How to Set Commissions in Your Salon

If you're spending your one-to-ones coaching people towards their commission target, well, I've got some bad news about your commission scheme. Today, three shifts in how you might think about paying your team. Hello, hello, hello, my salon friends. Phil Jackson here, your queen of salons, coming all over the internet with another dose of my Wise Owl Wisdom. How we doing? How's the month treating you? Are you managing to get some sunshine while it's still available because it's going to be autumn before we know it? And today, we're talking about money, so it must be Monday, and I'm going to be straight with you. We're talking commission, and I'm not going to give you a model or a spreadsheet because I've got a whole mini course that does that, and if you want it, I'm going to talk about that later. What I want you to do today, though, is to, I want to give you a bit of a challenge on how you think about commission in the first place, because most salon owners run a commission program, and I'm talking mainly here in the UK. They run a commission program because that's what salons do, and generally, that's a terrible reason to do anything because, well, there are firstly too many salons out there to make a decent amount of money, and secondly, most of them don't. So by being influenced by other salons, we're letting other salons that are making no money inform the way and the strategy that we use to run our business, and that's just stupid. So I've got three little shifts that might make you change your mind about how you think about commission, and I promise you, if you take any of this on board, you are going to be flying in the face of what the rest of the industry is doing, and I think that's a good thing, but it's going to take some bravery, okay? You're not going to see lots of salons thinking this way. Anyway, the first one, and it's a big one, is to ask yourself whether you actually need to pay commission at all. I know, it sounds like heresy, doesn't it? Your Uncle Phil being blasphemous and calling out commission because it's so baked into the industry that questioning it feels kind of insane. But hear me out, because I think a higher rate of pay, a flat, straight, predictable wage, has a few advantages that I don't think many owners have actually thought about. First is planning. When you pay a flat rate, you know your wage bill, and it's going to be the same next month as it was last month.

Your payroll is suddenly predictable, which means your cash flow is more predictable, and you can start to plan for a year instead of waiting to see what everyone's column actually did. Commission makes your single biggest cost move around each month, and I think that a cost that you can't predict is a cost that makes it difficult to plan around. Second, if you get rid of commission, I think you get a whole batch of freedom. When your team's on commission, every decision you make about pricing often gets tangled up on what it does to their pay. And I saw this with a client of mine over the last couple of months who had to suddenly go VAT registered. And VAT is usually taken off turnover before commissions are calculated. So because the salon owner is doing well, and now they're VAT registered, and they've gone over the threshold, the team is worse off. It kind of makes you think, doesn't it? So maybe you want to run things in a slightly different way. Or let's think about marketing. Perhaps you want to run a, I don't know, let's say it's a quiet Tuesday and you want to offer some kind of loyalty deal. Well, suddenly your team is resenting your marketing because they're earning less for doing the same work. I think it gets very confusing. And I think if you're on a flat rate, you're free to do whatever you want. You're standing outside, you could stand outside your salon. I'm not saying you would want to, but you could offer free facials all day, every day. But none of your team pay is going to change because you do it. So those pricing decisions, those marketing decisions are entirely yours again. And the third reason I think this works is around recruitment, which people never seem to think about. What you see in recruitment ads is a starting wage, which makes us look like everybody's poor relation. It makes the industry look very low paid and it makes it look much easier and much easier to make the same money stacking shelves in a supermarket. If we were guaranteeing a wage, it looks way more generous to someone who's thinking of entering the industry or switching careers or switching salons. That minimum wage plus commission thing feels really sketchy. It feels shady, feels unreliable.

