The buying of a salon can be quite a stressful exercise and it is vitally important that you are prepared for the rollercoster ride that awaits.

 

Preparation is the key – Make sure that you speak with a broker to determine what type of salon will suit you … eg Managed, Partly Managed, Owner Operator, Franchised etc … Once you know what you are looking for it is much easier to find it!

 

Budget and Finance is important so you know how much you can spend and you must take into consideration… Purchase Price + Stock Value + Some Money in the Bank + Rental Bond (3-6months rent) + 1 Month rent in advance + some repairs if necessary.

 

Now location is important. You need something that suits your budget in your desired area and this can be difficult.

 

Leasing is also key to getting the deal completed and this is where we find most applicants/buyers fall down. Have your asset and liabilities prepared and signed by your accountant, business plan, cashflow forecasts, a resume of your experience and 3 references for the landlord.

 

Staffing is the most important key to running salons and you need to look after the current staff and make sure you have a few back up options before you settle on the business.

 

Get all these components lined up and you’ll be well on your way … Goodluck and happy buying …

 

For more information on appraisals and finding the right salon. Contact a salon specialist broker today on 1300 366 521.

 

Benchmark Salon Sales

I’ve spent my life traveling around the world helping salon and spa owners improve their businesses and now I will tell you my secret. I can reveal right here what it is I do to make things better…Are you ready? I measure. I measure everything. I print out every report I can find and I measure them against each other, I measure them against the same reports from the year before, I measure them against industry benchmarks, I measure the time it takes for services, I measure the depth of bills in the owners in-tray, I measure the marketing responses, I measure everything, measure, measure, measure…

 

You get the picture. It is practically impossible to run a successful business and have it grow unless you are measuring what’s going on in it.  These days just about any salon software will give you a good set of reports by which to watch your business grow. It certainly makes it easier for us business consultant types! And I tell you – it’s Magic! As soon as you start watching the figures, they go up! As soon as you start informing your team of the figures and setting them new targets, they go up again! You can get a very clear picture of why your business is struggling and exactly where you need to focus in order to move forward. Its very powerful and exciting stuff!

 

Below are some key industry Benchmarks that makes you a Salon Guru overnight!

 

Vital Business Number	Benchmark HAIRDRESSING	Benchmark BEAUTY & SPAS
Number of clients per team member per day	6 minimum	6 minimum
Number of clients per fulltime team member per week	30 minimum	30 minimum
Number of services per team member per day	8 minimum	8 minimum
Number of services per team member per week	40 minimum	40 minimum
Team member service sales per hour	$70 – $80 minimum	$75 – $85 minimum
Employee wages vs their total salon income	3 – 3.5  times their gross wage inc. Super & work cover etc	3 – 3.5 times their gross wage inc. Super & work cover etc
Fulltime senior employee service income per week	$2100 – $2300 minimum	$2200 – $2500  minimum
Fulltime senior employee product income per week	$250 minimum 15% service total	$550 minimum 25%-30% service total
Average client spend	$10 – $15 over the price of your top selling service	$30 – $40 over the average price of your top 5 selling services (excluding courses)
Rebooking percentage	65% minimum	65% minimum
New clients per week for the entire salon	minimum 30% – 35% of total client visit	minimum 30% – 35% of total client visit
New client referrals from existing clients per week for the entire salon	50% minimum	50% minimum
New Client First Visit Retention	50%	50%
Client Retention Overall (Quarter)	75% minimum	75% minimum
Client Retention Overall (Year)	65% minimum	65% minimum
Client Retention (To the same team member)	65% maximum	65% maximum
Client Sharing (To another team member)	30% – 40%minimum	30%-40% minimum
Client Loss (Non returning)	20% max	20% max
Client Card Accuracy	90% – 95% minimum	90% – 95% minimum
Percentage of Sales Growth Above Last Years Figures	15%-20% minimum	15%-20% minimum
Total Cost of Goods inc professional & retail products vs Total Sales	15% however 10% is target	15% however 12% is target
Wages (inc owner) vs Total Sales	40% – 42%	40%% – 42%
Operational vs Total Sales	10 – 15%	10 – 15%
Rent vs Total Sales	10% in strip shop, 17% shopping centre	10% in strip shop, 17% shopping centre
Marketing vs Total Sales	5%	5%
Profit vs Total Sales	15% – 20%	15% – 20%
Mark Up on Retail Products	80% – 100%	40% – 60%
Services Pricing Vs Hourly Wage	4	4
Services Pricing Gross Margin	66%	66%
Team Member Productivity vs Scheduled Hours	80%	80%
Salon sale price appraisals	1 x net profit for owner operator – 2 times Net Profit for managed	1 x net profit for owner operator – 2 times Net Profit for managed

 

 

Here enters the second part of the process – the managing. Once you are aware of your key business figures; you can now highlight areas in your business that are doing well, that need improvement and that need urgent action! Write on the reports where you would like the figures to be at then make it happen. Reports are not just something your accountant needs to look at every now and then. A good system of report reading in your business can help you make key decisions in your business such as “Who will I market to this quarter?” Why are my product sales down?” “Is someone stealing all my professional stock!!!?”

 

I could do the usual and quote heaps of areas where the businesses we helped improved. But I won’t bore you, I just want you to understand that all you need to do is get a handle on one key area of your business and once you understand it, move on to another while still keeping an eye on first one. It’s really very easy … you just have to get started.

 

Key business figures to look for

 

Rebooking – What percentage of your clients are rebooking, is it enough?

Client retention – Are you keeping your customers or are they leaving in droves?

Wage versus sales for each team member.

