the_math_of_60%_commish_salon_gurus

The Math of Paying 60% Commish

Quote seen on Facebook:  “If the owner is not paying you at least 60% you’re getting ripped off!”

We’re seeing this all over FB lately…especially in massage therapy groups where some people are advising posters they are being taken advantage of if they are not being paid at least 60% commissions. This is not a discussion of employees vs independent contractors….this is a discussion about hired employees.

We are saying 60% is NOT sustainable for businesses who actually fulfill all their obligations as employers.  And if you hire people and boss them, then you NEED to classify them as employees and handle your business. If you are doing that…then you are paying people to do the work for you and at 60%, probably taking a loss. Let’s see how that works…

Let’s say you have two employees who generate about $100K in gross services revenue (round numbers…just for math’s sake). $40,000 left to you…so…hey…that’s great!

But you have employer’s share of Social Security and Medicare which is $7,650.00.
You have Federal Unemployment Insurance which is 6% of the first $7K or $420.00 x 2 employees

State Unemployment last quarter varied between Nebraska at 4% and Rhode Island at 12.8% and lots of states were between 6-9%, so let’s say….on average 8%  on the first $7K (varies) or $480.00) x 2 emps
(https://www.bls.gov/lau/)

So take $9,450 right off the top, leaving $30,550 for you. All good still!

Worker’s comp rates in the salon industry vary according to the work being done, but according to one provider the cost is 49 cents per $100 of wages paid or $294 for the 60K paid out. And a general liability policy to cover their errors and omissions is about $375. So now we’re down to $29,881.00. (www.workerscompensationshop.com).

But wait! In today’s cashless world, credit card fees will come right off the top, too. There are credit card processors who routinely quote rates like 1.65%…but …only for qualified cards. Processors who use that bait-and-switch marketing are selling a tiered fee plan and don’t tell the facts: barely any credit cards actually qualify for that lowest rate. Any cards that have points or mileage or are membership benefits cards or corporate credit cards do not qualify. (Almost everyone uses a card for miles, right? Who do you think pays for those bennies? Not the credit cards! They pass those costs along to their merchants by way of fees). In addition, many processors who quote low rates add on little fees here and there – swipe fees of a few cents, monthly billing fees of a few dollars. PCI compliance fees.  Government tariffs…etc. etc.

Sorry to tell you this, but you are most likely paying just under 3% on card processing…no matter what they quote you.   So…yeah…let’s take off another $2,900.00  Oops! Don’t forget the credit card fees on employee tips!  You have to pay those fees even though you didn’t earn that money.  Say your employees are great….and some people tip well…some not so much…so let’s be realistic and say your employees were tipped an additional 15% – the credit card fees on that additional $15K is another $450.00 off the revenues.  Now we’re down to $26,531.00.

Let’s look at that….your employees are receiving actual paid wages, legal obligations and benefits valued at $73.469.00 This makes their actual rate 73.5%.  Not 60%.

This is without paid days off-no holidays, no sick days, no vacation days. Many employers (in the real world…or in corporate salon businesses) pay a couple week’s paid vacation, 5 or more days of sick leave and a few holidays – let’s say 5. That’s around 20 days off per person per year!  Let’s math some more… on $60K, let’s say 2 employees each got $30K. There are on average 260 work days in a year (working 5 days a week). Divide 30K/260 that’s $115 per day x 20 days…so paid time off is worth $2,300 per person per year.   If your small business is trying to pay holidays/vacation days, you’re now down to $21,931.

There’s a reason corporate salons, spas and chains do not pay out these crazy-high commissions. They know there are a lot of additional benefits they are obligated to provide for their employees.  This is why you see sustainable commissions being in the higher 30-40 percentages. They have to make a profit – many have stockholders to answer for. They know their stuff…why would you discount their methods?

As if it weren’t enough…in my years of experience, product costs for nails were right at 7.2-7.5% of gross nail revenues. Skin care was between 11% – 14% (depending on if I had added a new modality). Linens were more.  Massage therapy has much lower per service product costs, and less linens than skin care. So, products could run you between say $1,000 for massage oils, lotions, disposables, new linens to up to over $10K for skin care.  Now you’re down to between $11K to $20K per year.  You gotta ask yourself is it really worth a lousy net revenue gain of $916 – $1666 per month to have two employees to worry about?

Note: None of these numbers are about overheads; these are the numbers from having paid staff perform additional services in the space at the existing overhead.

And if you are looking at taking a job as an employee…be sure you are receiving all the legal obligations required by the employer.  Be aware that if you demand more than say 40% of service revenue for commissions…something has to go. And that’s where the messy credit card fee charges, back bar charges, amenity fees for your guests…and all those other ways owner are desperately trying to cover the shortfall.

It’s all in the maths.

saloj_gurus_online_training

Email Addresses are Important!

Email names are important! An email may be your best chance to make a good impression with your clients, colleagues and vendors in your business. Don’t waste the opportunity.

