One of the most common discussions I have with new business owners is about pricing for profit. The importance of not only paying your team well but also paying yourself what you're worth. Ensuring that your pricing structure provides the profit required to pay the bills, reinvest in your business and pay your staff including yourself.
If you're scaling your business for sale, you need to pay yourself for all the hats you wear otherwise when you go to sell, it'll be too expensive to replace you for you to sell your business.
When I was looking at businesses to buy at the end of the pandemic, I sent out 250 letters to salon owners along the south coast. Interestingly I had a 25% response rate... I was only expecting 5% to reply. The biggest downfall for these owners was that they didn't pay themselves what they were worth, so their business wasn't viable for me to buy... the owners were too expensive to replace.
We're lucky as entrepreneurs and directors of limited companies that we can pay ourselves well and pay less tax. By paying ourselves a basic salary and the rest through dividends we pay half the amount of tax as someone as an employee earning the same amount. Speak with your accountant to help you through the figures within your business.
This week I'm hosting a live masterclass each evening at 5:30 for 45 minutes. Sign up for our next free online profit masterclass https://go.dianarichardson.uk/register
When you register for the Profit Lab Masterclass you’ll get access to a
🎙️Secret Podcast
📝 Magic Number Equation
📋 Profit Lab Guide
📞 You can also schedule a complimentary strategy session to discuss your business goals.
In my last business, my model was based on giving opportunities to young therapists and those new to industry. We helped them with apprenticeships, and those who attended full time college then joined us on evenings and weekends. We would help further their skill sets, develop their knowledge, give them real industry experience and coaching to become excellent therapists.
Below is a chart for minimum wage in the UK, there was an increase in April this year and with the cost of living this is due to go up again next year. We always pay our team's basic wage above minimum wage and offer an incentive program. Our team earn commission on products and a pyramid structure of commission on treatments.
To ensure profitability within our team, there are several strategies we can implement:
1. Clear goals and expectations:
Clearly communicate the team's goals, targets, and expectations. Ensure everyone understands their roles and responsibilities in achieving profitability.
We have weekly team meetings to discuss offers, treatments and what's new to share with our clients. We focus on our goals and targets for each therapist and as a salon team.
2. Regular performance reviews:
Conduct regular performance reviews to assess individual and team performance. Provide constructive feedback and identify areas for improvement. Recognize and reward high-performing team members.
Each month we have 'team member of the month' who is recognised for their performance and team work. We celebrate education milestones as well as performance within the salon. Each team member knows their stats and what we need to work on and what has gone well.
We have quarterly 1-2-1's with each team member to set goals and targets for performance and education, we also utilise this time to review the previous quarters achievements. This gives team members the opportunity to discuss things on an individual basis and to further develop their skill set.
3. Training and development:
Invest in training and development programs to enhance the skills and knowledge of your team. This will enable them to perform their roles more effectively and contribute to profitability.
We require all of our team members to become Dermalogica Experts. Dermalogica is the skincare range that we use in salon for both retail and professional treatments. We encourage our team members to work through each module of training to become certified, specialist and expert status.
We send team members on physical training, offer in-salon training and encourage them to also study at home. By achieving expert status our team is knowledgable and confident in recommending products to their clients and explaining why they've chosen their customised professional treatment plan.
4. Effective communication:
Establish open and transparent communication channels with your team. Encourage feedback, suggestions, and ideas. Foster a collaborative environment where everyone feels comfortable sharing their thoughts.
By having a weekly team meeting at the beginning of the week this provides a platform, time and space to share ideas, concerns and feedback on our policies and procedures.
Remember to lead by example - this blog shares what it means to be a LEADER within your orgsnisation. Whether that's you or a team member who has been appointed as the team leader or manager. https://www.orchidsretreat.co.uk/post/leading-by-example
5. Performance-based incentives:
Implement performance-based incentives or bonus structures tied to profitability goals. This motivates team members to be more productive and efficient, thereby contributing to profitability.
Each of our team members are motivated by different things. Some of our Moms want a treat for themselves so they're motivated by earning professional products or gift vouchers, and some of our younger therapists are motivated by earning money to spend socialising or saving up for a car. We have learned what motivates each therapist by discussing incentives during their 1-2-1's.
6. Efficient resource allocation:
Ensure resources, including budget, time, and manpower, are allocated efficiently. Regularly review and assess resource allocation to identify areas where costs can be reduced or reallocated towards more profitable activities.
In our team meetings we discuss profitability of our current offerings and types of services, treatment or retail bundles that we can offer to boost our bottom line.
7. Continuous improvement initiatives:
Encourage a culture of continuous improvement within your team. Regularly evaluate processes, identify inefficiencies, and implement changes to streamline operations and increase profitability. We discuss our policies and procedures during our weekly and monthly meetings to ensure things run smoothly in the salon.
8. Team collaboration and synergy:
Foster a collaborative and supportive team environment. Encourage teamwork and cross-functional collaboration to leverage individual strengths and achieve collective goals.
We encourage our team members to share their experience and have monthly workshops to share best practise, and cross pollinate our skill sets amongst the team.
Here are 15 tips for developing your Dream Team https://www.orchidsretreat.co.uk/post/15-tips-for-developing-your-dream-team
9. Customer focus:
Emphasize the importance of customer satisfaction and loyalty. Encourage your team to go above and beyond to meet customer needs and expectations. Satisfied customers are more likely to generate repeat business and referrals, contributing to profitability.
Our team have full autonomy to be able to offer the best customer service, we will back their decisions and choices that therapists have made to ensure each client treatment and visit is as good as their last. The team know that Customer care is paramount to us.
10. Regular monitoring and tracking:
Continuously monitor key performance indicators (KPIs) related to profitability. Set up systems to track progress and identify any deviations or areas of concern. This allows for timely interventions and corrective actions to maintain profitability.
We use an online booking and payment system that helps the team to monitor their performance daily, weekly, monthly and quarterly. It offers a snapshot of treatments performed and retail sales. This helps to keep them motivated and on target with reaching their goals.
By implementing these strategies, you can ensure your team is aligned towards profitability while fostering a positive and productive work environment.
Thank you for reading, if this was useful please 🩵and if it could help someone in your network, please share.
Thank you ~ Diana x
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