Rent versus sales – If this is too high you need to increase turnover to lower rent percentage or just sell up and move.

Retail sales and Mark-up.

 

If you are serious about doing business then you need to get enthusiastic about marking and managing your reports and business figures. It’s all just a game and these are your scorecards, so start keeping score today. The other important thing to remember is that when you go to sell your business it will be worth more to the buyer if you have an organized set of reports and a management strategy that showed clear growth in the past.

 

If you find all that business stuff daunting call in a professional to help you break it down into easily understandable chunks that will give you and your team clear direction and growth strategies.

 

If you don’t have a computer to print you out these very useful reports, I suggest you invest in one. Short of that, a very good accountant is needed to give you the kind of information you need. However an accountant won’t help you write targeted marketing letters or give you your rebooking percentage. So if you are in business for the long haul, get a computer and a dedicated salon software system. I can guarantee that when you combine it with strong operating procedures in your business it will save hours of time, buckets of sanity, and will make you more money. Hopefully one day you’ll even be able to sell it for a fortune!

 

For more information on appraisals and finding the right salon. Contact a salon specialist broker today on 1300 366 521.

 

Benchmark Salon Sales

It’s sometimes baffling and always frustrating to see a salon client running a promotion in a half hearted manner.

 

Allow me to extrapolate.  Imagine a salon running a promotion to bring in new clientele.  Then imagine the new client is not given a client card to fill out, they are not asked to re book and they are treated like a ‘bargain hunter’ and given a half hearted service from their stylist.

 

Then imagine me on the phone to the salon owner who is complaining wildly that the promotion attracted the wrong demographic, everyone using the promotion was a ‘bargain hunter’, and that no one rebooked.  It’s probably not hard then to imagine me slapping my forehead and vowing to run away to join the foreign legion.

 

Salon owners rarely like to admit a failed promotion had anything to do with them or their team.  In a way, the salon owner is right to say, “That promotion was a waste of money”.  What’s not right is to blame the promotion itself for the failure.

 

Let’s look at how you can be sure the salon promotions you run will be a success.

 

1 – Concept & Design

All promotional materials from the copywriting, to the photos and the actual promotional concept itself MUST appeal to the right target market.

 

Professionally designed and written promotions will get a better response from your demographic.  Stop using your talented friend or your butcher’s kid to design your promotions… unless they happen to be marketing professionals.

 

One more note from my marketing brethren.  If you hire a professional, listen to them and respect their opinions and advice.  They know what they are doing.  They are well trained and have experience in their field.  Remember the saying, “Why buy a watch dog if you’re going to go outside and bark yourself?”  Stop barking.  Let the dog do it.

 

2 – Training & Implementation

To make the most of your promotion it is essential that all of your team is aware of the terms and conditions.  They should confidently adhere to the promotion terms and be prepared to answer questions about them.

 

What’s more important is making your team aware of the standard of service you expect clients to receive, and making sure they deliver that standard every time.

 

It’s best to re-train everyone on re-booking and product recommendation procedures prior to running a promotion.  You may even want to spot check these procedures are being followed in your absence by sending some mystery shoppers through the salon.

 

Customers contacting your business for the first time are usually apprehensive. They may be concerned that the promotion offer will not be honored, or that staff will treat them less favorably, perceiving them to be ‘bargain hunters’.

 

Your team needs to be committed to treating everyone with care and respect.  No one is to make a judgment on a client, or to treat them like anything less than a VIP.

 

 

3 – Evaluation

Finally, I recommend conducting a promotion evaluation.  Once the promotional period is finished its advisable to ascertain its value.  Promotion evaluation allows you to determine which promotions work best for you, and therefore which promotions to run in the future.

 

Look at figures of how many new clients were introduced to your salon, what the promotion cost you to implement, how many people rebooked from the promotion, how much retail was sold and other pertinent figures.  Some promotions concentrate on rebooking, others on product sales and so on.  Establish whether your promotion goals were met and analyse what did and did not work.

 

Last of all, I need to tell you some good news and some bad news.  Bad news first…

 

In any promotion you run to attract new clients you will find not all of them will rebook.  If you get a 100% retention rate from such a promotion I want to congratulate you on your outstanding rebooking protocol.

 

Set a realistic goal for your promotion.  Don’t expect the world.  Some promotions are designed to raise brand awareness, some to promote your salon ethos, some to sell more retail, or bring in new custom.  Be aware of what your promotion is designed to do and don’t expect it to do anything else.

 

The good news is this…

 

Even if someone does not respond to the promotion you have on offer, they may have taken notice of your salon name or location for their future reference.  Raising your brand awareness in the community can bring in referrals unrelated to the promotion for months to come.

 

For more information on appraisals and finding the right salon. Contact a salon specialist broker today on 1300 366 521.

 

Benchmark Salon Sales

Too many salons put the cart before the horse.  Concentrating on attracting bulk numbers of new clients through the doors, before you’ve got your Customer Service and Rebooking procedures streamlined is a waste of time and money.

 

In our last issue I examined how to improve your client retention.  So now that you know how to keep a client, let’s look at how to attract a client in the first place.

 

In marketing circles, you never start a campaign without first identifying who your target market is.  Naturally the perfect demographic will vary from salon to salon, but your new clients will all fit one of these categories:

 

They don’t have a regular salon

They are unhappy with their current salon

 

Although these clients are most likely to try out your salon, they often come with a bit of ‘baggage’.  These poor dears have probably been ‘hurt’ before, and like heartbroken lovers, they’re scared to jump back into the game.  That’s where you come in.

