37. Thinking of SELLING your salon?

Hi everyone, this is the weekly Build Your Salon podcast with me, Phil Jackson. I'm here with the tools you need to generate the profits you deserve so that you can lead a fuller life. Hello and welcome and today I want us to learn the lessons from some of the sad stories I've heard over the years of people that have struggled to sell their salon business. For lots of us, it's part of our long-term goal to be able to put the salon up for sale and retire on the proceeds, or get the salon to the stage where it's running itself and live off the profits for the rest of our dotage. And guess what? The process for both is exactly the same. I've heard some horrible stories over the years of people either not being able to sell their salon at all, or not being able to sell it for as much money as they anticipated. And there's a good reason for this. What we need to understand is exactly what people are buying when they buy your business. Now, you may say that you're making a certain amount of profit, therefore the price that you charge for your salon should be a multiple of that price. So for a long time, people used to say if you're turning over say $100,000, you should be able to sell your salon for $250,000 or something like that. So it's either a multiple of profit or a multiple of your turnover. That doesn't really ring true unless there's lots of things in place to support that price. So you may think that the people are buying your profit. But actually most people know when they're buying a salon that most of the work is being done by the salon owner. Most of the profit is generated by the salon owner themselves. If you strip out the profit that's being contributed from the members of your team, you'll be quite surprised at what a difference it doesn't make to the rest of your business. Now, the way round this, of course, is ahead of you planning to sell your business. Three to five years ahead, you start to bring yourself off the floor and turn your role into that of a manager. There aren't many people out there who want to buy a salon to work in it as a therapist or a stylist. Most people either want to run the salon as a manager owner or they want to have completely hands off and a passive income. If you've got your salon to the stage where it's generating a passive income, however, I would question whether you need to sell it at all. So if we're not selling the profit on the business, maybe we're selling our team. Well, unfortunately, it's not legal in most cases to tie your team to a business that they don't want to work in. So even though you could have fantastic contracts,

if your team don't like the owners or don't actually like the process of change to a new owner, then they could absolutely put their notice in. And then all of a sudden your new owner is left with just an empty salon and no one to carry out any services. So perhaps they're buying your database. Now, this is an important one. If you've got an up to date current database secure with excellent details and complete details for your clientele, that can add some value to your business. But only if you have everything in place. If you've got a very stale database or incomplete data, it won't make a jot of difference to the price that you can charge. So what are people buying? Well, maybe they're just buying the furniture. And this is the sad reality for a lot of people that try to sell their businesses. They try and sell the salon as a going concern. Unfortunately, there's no database and the team aren't in excellent contracts and most of the profits being generated by the owner. So they end up selling chairs and mirrors or beauty beds. And it's a horrible reality that actually after that many years, the only thing you have is some depreciated goods on your shelf and some tired old equipment to salon. So if you want to build a business, what are you going to build? Guess what? It's all about systems. This is how you get to stay away from your salon and still make money. And it's also how you have something to sell when the time comes. You need policies and procedures in place in your business. You need a system for everything. They're useful in the day-to-day running of your business, but they're also useful when it comes to sell. Now, what form you put these systems in is entirely up to you. By a system, I mean a policy or a procedure, a way that you do things in your salon. And they have to be what we call robust. So you have to have a system that performs with very little interference from you. And you have them for everything. So we have a system in place in my salon on how we greet a customer. We have a system in place in my salon on how we take an appointment. We have a system in place in my salon for just about anything that you can think of. They're useful day-to-day for two reasons. First, it's how you train your new member of staff. So you may have got somebody fresh out of college, fantastic skills in hairdressing, but she doesn't understand how you do things in your salon. So her induction process is essentially taking her through the policies and procedures so that she has a clear idea of what you expect of her as a member of the team. And you have a clear idea that she's been absolutely told how you want services performed.

The other way they're useful is if people start to deviate from the system. So if you have a clear process in place that says a full head of highlights will take one and a quarter hours in a column, and you have a member of the team that is continually extending that appointment without your prior knowledge, then they are deviating from your system. If you've trained them on that procedure, if you've trained them on the policy, you then have something to wave at them in that meeting that says you understand, don't you? Because you signed this piece of paper that says you understand that a full head of highlights takes an hour and a quarter. Why are you extending that appointment? After that informal process, you then have ammunition should you need to go through the capability or disciplinary procedures. So the procedures in my salon take two forms. One, we have a written policy. This is our policy on the use of social media at Bravo Hairdressing. Now, it doesn't matter how detailed your process is to begin with. What we're going to do is a process of continual review. So write the policy with your team. Sit down in a staff meeting, say that you're concerned about one element of your business and you want to get something in black and white that says this is the way we do things at XYZ Salon. Once you've had that meeting, review the process every time anyone deviates from it or every time there is a question about it. The other way that I can do my processes is in the form of a flow chart. So we have these for things like how to take a wedding booking at Bravo. So it says things like customer fills in form and posts in. So when do we take the booking? Do we take it when we receive the form or do we take it when we receive the deposit? When does the trial for that wedding get booked? When do they pay the balance? Do they pay it at the end of the trial or do they pay it on the day of the wedding? So these are the things that are in the flow chart and it tells you exactly at each stage of the game what's expected from each person who's involved in the process. So when I say that a system is robust, that process of review is what makes it robust. Here's what I mean. Let's say you have a process in place for stock ordering. So you put a flow chart together that tells people exactly how to order stock, who's responsible for it and then accompanying that is a sheet that tells everybody what level of stock is needed for each item. Now you should be able to hand that process over to the person that you've identified as best place to do that. As a salon owner, doing a stock take and your weekly or fortnightly orders is a waste of your time. Find somebody on a much lower hourly rate and delegate it to them.

Now, if you start to get to the stage where you're overstocked or understocked or you're getting lots of questions from that member of staff, it means that you need to tweak the policy. So either you need to tweak the amount that you're saying you should hold for each item, or you need to make the process more detailed so they're not having these questions. So every time someone asks a question, by all means answer it, deal with the problem, but also go back to the policy, back to the procedure, back to the flow chart and put the step in that means that they don't have to pick up the phone next time. Then when it comes time to sell, what you've got is a salon that virtually runs itself or runs itself to the extent that you want it to. All the policies and procedures are in place for training your team and now you've got a business to sell. Now you've got something that someone can pick up, write you a nice fat check for, you get to retire and they get to run the salon with as much involvement as they want. I hope that's been useful to you. If it has, don't forget to subscribe. I do a broadcast like this every single Monday and I would hate you to miss out on the content that I'm sharing. If you've already subscribed, I will see you next week. Take care. Hey everyone, it's Phil again. I hope you enjoyed the episode. If you did, please subscribe and be sure to tell your friends. For more help and information on running your salon and your life, head over to buildyoursalon.com. I'll see you there.