Salon Pay Rise Management | Build Your Salon

The minimum wage went up. Your team is waiting, but your margins are thin. Here's how to handle the pay rise conversation without it costing you your business. All on Build your salon. Hello. My salon friends, Phil Jackson here, your Queen of salons come in all over the internet with a big dose of my Wise Owl wisdom. How on earth are you achingly well, I hope as we storm towards the end of April and what a month, it's been lots of ups and downs for lots of my group coaching program members, but generally it feels like things are more positive than they were. January, February, March. Lots of people gearing up and investing in their businesses too, which is wonderful to hear. And we've got a couple of celebrations coming up as well. We've got somebody who's opened a second branch of a salon and also someone who's moving to a bigger location in May as well. We've got some good stuff happening too. What's happening with you? Why not reach out and let me know? I love hearing from my salon owner friends. I don't hear nearly enough. Though, I did get a lovely email last week which made me smile, saying how much they were enjoying our content. What are we talking about today? Look at me pushing the topic away because it's a grotty one. We're talking about increasing pay and as an employee, this is always good news. As a salon business owner, it always stings, doesn't it? But the minimum wage went up on the 6th of April. And that means if you have a team, some of them are doing the sums and it always impresses me that we attract a lot of people into our industry who don't like writing, don't like maths, and yet when it comes to pay, my goodness, they're good with the calculators, aren't they? But even if you're working alone, this is still your episode because the question of whether the work being done in your salon is being properly rewarded applies as much to you as it does to anyone on your payroll. But pay is one of those conversations that most salon owners handle badly. And that's not because they're bad employers, it's because nobody showed them how to do it properly. They either end up saying yes because someone asked and they felt guilty or they thought they were going to lose a team member or they kick it into the long grass, say nothing and lose good people. There is a better way your uncle Phil is gonna help you with a simple plan. First up, we need to know what we can afford and we need to know this before the pay rise conversation happens either with a team member or with yourself. You need to know your numbers. The simplest measure is your total wages as a percentage of your turnover. And with a salon that has a team, particularly a salon that has premises, that number in my experience should sit below 40%. And that's a rough rule of thumb. Your total wages, your employer's national insurance, your pension contributions, everything. If all of that is at or above 40%, my experience tells me you're gonna struggle to turn a profit. And a pay rise is not possible, but it means you've got a bigger conversation to have around pricing and profit, not your payroll. Work it out now your total wages last month divided by your total turnover multiplied by a hundred. If it's under 40% and the business is profitable, there may be room to manoeuvre. If it's above that 40%, you need to fix the underlying problem before we start growing the wage bill for solo operators, sometimes things work differently. Work backwards. Decide what you need to take home each month to live on, not survive, to have a life. Then check whether your current pricing and your booking levels generate enough after cost to pay you that. I appreciate your cost. Structure's gonna be very different, particularly if you're self-employed, particularly if you don't have premises. But that 40% rule of thumb, if you've got a team on premises is a good place to start. The biggest mistake that I see people making is they wait until someone's asked for a pay rise before they do this calculation. They either say yes to something that hurts the business or they say no without being able to explain why numbers first. Always step two, we need to handle the conversation when somebody asks. So somebody asks for a pay rise and you can feel your heart pounding and here's what you do, you do not answer on the spot ever. You listen, thank you for raising it and you schedule a proper conversation. You might say something like, I appreciate you bringing this to me. I want to look at the numbers properly and come back to you with something that I've considered properly. Let's schedule a meeting for next week. That's it. That's your whole response in the moment. Then you've got time to take a breath. You've got time to do your homework. Have a look at what your wage percentage looks like. If you say yes, what has this person contributed? Are they hitting the measures in terms of client retention, average bill, retail, anything beyond turning up what does the business owe them versus what they'd like? When you sit back down, lead with the facts, not the feelings. If the answer is yes, brilliant, you can say that you've looked at everything and you agree your contribution justifies an increase based on what the business can afford, here's what I can offer you: a specific number and a clean close. If the answer is not yet, we can say something like, now the business can't support a permanent increase, but I want to get there with you. If we can start working on these measures, if we can hit X over the next quarter, I can come back to you with a concrete offer. A no without a pathway is how you lose people. But a no with a clear target is how we turn that into a coaching conversation. How we give them something to work towards. I would always separate your pay conversations from your performance reviews. If money's on the table every time you sit down to give feedback, they're only gonna hear the money part. So keep those two things separate. Section three is about getting ahead of the conversation and the best pay rise conversation is the one nobody had to ask for. If you're always reacting, if you're always waiting for someone to knock on the office door, you are handling control of that conversation over to your team. Get ahead of it. Set a fixed point in the year, once a year where you review pay across the board, then everyone knows it's coming. No one needs to ask better still build yourself out a simple career structure so that when someone goes from junior to senior or senior to director, whatever makes sense for your salon. Each level has a clear criteria in terms of these are the measures you need to hit in order to move up to the next rung of the ladder. Each level has a pay rate attached to it. And when someone hits the criteria, the conversation is done. This is how I used to run things in my salon. Everyone knew what they needed to do to get promoted and there were no pay increases beyond promotion. They knew exactly what had to be done. I didn't care whether someone had been with me for six months or 16 years. It was about the performance. That was what got them promoted, not that they've managed not to get sacked for a long time. We pay increase when they've earned it. We pay increase when there's no awkwardness, no negotiation. My team also knew that I paid as much as we profitably could. They also knew that we invested an awful lot in their training. There were two strategic decisions I'd made about my business. One is we paid more than anyone else in town. Two is we invested more in your training than anyone else. That also meant though, that they had to understand there is a finite pot of money to spend on the team. When it came to the Christmas do, our Christmas do was a little bit shit, to be honest. When it came to the staff room looking tired and needing redecorating, guess what we were gonna get our overalls on and do it ourselves because the money was not there outta that pot to spend on staff. That money was not there to bring decorators in to do a professional job. The team has to understand there are only so many places you can spend money on. If they want more money, that money's gotta come from somewhere. We paid an awful lot out in wages, paid an awful lot out in team training that meant that something else had to give. The team has to understand that as well. But if they understand that you're paying as much as you profitably can, no one's gonna come to you for a pay rise. The answer is always going to be no. Finally, section four is you can't separate pay rise from pricing. This is something you're gonna want to look at in sync. If your wage bill is at capacity and there's someone who deserves more money, there's only one place that money can come from and that's your profits. It's gonna hit your profits unless you're also increasing your pricing. This is not optional. You can't run a business where your costs are rising and your costs are increasing, but revenue stays flat. It's not gonna work in the long term. It's gonna slowly get worse. Give your clients notice, 30 days is the maximum. Keep the communication simple and confident and get on with those price increases. There are plenty of episodes of Build Your Salon, talking about increasing our prices. Those clients who value what you do are not gonna leave over a reasonable increase. There we have it. How are your team asking for wage increases? Are you due an increase in your own wage? What's going on in your business? Why not reach out and let me know my email address? Scrolling at the bottom of the screen, Phil, at build your salon.com. I would love to hear what's going on in your business and how you're affording the increasing demands that are coming from our teams. If you want to get to grips with what your numbers look like and what you can afford to pay yourself and your team, that's what get paid properly. My program is all about head over to get paid properly.com for the details. A few short days until I'm coming all over the internet again with another dose of my wise owl wisdom. Until then, take care.