 

Understand that everyone in the categories above is likely to enter your salon feeling nervous and vulnerable.  In the past they may have been hit with the hard sell, overcharged for salon services or just be naturally nervous about letting someone else ‘control’ their image (let alone anything else).

 

It’s your job to help them feel…

 

Relaxed, welcome and ‘at home’ in the salon

You’re genuinely interested in helping them look their best

You’re not going to pressure them to do or buy something they don’t want

 

 

Great copywriting of your advertising materials matters.  Identifying your demographics needs makes copywriting easier.  Let’s look at the information we have above and create some headlines.

 

For the client who doesn’t have a regular salon or is unhappy with their current salon because they are worried about being ripped off and leaving the salon looking average:

 

You don’t have to spend a fortune to look a million bucks!

 

For the client who doesn’t have a regular salon or is unhappy with their current salon because they’ve never felt welcome and never felt that the stylist genuinely cares to improve their image:

 

At <Salon Name> you don’t have to thank us for making you look fabulous.  You’re welcome!

 

I could play the Headline game all day, and as you can see, once you identify who you want to attract it’s easier to create the right advertising copy.

 

Another vital factor in your salon advertising materials is the image you use.  Unless you’re prepared to charge bargain basement prices, you will need a professionally designed logo and professional photographs of your work.  Poor quality images or a logo your nephew knocked together on his Mac will send a clear message to potential clients, “Our salon is cheap.”

 

It matters little what your taste is, and what images you like.  What matters is which images are attractive to your demographic.  Photos of young punky looking people will not attract the polo set to your salon.  When in doubt, investigate.  Ask people in your demographic to rate your images.  Look at the advertising and images that work in magazines aimed at your target market for inspiration.

 

Now we have the words and images sorted out, I’ll reveal three tried and tested promotions designed to get new people through the door of your salon:

 

Cross Promotion

Organise a cross promotion with a restaurant, sports club or other local business.  Agree to promote them in exchange for them promoting you.  You may want to swap vouchers for free services or ‘value add’ offers for first time visitors to your businesses.  Make the offer on the voucher attractive to potential clients.  Keep it local and make sure the business you cross promote with appeals to your demographic.

 

Remember to add the words “For first time salon customers only” on any promotional vouchers or cards to deter people who may exploit the promotion.  Explain to any business you cross promote with that if too many people try to abuse the promotion you will have to withdraw it.

 

Word of Mouth

Turn your existing clientele into walking advertisements for your salon.  Give a client a ‘refer a friend’ card.  The card may be for a complimentary cut for first time salon visitors.  Reward your client for referring their friend by offering to add value to their next service.

 

VIP Card Sales

Send a team of door to door salespeople out to sell VIP Cards.  We’ve all seen these before: new clients pay a fee to buy a card entitling them to receive a bunch of services from your business.  The VIP card concept represents a low cost, low risk option for salon marketing because you will be using surplus time and effort to impress people.  The purchase price of a VIP card is designed to put off the dreaded bargain hunter, yet not deter the serious customer.

 

Before you get all cranky because I am telling you to give away a free or discounted service, remember this:  the client does not think of themselves as ‘just another freebie’ and neither should you treat them like a second class citizen.  If you want the client to return and pay money for your services, you’d better impress them on their first visit.  The price of the service or discount is your advertising dollar being spent wisely to bring in new clients, not ‘just another freebie’.

 

Unless you’re in a high traffic location, you’re unlikely to get a lot of walk in clients.  That’s why it is prudent to lure new clients with a good offer.  Compared with many other forms of advertising, letting a potential customer try your salon for free makes more sense and costs less.

 

For more information on appraisals and finding the right salon. Contact a salon specialist broker today on 1300 366 521.

 

Benchmark Salon Sales

Almost every salon owner I speak with says they want to attract more new clients through the door.

I bet many of you are nodding your beautifully styled heads and thinking, “yep, me too”.  New clients through the door are like some kind of Holy Grail.  My question is, “Why?”

 

Did you know on average it costs 25% more of your advertising dollar to get new clients and keep getting them than it does to take care of the clients you have?  Unless you’re retaining existing clients, you might as well have a revolving door on your salon and money to burn.

 

My next question is this, “Why should a new client come to you if you can’t even keep the ones you already have?”

 

I have some tips for you shy artistic types out there on pain free rebooking procedures that will help keep your clients coming back.

 

Have a positive attitude and a bright cheery demeanor.  Nothing turns off a potential client like a snobby, stuck up, cranky stylist/therapist.  Leave your problems and bad moods at the salon door.  When someone is in the salon chair it’s never about you, it’s all about them.

Treat everyone as a VIP.  Imagine how you would treat Madonna or Hugh Jackman or some other high profile hottie if they were in your salon.  I’d bet my life if you treated everyone the same way they’d be fervently rebooking every time.

Never rush a service.  No one likes to feel like they’re an inconvenience or in the way.  If you’ve been put through the motions as quickly as possible by a robotic stylist set on auto pilot, you’re unlikely to re-book.  If a 1 hour service only goes for 45 minutes, your client will notice and will feel ripped off.

Analyse, identify, express, listen and repair.  You are the expert.  Analyse the hair or skin of the client.  Identify their needs and express your opinions on how you can meet those needs without being pushy or mean.  Listen to the client’s response and their analysis of their needs and make sure you meet them while you repair the damage.  Make sure the client looks as fabulous as they possibly could look when they walk out that salon door.

 

Plant the Seed

So you should have your client all blissed out from the amazing customer service you’re giving them.  Now they’re lulled into an almost hypnotic trance of ecstasy it’s time to plant the rebooking seed.

