Beauty Business Strategies
The podcast where salon, spa, medspa, barbershop, and lash studio owners — just like you — learn quick tips to make more money, inspire your team, and create world-class client experiences.
Beauty Business Strategies
Balancing Payroll Costs and Team Happiness in Your Beauty Business
In this episode, we tackle one of the most pressing issues facing beauty business owners today: PAYROLL. We discuss the delicate balance owners must maintain between meeting employee expectations for higher pay and ensuring the financial health of their company.
You'll learn valuable insights on how to approach this challenge, including the importance of communication, career paths for employees, and creating a transparent financial plan. We dive into practical advice on understanding your payroll expenses in relation to overall sales, establishing clear paths for growth, and addressing team members' expectations. Whether you're an established business owner or just starting in the beauty industry, this episode offers actionable strategies to help navigate payroll challenges and build a stronger, more resilient business.
Conversation highlights:
00:54 Balancing payroll costs and team happiness
01:50 Where does your payroll stand?
03:30 Communication + financial transparency are key
06:00 The importance of mapping out career paths
06:40 Common payroll challenges in the beauty industry
09:08 Action steps to take if you're overwhelmed by payroll
12:40 The real meaning behind an employee's request for a raise
Watch the video version of this episode: https://youtu.be/Ne5V6MJdPmk
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The Beauty Business Strategies Podcast is designed to give salon, spa, medspa, barbershop, and lash studio owners, just like you, quick tips to make more money, inspire your team, and create world-class client experiences.
Welcome to the Beauty Business Strategies Podcast. I'm Christy Hardy and today I'm here with Michael Yost, president of Strategies, and we are going to dive into one of the biggest struggles that we here owners have, and it comes down to payroll challenges. Exciting topic, michael, it's so exciting.
Speaker 2:I can hardly wait to attack it, that's so exciting, I can hardly wait to attack it. Right, so what kind of challenges do you feel? The beauty challenge, which is, people would like to get paid more.
Speaker 1:Right.
Speaker 2:But they also have to balance the financial health of their company.
Speaker 1:Right so.
Speaker 3:I mean, that's the challenge, right it's like owners out there going.
Speaker 1:I have people that want more money and I don't have any more money to give in a sense, how do we help owners find that money to be able to give it?
Speaker 2:Well, I mean, that's so this.
Speaker 1:I guess that's the challenge right.
Speaker 2:Yeah, I think that you know. I think the key thing is I think there's two key things that when we really start looking at this issue is you know. The first thing is this is I think the first thing is you have to know where you stand is the first thing I think you know. For business owners out there that are struggling or just kind of looking at this idea of a payroll challenge, which is I have, you know, people that would like to have raises and like to have more money, but I'm not sure where I am. You know, financial, I'm not sure that I can afford it.
Speaker 2:First things first is you got to know where you stand. Right, and that's as simple as just doing the simple idea of where's my payroll as an expense in relation to my overall sales. And so at Strategies and many of you might be familiar with this, but if you're not, at Strategies, we have a guideline for you that says this is we don't want your service providing payroll to be higher than 35% in relation to your total sales. So the math is quite easy Take your service payroll number whatever that number is, including the taxes in there take that service payroll number and divide that by your total sales number, which is services and retail combined, and whatever the math tells you, whatever percent is left, there you go. And we want to be. 35% or under tends to be a healthy range 35% to 40% comes up that way.
Speaker 2:Yeah, you're starting to feel that and over 40% you probably have a real challenge. You're feeling the pressure of that, and that's the first place I think to is just to know where are you on the journey, because most businesses I don't think, really recognize where they truly are in that area.
Speaker 1:I hear that a lot when I talk to owners. They just are not even sure. I'll ask the question and they'll say I have no idea. Like well, we can't make any changes until we really understand where you sit today.
Speaker 2:Right. Yeah, it's hard they don't know what they don't know Right. So I think that's the most important thing. I think, once you get past that, I think it really just starts to come down to how are we communicating. I think that's really how are we communicating? And to me, me, one of the most important things is solving this challenge. Is, you know, people want to grow financially, but they don't know how to grow yeah, financially and they hear out there that they can.
Speaker 1:They can make a hundred thousand dollars, or they can have this giant career and make all this money, or they're supposed to be making a really high percentage of commission, but they don't really have any context to that. So how do we teach them that context?
Speaker 2:Well, and I think that's it, I think we have to make sure that we teach people number one, how they grow in our companies, and the second thing is, you know, just financial awareness and literacy around our company.
Speaker 1:Right.
