How’s business? Industry consultants say most salon owners have no idea-and we have to agree. Certainly, the long list of top salons we called couldn’t get beyond “Great!” and “Busy!”
“How’s you client retention?” we asked. “I’m not sure,” they answered. “Salon productivity?” we quizzed. “Not sure.”
“Average service ticket?” we tried again. “Don’t know,” they admitted.
Percentages and averages may make your head spin, but business statistics are the equivalent of vital signs when it comes to revealing the health of your business. Without the numbers, you have no idea if your salon is on the verge of collapse or ready for a marathon run on growth.
Not having a head for numbers is no excuse these days: Salon software will compute these statistics in mere moments, and many consulting and training companies also offer programs that not only do the calculations but provide an arsenal of tools and templates for stacking the numbers in your favor.
Those tools are handy, but the numbers only provide a diagnosis. It’s up to you to find ways to remedy any problems that become apparent. “What the numbers mean is the hard part,” says Susie Fields Carder, co-founder and vice president of salon Training International in Oceanside, Calif. “What does it mean if you have 40% client retention?” According to Carder, it means the entire staff needs to evaluate the customer experience.
“Focus on specific behaviors instead of the problem,” agrees Kate Troc, president of 20/20 Foresight, a salon and spa consulting firm in Bolingbrook, Ill. “We spend so much time in this industry saying we have to sell more retail, when what we really need to do is focus on the behaviors that will grow retail sales.”
SALON PROFITABILITY: X- (Y + Z) = A
X- gross sales
Y = fixed expenses
Z= variable expenses
A = gross profit
The numbers game begins and ends with profitability-how much money do you have left at the end of the day? Industry pundits peg average salon profitability at anywhere from 5%-7%, a disastrous number from a business perspective. According to Neil Ducoff, founder, publisher and “guru” profit margin-above and beyond any income they might generate with their own clientele.
First, use the equation below to determine your salon’s historical profitability-say, for the past 12 months-to learn where you are now. Then set a goal for where you want to be and start plotting your path to profitability.
Start with your past history to project sales for the coming month.
Then, calculate your variable expenses (expenses that fluctuate based on sales, such as payroll, professional product usage, and cost of retail goods) as a percentage of sales. Finally, add up your fixed expenses (expenses that remain roughly the same regardless of sales, such as the owner’s salary rent, utilities, benefits, and education). Subtract both your fixed sales) from projected sales.
If the amount remaining as profit doesn’t equal 15% or more of sales, get ready to tinker. But think before you act. First, analysis every expense with an eye toward lowering your cost of doing business without impacting your customer service levels. For example, could you trim professional product costs?
Next explore ways to grow sales. Many of the calculations that follow can help you to identify short-and long-term growth opportunities, then plan a course of action to make your business boom.
AVERAGE SERVICE TICKET: - X/Y = Z
X= total service sales
Y = number of clients serviced
Z = average service ticket
Measure how well your staff is servicing it’s by calculating your average service ticket. It it equals the price of your base service, you know your staff isn’t consulting with clients and making, personalized service recommendations based on their needs and wants.
Ducoff insists that most salons could boost their service ticket average by $5 or more if staff members simply charge for every service they provide. Carder agrees: “Usually there are some repairs and not charging for those is a huge problem in the nail industry.”
|Help Is on the Way - Don’t have a head for business? These companies offer user-friendly tools that help salon owners groom their business for profitability.|
|Salon Business Strategies offers Strategies magazine, personalized salon and spa consulting and coaching as well as a Salon and Spa Business CD and downloaded management tools online (sales forecast, pay calculation, and cash flow). Visit.www.strategiespub.com.|
|In addition to salon and spa management seminars, training, and business consulting and coaching, Salon Training offers Your Beauty Network.com, a subscription-based business resource that includes management tools accessible online Visit.www.YourBeauty/Network.com.|
|This month, 20/20 Foresight rolls out Career Pathing for Salons and Spas, a CD that provides diagnostic tools and templates for everything from multilevel pricing to performance appraisals to compensation structures.|
|Minton Business Solutions offers Pathway To Profit a CD-ROM containing 12 business management systems. Plan you business using sales forecasts income and cash flow projections, and analysis of your retail lines, service, equipment and floorspace. Visit .www.minitonweb.com/products.htm.|
Start every service with a mini-consultation. “We teach everyone a needs assessment,” Carder explains. “Study it. Own it and make three to four recommendations for every client. Do it for every client, every time. Life changes a lot in two to three weeks. Ask how her nails were. If she complains of chipping or yellowing advise her to book an appointment for a new full set.