 

Say something like ““Madonna, to maintain the style that I’m creating for you today, I’m going to need to see you again in 5 to 6 weeks to keep it looking great” and leave it at that.  Give the client time to absorb the concept of regular upkeep being a good thing.

 

Reaffirm
You can reaffirm without being pushy by having a clear plan for the future of your client’s style.  Saying something like “Your brows are looking great right now, and the fringe I’m giving you will draw a lot more attention to your gorgeous brows and eyes.  By the next time we see you they will probably need some tidying up so if you want us to take care of it for you, make sure you tell reception when re-booking.  The salon books out quickly so you’re better off organising it with us in advance so you don’t miss out”

 

Now you’ve established two things in the client’s mind.  One is that you actually care about the overall look and style of the client, now and in the future.  The other is that your salon is popular and it’s best to rebook to guarantee they don’t miss out.

 

Use your Client Profile Card

Hopefully you’re using a client card during the service to note what services you’re performing for the client, which ones you’ve recommended they rebook for, what refreshment the client ordered, and any retail you’ve recommended.

 

This card will serve you on two levels.  One is for your own future reference when a client returns to the salon.  Imagine their delight when you ‘remember’ their dog’s name, the way they take their coffee, and the details of their last visit.

 

The other way a Client Card will serve you is to make the point of sale process run smoothly.  Hand the card to reception at the end of the service so they may accurately tot up the client’s services.  Have your receptionist trained in the final process of rebooking: closing the deal.

 

Reception & Choices

S/he should say something like, “Madonna, as Mandy suggested before, to keep your hair looking and feeling great you’ll need to come back and see us in the next five to six weeks. We get really busy, so can I put you in the appointment book for five or six weeks’ time?”

 

Some clients may say they are unsure if they’ll be available or if they will remember an appointment booked in advance.  Your receptionist can offer to SMS a reminder or write the appointment on a card.  Never get pushy, impatient or frustrated with the client.  If the client is still unsure, leave it at that.

 

Follow Up

If a client does not rebook then and there, don’t look at them as a lost cause.  Send a new client welcome letter to them within 2 weeks of their visit.  If you still have no response from the client within 6 weeks, send a non-returning client letter to them offering them an incentive to return to the salon.  You’ll be surprised how effectively this cheap marketing tool can boost your client retention.

 

A Final Word

David Bowie once said something to the effect of this, “If you treat the normal person as if they are famous and famous people as if they are just like everyone else, you’ll go a long way”.  I’m paraphrasing Bowie to get to this point:  For some of your clients, their visit to the salon is the only time they get to feel pampered, special and beautiful; just like a VIP.  Give people what they want every time, a beautiful special pampering, and then watch that client retention rate improve.

 

 

For more information on appraisals and finding the right salon. Contact a salon specialist broker today on 1300 366 521.

 

Benchmark Salon Sales Blog

The way you conduct client consultations can make or break their experience in the salon.  It can effect whether or not you give your clients the style or colour they want, whether they purchase product and whether or not they rebook.

 

Believe it or not a great hair or beauty consultation starts before your client arrives in the salon, at what we call the daily service opportunity session.  This session is designed to help you pinpoint areas where you can enhance your clients’ salon experience.  Come to these sessions with the Client Profile Card for each person you’ll be seeing that day.

 

Preparing your CPCs is easy; just remember the five R’s:

 

• Refreshment
• Recommendations
• Retail
• Rapport
• Rebooking

 

Use the session to look over each client’s history, note missing information, future service recommendations, rebooking frequency and future retail requirements.  Make your notes on each Client Profile Card, including details of service opportunities that the client may need compared to previous purchasing habits, e.g. Client purchased shampoo and conditioner eight weeks ago – note down to ask if they have run out and need to purchase more.

 

Note down under the rebooking area on the CPC the frequency of the client’s visits to the salon. This information can be used in the consultation so that you can tell the client that they usually come in on a 6 week frequency and that we should put them in the appointment book next time for 5 weeks as their hair gets a little out of shape on their current six week cycle.

 

Also note down a retail product and service that the client has not purchased which you think will benefit the service they are having that day. If you don’t know the client you should still note down two services and products to recommend to them.

 

Remember to only recommend the right services and products for the right people.  These could include a treatment or facial waxing as well as shampoo and conditioner and a styling product.  Don’t ever try to hard sell something for the sake of a sale.  Clients hate that and most stylists hate having to do it.

 

Customize the client’s service by noting down suggestions on styles which you think would enhance the client’s image and experience. Wherever possible, use salon books or magazines to confirm with the client what you’re envisioning for them.  Check the client’s CPC for comments on what you talked about last time so that you can build rapport quickly.

 

Make a note of the refreshment the client usually has so you can offer them their regular drink in the consultation or on their arrival. This is often the receptionist’s or the Salon Coordinator’s job. Say, “Britney, can I get you your regular skinny flat white with one sugar?” She will be immediately amazed that you have remembered how she has her coffee (when she can’t even remember to wear her undies!)

 

Finally make a note of special occasions coming up such as Valentine’s Day, Easter, Mother’s Day, Father’s Day, the client’s birthday Christmas etc, where you could recommend a gift pack, special service or gift certificate. After the SOS it is time to open the salon and start looking after clients by using the fully prepared Client Profile Cards.

 

Now you’re fully prepared for the face to face part of the consultation.  You only get one chance to make a great first impression so get it right the first time, and every time after that!  When a client walks through the door, whoever is not attending to a client, or alternatively the receptionist or closest team member, should acknowledge, approach, and greet them promptly.