Choosing a good email address is vital for the following reasons:

  • Consider the image your email address offers in your business communications. It will reflect and represent your business. For example, [email protected] may reflect the truth, but is NOT a good business email. Neither is [email protected], or [email protected]. Or, [email protected]. There are millions of VERY bad ones that will cause a raised eyebrow or a “Hmmmm” in your clients or vendor’s minds, even if it is just because it is a non-business name. It may not be offensive or stupid, may even be cute, but it may not be business-like.  It should be.
  • Many put numbers in their email address. This is a choice but be certain to consider that numbers can be difficult to remember. For that reason, I do not recommend using numbers in your email address.
  • Consider branding the name of your business in the email. For example, [email protected] leaves no doubt what business is sending you a communication. You can pay one of the email providers for custom email accounts. Your logo, if you are in business and have one, should be somewhere on your email. Ours is below our company description, below our signature. Put it in there permanently and then you don’t have to think about it ever again.
  • Using a signature block is a good idea – a description of who you are, company info, and even your logo. Following is a simple one:

Janet McCormick, Co-founder
Salon Gurus, LLC
Phone: 863-273-9134
www.salon-gurus.com

On the other hand, having one that is half a page long usually causes rolled eyes!

  • Choice of provider – Some providers are so tightly filtered that many emails do not get through to you. These following are especially bad: msn, aol and yahoo. Some providers make it difficult for you to interact with people you choose to do business with, for example when you take online classes.
  • Length can be a consideration. My personal one is too long, for example, [email protected] is very long. Every time I have to type it out or provide it for someone I wish I had chosen something simpler but still “me.”
  • You may need more than one. I have many and must monitor them all. Yes, it is a bother, but I don’t mind because the emails come to me as who I am to that person. That is important, so that I can reply from the correct point of view. Many business owners/managers have one business and one personal one, and that is good business!

Your choice of email address could be considered almost a forever decision.  Consider it from every angle. I have one on an auto-answer from years ago saying that it is ”no longer an active email. To reach Janet, go to …..” and that routinely feeds email inquiries to me… and it’s been 15 years! Choose carefully as it is almost a disaster to change down the road after you have begun your business.

This is the bottom line: Your personal email can be whatever you wish it to be, it’s a personal thing. But not your business email. It can actually be considered a marketing issue if it is a poor one!

Creating a List of Services

How to Create a List of Services That Will Make Clients Want to

Book a Service With You Regardless of the Price

This audio podcast is by the award-winning Lora Condon. Esthetician and educator, Lora has been featured on TV as well as in mainstream publications such as Ladies Home Journal.

We recommend you have the ability to take notes  – see the link below to download the printable Workbook.

Click the play icon to begin.

Click here to download the Workbook for this course.

Creating a List of Services

How to Create a List of Services That Will Make Clients Want to

Book a Service With You Regardless of the Price

Learning Targets:

This podcast will help you

  • Answer targeted questions about your desired client and how you will attract them.
  • Answer specific questions about yourself, your business and your vision for success.
  • Learn the calculations you will need in order to price your services for more profit.
  • Learn the words that will entice clients to choose your business over your competitors.

Prerequisites: None

This course includes:

  • An audio podcast – note taking is recommended (run time 1 hour, 9 minutes)
  • A downloadable and printable Workbook for your use
  • A 15-minute call with Lora to review your new List of Services after you’ve done the work
  • Access to Elite Estheticians Facebook group

Safety Training for the Beauty Industry – Module 1

If the presentation does not begin to play automatically, click on the “play” icon at the bottom left of the view screen.
You may use the control buttons at the bottom of the screen to navigate within the module.

 

Work Practices and Engineering Controls – Module 2

If the presentation does not begin to play automatically, click on the “play” icon at the bottom left of the view screen.
You may use the control buttons at the bottom of the screen to navigate within the module.

 

Infection Control – Module 3

If the presentation does not begin to play automatically, click on the “play” icon at the bottom left of the view screen.
You may use the control buttons at the bottom of the screen to navigate within the module.

 

Proper Use of PPE – Module 4

Client Management – Module 5

Safety Training for the Beauty Industry

New Practices for a New World

This Safety Training program is meant to be a comprehensive review of safety awareness and protocols for all working professionals who provide beauty industry personal services. From Cosmetology or Barbering licensed practitioners, as well as those ancillary service providers such as Makeup Artists, Spray Tan Artists, Hair Removal Specialists and others…to body workers such as Massage Therapists, Energy Workers and more, if you provide a personal service to your clients, you will benefit from this course.

Module 1  Introduction and Course Rationale

Module 2 Work Practices and Engineering Controls – Working safely has two elements that need your attention and constant review. Am I doing things in the safest manner? Do I have everything in place to protect my clients, my staff and myself?

Module 3 Infection Control – It’s a whole new world and our protocols need refreshing. State Boards of Cosmetology or Barbering and the other Boards that regulate Massage Therapy, Electrology and other companion services set up minimum standards written in different times and that vary widely from state to state. It’s up to the professional to supplement those minimums with practical working standards that keep everybody safe.

Module 4 Proper Use of PPE – Using protective equipment is mandated by Federal law though OSHA in every state in the U.S. You must know and use PPE correctly–in the past it was not so vital to understand the nuances of proper fit, wear and use as it is today.

Module 5 Client Management – When you set up a new way of working, you will have some push-back from clients. We discuss effective techniques for making rules that suit your salon culture and implementing compliance.

Module 6 Safe Salon Components – Implementing new safety practices can be overwhelming. We’ve broken it down into three components that can help you develop your concept of a “Safe Salon,” a “Safe Spa” and so forth.