Archive for the Improving Profits Category
Posted on August 14, 2009 with No Comments
Publishing your prices to the world – competitors or prospective customers, alike – can be a good thing and, well, a not so good thing.
With a deepening economy and salon traffic and sales down substantially, the creativity fires are brewing – leading to many conservative as well as fringe techniques for getting more folks through the door.
Most recently I noticed one of the top boutique salons in Atlanta publishing their prices on their marque. Normally used for prophetic sayings or introducing new products, the sign clearly laid out all the prices they were charging for certain treatments…shampoo and style; shampoo, color and style, perms, et al!
While this may not seem too unusual, for this “top tier” exclusive salon, it was unexpected for me. Does it work? Well, yes and no.
The first argument is that you give away your pricing to your competition and you lose exclusivity. The first issue is competitors can get your prices easy enough with a quick call or having a “shopper” stop by the salon or in fact have their hair done.
Yet pricing exclusivity issue is another challenge. Exclusivity draws customers, and in some cases, repels them. The trick is to find the balance – which I believe is understanding what are the most common treatments in your area, finding a price point that will draw folks into the store, then keeping them (with service and a great hairstyle) for increased salon revenue?
So, how do you price the services?? I recommend running seasonal or situational sales – back-to-school, Thanksgiving, Halloween, wedding parties, etc. Whatever the occassion, make sure it is well publisized – on your website, in the papers, on your sign, or have a small sign made-up to stick in your lawn, outside the store or in your window.
Remember, as you consider pricing and competition, that the majority of customers will stay with and be loyal to their stylist once they find someone who works well with them and does a great job on their hair. Pulling someone away from that loyalty is tough, so make it easy with the right pricing and occasion.
The idea to keep in the back of your mind is that if you normally see 60 customers per week and each of them extend their stylings one week, you will lose about 240 stylings per year – or the equivalent of roughly one month’s worth of revenue. (Note- this assumes your clients get their hair styled once per month)
Price your services and consider your service specials accordingly to make-up for that lost traffic.
Tags: advertising, barbers, hair salons, increase profits, increase revenue, pricing services, salon management, salon revenue
Category: Community, Improving Profits, salon management, Traffic & Revenue
Posted on July 20, 2009 with No Comments
In keeping with our continued theme of improving salon sales, I wanted to share with you an idea from a friend of my wife and mine.
She owns a relatively upscale salon in the heart of Roswell, GA…you know the kind – lot’s of shops and boutiques nearby in a renovated, very old home. It’s filled with art and unique antiques and her clientele get the best styling and are able to afford it.
As with most salons, her traffic has been down – fortunately many of her customers have not been directly affected by the poor economy, though her traffic has decreased measurably in the past 18 months.
In the south and southeast – Georgia, North and South Carolina, Florida and the panhandle states, many kids are starting to get ready for school (this was quick summer, uh?!) With that in mind, our friend started offering free haircuts to children 10 years old and under when a mom or dad came in for styling.
This makes sense. The kids are starting to get haircuts, buy clothes and get into the “groove” for their return to school. They’re getting their haircut somewhere, so she figured it might as well be here (there). And guess what…she was right. Since the July 4th weekend, she has seen a big boost in traffic.
And interestingly, many of the moms who often send the dads out to get cuts with the kids on weekends, scheduled appointments – needless to say, they have been “slammed” on the weekends – just as much of the wedding party group traffic has started to slow.
Depending on your target customer, this may or may not work for you…but, hopefully it will get your “imagination gears” turning with some possibly good ideas.
Good luck!
Posted on June 3, 2009 with 1 Comment
This a bit rambling, but stay with me for the punch line.
My wife, kids and I have been going to the same “favorite” sushi place almost once a week for the past 9 years. The staff knows us and we know them by name. They know what we like to drink, eat, and where at the bar we like to sit (the kids and I love to watch the food being prepared). We’ve seen the owners’ kids get married and have a couple of kids themselves. Even their older boy knows us when we come in and he and my 5-year-old go to the back and play with the toys.
Given the economy and recession, its no surprise that the crowds have dwindled. In fact, we are only going every 2-3 weeks. But here is the kicker. In the past several months (more like a year now), we have noticed the prices going up and up. In fact, I would argue prices have climbed probably 30-40% based on the bill we receive at the end of the night.
The Case Against Margin
I asked the owner why the steep price increases. She commented, rather sheepishly, that they needed to maintain their margins. Well interestingly, part of the reason we go there less often is because its getting too expensive. As a side note, we have several other friends who go there as well and we all agree the cost has gone through the roof. Like everyone else, we’re watching what we’re spending having seen many of our investments drop.
The point I’m making is that though business has dropped-off because of economic woes, they have further cut-off their toes by driving away business they are getting – or could be getting.