And it feels like I'm taking a gamble as a team member. Whereas if you're giving me a solid, dependable figure, which I'm going to get paid every month, well, it makes it a lot more attractive in the recruitment market. And I've already said there's way too many salons out there chasing the same number of recruits, which means that recruits can pretty much pick and choose where they go and work. I think if we sell this properly, it becomes a much more attractive offer. Now, I'm not saying commission's always wrong. For salons, sometimes it can be the right thing, but nobody really asks those questions. And they just assume because they've always paid commission, they always should. And I think that's dangerous. Shift number two is around your wage structure. So whichever model of commission that you land on, whichever commission scheme you decide you're going to be running, I want you to make sure you're paying your people as much as you can profitably afford, not the least that you can get away with. I don't want you to be paying the absolute minimum. I want you to pay the most that the business can stand while still making a profit. And I know that feels the opposite of your instincts. Your instinct is to keep your wages as low as possible to protect your profit margin. But the recruitment market has shifted. Those minimum wage team members are not going to stick around for very long. They can't afford to. And they don't have to because there's a salon down the road or a chair to rent or a room to rent or a different industry paying more with none of the pressure of working in a salon. If you pay the absolute minimum, you're going to be recruiting continually and recruitment is draining and it's expensive. But here's the bit that really sold me on this. When you already pay well, when you already pay as much as you profitably can, the pay rise conversation is the easiest conversation in the building. If somebody comes to you wanting more money, you can immediately say, I'm sorry, I'm paying as much as I profitably can. If you're underpaying, you're on the back foot and you've got to justify why you're paying what you do or you're going to have to offer them a small increase to keep them happy. If you're already paying top wages, the top of what a business can profitably afford, you're already completely open. You can't go any further. And then all we need to explain to the team member is what would need to change for their wages to increase.

So whether that's increasing the number of hours or increasing the range of services so that we can increase our offering and our wages in the long term or growing the average bill so that everybody gets a pay rise. That's a grown up conversation, but it's only available to a generous owner. And shift number three, when it comes to commission, if you are, and this is the one that I feel most strongly about, if you're coaching your team to hit commission targets, commission is not working for you. I know the whole point of commission, gosh, I'm getting riled now. You're going to get me ranting, getting riled up on a day like today. Think about what commission is supposed to do. The entire point of it, the only reason commission exists is to motivate. And it's supposed to be self-driving. You set it up and then the commission does the pushing for you so that you don't have to. That's the deal. So if you're sitting in one-to-ones every month, chasing people towards their commission number, holding meetings to push retail, prodding people to rebook, bolting on little extra incentives to make sure those targets land, stop. And notice what that means, because it means the thing that was in place to motivate the team is not working. It's not motivating them. You're doing the motivating, not the commission. You're doing the job of the commission. It's not that they need more coaching. What you've got is a broken system and no amount of coaching will fix a broken system. It just turns you into a full-time manager of a broken system. So here's the reframe. You're going to coach your team towards what the salon needs, what the business needs them to hit. And we talked about those targets last Monday. The numbers that come from your profit goal. You remember we've talked about your profit goal and working backwards to what everyone needs to put in the till. That's what your team should understand and aim for. What the salon needs them to take for everyone to be secure, for everyone to get paid properly. Coaching someone to maximize their own column and coaching them towards what the business needs is not the same thing. And commission is pushing them towards the first one.

So they're my three shifts in the way you think about commission. Asking about whether you need commission at all because flat rate buys you easier planning, pricing, freedom, and a much more attractive offer for recruitment. Two, pay as much as you profitably can afford because cheap teams leave and well-paid teams tend to make the rise conversation really easy. And three, if you're coaching people towards commission, commission is broken. Have a proper look at what you're doing now and figure out which of these assumptions you have never questioned. Let me know what you think. This is controversial stuff. My email address scrolling at the bottom of the screen. I know there are people listening to this right now who do not agree with what I say. I don't want to argue with you, but I would love to hear your take on this. More than that, I'd love to interview you about this on a future episode of the Build Your Salon podcast. I'm not trying to catch anybody out, but I'd love to hear the counterbalance, the other side of that argument. Because believe it or not, my darlings, even with my ancient wisdom, I do not know it all. If you do go through all that and decide you want commission, let's at least choose a model that fits your salon. And that's what my commission's mini course is for. It's called Salon Commissions Made Easy. I'll walk you through the different models of commission. There's a spreadsheet so you can compare which one is going to cost you what so that you can decide what's going to be best for your business over time. It's over on my homepage at philjackson.coach. I'm going to put that link in the description as well. Pay your people well, keep it simple, stop doing what everyone else is doing, and I will speak to you in a few short days when I'm coming over the internet again with another dose of my wise owl wisdom. And until then, take care.