Salon Spa Compensation Models

4 compensation plans that can make or break you
Christopher Brazy

How do I pay my staff!!!???
Compensation is a HUGE concern for owners and staff alike. Choosing the wrong one can literally put you out of business in no time. With so many different systems out there and payroll often being your number one expense, how do you find the one right for you? These 4 types below should give you a clear picture on which one you should use to get profitable.

Hourly Pay
This, as well as salaried, is how most of the nation is paid. If someone is at work they get paid for it. The benefit is your staff will always know what to expect, as well as yourself. By offering an hourly pay you’re offering security (people work for more than just money). You can keep your pay rate lower than a typical commission scenario since it’s guaranteed. Just make sure you have enough clients so that you aren’t paying your staff to sit around all day. This not only is a very successful model for spas that are very established and busy (many resort spas pay hourly since they don’t rely on their staff to get their business) but is common in many hair franchises as well.

Additional benefits of hourly pay are that you can focus (and afford) on other types of benefits/compensation as well. Insurance, perks, training, bonuses, paid vacation, sick days, etc. are now all within the realm of something affordable. Items such as these offer better employee satisfaction. Take away all these other benefits of compensation and all your staff is left with is money. Supply these benefits (as well as praise, education, etc.) and money becomes less and less of an issue.

Commission
Salesmen are often commission based. It can be a percentage OR a flat fee per service, but the point is that you only pay your staff when they are actually performing a service. We’ve found many salons work this way. Since a stylist often has their own client list and following, they can demand a higher amount. The typical salon percentage was 50% for years. Many spas took this example and implemented it into their spa. That may not have been the best idea. With spa staff, they often do NOT have a following. They are relying on you to supply the clients. So if you’re paying a high commission AND have to do all the advertising to get clients, you’ll find yourself in hot water quick! Expenses alone are often well beyond 60% in a spa BEFORE staff, so anything near 40% leaves you with practically nothing as an owner. Copying the salon model in a spa is where most spa owners doom themselves before they even open their doors.

If you’re paying a smaller percentage (20-30%) or flat fee/service (an even better setup for commissions since price increases don’t automatically create pay raises) it’s will keep you much more liquid. However, your staff will be very nervous when the books are slim. They’ll want to be on call (this has never worked out well for us), show up late and leave early. They feel that they aren’t being compensated for their down time. You can try to negate this feeling with paying min. wage OR commission, WHICHEVER IS GREATER, but they don’t relate too well to that either. Since they’re used to $X/service, the idea of making that OR minimum wage isn’t appealing to them.

Commission PLUS hourly, your staffs dream
A commission for each service AND an hourly rate for the down time is what every employee dreams of. It would most likely be your worst nightmare though. They get the best of both worlds, a high salon style percentage and hourly down time pay. For an owner, you are not only offering a decent pay hourly for nothing, but also higher commission pay when they’re busy. Some med-spas have taken this but reversed the typical roles of it. Instead of a higher commission and lower hourly, they offer a very small commission (let’s say 5%) and a higher hourly (let’s say $15/hour). So in this case the commission is more of a sales-bonus. Med-spas are a new and different breed though and their model is yet to stand the test of time.

Booth Rental
This is a very popular salon model. Renting space is the cosmo’s end dream. Just out of school when they have no clients, they want paid hourly. Once they get busier they’ll want to be paid commission. Once your split of the commission is the same as booth rent, they’ll want to switch to that. Simply put, that’s all renters should be doing, renting space. They should get a key and that’s it. However there’s a lot of grey area. Mainly with who’s the boss? If someone is renting from you they should be running their own business. All phone lines, credit card transactions, business cards, signage, booking, ringing up, advertising, etc. should all be the renter’s obligation. As a landlord your obligation is to give them a key and collect rent. But the lines have been blurred here and the owner is supplying EVERYTHING the renter should be and are still getting very little for their efforts, just a meager rent check.

There’s also the issue of creating your dream spa experience. When someone else is the boss of themselves (they are just renting after all) they can perform and act however they like. For you to be in charge of your place, you can’t let someone else open up shop within it.

So what’s best?
Naturally, it depends on your situation. Do you want to create a dream spa experience and need everyone to follow your rules as an employee? If so, booth rental is out. Here’s what we’ve observed:

Many new spas start out commission based, since they can only afford to pay out when there’s money coming in. This is why many fail, they forgot to build in working capital and end up with not enough operational funds, or money for themselves. So you’ll see spas offering a higher and higher percentage commission to lure in staff that has a following. What it means for staff is a higher pay/service but fewer clients.

Hourly we see at spas that are packed with clients and don’t rely upon their staff to supply them. Since they have the clients coming in to cover expenses, they can guarantee an hourly rate that would translate to a very small commission. But since they’re paying less, they can offer security along with other benefits that staff find attractive.

Commission plus hourly would get very expensive unless you reverse the typical roles and go the med-spa way of a higher hourly with a smaller bonus commission, but then that is similar to hourly with a commission benefit. Booth rental will provide very little income and we feel is still best when offering a small space to someone with a large following, which means pretty much salons only.

