Salon Owners: Stop Paying Yourself Last

Are you trying to motivate yourself by saying that you'll take whatever's left at the end of the month? How's that working out for you? Let me guess, because I'll bet by the end of the month, there's just nothing left. Hello, hello, hello, my salon friends. How on earth are you? Achingly well, I hope. Phil Jackson here, your queen of salons, coming all over the internet again with another dose of my Wise Owl Wisdom. This is one of those episodes when you get to learn from all the mistakes that your wise old Uncle Phil has made over the years, hopefully in an effort to save you some of the aggro that I've been through. Let me see if this sounds kind of familiar to you. I got this wrong for a lot of years. I would have a fully booked salon, but my personal bank account was full of cobwebs. I want to save you from that. And if this sounds like you, reach out and let me know. I'd love to know whether I've got this right, because I see this in a lot of salons that I visit, but I'm only seeing a cross section of salon businesses. And I want to know if I'm seeing this exception or whether it's actually the rule. So the money's coming in and you look like you're making really good turnover targets and the team's busy. But when you look at your finances, you're personally running on fumes. So the rent gets paid, the team gets paid, the stock gets ordered. So your manufacturers are getting paid and you're getting what's left. And usually that's close to a big, fat, ugly zero. And we tell ourselves that we're doing the responsible thing by putting ourselves last. But I don't think it is the responsible thing. I think it's a bit of a trap. And what you're building is a business designed to run you into the ground. And I lived it for years. I had stretches in my own salon business where I would skip my own paycheck, sometimes for two or three months at a time, just to ensure that the team still got paid, because I felt that their wages were non-negotiable and my wages somehow felt optional. I had times in my businesses where I bought stock for the salon on my personal credit card because the business account was empty and we needed stock. And I would tell myself that it was a temporary loan to the business, which actually was never temporary. It became kind of normal. It became the model. I was the subsidy, the secret subsidy that was keeping the doors open.

So from the outside, the salon looked successful the whole time. But I was branding it beautifully and actually propping it up on the inside. And the thing that changed it for me was not that dramatic. I just sat down one night and laid all the numbers out in front of me. And it was there in black and white. My fantastically successful business was just scraping by, surviving. And it was surviving off the back of me. It was surviving off the back of my unpaid hours, my cash flow subsidies. I was the thing that was holding it together. And I realized then that I had it completely backwards because what I didn't have was a business. I had a job. And to be honest with you, I would have been better off working for someone else. I was treating my own pay as a bit of optional bonus that might turn up in a good month. But my pay wasn't a bonus. It should have been an expense. It was the cost of work that I was doing in the business, not just in terms of the service that I was carrying out, but the managing and the marketing. And it should have been paid the same as the rents, the same as the electric, the same as the non-negotiable costs of running a business. And you need that pain sometimes because a business that can't meet its costs needs looking at or it shouldn't be in business at all. So if you're propping your business up, honestly, what you're doing is hiding the truth from yourself longer and longer. And here's the bit that I want you to take away. There are two pots of money that you're entitled to. And blurring them together is keeping you confused and ultimately a little bit skint, I expect. And darling, there's nothing uglier than someone skint who ought to have money in their pockets. So there's two pots of money in your business that you can have. The first is your wage. And the wage is the money you earn for the jobs that you do in your business. Not the owner's pay. This is employee pay. And it might go through the payroll. It might come out as dividends. But it should be, in your mind, non-negotiable. If you're carrying out service, you should be covering the cost of you carrying out service as a therapist or an aesthetician or as a hairdresser. On top of that, if you're managing a team, a manager gets a manager's wage. If you're managing reception for two days a week, you should be getting a receptionist wage.

That's a job. And it's paid. And you should be paid for all of those jobs the same as any other member of staff would be. If there isn't enough money in the till to pay you for those things, well, what would you do if you were faced with a business that was overstaffed? You'd start making cuts. You'd start cutting away other bits of team members until the business starts to break even. But by hiding that, by not paying yourself properly, what you're doing is hiding the truth about the state of your business. You're hiding the truth about a business that may not be profitable at all. So your wage needs to be a predictable cost to the business, non-negotiable, the same as everybody else on the payroll. Because if the business can't afford you, it's not because you're being greedy. That's an honest reflection of how your business is at the moment. Then your second pot is profit. And that's a completely different animal. Profit is your reward for taking the risk of owning your own business. It's your reward for those sleepless nights because you're panicking. So after all the costs are covered, including your wage, the profit is the bonus that you can take in the good times. And that bit should be negotiable. It's the bit that builds your wealth or funds something that you can invest or it pays for that amazing holiday that you haven't taken in years. And it's negotiable because it should only be paid to you in the good times. If you can't live without drawing on those dividends, well, that's not really dividends anymore. That's wages. Now, it might be called something different by your accountant for tax purposes, but it's really important in your mind that you understand the difference between the two. Because where it went wrong for me and where it goes wrong for a lot of salon owners is I was trying to live off the profit. But when there was no profit, I was still subsidizing the business. When you treat it all as one big pot, you start feeling guilty about taking too much out of the business. So you take too little and you go around telling yourself that you're going to catch up in a good month. And that good month never quite seems to happen. And then you wonder why you're not motivated to build your business further. So what needs to happen? We need to go first. And what changes when you go first? You flip it. Your wage stops being negotiable.

It starts becoming a line in the budget. The same as your rents, the same as your rates, the same as your expenses. So instead of deciding what you can afford to pay yourself, you start by paying yourself a fair wage for the work that you're doing. And you take the guilt out of it completely because you're not raiding the till for a treat. You're paying a legitimate cost in the business. And the knock on effect is that the month the business can't cover your wages becomes a reality check, a red flag, a signal that something needs to shift in the business. Prices need to move or costs need to come down. Something drastic has to change. And you need those signals to help you steer your business properly. You made me rant again. I'm starting to build. I can feel my temper starting to rise. Get this right and start paying yourself properly. Stop hiding behind the credit cards and the subsidies and not paying yourself properly. So many salon business owners, I go into their salons. I figure out what they should be paying themselves. And they couldn't afford to be. They couldn't afford that team member if they employed them. And that's not on. If they if you if you had to replace yourself with a team member and you couldn't afford to pay them. That's not fair. So here's your job this week. I want you to mentally separate out those two pots in your own head and then on paper. Work out the wage bit and start treating it as a fixed non-negotiable costs. And then the rest of it is profit. Your reward for those sleepless nights. Your reward for taking the risk. If you know that numbers are part of the problem. If you genuinely don't know what the business can afford to pay you. That's exactly what getting to grips with the money in your business is all about. I want you to head over to get paid properly dot com. I'm going to put that link in the description as well. I want to help you get to grips with all of the expenses in your business. Figure out what you should be charging for every single item on your price card too. So what have I missed? Where are you struggling? What's happening financially in your business? Reach out and let me know. Phil at buildyoursalon.com. Let me take the temperature of the industry. I'd love to hear from you. You know I love hearing from my salon owner friends anyway. Just a few short days until I'm coming all over the internet again with another dose of my wise hour wisdom. And until then, take care.