Speaker 2:Because I think too many owners just don't share the right amount of information and don't communicate in these two really key areas. You know, if we looked at as an example, whether you're hourly which is what we advocate here at Strategies from a pay standpoint, or whether you're commissioned we advocate here at Strategies from a pay standpoint, or whether you're commissioned In either scenario, do people really know how they can grow, how they can earn more money, what would constitute a raise of some sort? How would that go into effect? Most people don't know that. Most team members and employees don't recognize that or don't know that, and they don't know that because, again, it's not shared with them. And the second thing is, you know, they also aren't aware of what really is capable of, what the business is really, what's really possible in the business, and that's what we and that's what business owners and leaders need to really focus on.
Speaker 1:Absolutely, absolutely. Communication is key. It builds the culture, it builds the trust, it builds all of that. And I know personally, when I had strong culture, had strong trust with team members, I was able to communicate those times where we could give a little bit more and those times where we just couldn't do it. And most of the times when we couldn't do it, I didn't even have to have the conversation. They just kind of knew because the trust was there and the communication was there. So that is the key it's not over sharing, but sharing the right stuff.
Speaker 2:Right, exactly so you know, if you know, if you're sitting here and you're listening and you're saying, all right, I need to share how people grow in my business. You know, do you have a career path for people? Do you have something that's mapped out that shows them how, uh what skills they need to be growing? Do we, do we under? Do they understand the other behaviors and actions that need to be engaged? Do you understand the key? Um, you know, I guess, some of the key metrics along the way to measure are we growing or not? And again, many, many, many team members just have no clue what that looks like in their world and in their environment, so I don't know what I mean. What are some of the common things that I know? In your role here at Strategies, you have a lot of conversations with people that are just calling us and just, you know, directly connecting. What are some of the challenges that you most often hear?
Speaker 1:The primary challenge has been lately. I pay a very high commission rate and I am drowning and they're not able to communicate to their team members that I might be overpaying you for what we are able to do. That's been a lot of them, you know it's really about. They don't have a career path but they want more. They want more. They hear what's happening out in the world and they can have these giant percentages and it's just not reality. We're working a lot with owners to figure out not only what their percentage is but other opportunities for them to be able to figure out where they can build a little bit or decrease expenses a little bit, to be able to build a little bit of a cushion for their team members. But it's really about not communicating, right? You?
Speaker 2:know we have to always keep in mind that the world around us is always communicating, so maybe team members are seeing things on social media that are just becoming the norm for their thinking.
Speaker 2:Yes, you know, if they're constantly here about how in this industry you can earn X amount of dollars or a payroll or a commission rate should be X commission rate or things like that, they're constantly being communicated with. But as a business, we need to consistently communicate with these team members and with your team members. So, again, going back to what do we need to have in place? Got to have that career path, map that out for them, talk to them in a clear and transparent way about what the goals of the business are in relation to how that triggers growth for them. So you know, pointing out, here's the, here's the realities of our business from the standpoint of you know. Hey, here's a look at you know big picture, here's what we can contribute and put toward payroll to be a healthy company. Giving people a sense of understanding and communicating is, again, just a critical piece understanding and communicating is again just a critical piece.
Speaker 1:Absolutely, Absolutely. Is there anything that you would recommend to an owner who is just feeling completely overwhelmed at the moment but like what's the one starting point that they could, kind of action item that they could use?
Speaker 2:I think the biggest action item around this is you know. First and foremost, you need to make sure you have a plan. You've built a cash flow plan for your company. That's the first thing. It's the only way you're going to know what's happening in your company and where you can give and when it is affordable for your company to be able to do so. So being tuned into the bottom line and dollars and cents of your business is absolutely the first thing. Then it comes down to really maybe for many of us it's looking at the payroll structure that we are currently using and does it fit the reality of what we want for our business?
Speaker 1:Right.
Speaker 2:You know, and is rewarding the things we'd like to see rewarded. Is it having the impact on our company that we'd like to see. In other words, giving people growth for their overall performance in the company, not maybe just one aspect of what they do, which is really, you know, the primary reason that a strategy. We advocate an hourly based pay structure for the simple reason Number one it allows you better to understand, dollars and cents wise, what's happening Bottom line in your company. Control that expense. But to me the most important thing is hourly enables you to reward people for the overall performance in the company, not just one aspect. I will you know myself my history is I was a commissioned hairdresser for 16 years of my hairdressing career, totaling 25 total, but for my first, you know, 16 years, that's what I did and that's the environment I worked in. And with that in mind, you know, all I knew was I reached a plateau and growth from there was very stagnant.
Speaker 1:Right, you know, it was very you were like, if I recall correctly, you were a I'm driven, I'm going to do as much as I can, but you can only do with what you can do with your two hands, right, right. So how did you change that when you were able to be in a team-based environment?
