Whether by coaching leading, or suggesting, salon consultants revamp and revitalize client and staff retention, sales and profits, as well as the owner themselves.
Editor’s note: This is the first article of a three-part series on where to turn for help in the salon industry. While this first segment deals with the benefits of using salon consultants, future articles will tackle promoting your salon and improving your salon’s design and decor.
“When I started this business in 1981, there were more than 250,000 salons in this country. Back then salons were making a 7% profit, practitioners were making a good living, and everyone was happy,” says Jeff Reichenthal, president of Synergy Consulting. “Today, there are 145,000 beauty salons. Their owners have gone to seminars and learned 45 ways to colour hair and 15 ways to polish nails and after 18 years we still retail 7% of gross sales, profits have gone down, and, in comparison to other professions, salon professionals’ income has decreased. If you factor out the chains and franchises and look at the industry’s core of independent salons, they are breaking even or losing money. If the salon owner wasn’t doing services, the salon would be closed.”
Whether his words hit close to home or couldn’t be further from the truth in your situation, few would argue with Reichenthal’s estimate that 99% of salons aren’t realizing their full potential. “Everyone needs a coach,” adds Cindy Angelly, president of Spa and Salon Systems. “Michael Jordan was the perfect example. Even though he was a star athlete, he had a coach to work with and help him improve. There are always opportunities for growth and improvement, but without a coach you won’t move forward.”
By the same token, both agree that 99% of salons can be helped. “There have been only two salons in my career that were beyond help,” Reichenthal notes. When he first meets with a salon, he breaks down business issues into two categories: strategic and tactical. “A strategic problem is a condition that would incur so much expense to change that it just couldn’t be done and it’s time to close. For example, a poor location or excessively high rent. Or you just don’t have the business skills. You may be a great nail technician or hairdresser, but that doesn’t make you a great owner. I can counsel you, but short of taking on a manager or a partner, some people just can’t run a business.”
Tactical issues, on the other hand, include things like compensation systems, pricing, the scope of services, or operational programs, and they can be fixed. “I do an efficiency analysis on all the salons I work with,” he continues. “For example, a hotel’s efficiency is based on occupancy and a restaurant’s is based on its rate of table turns per hour. Salons are no different: You want to charge the most you can per hour and turn the most clients you can, but I have yet to see a salon that is more than 70% efficient.”
That’s not to say a salon isn’t busy, he adds, but at the right price? “For example, if an esthetician is busy doing leg waxes and eyebrow shaping, I want to know where the deluxe fecial appointments are.”
While consultants will illuminate the problems they see within a salon’s structure and operations, don’t expect them to act as a handyman. “A consultant acts in many different ways,” Angelly observes. “Sometimes I will act as the expert and say this is what size rooms you need and this is the commission structure you should implement, but I also do a lot of coaching. As a coach, I’m leading and directing owners to begin examining what they’re doing and find ways to improve and grow.”
While consultants often identify a few “quick fixes” that can bring immediate results in lowering expenses and boosting sales and profitability, both Angelly and Reichenthal are quick to note that a salon’s improvement and growth is always a shifting target: As soon as one goal is met, a new, higher one is set.
Sounds great, but already seeing dollar signs? You’re right: Consultant expertise doesn’t come cheaply. But the money shouldn’t be coming out of your pocket, anyway: “I pull out the financial statements and show owners the money is there in the business,” Reichenthal argues. “If you want me to maintain status quo, you’re crazy. My job is to increase your bottom line.”
“I have a client who when we started had a ratio of 8% retail sales to services, and over the past three years he’s grown that to 22%,” Angelly says. “That alone has more than paid my fees, and he’s also doubled service income through the same process.”
Here, three salon owners describe their situations, explain why they sought help from a consultant, and tell what it did for their businesses.