 

If they are a new client, find out their name immediately and use it often to establish rapport.  There’s nothing sweeter to a customer’s ear than the sound of their own name.  If it’s a regular client, greet them by name right from the start.  If they will be waiting for their service, inform them of the length of the wait and offer them their regular beverage and some hair magazines (not gossip mags).  This is a great time to recommend the client make note of any colours or styles they like in the magazines.

 

When the team member is ready to start the consultation on the client they should promptly and confidently greet the client by saying, “Hi Britney, welcome to Nsync Salon, I’m Justin and I’m going to be looking after you today.”  Sit at eye level with the customer, and prepare to really listen.  This point is where a lot of stylists and colourists fall down.  If you do not listen with two open ears and one open mind, you won’t give the client exactly what they want.

 

In order to be great at conducting consultations, you need to understand the top twenty reasons why people have their hair done in a salon in the first place (instead of having an ‘at home’ cut with a bowl and some blunt scissors, just like mum used to do)…

 

 

• To attract praise
• To increase enjoyment
• To avoid criticism
• To keep up with the Joneses
• To feel opulent
• To look younger
• To avoid effort
• To express love for the self
• To emulate others
• To protect their reputation
• To be in style
• To socialize
• To be trendy
• To satisfy curiosity
• To feel good
• To combat boredom
• To feel pretty
• To save time doing hair each day
• To increase comfort
• To be excited

 

 

Once you understand the clients’ reasons for visiting a salon, you are one step closer to giving them their perfect salon experience.  After all, a client who wants to save time doing their hair every morning isn’t necessarily going to be keen on a ‘high maintenance’ style coveted by a client who wants to be trendy.

 

You can find out why your client is visiting the salon by asking questions like:

 

• What do you like about your hair at the moment?
• What do you dislike about your hair at the moment?
• How much time do you like to spend on your hair each morning?
• Who are your style icons?
• Can you show me any magazine images which reflect the type of style or colour you would like?

 

The main complaint clients have is that their hairdressers don’t really listen to what they want.  It’s impossible to give someone what they want if you’re not intent on making sure you fully comprehend what the client wants.  Worse still, many stylists don’t even ask any leading questions like the ones above.  The client ends up feeling ignored, and resents winding up with a style or service which is close to but not exactly what they wanted.

 

Once you’ve listened to and comprehended all of the client’s needs, say the following, “Britney are you after something similar to what you have now or are you open to a few of my suggestions?”  Most clients will see you as an expert and would love to know what will make them look and feel better.  Most clients also dread the typical question, “So what are we doing with your hair today?”  YOU are the expert, so you should have a professional opinion on what to do with the hair, based on the client’s needs and wants.

 

Once you have listened to their reply, recap what you just heard.  If you are not sure, ask questions and confirm with magazine images so you are both on the same wave length.  Then it’s your turn as an expert in your field to let them know what you recommend, before asking for their permission to proceed with the service.  If the service price is going to be much higher than what they had originally asked for, make sure you quote on the new service before beginning.

 

Watch the client’s body language and listen to their tone of voice for signs of happiness (or unhappiness) throughout the entire procedure.  While you’re styling their hair, it’s a great opportunity to present an idea for a long term plan for their hair.  You might say something like, “Britney, you mentioned you’d like to grow your hair now that your baby is a little older, that’s why I’m cutting a few layers in so the style will grow out nicely and look fashionable as it grows.  It also means we can keep a lot of the length while making the style less bulky and heavy”.

 

Establishing a long term plan for your client conveys to them that you care about their image, and that you’re approach to their hair is not for the short term gain of your salon.  A client is more likely to trust your motives and rebook if they feel you really are committed to making them look and feel the best they possibly could.

 

Finally, be excited to do their hair and never let a client leave looking anything but amazing.  Think of each client as a superstar or a model you’re preparing for the catwalk.  After all, giving a client their dream hair is the best way to ensure increased retention and positive word of mouth.

 

For more information on appraisals and finding the right salon. Contact a salon specialist broker today on 1300 366 521.

 

Benchmark Salon Sales

The sale value of a salon is the most asked question I get as I travel around the country to various businesses … So let’s look at what makes up the value of a salon and how to establish a realistic price for your business.

 

In my experience 90% of all salon owners think that their business is worth more than what it really is and the reason is that most salon owners have put in blood, sweat and tears to get their business to a point where they think it will sell at the price they want.

 

The reality is a little different. As a salon owner about to sell you are totally focused on how much you want for your hard work; of course why wouldn’t you be, your aim is to get the best price for your salon.

 

However owners are often blinded by the fact that their business is viewed by a potential buyer as a risk and the irony is that while you are focused on the highest price they are focused on getting the cheapest price they possibly can.

 

So let’s talk about how we make this transaction work so that all parties are happy with the result.

 

The first thing we need to look at is value…

 

1. The value of your salon directly relates to your financial figures. In the industry a good rule of thumb for the value of your salon can be derived by multiplying your Net Profit inc owners wage by 1 or 2 depending on weather it is an owner operator or fully managed.

 

Example 1 – owner operator salon with a net profit of $50,000 per year x multiple of 1

= $50,000 + STOCK

 

Sale listing price would be around = $65,000 + STOCK

 

Example 2 – fully managed salon with a net profit of $50,000 per year x multiple of 2

= $100,000 + STOCK

 

Sale listing price would be around = $115,000 + STOCK

 

How to increase the value of your business…

 

• A salon that has a good turnover e.g. $15,000 to $20,000 per week is often worth more as this provides a guaranteed cash flow with a large stable team.

