How to Set Commissions in Your Salon

If you're spending your one-to-ones coaching people towards their commission targets, I've got some bad news about your commission scheme today. Three shifts in how you think about paying your team. All on build your salon. Hello, hello, hello. My salon friends, Phil Jackson here, your queen of salons coming over the internet with another dose of my wise out wisdom. How are 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. I'm going to be straight with you. We're talking commission and I'm not going to give you a model and a spreadsheet. I've got a whole mini-course that does that if you want it and I'll talk about that later. What I want to do today though is to is you a bit of a challenge on how you think about commission in the first place because most salon owners run a commission programme, but now I'm talking mainly here in the UK. They run a commission programme because that's what salons do and generally that is a terrible reason to do anything because there are firstly too many salons out there for everyone to make a decent amount of money. And secondly, most of them don't. So why are we letting other salons that are making no money inform the way and the strategy that we use to run our business? So I've got three little shifts that might make you change your mind about how you think about commission. And the first one, and it's the big one, is do 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. It's so baked into the industry that questioning it feels kind of insane but hear me out. Because I think a higher flat rate pay, a flat, straight, predictable wage has got a few advantages that I don't think many owners have actually thought about. The first is planning. When you pay a flat rate, you know your wage bill, it's the same next month as it was this month. Your payroll is predictable, cash flow is predictable and you can actually plan a year instead of waiting to see what everyone's column actually did. Commission makes your single biggest cost move around every month and a cost that you can't predict is a cost that you can't 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 weren't VAT registered, suddenly VAT's being taken off the turnover before commissions are calculated. So basically because the salon owner's doing well because they're now back registered, they've gone over the threshold, all of the team is worse off. Hmm, makes you think, doesn't it? Or maybe you want to run a sub package, perhaps it's a quiet Tuesday, you want to offer some kind of loyalty deal or suddenly your team is resenting your marketing because they're working for less money somehow. It just gets very confusing and I think on a flat rate you are free. You can do whatever you want. You could stand outside your salon offering free facials all day, every day if you wanted to. Not that suggest you would, but nobody's pay is going to change because of it. Those pricing decisions, those marketing decisions are entirely yours again. And the third reason I think this works is around recruitment, which people would never think of. What you see in recruitment heads at the moment is a starting wave, which makes us look like everybody's poor relation. It makes our industry look very low paid when actually you can make good money in heroin business these days. Whereas if we were guaranteeing a wage, it looks way more generous to someone who's thinking of switching careers or coming into the industry or even switching salons. That minimum wage plus commission thing feels sketchy. It feels shady, it feels unreliable. It feels like I'm taking a gamble. Whereas if you say here's a solid dependable figure, you are going to get paid every month. Well, I think it makes it a lot more attractive in the recruitment markets. Bearing in mind there's too many someones out there, bearing in mind that recruits can pretty much pick and choose where they go and work, I think sold properly. It becomes a much more attractive offer. Now I'm not saying commission's always wrong for salons as sub salons, it's the right thing, but nobody really asks those questions. They just assume that because they've always paid commission, they always should. And I think that's dangerous. Shift number two is around your wage structure. Whichever model you land on, whichever commission scheme you decide that you're going to be running, I want you to make sure you are paying your people as much as you can profitably afford, not the least that you can get away with, the most. The business can stand while still making a profit. And I know that's the opposite of instinct. The instinct is to keep your wages as low as possible to protect your profit margin. But the job market has shifted and 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 there's a chair to rent or room to rent or there's a different industry paying more to stack shelves 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 a very expensive, draining thing to do. But here's the bit that really sold me on this. When you already pay well, when you already pay as much as you possibly can, the pay rise conversation is the easiest conversation in the building. Someone comes to you wanting more, immediately you can say, I'm really sorry, I'm paying as much as I profitably can. If you are underpaying, you are on the back flips and you have to justify why you are paying or why you are already going to offer them this small increase. If you are already paying them the top, the top of the business can profitably afford, you're completely open. You can't go any further. And you can then explain to the team member what would need to change for their wages to increase when we're not having a row anymore. We're talking about increasing their hours or increasing their range of services so that we can increase our hours in the long term or growing the average bill so that everyone can have a pay rise. That's a grown-up conversation, but it's only available to a generous owner. Shift number three when it comes to commission. If you are, and this is the one I feel most strongly about, if you are coaching your team to hit commission targets, commission is not working for you. The whole point of commission, gosh I'm ranting, look at you getting me all riled up on an update like today. Think about what commission's supposed to do. The entire point of it, the only reason commission exists is to motivate, it is supposed to be self-driving. You set it up and then the commission does the pushing for you. So you don't have to. That's the deal. And if you are sitting in one-to-ones every month, chasing people towards their 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 what it means is the thing that was in place to motivate the team is not motivating them. You are doing the motivating, not the commission anymore. You are doing the job of the commission. It's not that they need more coaching. You've got a broken system and no amount of coaching will fix a broken system. It just turns you into a full-time manager of the system. So here's a reframe. You're going to coach your team towards anything, coach them towards what the salon needs, what the business needs for them to hit. And we talked about those targets last Monday. The numbers that come from your profit goal when we worked backwards to figure out what everyone needs to put in the till. That's what your team should understand and aim for, what the salon needs to take for everyone to be secure and pay properly, including them coaching someone to maximise 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 that you think about commission, asking whether you need commission at all. Because flat rate buys you easier planning, pricing, freedom, and a more attractive offer to recruits. Two, pay as much as you profitably can afford to because cheap teams leave and well-paid teams make the rise conversation really easy. And three, if you're coaching people towards their 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. 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 on a future episode of the Digital Sun Podcast. I'm not to try and catch you out, but to hear the counterbalance. 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, at least let's choose a model that actually fits your salon, and that's what my commissions mini-course is for. It's called Salon Commissions Made Easy. I'll walk you through the different models of commission as a spreadsheet so you can compare which one is going to cost you what over time. You'll find it over on my homepage at philjackson.coach. I'm going to put that link in description as well. Pay your people well, keep it simple. Stop doing what everyone else is doing just because they're doing it. I will speak to you in just a few short days when I'm coming over the internet again with another dose of my wise hour wisdom. Until then, take care.