Intensive Overhaul Builds Salon Revenue
After years of watching her clients grow and expand their businesses, Debbie Elliott realized it was time to stop wishing she could do the same with hers and act. Having focused on servicing her clientele and constantly training her staff as it turned over, she finally realized she was what was standing in the salon’s way. “Being a salon owner, you live in fear that if it’s not broke, don’t fix it,” Elliott says. “The business was growing. No, I wasn’t seeing the profits I wanted, but it was working.”
Acting decisively, Elliott hired a former regional manager for Jenny Craig Weight Loss Centers as the new manager for the 750-square-foot salon, cut back her own hours behind the chair, and called Neil Ducoff, industry consultant and publisher of Salon Business Strategies. “When Debbie’s husband first called me [at her request], he said, ‘Everything is up and we have to get it down,’” he says. “Everything” included costs, work hours, and staff turnover.
“These are the typical salon owner/entrepreneur problems — working real hard and not getting lots of return.”
Delighted to learn Elliott had hired an experienced manager, Ducoff’s first action was to do a one-year cash flow study of the salon. “I put them through the absolute agony of going through the numbers and taking all the pieces of the puzzle and seeing what fits, what doesn’t, and what has to be reshaped,” he explains. There’s no better tool to find out where the salon is now and build revenue and expense budgets for the next 12 months.”
Next, Ducoff worked with Elliott to determine what it would take to increase the salon’s profit margin. “With the cash flow we gave her a target of what she has to bring in, and what she has to spend to make that happen. The salon manager knew her job was to keep the staff focused on the numbers and for her to sell the revenue-producing hours on the book,” he continues. “We put together a scoreboard for them so they knew what they had to do in hair colour, nails, and spa services, etc., and what their retail and gift certificate sales goals were.”
Next, Ducoff overhauled the salon’s compensation program, putting everyone on a guaranteed salary or hourly rate. “We designed team-based compensation. The big picture is we want to grow the business and create quality and consistency for client and staff satisfaction,” he says. “So we averaged everyone’s pay for the past four to six months, bumped it up a little, and started them on a salary.” Next, he worked with Elliott and her manager to put systems in to track each individual’s productivity, average ticket, pre-booked appointments, and overall retention. By removing the commission incentive, the staff works to meet the salon’s goals instead of their own, Elliott says, yet also works to improve their performance in the areas tracked to earn pay increases.
The first year’s results are impressive: In 1997 the spa had gross sales of $245,000; in 1998, that number grew to just about $400,000. Just as important, Elliott says, “Now, it’s a business — not just a hair salon or spa.” As for the future, the sky is the limit as Debbie Elliott’s Salon & Day Spa moves into a new 6,000-square-foot location in May.
Sound Financial Planning Makes Opening Grand
Michelle Mott was well into the planning stages of her Portage, Mich.-based spa when she met Jeff Reichenthal, president of Synergy Consulting. When she introduced herself after attending one of his seminars, she asked him for five minutes to show him the blueprints for her spa. He agreed, and soon saw some concerns that made him urge her to meet with him. “He said. We really need to talk,’“ she remembers with a laugh. The following week Reichenthal visited the construction site where the foundation had already been poured and the walls studded out.
“Michelle was working with an architect who had never designed a spa before,” Reichenthal continues. “Her input into the plans had been good, but the architect’s plans weren’t fully functional for a salon. By that, I mean things like shampoo bowls were in the wrong places and the lighting wasn’t right.” With some minor tweaking, Reichenthal improved the traffic flow and layout of work areas, but the real work lay ahead.
“What she really needed was a financial planner,” he continues. “She needed to say, ‘OK, one day I’ll get the key to this place and need to know how much business each person has to do to keep the doors open,” he adds. “An owner needs to know what each person has to do each day for her to make a profit Instead of walking in and saying, ‘I have to do $450,000 this year,’ you need to say, ‘Everyone here has to do $400 today to make a profit.”
Tackling the numbers, Reichenthal and Mott forecasted the costs to get the spa ready to open, estimated the loan amount, then forecasted revenues by each department. “Then we forecasted all fixed expenses, most of which we knew or could estimate. The harder part is variable expenses.” With this done, Reichenthal presented Mott with a plan that outlined the gross sales M spa had to realize per month, per week, and per day for the next 12 months. Then he extended that to a three-year plan.
