MORE ON THE TERRIBLE TREND

In an earlier posting, THE TERRIBLE TREND, I responded to a question regarding a salon's revenue that was spiraling downward. Below is the rest of our email conversation.

Larry, thank you so much for answering my email. I can only imagine your inbox. (I can't keep my own clean).

Having 1 on 1 is a good idea. I did this at the end of 2007 (our first year) but neglected to do it at the end of last year. Perhaps I can get ready for mid-year 1 on 1's and talk this very thing. I have a couple stylist who are close to retirement and whose husbands still work. I think they do it just to give them a little more family money and they love their clients. More of a social than an economic motivation to work. BUT - I do have 4 young ladies raising families, and I'm sure this is where I can light a fire and get back to growing this business.

Thank you for your advice. It will be acted on.

Randy

Randy, I really see results when meetings are held more often than annually. Monthly would be great. It creates some accountability for the technicians. Knowing what their goals are and that you are going to be comparing goals to actual seems to help keep their eye on the ball.

Larry

Wow, that's a lot of work on me. But I agree with you that they would see their goals better.

How hard-line do you suggest? Are the goals mandatory and rigid? Or is it more of a "Hey, it's up to you. Here's what you have to do to increase YOUR income" type of thing?

I'll see if I can discipline myself to that. Larry, I work full time at the US Post Office, plus have a lot of family challenges right now. But God is faithful in helping me manage both the time and the money that He has given me.

Thanks for that input of monthly, Larry. Best of everything to you.

Randy

It does take a lot of time but if it works it can be very beneficial. I think working up front with the people and letting them help set their goals gives them some ownership of the targets. At the same time, if their expectations are really low then you have to decide as an owner if the operation can be profitable at the level that they set. If not, you need new people or you are going to continue to tread water.

Larry Kopsa CPA

TERRIBLE TREND

Larry, as you know, I attended most of the "Surviving" webinar on May 18th and I'd like to show you the depressing revenue trend I've realized for the first two years that my wife and I have owned this business.

I've attached three copies of my sales out of my point-of-sale software program. As you can see, we continue downward in revenues. If my calculations are correct, 2007 was 3.9% less than 2006 and 2008 was a larger loss of 8.4%.

I'm going to have a salon meeting tomorrow with all stylists (8 of them) and receptionists (3 of them). Should I tell them these numbers? Will it scare them too much?

What questions do you have for me to investigate the why's and do you have any immediate suggestions for me?

Thank you for looking at this

Randy

Randy, I hope you are doing well. I am sorry it has taken so long to get back to you. As you may or may not know, I have been out of the office at speaking engagements the last couple of weeks. I was at the IBS Show in Las Vegas this last weekend. Prior to that, I was at the AACS program in Las Vegas. I am sorry about the delay.

I looked at your numbers and I can certainly see your concern. I see no month or quarter where there are any increases. I am curious as to whether or not the same staff was in place this entire time. Sometimes we do see numbers go down because staff has left, pregnancy, or sickness.

I also would be curious as to your average service ticket to staff person.

Your question really is what can you do to reverse this trend. I would presume if you are dealing with the same staff that your staff is also feeling the hit and their commission has decreased. Without more details, it would be difficult to give an answer that I am certain of, but what I have seen many people do is this.

Look at your production software by individual and then meet with your people to determine if they are satisfied with their income. Most likely they are not. The next step is to show them how they can make more money. As I look at salons, I feel there are only five ways to increase the bottom line. These are:

• More clients – referral program.


• Clients come in more often – prebooking.


• Clients spend more when they come in – retail sales – upsell.

• Increase prices – increase your level of competency so you can charge more.


• Cut expenses.

As you can see by this list, four of the five relate to your stylists. Showing them how they can make more money by doing any one of the four items would certainly help your bottom line.

There are systems in place that will help you to achieve the above goals. Setting those goals with your staff and then monitoring those goals and meeting with them on a periodic basis can be the key to helping you become more profitable.

I know this is just basically a general outline of what you can do, but I thought it might help. If there is anything else I can do to assist you, please let me know.

Larry Kopsa CPA