Now there is a reasonableness to the level of margins any business can sustain and still pay the bills, but as the saying goes, “I’d rather have 25% of something, than 100% of nothing”!
In the recession in 91′-92′, my wife and I owned a firm with 5 locations and about $5 million in revenue. We had a tough time when our customers’ purchase volume decreased by ~35%. With about 45 employees she and I both were more in management roles (vs. sales that we had been doing since we started). The Gulf War had started and business dropped almost overnight.
We assembled our staff and had a series of meetings to outline a game plan for surviving. The result was a three-point approach involving putting revenue, gross margin and expenses “under the microscope” to see what we could come up with. After several days we had put together a rather long list under each primary category. Interestingly, the gross margin list was the smallest, and it was agreed, the most fragile to our success (and survival). Why?
Raising Prices Can Be Bad for Profit
Fortunately, we had some very good customers – many personal friends. I called many of them and asked if they could continue doing business with us if we raised our prices a bit. The response was friendly, but frank. They too were having a rough time and if we raised our prices (even a bit), their management would ask they find another vendor (see, they were looking to cut costs as well).
The verdict was in. There were some services that were inelastic (less prone to pricing change), so we rose them a bit; but we slowly started lowering prices with new orders. Many of our customers noticed this and we were able to avoid widespread attrition of our client base. In fact, we ended up picking up a bit of market share as a result.
The Case for Traffic, New Customers & Sales
If you’re tired of reading, sorry. That was the prelude. The real story here is the other ideas that came from the meeting. Specifically, we needed to do everything we could to increase revenue and sales.
The list was long. Some ideas were great, some good, some goofy. But we wrote everything down, prioritized, and went to work – but the holy grail was to get more, new customers…period!
We put additional sales incentives in place for account execs (sales folks), and my wife and I returned to a daily sales routine. In the roughly 18 months of the recession, we increased our customer base by ~40% – but, our revenue remained flat. The good news is, if we hadn’t increased the traffic and number of customers, I’m sure we would have seen a steep decline in sales with layoffs and closings as unavoidable results. Another note, when the recovery began in 92″, our sales sky-rocketed. We had ~60% more customers than 2 years prior and everyone began ordering again.
It was a tough time, but we got through it. but the lesson learned was folks are very sensitive to price during a down economy, yet they still need services, though at a greatly reduced level. As per-customer-volume drops, it must be made-up with increased transactions albeit at possibly a lower margin.
Consideration for Salons
I want to finish with a real-world salon story. My wife has been going to the same stylist for 9 years. he and his partner split-off several years ago from a previous salon. The last time she went there, they were “slow” – as is the common phrase I hear with several of the salons we work with.
Well if you have folks on staff or if you are a partner or owner-operator, the time you spend at the shop is a “sunk cost”. Meaning that money and cost is incurred whether 1 customer or 30 come in that day – similar to rent or utilities. With that said, if your cost structure is somewhat fixed, then driving traffic is the difference between making money or not.
Let me give an example. Let’s assume you have three salaried staff plus yourself and two partners. Again, assuming you’re paying yourself a salary (plus tips and commission), you have overhead and daily costs you must cover. If your customer traffic has dropped-off because of the expense of coloring, consider contacting all your customers (email, phone, letter, etc.) and charging just for the cost of the materials and chemicals (and maybe a few extra bucks) – maybe once per month or something else a bit more creative.
Wow…are you kidding? Well consider this. If you have a staff of 6 and you’re working at 50% capacity, wouldn’t you rather have the traffic with hopes of new customers, repeat customers, sale of a few accessories or products, or some pretty healthy tips? I would – and it works.
This is one possible example, but there are more…many more ways to drive traffic, keep everyone busy and gain market share. When the economy returns to “normal”, your customers will love you, tell their friends, and business should be booming. Right now the keyword is market share and volume. Margin will take care of itself. That’s what we found! Good luck.
By the way, if you want to leave a comment or have a specific issue or want some advice, leave a comment, and I promise I will get back with you soon.
Posted on May 25, 2009 with No Comments
The ISBN (International SpaSalon Business Network) is holding it’s 2009 Annual Conference May 31st, June st and June 2nd at the Ritz Carlton on Amelia Island.
If your company owns multiple salon/spa locations, attending ISBN’s Conference gives you your best chance to stay on top of the many changes our industry is experiencing, especially important in these difficult times. Our association offers salon and spa owners an opportunity to belong to an inclusive network of companies that shares information and ideas. ISBN
The Keynote Speaker will be John Paul DeJoria the CEO of Paul Mitchell. The conference will highlight workshops, a “Link-Up lounge” for making and re-cementing industry contacts, and will kick-off with a golf tournament. Registration ranges from $395 to $995. Follow this link for more information and registration.
Considered a great online destination for the hair salon owner, ISBN does a great job focusing on business management…particularly in these difficult economic times when traffic and profits are down and costs continue to increase.
