July 27, 2020 james

Should I Lease, work Commissions or Hourly? (Where should I work) PART 1

Deciding what type of Salon/Spa scenario to work in should be an easy task.

Should I work in a Hourly or Commission Salon/Spa? Should I Lease?

(Part 1)

We hear these questions often from our students as they get closer to graduation and licensure status. 

Honestly, this is a decision that you should start making the day you start school.

The answer to this question can be easy but it requires each person to consider a series of questions/scenarios that can help clarify which is the right choice.

Curious to see how this can help? This multi-part presentation for Oliver Finley Students and Alumni will help address these questions.

Keep in mind that much of what we’ll cover here can vary for each individual. The overall ideas can apply to many. There are variations and exceptions to each of the scenarios discussed here as well.

“Being excellent in your craft and your customer service will affect your success more than any “place” you decide to work. Whether you lease, work commission or hourly; Take excellent care of your clients and you’ll find success in our Industry.

There is a lot of misconception floating around when it comes to deciding the type of work scenario you should be in. Take some time to read through this information, consider the questions below and answer them honestly. Then begin making the decision about what type of business you want to be a part of.

Doing these things will help you make this decision much easier and with greater success if done correctly.

Okay, ready to answer some questions?

  • Do you like the idea of running your own small business? Maybe not a full Salon or Spa necessarily, but leasing your own station is essentially running your own small business. By the way, there are numerous “leasing scenarios” available…so even deciding what “type” of lease environment to be in, (if you choose to lease), needs to be determined up front for your best chance of success.

If the answer to the first question is “I don’t know”, then think about whether you like doing the following:

  • Marketing (like social media, goole business, etc), good quality marketing too, which takes time and energy to do successfully to promote yourself and your beauty brand.
  • Do you like working with numbers and math? Running financial books, paying business taxes (sales tax, etc), Doing all of your self employment taxes, making bank deposits, paying rent/utilities (if you are running a solo lease booth), placing product orders, cleaning your entire environment, booking your own clients, sending reminders, doing all the follow-up, etc.

The amount of self-employed tasks is larger than what I’ve listed above. Running your own small business is a LOT of work, but millions of people do it everyday and they love it. The control, the challenge and the potential pay-off financially. The money can be awesome when done well. When done poorly, you can easily find yourself in desperate need of funds very quickly.

If the answer to the first question is now “No” (or “maybe a little”), then working in a Commission or Hourly Salon may be the best choice for you. With this first part complete, we’ll briefly cover each type of work scenario below starting with “Leasing”.

LEASING

In my opinion, it does not matter “when” you decide to Lease (straight out of school or later in your career), you’ll either be successful at it or you’ll find quickly that it may not be for you. Most of that will be based on whether or not you love running your own business and how well you’ve marketed yourself while in school and in general. Also, your ability to start pre-planning “financially” for the process the moment (or before) you decide to go the Lease route. The biggest component though, is attaching clientele to yourself as a professional they trust, need and will refer to their friends. Being excellent at what you do is crucial to Leasing success. DISCLAIMER: Just know that there is a greater financial “risk” with this option, especially if you opt to try it straight out of school. Successful “leasers” typically enjoy a large client-count and if you’re not able to establish that prior to leaving school, you may want to consider giving yourself some time to build your client count up.

Leasing is the pure essence of running your own small business in every aspect. It goes way beyond providing services and lets you become a major part of building a unique experience for your clientele and a “Brand” for yourself. Creativity and hard work are rewarded. Add excellent customer Service and you can be making a serious living. It’s also a very good stepping stone to opening a full Salon/Spa as it provides a great way to experience the overall work requirements without the same financial exposure up front. 

Most Salon failures result from a Beauty professional who liked the idea of opening a Salon, then found they did not enjoy the amount of work required to run a successful business. Sometimes a “lack of business experience” causes those failures (not a lack of hard work). Leasing can be the perfect learning experience. Some professionals Lease a booth their whole life, they love the experience but don’t relish the idea of owning and operating a full-blown Salon store front themselves. 

PROS AND CONS OF LEASING:

  • You get to enjoy the entire gross $ value of every client you service. You don’t have to share anything with anyone and you make your own rules (unless you’re leasing from a Salon with house rules for their leasers). Sometime they have shared retail, shared shampoo areas, shared lobby expenses. A lot of variance exists within leasing scenarios. Either way, you’re going to pay rent/expenses for your space.
  • No limitations on how you run your business (unless you’re sharing a space). However, if you really want to make your own rules, there are more places than ever now where you can lease an independent set-up!
  • It’s a much larger gamble financially than a Commission Salon job or Hourly Salon position. Not only does it require some capital to start up, but if you don’t perform well in all aspects of your business, you can find it hard to make the living you want or even stay in business.
  • It can be one of the best ways to make a very lucrative living in this Industry.
  • Leasing requires a small bit of capital to start your business. If you want to begin right out of school, it’s helpful to make the decision when you “start” your schooling so you can plan for the funds needed.
  • Leasing will require more of your time outside of the services you provide to clients
  • Leasing is definitely “not” for everyone.