“At the beginning I had a real weak business plan, so he helped me reformulate it and he put me in touch with the right people to ask questions like, how many towels do I need for the spa? How many sheets for herbal wraps? What equipment do I need for all these services?” Mott adds.
Next, they worked on the service menu and spa brochure even as they defined Mott’s business philosophies that would guide her operational decisions such as pay structures, benefits like vacation time, health insurance, and ongoing education, as well as policies like a basic dress code.
“He never said, ‘You need to do it this way.’ He showed me the advantages and disadvantages of all the options, and let me decide,” Mott says. “For instance, I knew to create an employee manual, but I didn’t know everything I needed to include or what angles to take.”
Reichenthal’s final official act as Mott’s consultant (thought they remain in close contact) was to help plan the salon’s grand opening for last October, three months after the July soft opening. “He gave me a great idea to create a gift basket filled with sauces, pastas and samples of the Italian skin care line we’re carrying and deliver it to 80 prominent people in our area with an invitation to call within 48 hours to book their complimentary facials.” The baskets got a fantastic response, as has M spa, which Mott says met, and even slightly exceeded, Reichenthal’s initial projections.
Team-Building Techniques Create Strong Salon
For Spa Virginia’s first eight months of operation, owner Robin Goodpasture and consultant Cindy Angelly projected gross sales of $211,000 — which Goodpasture says the spa has beaten by almost 10%. According to Goodpasture, the business has done better than she ever dreamt it would so early — so much so that she’s already expanded twice, more than tripling her original 1,100 square feet to 3,800 square feet.
Far from cocky, the admittedly soft-hearted spa owner appreciates her success and places part of the credit for Spa Virginia’s success in Angelly’s lap. “She calls me every week, she checks the financials, and she comes m and trains the staff,” Goodpasture says. “She helps me deal with issues I don’t want to or can’t deal with alone. Business is not one of my strong points, and I’m humble enough to admit I need help.”
Over the past 18 months, Goodpasture has renewed her initial six-month contract with Angelly, president of Spa & Salon Systems, twice, each time entering a new phase in her business and the relationship. “In the first six months, we developed the concept, working on the floor plan for maximum traffic flow and on Robin’s business plan,” Angelly says. “I helped her develop an operational budget and her first year projections. We set up a payroll structure that would let her be profitable right away, and as she began interviewing I coached her on how to do it.”
When the Salem, Va., spa opened, Angelly worked with Goodpasture to train her as an effective manager as well as train the staff on team-building and services. “I worked with her and the manager she had hired to coach them on the issues that probably would arise and how to deal with them. We talked about things that need to be done in staff meetings, and how to make herself available to her staff.”
For this very reason, Goodpasture spends two days a week working in her office, and another three working in the treatment rooms. She also hired a former school teacher as a manager, and promoted a front desk assistant and an esthetician to assistant managers. “So many owners are afraid to let go of that income, but they really can save more money with good, efficient management,” Angelly says.
Goodpasture agrees: “It is a big payroll issue, but Cindy helped me realize I can’t do it all.” As for Angelly’s fees, Goodpasture notes that they are well worth it. “It’s expensive, but part of what she does is help me with my budget, and she has budgeted her fees into it I get a weekly phone call where she coaches me on issues that have come up and makes me aware of what other spas are doing and the challenges they’re facing, she checks the financial, and she listens if I just need to vent”
Both Goodpasture and Angelly are quick to note, however, that while Angelly provides advice and guidance, Goodpasture is the decision-maker. “She could just tell me what to do, but instead she makes me actively participate while she offers suggestions or gives examples of how other clients have handled a certain thing,” Goodpasture says.
Goodpasture needs no further validation for using a salon consultant than a conversation she recently had with a fellow spa owner. “She was very excited because she had just had her first thousand-dollar day after being open almost a year and a half. I had my first thousand-dollar day in the first two weeks.”