Q: “I used to pay $9/hour plus commissions but it’s hard to recruit new employees. Should I raise the hourly to $13-$14/hour and cut back on commissions?”
A: The short answer to your question is yes and no. Yes, you should raise your hourly rate but no, you shouldn’t cut back on commissions.
A good commission structure should be at least (for budgeting purposes) 10% of the tanning lotions. However, it’s probably more effective for EFT incentives if you construct a dollar amount at each EFT level of tanning and tanning duration because most salon employees, (sorry if this sounds condescending) can’t figure percentages in their heads. They DO recognize a dollar figure much easier than trying to figure a percent of say a $50 EFT level. So, if they know they can get a $10 bill for selling a higher level of UV tanning, that’s more immediate in their pocket than waiting to see what they earned off a percentage.
Tanning lotions are another situation. Offering a 10% commission on lotion or product sales can work as a higher amount on a per-tan average. This depends on the season of the year of course. Obviously per-tan averages should go up in peak season instead of during J.A.S.O.N.
There was a time (15-20 years ago) when salon owners could pay minimum wages plus paltry commissions and get many people to apply. Salon owners didn’t necessarily care about quality because there were so many tanners that they believed they didn’t have to provide excellent customer service. People applied because they thought working at a tanning salon was an “easy” job. (All they had to do was turn on a tanning bed for a customer, right?)
Today, things are a lot different!
Tanners expect great color and an “indulgent experience.” Because of this, salon owners have to eliminate teenagers and most Millennial employees who are only looking for a paycheck and place to spend time on their cell phones. (To be fair, some also do their homework or hang out with their boyfriends, but both of these activities still steal time from you!)
The most profitable salons today spend more money to hire quality folks behind the counter. (Just like they don’t scrimp on quality tanning units and build-out ambiance.) My fear is if the minimum wage moves up to $15 an hour, these salons that are not particularly skilled in recruiting, hiring, and managing processes will pay more money for the same low-quality talent and low work ethics.
As a tanning salon business consultant, I’ve been managing employees for 51 years. I can honestly say that this millennial generation is the most challenging of the five generations I’ve managed and motivated. Having said that, I would suggest that you’re wise to dramatically increase your base wages if you want quality folks to apply. When you try to recruit with a low base rate, you essentially cut off that rare small percentage of folks who really embrace working for a living and for the love of tanning itself.
I would also recommend that you should not cut back on incentives, either. The best thing for all salon owners to do is to reevaluate their balance sheet expense plans and realize that the real key to huge profitability in our industry is increasing the top line, aka gross sales. Fixed expenses are not the issue because we can’t do a lot about them. (Leases and similar expenses are there whether we like them or not.)
Payroll is a variable expense to some extent, and hiring the BEST and retaining them won’t be cheap. Keep in mind that those costs are nowhere near an impact on profitability as raising the top line. You have to have the best talent handling your valuable tanning customers to do that. You have to suck it up cost-wise to have the best tanning equipment that looks like spaceships have landed. Putting a tattooed, face-pierced Millennial in charge of time in those “ships” is not a ticket to increased sales and profits.
I have developed a solid strategy that works. I plan to share that in my upcoming webinar in fourth quarter of this year. It will be called “20/20 Vision,” and I will share it in the Webinar section of The Vault. (Just like all the other webinars I share in here.) I you need help now, I’ve consulted over 400 tanning salon owners and have helped them turn their businesses around. I can do the same for your salon. I’m sure you have questions and I’m happy to answer them. Just give me a call at 859-250-8475, or fill out the form below.
For Additional Information
As I said above, there are two more interviewing etools located in the Vault. Are you ready to get series about finding the ideal employees for your salon? If so, check out these etools:
- Commissions for Level-One Tanning Membership Sales
- Don’t Get Hung up on Reducing Payroll!
- Compensation and Incentives
- Compensation and Incentives That Make Cents
Thank You for Your Question!
It was a pleasure providing you with the information you need. If you have any other questions, don’t hesitate to ask this tanning salon business consultant.