Tags: conferences, education, hair salons, increase profits, increase revenue, increase traffic, profitability, recession, Symposium, workshops
Category: Community, Improving Profits, Shows & Conferences, Symposium
Posted on May 6, 2009 with No Comments
As a follow-up on our previous post regarding increasing salon revenue, last night (coincidentally) I saw a report on the local Atlanta news about salon owner giving away free haircuts to those who recently lost jobs.
11 Alive News a local NBC affiliate reported how a salon owner was reaching out to those who recently becam unemployed. I reported on this in previous blog as a technique to not only improve traffic but to help your community. Apparently from the report, all the stylists were excited to take part and response from customers was overwhelming – and heart-felt with gratification.
Needless to say, the two minute piece on the 7pm news has helped build traffic, loyalty and exposure – free exposure. While every owner who chooses to offer a plan like this will get similar FREE coverage, it might be picked on the radio, local or community paper, or by word of mouth.
The key to promoting, is, well, promoting. Let nearby unemployment agencies and churches know of your program. Drop-off leaflets at temporary agencies. They usually have large rolls of folks looking for work, and displaying or posting a professionally prepared flyer may often work well. Especially if you reciprocate. Offer to put some of their cards or a flyer in your shop. If folks are getting their haircut and are looking for a job, considering registering with a temporary employment service may help them find a job…everyone wins!
The cond part of the report focused on free styling for moms for Mother’s Day. An Atlanta-area salon hosted a Mom Pampering Day. The recruited several makeup artist, nail specialists, and spa staff to give free massages, nail treatments, and makeovers – along with a wash, cut and styling. Again, they got great, free press and exposure and judging from the video, the place was PACKED. Most salons provide some spa services. If you don’t, go visit a few to see if you can pull together a partnership for a day to promote everyone’s business. If they are slow, then they might jump at the chance to perform the services + they have their own prospect for promotion.
Posted on May 3, 2009 with 1 Comment
If you’re a hair salon owner, you have probably been asking yourself “How do I increase revenue, sales or traffic?” Here are some tips, advice and ideas on how you can weather the current economic storm and increase profit.
During the current economic crisis, sales and revenues for hair salons has plummeted. Many people are choosing to prolong cuts and styling, and product purchases have dried-up for all but the largest and heavily trafficked locales. With economic conditiions are what they are, increasing traffic is the primary concern. Consider several several of these successful ideas we have seen or heard about:
- Give away business (cuts) for free – There are many people in a tough situation and could use a helping hand. While this idea seems to go against the grain and purpose, promoting free (or nearly free) haircuts can give you a lot of free press and customer goodwill. Ideas we have seen are the “First Cut a Penny”. One salon owner has jars of pennies sitting around the the store full of pennies. The hope is if customers get friendly, curteous service, they will return..plus the jars of pennies are a great novelty. You can expand this idea to children, veterans, over the age of 65, or limit the offer to slow or off days when business is weak.
- Partner – Many successful reataurants and salons partner with local elementary, middle and high schools. Contant local administration offices to see how you can participate. This make require a small investment, but schools often have programs whereby partners are allowed to participate, advertising and promote their business. Chic-fil-a is a master at this and have lead to great success for many of their stores located near schools.
- Use discount coupons – I continue to be amazed how many folks look for and use coupons. Give all customers coupons for discounts on future services. We have seen quite a bit of success when coupons also include 2 for 1 or 50% discounts for hair products. It’s a great way to move shampoos, conditioners or styling aids off the shelves that might not be selling anyway.
- E-mail campaign - Though more of a long-term consideration, ask customers for email addresses when the registered for a cut or have them register online for promotions. Periodically use this campaign to announce discounts, holiday specials or servie specials – coloring, perms, products sales, etc. Be cautious not to use emails for other purposes (or sell them), and make sure propsects “opt-in” to your program to avoid violating spam laws.
- Website optimization – Make sure you have a website that is optimized for your location. We looked at a local salon’s site recently and found their meta data had not information that described their services or location. For those of you who don’t know what meta data is, it is the information search engines use to identify and classify your site. If you service downtown Atlanta or north Jacksonville, your meta data needs to say that…or, your site will be thrown in with the rest and you’ll have little chance you will be found for local products or services.
- Participate in local chambers of commerce – personally I have found this to be a bit of a drag, but for many, getting out there, mingling and getting to know local business people can be hugely helpful – especially in the long run. Many meetings allow you to do a “3 minute pitch” on your company, and announcing some sort of promotion can get you some pretty good free press. It’s all about networking.
I’ll talk about several other ideas (including buying wholesale hair products) in a couple of weeks or when we see things that really work. If you have ideas for increasing traffic, revenue or profits, please post a comment to help everyone. We would love to hear what has worked for you and we’ll happily refer to your information. Good luck.