Here’s a funny side-note we observed. Regardless of the pay, a higher commission salon with few clients, or lower commission fee/service with a more clients, or a decent hourly with many clients it all comes out to about the same HOURLY pay. When you factor in all of your staffs types of pay, the service/hourly pay, their retail sales and tips, most average about $20-$30 something per hour. And that’s what it’s all really about for them anyway. Try to get them beyond the “setup” of pay and into the reality of “this is what your paycheck is going to be.” More on that in another article though…

6 Easy Steps to Retaining Clients

6 Easy Steps to Retaining Clients
Christopher Brazy

Struggling trying to get a steady flow of regular clients? Frustrated with the slow pace of building your business? These six easy steps will show you how to multiply your income by turning your clients into loyal regulars that will allow you to build your business quickly.

1. Before anything else, establish rapport
People are much more receptive to those they know and trust. So before doing anything with a new client, you must get to know them. Find out about them. What kind of person are they? What do they do? How long have they lived here? Are they married? Do they have kids?

By spending just a few short minutes, and showing that you are TRULY concerned about them (don’t spend the time talking about yourself!) you’ll connect with that person in a real way. This is the single most important thing you can do with your new client.

2. Customize your service to their preferences
Once you have a feeling about each other you can now question them about their service. Do they get services often? What do they like best about getting services? What do they dislike?

If you take me for an example, I LOVE having my feet massaged and HATE lotions and oils on my face. If someone’s standard protocol consisted of lavender lotion on the face and skimping on the feet, I’d be very disappointed. But by simply asking what my preferences are you can customize the service a bit to my desires and give me the best service I’ve ever had!

3. Identify their needs and problems
Now for a lifelong client, you need to delve deeper into their needs. This may take a bit of work to get to, but its worthwhile once achieved because you’ll develop a long term treatment plan for them to follow.

Many of us won’t take time for ourselves. We even feel guilty about it. So to get a client to take care of themselves is a true accomplishment. But instead of us telling them the benefits and trying to “sell” them on services, we let them talk themselves into it. We do this by asking what things they would like to change/improve with today’s service. We then dig deeper and ask them to show us where exactly their concern is, get into detail about it and most importantly find out HOW IT MAKES THEM FEEL? The ability to get them to open up and acknowledge their issues will finally allow them to take action on correcting them. I refer to this as the emotional portion of the consultation.

If you don’t want to be pushy, you can even give them tips to try to correct the problem or reassure them it can’t be that bad and guide them in a direction different than yourself for a solution. So for back pain you could suggest stretching or for acne you could suggest using an oil free cleanser. By doing this and putting your client’s needs first and foremost you’ll win their trust even further. And often they’ll say they’ve tried it all and it’s not working (hence coming to see you). LET THEM give you the reasons why they should work with you to take care of them. They’ll talk themselves into it if you just sit back and listen. Then all you need to is let them know you can take care of their concerns and setup a treatment plan.

4. Stay in constant touch with them
Once you’ve identified their preferences and problems you should have a plan in place to take care of them. But don’t let it stop there. You don’t have decades to create a brand to achieve “top of the mind awareness.” You need to stay on top of them so they don’t forget about you. You can do this by sending a thank you card after their initial visit. I know of one spa owner who says if she doesn’t send a thank you card the “goodbye” she says that initial day will be the last one she’ll ever say to them! Also call them the following day to check in and see how they’re doing.

A monthly newsletter is also a great way to stay in touch with you clients to keep top of the mind awareness with them. They say that every month you go without connecting with your clients is a 10% loss of relationship. So send a home made (gives a more real feel) newsletter, share an article with them, spotlight your specials, new staff/services, and applaud those that referred you publicly in your newsletter. Birthday gifts (a $20 gift certificate for your spa) will do wonders as well, or even a call out of the blue every now and then.

5. Never take them for granted
It’s common to often overlook the best of clients. They’re always there, always fine, so you just tend to say hi as you pass by and ignore them. It’s like the well behaved kids at school. They never get any attention because the teacher is always paying attention to Johnny Rotten in the back row. When you see one of your regulars (and regulars are your lifeblood!) take time to stop and chat with them. Continue to build that personal connection. Ask how things are going, did they get that new job? how are their kids (always a great topic)? Are they doing well? Let them know that you still care and value them.

A GREAT mindset to have with ALL you clients are that of a first date. Remember how you act on a first date? You are extra careful to be accommodating, dressed in your best clothes, perfect manners, kind, funny and just great to be around? You need to be that at all times with your clients. They’re spending their money to come experience your spa and you should always appreciate that and treat them like it’s their first visit.

If you have any news let them know about it. Send a thank you card out of the blue (hand written). Open the door for them as they arrive to your spa. Call the day after they start a new series of treatments to see how it did for them. A lot of it may be repeat from before, but they’ll appreciate it.

6. Retail (believe it or not)
It’s been shown that if a client leaves without buying retail, there’s only a 10% chance of them returning. The chances of seeing them again goes up to 30% with the purchase of 1 retail item, and a whopping 60% if they buy 2 items! Why? I personally feel that with 1 item purchase they have it there as a reminder of the experience. A souvenir of their visit, keeping you on their mind. With 2 items you’ve most likely given them some extra advice and recommendations on what will help with their concerns and they’re committing to that plan of action by buying your recommendations, so naturally they’ll be coming back so the “pros” can do some more work on them.

By creating relationships with your clients, finding out their preferences, discovering hidden needs, creating a plan with them, staying in touch with them and always treating them like gold, you will be COMPETITION PROOF. No one else will be able to take away or compete with that special relationship you have. They’ll be your client for life.