Don’t get hung up on reducing payroll!

by | Farr Factor

Focus more fiercely on sales!

For the tanning business, the first quarter was not one to cheer about. The still re-emerging economy and Nome-like weather in the Midwest, Northeast and relatively cool temps in the Southeast seem to have made tanners shy about starting their spring tanning programs. For some salon owners, this lower-than-expected sales activity produces the knee-jerk reaction to cut costs of the variable kind. Namely, they get uptight about payroll and marketing, expenses they feel they can and should control. But the truth is that cutting your marketing – your contact with your potential customer audience – is just the opposite of what you should do. For this article, I’ll tackle the issue of payroll.

The tanning industry has one of the most unreliable sets of payroll standards; this is because of the wide variance of revenues, competitive pressure, high volume of custom airbrush sessions, number of salons to amortize your admin, headcount over, employee-per-shift count (a salon obviously can’t have less than one person on a shift, but some double-shift for reasons other than volume, such as security, training co-shifts etc.), etc. The higher a location’s sales volume, the more it can flatten down payroll percentage. However, to the often asked question of payroll percent goals, I’ve seen 17 percent for large-volume (salon level staff payroll only) and as high as 29 percent of gross revenues. Sometimes these figures are not well defined because an owner may work a shift or two and not count any personal funds withdrawal as payroll.

Frankly, payroll percentage is a much lesser issue than driving the top line. The more you drive the top line, the lower your payroll expense. You should not always address staff scheduling based on operating within a set payroll percentage. (Seasons and sales trends make a huge difference!) Besides, you can’t have less than one employee on shift and the expense you incur for top-quality sales staff will pay you back much more than trying to shave off a percent or two here and there. There is a limit to that course, and that applies, for example, to having three people still on the clock at closing. We did that once at a salon located near a high crime area – the last thing you want is to be seen as an easy target for some perpetrator with a weapon. However, one way that payroll can and should be affected is for shift managers to recognize a slow, late evening and if possible, send extra staff home early. Add up those instances and you’ll see some savings.

Bottom line? The same effort/profit results you put into cutting variable expenses (such as payroll) is rarely matched by investing that time and sweat on driving the top line. Increase your top line and any apparent payroll overage will not be an issue. Finally, the last thing I would do when running a salon is seek to find every minimum wage worker I could get my hands on, so my payroll expense came down. Because if you have unskilled, immature sales help, your sales drop and your payroll percent actually goes up. Your “brand” is not so much expensive equipment or 100 lotion SKUs as it is the “experience” delivered by mature and sales-oriented staff personalities.

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