“If your average service ticket is your base price, you’re an average salon,” she continues “The top 10% do three to four times the base price.” If your nail department doesn’t offer any services that equal three times your base price, grab this opportunity to create a few.
“As a rule, the average service ticket should be 20% higher than your base price, and I would shoot for 50% higher,” says Troc.
AVERAGE RETAIL TICKET
X /Y = Z
“I’m not a salesperson.” How many times have you heard that line? However many, your answer should remain the same: Salon retailing is not about hawking products but about meeting clients’ needs and providing solutions to their problems.
Carder advises owners to set the standard by making retailing a mandatory part of the salon experience. “Tell people exactly what they have to produce to work for you,” she says. Next, set standard operating procedures and incentives. For example, she recommends making retail sales percentages another criteria of pay increases, along with productivity and client retention.
Retail goals will vary depending on the type of service and the amount of home care recommended between visits. For nail technicians, the average retail ticket should equal 15% of the service ticket. “For hairdressers it’s 25%, for estheticians it’s 100% and for massage therapists it’s 5%,” adds Carder. Tie retail sales to advancement with 15% the minimum to move past the first level. Then raise it to 17%, 18% and 20% she advises.
For your part provide a retail selection that supports their efforts. Go beyond polishes, files and hand creams with bath and body products, skin care, costume jewelry, and perhaps even hair care.
“If clients aren’t buying much, you’re not selling the right stuff,” Troc says. “Stock consumable items that aren’t that expensive and that customers see as fun.” With the right product mix retail can equal 20%-25% of sales. Track which items are hot and which are not, and adjust your selections accordingly.
The perceived value of salon products lies largely with the professional recommendation. Provide your entire staff-including front desk coordinators-with regular product knowledge classes. Connect at least three clear features and benefits with each professional product, and role-play retail recommendations.
Ducoff advocates the retail prescription, whereby the service provider verbally recommends a product based on the client’s specific needs, then finishes the appointment by writing out that recommendation for the client. As the client prepares to pay simply ask if she’d like to take those products home today. Ducoff says salon clients have doubled their retail sales using this approach.
SALES BY REVENUE STREAM: X/Y = Z
X = total sales in each category
Y = Gross salon sales
Z = sales by revenue stream
“It’s great to hit your gross sales goals, but where is the revenue coming from?” Carder asks. “I find that nails and massage get swept under the rug in a full-service salon,” Regardless of whether yours is a full-service or nails-only salon. Carder advises not only calculating total nail sales, but breaking it down by individual service. “Analyze what percentage are full sets and how many are pink-and-whites.” She says. “If pink-and-white fills are $10 more, how many fill clients can you convert?” she asks.
If a high percentage of a particular tech’s clients will pay the premium, she essentially loses $10 every time a regular fill client sits down. “Start weaning those clients to another tech and getting clients in who are wiling to pay the higher price,” Carder says.
For example, if a facial or massage room eats up 10% of your service area but only contributes 2% over your overall service revenues, you know that you either need to build the service or convert the space for a high-demand, high-revenue service like pedicures.
As you examine sales by revenue stream, look for peaks and valleys, which will reveal the seasonality of services. If pedicures peak in the summer months will facials fill up for fall? Look for ways to smooth the seasonal differences through marketing and promotions or to leverage them via a versatile staff and space.
SALON PRODUCTIVITY: X/Y = Z
X = service hours sold
Y = service hours available
Z = salon productivity
How busy are you, really? When calculating productivity, Ducoff cautions counting only the hours available to sell. “You can’t count time marked out on someone’s books,” he explains Troc and Ducoff agree that 85% represents maximum salon productivity and they speculate that the average salon performs at 30% to 40% productivity.
Set realistic goals for growing productivity. “If we’re only at 40% let’s look to hit 50% first.” Ducoff comments. “Seventy to 75% is good and 80% is cranking.”
Take time for a five-minutes staff huddle each morning to discuss the coming day. “Brainstorm beforehand and project if clients would be interested in services you offer,” advises Melinda Minton owner of Minton Business Solutions and a former salon owner. Role-play upselling and cross-referring clients: Suggest manicures to pedicure clients, toenail polish changes to manicure clients, and nail art, a paraffin dip or eyebrow wax to all. Train your front desk staff to do the same to fill openings as they confirm appointments and feld call-and walk-in requests.
Once you’ve maxed out, don’t start looking for a new space just yet. At 80% salon productivity increase your prices to create space for clients willing to pay more. At the same time, calculate the productivity of your current space if every station were staffed full-time. “If you’re open 60 hours a week that’s two, 30 hour shifts per station.,” Troc says.