 

• A totally managed salon (owner does nothing on a day to day basis) is worth much more and these salons are often highly sort after.

 

• An outstanding long lease, low rent for the position or high traffic flow is also a premium.

 

• Detailed Policy & Procedures with regards to every aspect of the business, implemented on a daily basis and user friendly also add value.

 

If you combine some of these factors above you may be able to achieve a net profit multiple of 2.5. We have seen many salons sell for these figures because they are such a good investment for a buyer.

 

Steps you can take to increase the value of your salon …

 

• First and foremost you must increase your net profit. Net profit is the money that is left after all operational expenses e.g. – product purchases, rent, wages including yours if you work in the business, marketing etc. You can often leave out things like Depreciation, Personal Expenses and odd purchases. This figure is called the EBITDA. (Earnings Before Income Tax Depreciation Amortization) The way you increase your net profit is to control the expenses above. Keep on a few casual staff that you can send home if work is not busy, don’t order too much stock and control wastage. These are the best places to start.

 

• The other thing you can do to increase your net profit is to increase revenue .i.e. money coming into the salon. Have training with staff, get a business coach (this can be added back into your net profit) or invest in results driven marketing.

 

• The final thing we recommend to do is get yourself out of the business over the next few months without affecting your net profit. We are inundated with enquiries from people who what to buy a managed profitable salon. The best way to get you out of the business is to develop good policy and procedures and hire a quality manager.

 

Now that your business is highly valued, it is time to sell… We always have the motto of “When things are going well that’s the time to sell!”

 

• The first thing you need to do is make sure your financials look good, go and see your accountant.
• Read your lease again and make sure there are not going to be any hiccups with the transfer.
• Decide on what sale price you want to put on the salon. Be realistic and leave room for negotiation.
• Take a few pictures while the salon is busy and also when it is closed so this can be used in an information pack for the potential buyer.
• Contact a salon specialist broker and introduce them to your business, ask for an appraisal.
• Let the broker advertise the business and negotiate the deal for you as this is more likely to get the desired result. Leave your emotions out it!
• Most importantly keep the whole thing confidential (including your clients and team) until the deal is done and unconditional – meaning the money is in the bank!

 

For more information on appraisals and finding the right salon. Contact a salon specialist broker today on 1300 366 521.

 

Benchmark Salon Sales

Buy or Selling Salons … here’s how you learn the lingo …

 

Reading an advertisement for a salon for sale can be a very confusing exercise. Below is a list of all the common phrases and abbreviations so you know what you are looking at.

 

1. Rent per square meter (sqm) – a key area in any business is rent paid vs the location of the business. It is essential to have a good location but make sure you are not paying too much for it. The easiest way to benchmark rent is to break it down into a dollar value per square meter. For example a salon in Sydney CBD Westfield Shopping Centre would come in at around $2700 per sqm. Some might say that’s expensive but that rent guarantees millions of people each year walking past your door. Most shopping centre rents are in the vicinity of $1500 per sqm. Strip Shops around $1000 per sqm and boutique (not on main road) sites can be as cheap $150 per sqm.

 

2. Stock at Value (SAV) – this is often tacked onto the price of a business and suggests that you will be required to purchase the salon at a certain price plus you will be required to purchase the current stock in the business as well. Eg – Sale Price – $100K (By the way K means thousand) + SAV

 

3. Walk In Walk Out (WIWO) – the other option when buying a business is to purchase it on a WIWO basis where all the stock is included in the sale price. This often happens if the business does not have a lot of stock (less than $5000) or the owner just wants to sweeten the deal. Eg Sale Price – $100K WIWO.

 

4. Net Profit – once you have paid all your bills then you’re left with a net profit. This is the most important figure when buying or selling a salon. Often the net profit may be small at around $15-$20K however the owner lives an extravagant lifestyle … trips to Paris each year, leases a Porsche etc. This is done to lower the net profit and avoid paying too much tax. When selling a salon, many of these expenses can be ‘added back’ into the net profit as the new owner may be a bit more restrained. Always remember the bigger the net profit the higher the sale price will be on a salon.

 

5. Earnings Before Income Tax (EBIT) – this very important term relates to net profit and how it is displayed. An EBIT net profit means that the owner has taken a wage and there is still profit at the end of the day. This is often referenced to managed salons where the owner does not work in them. An EBIT profit is one the best profit figures you can get and this type of profit commands the best sales price of a salon.

 

6. Proprietors Earnings Before Income Tax (PEBIT) – this type of profit has the owners wage added back into the net profit which means it is not as appealing as an EBIT profit. You don’t need to get too hooked up on this concept, just understand that there are different ways of representing net profit.

 

7. Addbacks – when calculating the real net profit of a business it is a common practice to add back into the net profit certain expenses to give a true indication of the actual money you will earn out of the business. Justifiable addbacks are depreciation, one off expenses like getting sued, interest on a loan, often business coaches, leasing of motor vehicles, overseas trips, excess wages or superannuation. All of these expenses can be stopped when you buy the business.

 

8. Return on Investment (ROI) – this figure is very important as it lets you know how quickly you will get your money back on your investment. For example if a salon had an EBIT net profit of $100K and you purchased the salon for $200K then your ROI would be 50% which means you would make you money back in 2 years. To work out ROI all you need to do is take the net profit and divide it by the sale price of the business then multiply by 100. EG $100K ÷ $200K x 100 = 50%.

 

For more information on appraisals and finding the right salon. Contact a salon specialist broker today on 1300 366 521.

