then create your own version.
3. Dont let 2 lines be a block to success. You can succeed with one, two or ten - if you know how to retail and constantly adjust your promotions, display and sales efforts. The right lines will stand on their own - but the staff ideally must support the sales of those lines. And for sure, the receptionist should be passionate
4. Does your salon get distributor support? Manufacturer support? The industry if filled with great ideas and best practice models. Leverage the product buys the salon makes to get help from those you support. If the support is not there, consider changing lines.
Hope this is the beginning of a conversation with others on the blog.
March 12th, 2008 at 12:52 pm
[…] Dawn R. recently responded to our “Devil in the Details” blog with a cry for help! Dawn is need of some advice to share with her salon owner (and how to best do that!). This particular comment seems like the perfect opportunity for some serious give and take on the core concepts and strategies of building salon success. Hope all will considering adding your thoughts: […]
March 13th, 2008 at 4:21 pm
Dawn R.
Hi Dawn R. I hope this will help.
I am a business consultant for the salon Industy. I do understand how you feel, and your frustration. I run into this, issue very often.
There are so many different reasons for the business owner to seem frugal. From the eyes of a employee or boothrenter, it may seem like it is so easy to fix, buy just implementing the obvious, whitch in this case is possibly retail and more marketing.You are right, about retail being the highest profitable area in the salon. That is one key area, there are many different ways to increase business in not, only retail but in services as well. Not just my adding more costly Brands. If there is not enough money, then buying more brands is going to be something that wont happen. Until the numbers are increased by quite a lot. Then then when the budget allows then it can be looked at to look at the brands there are and the education and support they give.(Key stay on budget- or below!)
What I would suggest for your boss, is to network with other salon owners that are sucessful,and or contact a expert in the field that can do a complete business analysis for her. What this will do is cover all the systems that she has in place and what she doesn’t have. They also will be able to help her see what she can not see, or doesn’t know. I am amazed personally, on how many Salon owners that I talk too, (including myself as an ex-salon owner) On how much business knowledge that they really don’t know.
The one thing we do know is that salon owners are really good at doing hair, but usually have little time(for business), not enough capital, do not have the right tools(systems), and business education to make any money at all. A HUGE 74% of all salons are not profitable. WOW!
That is why I am so deticated to helping any one I can. Usually the analysis from a consultant, are complimenty. So look for salon owner that is profitable or business consultant that specializes in the salon industry.
If you need any more advice, I would be more than happy to help. My e-mail is carrie.brabant@cengage.com
I work for Milady.
March 14th, 2008 at 7:23 am
Hi Carrie,
I agree with your advice but why is everyone focused on the salon owner? Sometimes the salon owner isn’t even in the industry and I think that is what Dawn is facing. With the economy in such a state some people purchase a business and expect it to run itself. Without industry experience, they assume the cosmetologist, sytlists and the rest of the team will create the traffice, sell product, pay rent and market. The problem is the individual is not taught to market and the industry is focused on teaching salon owners. As a business consultant to the individuals in the salon industry my goal is to make the individual profitable and salon owners will reap the benefit of successful stylists and all the cosmetologists in the salon and spa.
March 25th, 2008 at 7:06 am
omg like what the hell i need to know what some business owners that own hair salons do to create revenue. Do the employees rent their spaces and if so how much would they spend around?? also i need to know what some salons do with their financial books do they hire an accountant quarterly or do they do it on their own??? i need help im doing a business plan in school and im opening up my own hair salon
April 2nd, 2008 at 11:40 am
can someone please tell me where i can find information about changing from being an employee to a chair renter and what are my responsibilities and what are the owners
April 2nd, 2008 at 11:48 am
the owners of this salon are trying to make money yet they are not willing to do the work required to be successful and I am definately looking to improve myself and in the long run i believe it will help them but i need to know what are my responsibilities and what are theirs
May 18th, 2008 at 11:56 am
The new managment at the agency where I recently started work, is taking the credit card processing fee for the whole sale of services out of my tip money when it is included in the sale. I have never heard of this. Do other salons do this and/or is it legal?