Make sure your wage bills make business sense

Are you paying your team members what they are worth? asks Penny Etheridge of The Radiant Hair Consultancy . I remember opening my first salon with no computer system, many years ago now, I hasten to add, with just an inner feeling of what I felt was right and the belief that if I was out on the floor converting clients to higher services on the day, rebooking, and giving great consultations which included a future plan, all my hairdressers and subsequent therapists would do the same. WRONG Unfortunately, the reality is a lot of the team you employ may be quite happy to watch you do it all, not a lot else and still not think they are not being paid enough! After all, why should they make the owner loads of money? Well, to begin with this is not about people making loads of money for the salon owner. Half the time it’s about the team being accountable for the wages they are actually on and not slowly taking a salon under because salaries are outstripping profits. One of the main issues I deal with when working with my clients is ensuring wages are stabilised. Demands for more money from staff, however long they have been with a company just can’t be done unless the wage increase can be accounted for and justified within the total salon outgoings. No salon can operate successfully without a top banding of 50% total wage bill to total salon revenue. Any more and this area has to be quickly addressed. The fact is that most salons today do have computer systems in place which makes all these sums easy to access. if you haven’t got a software system I would be saying it’s the very next thing you need to be addressing within your business. In this day and age a Software System is pretty much an essential not an optional extra. However, if using a manual system is something you refuse to compromise on then do the sum of salary to revenue like this. Here is a simple scenario

• Terri works 23 hours at £7.50 p/h = £172 per week.
• She averages 9 clients a week at a weekly take of £300

Sum is 172 300 x 100% = 57 % £172 wage means she is on 57 % take.

• National average is between 33% and 35 %

Terri is being overpaid, this needs to be addressed and productivity needs to be raised. It doesn’t matter that she is “not on a lot of money “which is probably her perception but the fact that even at this relatively small salary she is being paid over the accepted level of 33% to 35%. I believe the biggest relationship breakdown between a team member and their salon owner is when this percentage of wage to revenue is not clearly explained. Often when I ask a client to explain their salon commission structure they don’t really understand it themselves let alone anyone else! So Keep it simple.  Keep to the sum shown above and reinforce the message that The more they take the more they make. Penny Etheridge, founder of the Radiant Hair Consultancy, is recognised as a highly qualified and passionate business coach, lecturer and presenter for the hair and beauty industry. With over 30 years in the business, Penny has first-hand experience of owning salons and recognises all the issues a salon owner faces today. She is regional head of London for the Association of Business Mentors and is a member of the institute of Enterprise and Entrepreneurs. She also sits on the steering committee for the Hair Council. Penny is a certified NLP Practitioner and has been the recipient of countless industry awards for her work over the years.