Benchmark Salon Sales

A little tale about a successful salon sale …

 

You’ve worked hard for years, your life is your salon, then before you know it, your husband gets a new job overseas, or you fall pregnant, or you reach a point where you’ve just had enough.  Whatever the reason, you want to get out and you want to get out NOW!

 

Selling your salon can be an involved and often a time consuming process.  Before you jump in, you’ll need to assemble…

 

The top things you need to get organised before selling a salon…

Requirements	Check
Financial Information:
Current Year Financials (to date)
BAS Reports (Current Year)
Tax Returns (past 2 years)
Profit & Loss Statements (past 2 years)
Balance Sheets (past 2 years)
Computer Reports – Trading Figures (past 2 years)
Current Individually itemised Team Weekly Wage Expenses
Current outstanding staff holiday entitlements
Current outstanding liabilities of gift certificates, per purchased services  etc
Fit out cost and any shop plans
List of Assets:
Owned Equipment
Leased Equipment – with leasing details
Rented Equipment – with rent details
Plant and Equipment Schedule including values and current depreciation
Intangible Assets (if any): trademarks, patents, items subject to copyright, unique software, technical training manuals etc
Lease of Premises
Original Lease
Amendments to Lease
Assignments of the Lease
Certificates and Permits
Health Certificate
Business Name Registration – ASIC Corporate Key
Any other Certificates or Permits as may be required
Other Items
Management Organisation Chart
Written Overview of the Business
Representative Promotional Material
Policy and Procedure Manuals or processes on how to operate the business
Write a few paragraphs about the best things the business has to offer and how long it has been trading and where any opportunity for improvement exists
Location details including a spiel on other shops around
History of the salon and why you want to sell
Spiel on the team and their skills
Competition Submissions and awards granted to the business
Any marketing plans you have for the future
Past Marketing Promotions and Results
Photos of the business and team

 

Picking a broker

Now you’ve completed this checklist you’re ready to find a broker. Utilise someone with industry knowledge and never go with the cheapest commission – remember you get what you pay for! Ask how many salons they have sold. Ask for testimonials. Ask to see their detailed commission structure, as many brokers have hidden fees.

 

Compile documentation

Once you’re happy with all of this, pass on all of your details from the checklist above to your broker.  They’ll develop an appraisal and compile a document which easily and concisely explains all the important attributes of your business. From there your salon is ready to show to prospective buyers.

Picking your price is the most important component in selling a business. And although we can give you a business appraisal with some price parameters you are the person who ultimately decides the listing price. If you are looking for a quick sale then price is the key driver, however if you don’t mind waiting till the right buyer comes along then you may get your listing price.

 

Unfortunately unlike real estate there can be no comparisons to develop an accurate valuation. However this is where an industry based broker can guide you. We say there are two mythical creatures: 1 is the buyer and the 2nd is the seller.  When all is good and the moons align then we have a deal.

 

When the seller looks at the offer on the table, they will usually respond with a counter offer.  If this is accepted by the buyer then the seller and the buyer go to contract and the business is taken off the market.

 

In my experience there can be no time limit for which a salon sells.  It could be one week or one year, but settlement is usually around 1 – 2 months after the contract is signed. This is the period where all the legal stuff gets done.  You don’t really need to know much here other than to make sure you get a decent lawyer to guide you through the transfer and any conditions attached to business sale. There are some standard terms of sale, but make sure there aren’t any special conditions to restrict your future plans or the sale going through smoothly.

 

Just prior to settlement you’ll need to do a stock count.  You should also assist the new owner with an introduction on how the business works and introduce them to the team. This is usually takes about 1-2 days. Finally the money is transferred and settlement has occurred. Give the new owners the keys and pop a bottle of Champagne as your salon is now out of your hands and you have stacks of money because you built a great, well presented business which sold to the first interested party!

 

Now wasn’t that a dandy little tale about a successful salon sale?  I only wish they always went that smoothly!

 

Happy sales…

 

For more information on appraisals and finding the right salon. Contact a salon specialist broker today on 1300 366 521.

 

Benchmark Salon Sales

It was the night before Christmas when all through the house not a creature was stirring except for the hairdresser down the street who was cramming in another client so she could have a week off and still be able to pay the team’s wages and keep the doors open. This situation is far too common and one of the first signs that a salon owner is under financial stress.

 

So how do you find yourself in such a bah-humbug of a situation?  Let’s wind the clock back 12 months earlier…

 

I love to see the magic in the eyes of a new salon owner, excited, enthusiastic, just like a child on Christmas morning. They’ve gotten their hands on the biggest present under the tree and are busily working at the wrapping to discover the spoils. Just like a new present, a new salon is fun to play with for a time, but then something unexpected happens; a wheel falls off or the batteries run out. Unlike a broken toy, a new salon can’t just be pushed aside or thrown out on Boxing Day.

 

Most owners find it difficult to get out and sell a salon with problems, so they keep operating it with all its broken equipment, lack of staff and financial woes.

 

Here’s how a salon ownership downward progression can often go…

 

A hairdresser gets annoyed at working for $20 per hour so s/he decides to set up a new salon or buy an existing salon (or worse still go into partnership with another hairdresser). They poach the clientele from their current salon, which hurts the previous owner’s bottom line, and they set up their new salon down the road.

 

they spend too much on the fit out

they pay too much for the salon

they choose a poor location

they forgot to negotiate the lease and wind up paying high rent

they don’t have enough capital to get through tough times

 

After one or a combination of these scenarios occurs, the bills start to mount up.  The owner works harder to pay the bills, stress increases and suddenly the owner is working for way less than $20 per hour for more than 50hrs per week.

