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. Build your salon. Hello, hello, hello, my salon friends. Phil Jackson here, your Queen of Salons, coming all over the internet again with another dose of my wise wisdom. How on earth are you? Well, I hope. I'll take what's left. This is one of those episodes where 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 years. I have a fully booked salon, but my personal bank account full of crickets and cobwebs. I want to save you from that and tell me if this sounds like you. Reach out and let me know. I want to know if this sounds like you, where I've still got this right? 'Cause I see this a lot in different salons that I visit, but is that the norm or am I just seeing a little exception to the rule? Let's see if this sounds good to you or not good. So the money's coming in and you look like you are making really good turnover targets. Team's busy, but when you look at your finances, you are running on fumes. So the rent gets paid and the team gets paid and the stock order gets paid and you get what's left. And usually that is a big fat ugly zero. And we tell ourselves that that's responsible, but I don't think it is. I think it's a bit of a trap when you always come last. What you are building is a business designed to run you into the ground. And I lived it for years. I had stretches where I would skip my own paycheck for two, three months at a time sometimes just to make sure the team still got paid because their wages felt non-negotiable and my wages felt optional. I've had times in my business where I bought stock for the salon on my personal credit card because the business account was empty. And I would tell myself that it was a temporary loan to the business. It was never temporary. It became the norm. It became the model. I was the subsidy, the secret subsidy that was keeping the doors open and from the outside the place looked successful the whole time. So I was branding it beautifully and the thing that changed it for me was not that dramatic. It was just I sat down one night, laid all the numbers and there it was in black and white. My fantastically successful business from the outside was just scraping by, surviving. But 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 realised I had it completely backwards. I didn't actually have a business at all. What I had was a grueling job, to be honest with you. I would have been better off working for someone else and I was treating my own pay, my own reward as a bit of an 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 the work that I did, not just in terms of the service that I was carrying out, but the managing and the marketing. It should be paid the same as the rent, the same as the electric, the same as the non-negotiable costs of running the business. And a business that can't meet its costs shouldn't be in business at all. So if you are propping your business up, honestly what you're doing is just hiding the truth from yourself. Longer and longer. So here's the bit that I want you to take away. There are two pots of money that you are entitled to and blurring them together is keeping you confused and ultimately kind of skint, to be honest with you. And darling, there is nothing uglier than somebody skint who ought to have money in their pockets. So there are two pots. The first is your wage and the wage is the money you earn for the jobs you do in the business. This isn't the owner's pay; this is employee pay and it might go through the payroll, it might come out dividends, but it should be non-negotiable. If you are carrying out service, you should be covering the cost of you carrying out service as a therapist, as a holistic therapist, as an aesthetician, as a hairdresser. On top of that, if you are managing a team, a manager gets a manager's wage. If you are manning reception for two days a week, you should be getting receptionist wage. That's a job and it's paid. Then 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 for those things, what would you do if you were faced with a business that was overstaffed? You'd start making cuts. So you start cutting away other 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. It is right now. So your wage is a predictable cost of the business, as non-negotiable as everyone else on the payroll. The business can't afford you. It's not because you're being greedy. It is an honest assessment of how your business is working at the moment. The second pot is profit and it's a completely different animal. Profit is your reward for all of those late nights. It's your reward for taking the risk. It is your reward for not being able to sleep at three in the morning 'cause you're panicking. After all the costs are covered, including your wage, profit is the bonus in the good times. And that bit should be negotiable. It is the bit that builds your wealth or funds something that you can reinvest or it pays for that 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 your dividends, that's not dividends anymore. That's wages. And it might be called something different by your accountant, but it's really important in your mind you understand the difference between the two because where it went wrong for me, where it went 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 subsidising 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 when you go around telling yourself you're going to catch up in a good month, that never quite comes. And then you wonder why you are not motivated to build business further. So what changes when you go first? When you flip it, your wage stops being the question and it starts becoming a line in the budget, the same as your rent, same as your rates, the same as the rest of the expenses. Instead of deciding what you can afford to pay yourself, you start paying yourself a fair wage for the work that you're doing and you take the guilt out of it completely. 'Cause 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 genuinely can't cover your wages stops being something that you absorb with a skipped paycheck or getting your credit card out, it becomes a real red flag, a signal that prices need to move or costs need to come down or something drastic has to change. And you need those signals to help you steer your business properly. I've actually run it again, it's two episodes in a row. You made me lose my temper. Get this right. Pay yourself properly. Stop hiding behind credit cards and subsidies and not paying yourself properly. So many salon business owners, I go into their salons and I figure out what they should be paying themselves and they could not afford that team member if they employed them. That's not on. So here's your job this week. Separate those two pots out in your own head and then on paper, work out the wage bit, treat it as a fixed non-negotiable cost. And then the rest of it is the profit. Your reward for losing sleep three nights a week. If you know that numbers are part of the problem. If you genuinely don't know what the business could afford to pay you, that's exactly what getting to grips with the money in your business is all about. Head over to getpaidproperly.com. I'm going to put that link in the description as well to help you get to grips with all of the expenses in your business and figure out what you should be charging for every single line item on your price card too. What have I missed? How are you doing financially? Let me take the temperature of the industry, reach out and let me know. Phil, buildyoursalon.com, scrolling at the bottom of the screen. I would love to hear from you. I love hearing from my salon owner friends. Just a few short days until I'm coming all over the internet again with another dose of my wise wisdom. And until then, take care.