47. If you own a salon, pay yourself properly!

Hello, Phil Jackson here from Build Your Salon, bringing you the tools you need to master to build the salon business you deserve. And my question for you today is, how on earth are you going to achieve long-term success in your salon business if you're not even paying yourself properly? Hello and welcome. And today I want to talk through a slightly disturbing trend that I've noticed when I've been doing my networking with salon owners and managers and also in my own mentoring activities. So as well as being an author and as well as getting lots of abuse every time I put a video out on YouTube or a podcast out on iTunes, I am also a salon coach and mentor. So I mentor up to 20 salons a year. So they take me on as a coach to help them through times of particular change or some of my clients have me on an ongoing basis just to support them in their business activities. And it's actually my favourite part of everything that I do. I don't sign up more than two clients a month though because it's actually very hard work. There's quite an involved onboarding process and lots of goal setting to be done as well. And it's fantastic, but it does take an awful lot of my time. Now, unfortunately what I've noticed this year and bearing in mind, we're only heading into April. So I've only signed up six new clients this year so far. Three of them are salon owners who are not paying themselves properly. And I don't see how that is a long term situation which can be maintained. Now, I know through lots of years of management and through meeting lots and lots of you lovely salon owners and managers that nobody comes into our industry primarily for the money. When you have a member of the team who you are struggling to motivate, money is actually not a very effective motivator in our industry. We all know that traditionally hair and beauty salons are places where people do not get paid as much as they are necessarily worth given the amount of effort that we have to put in and certainly the amount of training that we have to put into our careers. That said, if you want to demotivate a member of your team very quickly, try cutting their pay. So we're not switched on by money, but there is a certain level of income which can be expected. Now, I'm also not saying that there aren't situations where you might want to go negative or to make a loss.

So there's an old adage that in the first year of business, you should expect to make a loss. In the second year of business, you should expect to break even. And in years three and above, you can start to make a profit. I'm not necessarily suggesting that that's quite the case these days. But when you open a new business, you may well expect to make a loss in the shorter term. But I'm talking about salons that have been open for a while now. From outward appearances, they would appear to be very successful salons with quite large teams of employees as well. But the salon manager isn't getting paid properly. And in fact, two out of three of those cases, if we had put the salon manager onto the same wage plus commission structure as the rest of the team was on, they could not have afforded to pay themselves. Now, I've already said we don't go into this business for the money. But do you know what? Sometimes we need some shiny things. Sometimes we need to be working towards a holiday or a new car to help us maintain and be passionate about the long term success of our businesses. We've got to start putting our own wages first. So what I suggest you do mentally and financially is separate out two elements of how you pay yourself. First, if you're carrying out any services or you're paying yourself as a manager, you need a wage element, either fixed or variable according to your performance on those services in exactly the same way as you calculate the wages for your team. So that wage element needs to be a cost which is incurred and which is paid alongside your team. If you can't afford to pay yourself that element, you need to seriously look at the profitability of your business on a very, very urgent basis. Then on top of your wages, you can take dividends. And this is where I think a lot of salon owners and managers start to go wrong. There seems to be a fear and a guilt about taking profit out of your business. And we need to get past that. Your dividend is your reward. Let me explain. So your wages are your reward for carrying out service or managing your business. Your dividends are the reward for the risk that you take. So if your salon was to go bankrupt tomorrow, most of your team would be able to find a job. As long as the standard of service is relatively high, they would find a job very, very quickly. Lots of salons are recruiting. Lots of salons are struggling to recruit. And within a couple of months, I'm fairly sure that most of your team would be relatively okay. It's not the same for the salon owner and manager. Maybe you borrowed considerable amounts on a personal level to start your business.

Maybe you are personally liable to your suppliers for the stock that you've taken. Maybe you put a personal guarantee on the lease agreement so that you are personally liable for the rent that has to be paid. So there's a lot more risk around being a salon owner and manager than there is around being employed by a salon as a therapist or as a stylist. So your reward for taking that risk is dividends. So either every couple of months or every quarter, if the salon's doing well, you're allowed to take some of that profit. That's your reward for putting that extra effort in and taking the extra risk that you did as a salon owner. If you can't afford to take that profit, if you can't afford to take a slice of dividends on a fairly regular basis out of your business, you need to go back, look at your profitability and your pricing. I have a whole programme around this called Get Paid Properly and the link for that is in the description below. If you'd like a bit more of my advice up close and personal, also check in the description box because I've got my first ever live event coming up this September in London, which I'm really excited about. It's going to be a fantastic day. If you've already subscribed, I will see you again next week. If not, hit subscribe now. I put a video out like this and a podcast out like this every single week and I would hate you to miss out on the content that I'm sharing. Until next week, take care.