I have owned a booth rental salon for four years. I need to increase how much money I’m bringing in and was thinking about converting to a commission situation. Is this really going to be more profitable? What else do I need to consider?
Before considering if you should switch to commission you need to weigh a few important things: 1) Have you exercised every available option you have to increase income as a rental business? This includes raising your rent, increasing retail sales, and also double shifting. If you have four stations, you could have eight renters instead of four renters by setting two shifts per day. This could make a great impact. 2) If all of these options are exercised and you still are not profitable, before switching to commission, you have to ask yourself what impact it will have on your culture and your daily operations. If you then feel that you want to move forward with the switch you will need to look at the impact being a commission business will have financially. Work out financial projections that include an increase in sales, but also an increase of the corresponding expenses that come with it, like service and retail commission, payroll taxes, an increase in back bar costs, workers compensation, and increased marketing and training expenses.
— Steve Gomez is professional development manager for Milady (www.milady.cengage.com).