Speaker 2:Well, and that's why, when I opened then and I started my own business, I got tired of that.
Speaker 2:I knew there had to be a better way to recognize someone on the entirety of the person, not just one thing that they did.
Speaker 2:For me it was, yeah, doing hair and standing behind the chair and, ok, that was important.
Speaker 2:But the people that work for us, and even myself then I had a lot of other talents that I wanted to give, and you have the same thing in your own companies.
Speaker 2:You know people that want to be involved in social media, people that want to be involved in education, people that want to be mentors, those that go the extra mile, maybe behind the scenes as such, but they do so much more. So, again, this is where having a clear career path for someone and showing them the other opportunities that can be available to them is critical. You put that with a clear understanding of how growth happens and if you have a clear understanding of, financially, what can be done, suddenly now everything runs a whole lot smoother. Everything runs a whole lot smoother. I always kind of have to kind of laugh to myself when people come to you and they ask you for a raise. That really is kind of a bad question. That's really a bad question, not because we don't want to give people raises or anything like that, but what it's really saying is they just don't understand how to grow.
Speaker 1:I haven't communicated well as a leader, exactly.
Speaker 2:I just don't understand how I can grow. I'll, you know, I'll go back. I'll touch on on your history, which is as the general manager of a you know, a larger salon and spa. You know how many times. I mean, you know really, how many times did you hear that question? Probably a few. And how did you, in your role that had to answer those questions? How did that evolve for you over your history?
Speaker 1:Great question. You know, I think when I first took over my role as GM, I got it a lot and I think it was actually just a challenge question to see if my team knew if I had their back or not. You know, we worked a lot on making sure that everyone understood where their career path was. We did lots of check-ins. It really came down to one word, you guys, and that word is communication. If I wasn't communicating with opportunities, with advancement, with kudos for when they were doing things right, then we weren't going to grow as a team. The more I could communicate where we were as a business, where they were as a team member in that business, then they could understand where they were going to start to be able to see the reward financially. So it really comes down to communication.
Speaker 2:Yeah, exactly, absolutely, and you also have to. I think the other key with this is well, this is a. I think this is a challenge, but in a different way as well, because I think oftentimes, when we start talking about payroll and challenges, we often think bottom line and we often think about the financial implications and, yes, all that needs to be considered. But I think the other challenge that lies here is the opportunity to show just how can people continue to grow in your business, and I think that's another big challenge, because if people only feel that they're, if people feel as though their growth is limited in some way in your business, that's also a challenge that can come up. I mean, you can have extremely listen. We work with plenty of healthy businesses, very healthy companies that also have payroll challenges. Because I think it really comes down more to maybe they're not clearly.
Speaker 2:Again, the theme of today is, obviously it's hard to believe that we can talk about payroll challenges, but the key theme is communication, but it is. But you can have a very healthy company and still have payroll challenges. But the key theme is communication, but it is. But you can have a very healthy company and still have payroll challenges, meaning people coming to you and saying, hey, listen, I'd like a raise, I'd like a raise. Another way that what that's interpreting to is I feel like my growth here might be limited. How can I continue to grow beyond this? How can I continue to grow in this area? Financially as well Is, I think, another challenge.
Speaker 1:Sometimes it's not about the dollar and cents that somebody's coming to ask for, but it's about what my future is. And that's exactly what you were just saying. It's not about the pennies, it's about what? Can the pennies kind of evolve to. It's about what can the pennies kind of evolve to?
Speaker 2:Right and I think that's a great point is sometimes questions like this manifest themselves when they might be asking for what you perceive as financial growth, but really, when they're asking for a raise, could be something completely different, which is you know what is next for me, or how do I relate in a different way?
Speaker 1:Right, how do I get better?
Speaker 2:Yeah.
Speaker 1:Yeah, that's huge. That is huge, Michael. Thank you. This has been an interesting conversation. We're going to continue this conversation for years and years and forever, because payroll challenges seem to be something that come up no matter what. Like you said, healthy business, challenging business we all have payroll challenges, but if you need to learn more about how your business can really be streamlined, affected, supported with your payroll challenges, feel free to reach out to us. We would love to be able to support you. Go visit us at strategiescom, but thank you for joining us. Joining us at the Beauty Business Strategies Podcast.
Speaker 3:Thanks again for listening to the Beauty Business Strategies Podcast. If you like this episode, be sure to hit follow and please share the episode link with anyone who you think could benefit from today's content. To learn more about how strategies can help create more fun, profit and growth potential for you, your company and your team, we invite you to schedule a free 60 minute strategy session by clicking the direct link in the description of this episode. There you also find links to our wide array of coaching, seminar and learning opportunities, all of which can be found at strategiescom.