 

Some hire more team members thinking that will solve the problem, but this usually accelerates the decline.  Others get help and advice from business mentors and often pull through.  Sadly, the majority ride the failure train on its one way journey to bankruptsville.  Sometimes owners will drag out this trip, but others prefer to arrive there on the express train.

 

Finally, the salon team tire of the low pay and stress, take their clientele and open up down the road, continuing the salon failure cycle.

 

Before you can say “Jingle Bells” one more salon has closed and our intrepid entrepreneur is back working for someone else, once more earning their $20 per hour. Except now they have racked up about $100,000 – $200,000 in ATO bills, outstanding super and a credit card bill to rival Elton John’s.

 

This sad scenario is typical of 80% of the business that cross my path. They arrive at many different stages in their business evolution, but if I had a dollar for the amount of times I hear … “I wish I had know about your services when we first thought of opening the salon we could be in a much better position.” I’d be a very wealthy person.

 

So let me try to end your sleepless nights and make sure that when you do take the step into salon ownership you will be one of the survivors and not one of the victims.

 

Here are my top 11 tips to buying a salon …

 

Location

Decide on the type of clientele you want to attract and put your salon smack bang in the middle of the suburb where they live.  The website www.abs.gov.au is a great resource to find out the demographics in a particular area.  Another great website to look at is yellowpages.com.au and obviously google.  It will tell you how many salons are located in that area.

 

Rent

Look for cheap rent vs. good location.  This may seem obvious but it is the number one reason why salons don’t make money. The rule of thumb is: rent must be around 10% of turnover in strip shops, 15% in shopping centers and below 7% if it’s out in the ‘burbs. Work out how close the salon you are considering buying is to reaching these benchmarks using this formula: Turnover ÷ Rent x 100 = Percentage Rent

 

Finance

Make sure you have the money to act quickly when the deal needs to be done.  Establish the value of equity in your home, the amount of cash you can raise then take 25% off that total and you have your purchase price for that salon.  This will leave you with a little in the bank for the tough times and to pay your lawyer for the transfer of the lease and general business which goes with buying a salon.

 

Price

The price is never the price.  However at Benchmark we do price our salons at market so that they don’t sit there forever. Just like when buying real estate or a car, you need to negotiate – and hard! Don’t be scared to put in offers on a few salons to see if you can pick one up within your budget. Remember, the bargain of a century can come along at any time and you need to be ready to jump in quickly.

 

Budget

Understand your budget and stick to it. If you over-commit on the purchase price you’ll find it very difficult to make the business return enough to get back your investment. A good way to measure this is: net profit by a multiple of 1-2 plus stock and also depending of a multitude of factors. E.g. Salon 1 nets $50K in the year above fully managed and owners earnings (Ebit) would be worth around $100 + Stock. Salon 2 nets $50K includes owners wage then business may only be worth $50 + Stock + (Pebit).

 

Lease

A salon with no lease is worth next to nothing. A salon with a long lease is an asset.  I would rarely buy a salon with less than 2 years left on the lease with no option period. But there are always landlords that will issue new leases on favorable terms if your are the right tenant for them.

 

Plant & Equipment

When you decide on a price for the business you must take into consideration the depreciation of the plant and equipment. A business may have a $200K fit out, but if it has been in operation for 3 years, the value of the fit out can depreciate till it’s only worth $120K. Also make sure you have financial statements including a depreciation schedule which substantiates the figures.

 

Stock

“Stock at Value (SAV)” means the stock will be paid for by you in addition to the agreed sales price. Make sure this is within your budget or that you negotiate to only take a certain amount of stock. “Walk in walk out” means stock is included in the agreed sales price (WIWO). Neither is better than the other.  It really just comes down to good negotiation. You need to decide whether you want to keep the current product supplier in your new salon.  If you do then make sure you could receive the same vendor credit terms and discounts offered to the last owner. If you don’t, then talk to your desired supplier before signing the contract to see if they will buy out or swap your unwanted stock for their stock.

 

Cash Cow

Often sellers will try to bargain with you based on the amount of cash they’re taking in the business and not declaring to the tax department. We all know that the cash cow is regularly practiced in the industry but fortunately you don’t have to pay a premium to get this little hidden bag of goodies. I always view this cash component as a surprise bonus if it even exists at all. After all, without clear book keeping proving the amount of cash taken, you can’t trust a seller isn’t exaggerating about the extra $25K they’re skimming off the profits. Never negotiate on this hidden commodity.

 

Salon Team

A key factor in the price of a business is the team attached to it. Bigger salons with more than 6 people in them tend to get a higher sale price than ones with less. Always do a secret shop on a potential salon (keep it very confidential) to see where they can improve and whether there is a sense of camaraderie and strong teamwork skills. Bigger salons offer a more stable structure if someone leaves under the new ownership. This reduces a new owner’s risk level. Another component to consider in the sale price is outstanding staff leave entitlements.  These can be rolled into the sale price or off set against stock or transfer fees, so make sure you keep an eye open for these little surprises.

 

X Factor

Some salons sell for quite a lot over the multiple of net profit rule because they have the x factor. This could include a good computer system with very accurate data, fully managed so the owner is not required to work in the business (these are rare), award winning, business plans, proven tested marketing, killer location and very cheap rent, chain of sites, accurate financials, quality policy and procedures, and good supplier discounts due to volume. I would easily pay an extra premium for these kinds of business assets.

Now that you know the rules of how to play the buying game, get out there and look around, you just may find a mystery gift under the tree this Christmas!

 

For more information on appraisals and finding the right buyer for your salon. Contact a salon specialist broker today on 1300 366 521.

 

Benchmark Business Sales and Valuations