ASK YOURSELF THIS: If you do NOT like the idea of all aspects of running your own small business but you DO like the idea of controlling your own earnings based on hard work and marketing yourself, then a well set-up Commission-based Salon could be the answer for you

Let’s cover some Commission Salon basics

Commission Salons vary somewhat in their opertaions, earning tiers, employee rules, etc. 

Most share these common traits though:

  • Commission salons are generally owned by people who are really good at running a small business and they enjoy all the work involved, (things we discussed above).
  • They do all the work that you don’t enjoy; like paying taxes, meeting with product reps, ordering and stocking retail shelves, reordering products, doing payroll, booking appointments, following up with clients appointments, paying rent and utilities on the building space, advertising, upkeep, etc
  • They take a percentage of what you make on each service to provide the Salon facilities and take care of these business tasks for you. Consider this; you’d have to pay a percentage of your gross earnings every year for all of this anyway (if you were running your own business) and you’d have the work involved for all of it as well. Interesting thought, right?

Commission Salons (for the most part) “do” expect you to market yourself and bring clientele in to work on. This is where things can be different depending on the Salon but most Commission Salons will expect you to generate some or all of your business.

You may think, “Wait a minute, if I’m bringing in clientele then why not work for myself?”

This is where you’d have to re-read the work tasks we’ve already covered in “Leasing” to determine if paying someone to do all the stuff you don’t want to worry about is worth the percentage you’ll give up at a commission salon. Many Commission Salon users love the trade-off though. You do what you love, control much of your earning potential and leave the business stuff you don’t want to do to someone else.

PROS AND CONS OF COMMISSION SALONS:

  • Unlike an hourly salon, there is still the gamble of being at work and not making money (if you’re not bringing in enough clientele, etc). 
  • You make a percentage of the entire service transaction (not an hourly wage). If you’re proficient in your service speed and do a good job of keeping high yield services on your schedule, you can create a very desirable “per hour” earnings return.
  • Commission Salons almost always have graduated “tier” levels in place so the more you produce in gross sales, the higher your earning percentage goes up. This can have a very positive effect on your daily earning potential.
  • Many Commission Salons provide educational classes for you (or opportunities to earn them)
  • Someone else takes care of all the business things you may not want to do OR you may want to spend that time doing something else.

Think about that last bullet point: You may be perfectly capable of doing all the business stuff and you may be excellent at it. But what if you’d rather spend your time doing something else (family, friends, hobbies for example)? In that case, you may be happy paying someone else to take care of the business tasks so you can spend more of your time doing the things you love most.

Finally, let’s touch on “Hourly salons”

Hourly salons often get a bad rap as a place Beauty professionals go to get started after schooling, or if they can’t succeed in Commission or Leasing. 

WRONG.

While there are certainly good and bad hourly salons, I think they are often misjudged.

Consider this; Hourly Salons pay a consistent wage regardless of how busy you are. You still have to do a good job when you are working of course, but an Hourly Salon will have incentive-based rewards in place in most cases that allow smart, hard-workers to make a decent living. The right type of technician can do very well in a good Hourly Salon environment.

Hourly salons will do the business work for you, often require less self-promotion outside of the Salon and unlike a Commission salon, will pay you for every hour you are there working a shift whether you’re in-service or not. You are sacrificing “more” of the total service value from each client BUT you also have even less risk/responsibilities than someone working in a Lease or Commission scenario (in most cases).

Hourly salons can be a great fit for the Stylist who doesn’t enjoy marketing themselves as much, doesn’t like the idea of any business duties and really just wants to focus on providing service, taking good care of people and focusing on the incentives they can earn along with their guaranteed hourly wage.

Many people like the “stability” of a guaranteed paycheck and are okay sacrificing even more of the gross service dollars per client so they can enjoy that stability of earnings.

PROS AND CONS OF HOURLY SALONS:

  • Guaranteed income for your time (you still have to perform well of course)
  • Incentives available for smart workers to increase their living
  • Very little of the business details involved. You’re leaving the non-service work to someone else
  • In many cases, you don’t have to self-promote outside of the Salon (depends on salon of course)
  • You give up a much larger chunk of the hourly generated service earnings for the above benefits/guarantees.
  • Your per-hour earning potential may be lower but your risk and workload are also lower. This is a VERY important factor to consider. There are many people who are happy making a little less, in return for spending less-time in the workplace and/or performing little or no “work-related” duties outside of the workplace.
  • Many Hourly Salons provide educational classes for you (or opportunities to earn them)

To finish up Part 1, here’s a quick recap

LEASING: All the work, All the risk, All the potential rewards when done correctly

COMMISSION: Less business duties, self-promotion to keep schedule full, earn a percentage of the gross service dollars from each service, incentive tiers for better % earning. Some risk involved

HOURLY: Little to no business duties, guaranteed hourly income, give up larger % of service dollars for guaranteed hourly wage, incentives to increase your earnings based on personal performance. Less of your time involved outside of your scheduled work hours.

I hope this helps get you started on the journey of making the decision. I realize that there are exceptions out there and that you may be aware of differences in these options that exist out in the field. I will cover each type of work scenario in greater detail in the future. Please feel free to reach out with any questions or information you think should be included in future blogs about this subject.

Thank you for reading!

James Lancaster

School Director | Oliver Finley Academy

 

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