FREQUENCY OF CLIENT VISITS
New clients may be the lifeblood of a salon, but remember that regular clients are both the heart and soul of your business. Are you providing them the level of service they want and need? You might be surprised, says Carder, offering herself as an example.
“My nail tech books me every three weeks, but I really want to come every two weeks because I’m constantly judged on my appearance and I can’t afford to have a nail pop off,” she says. Show staff what it means to their income if each of her regular clients were to come just one more time per year.
“Re-book clients for when you want to see them, “Troc reiterates, “Everyone calls and wants to come in now, and the next appointment typically is in three days. Add those three days up over a year, and you’re losing several visits with just that one client,”
Carder says she visits her nail tech an average of 17 times per year and spends an average of $40 for a fill. “So I’m worth $680 a year in income. If she tuned me one more time, that takes it to $720.” If she converted her to biweekly appointments, Carder’s value jumps to $1,040.
Consider what other services might draw your clients to the salon more frequently. Should some of your two-week fill clients really come every 10 days to keep their nails looking their best? Would others appreciate a polish change between fill appointments to keep their nails looking fresh.
That’s not to say should see dollar signs instead of clients. Rather Carder offers the example to emphasize the good-as-gold value of your regular clientele.
CLIENT RETENTION: X/Y = Z
X = number of clients returning in a specified timeframe
Y = total new clients
Z = client retention rate
Client retention measures how efficiently your salon is growing its customer base and directly correlates to customer satisfaction. There are many ways to measure it: First to second visit, second to third visit, three or more visits, etc., but Ducoff recommends initially simplifying your task by measuring retention from the first to second visit, which historically is the hardest hurdle. “In nails you can consider someone as lost if you haven’t seen them in six weeks,” Minton adds.
The consultants we asked agree that salons average a 30%, 35% new client retention rate. “which means they mange to [alienate] almost seven out of every 10 people who walk through the door,” Ducoff says wryly.
View the salon’s client retention as a measure of the client’s experience “Fifteen percent of success is based on technical ability, while the other 85% is the client experience,” Carder says. In this sense, it’s the little things that count, from sanitation practices to the cleanliness of the bathroom to the kind of cups you serve beverages in. Client retention by service also can reveal techniques in which a person needs additional training.
According to Carder even the newest techs should retain 50% of new clients, while people with one to two years of experience should easily surpass 60%. Minton sets the bar a bit lower, saying her experience shows salons average 40% 45%. Tie client retention to pay increases. Finally, brainstorm as a staff the question of how to bring first-time clients back and don’t stop asking until first-time clients back, and don’t stop asking until first-time client retention his 70%.
INDIVIDUAL PRODUCTIVITY: X/Y = Z
Z = individual actual service hours sold
Y - individual maximum potential hours sold
Z = individual productivity (bookings)
X = total hours worked
Y = average appointment length
Z = individual productivity (speed)
The whole is the sum of its parts, and your techs all have to take part to grow salon productivity. Eighty-five percent productivity equals a full book, and anyone consistently hitting, 80% should increase her prices.
Set a threshold of 80% productivity over a specified period as a criteria for advancing to the next service pricing level. Fear is the greatest hokdback, so run the numbers to show techs that even though they can expect to lose 10% of their clientele, they’ll actually earn more money and have room for further income growth from new clients willing to pay more. By the same token, the salon keeps everyone’s business by transitioning price conscious clients to a more junior tech.
As you evaluate individual productivity, consider appointment lengths. If you have a nail tech who needs 15 minutes more than anyone else to do a fill, explore ways to help her speed up, which in turn will open her book and grow her income. She also may benefit from additional training or a simple boost in confidence.
PRE-BOOKING PERCENTAGE: X/Y = Z
X = clients who prebook next appointment
Y = clients serviced
Z = prebooked percentage
Pre-booking is a simple practice that has profound effects on everything from client retention to salon and staff productivity to frequency of client visits. Make clients happy by booking them in at their convenience. Pre-booking also enhances your customer service levels by reducing your call volume. Best of all it’s one of the easiest numbers to grow. All you have to do is ask.
“Assume the sale,” advises Minton.” Tell the client you’d like to see her in two weeks, then ask if the same day and time fits her schedule.” Troc recommends writing scripts and role-playing between staff members. For example, what should you say if the client isn’t of her schedule?
One way might be to ask her to check her schedule and let her know you’ll call her in a day or two to follow-up-and then follow through with the call. Remind her that you have her interests at heart: Pre-scheduling her next appointment guarantees she’ll get in at her convenience rather than yours. These consultants say most salons should be able to pre-book 75% of their regular clientele.