Ever since Urban Betty owner Chelle Neff stepped away from working behind the chair in 2017, she’s been putting her energy big-time into salon management. Neff got comfortable with profit-and-loss statements, PowerPoints, monthly expense charts. She studied with High Performance Salon Academy (HPSA) and sat down with her Summit coach.
Then she watched her husband pick up a six-figure windfall when his workplace, an employee-owned company, was sold. This drove home what she’d learned at HPSA about salons taking a page from the corporate book: have people buy into your business and become part of your brand. Neff wanted to try out the idea at her two-location Austin salon.
“As salon owners, we don’t always have a ton of capital,” Neff says. “We can’t just keep giving raises. And rewarding staff with raises and promotions can go only so far. If you allow employees to have skin in the game, it takes your salon company to a whole other level.”
The first step was to have a valuation done, so Neff arranged for that in 2020. The number that came in was big—$5.2 million for her two locations with nearly 80 employees. She directed the salon’s attorney to begin drafting the language for the buy-ins, and she used Carta.com to set up the site. It connects to the salon’s Quickbooks and gives shareholders access to all the numbers.
Business Education for the Team
The pandemic paused Neff’s plans but didn’t deflect her intentions. By April 2022, she was ready to resume the salon’s “all hands” meetings, normally held three times a year and each lasting three to four hours. She set up her PowerPoint and made her pitch.
“I explained how the business made money,” Neff says. “I think it was a big ‘aha’ moment for the staff! I told them the payoff would be good, but they would have to play the long game. It might take years to make any money off these stocks.” Quarterly profit distributions would offer some short-term earnings as long as the salon was profitable in that quarter.
Some employees were afraid Neff was preparing to sell the salon. She assured them that she was not looking to sell but says she’s open to considering that in the future.
“Right now my ego is still attached to my salon,” Neff explains. “I am not ready to let it go, but I want to start separating my self-worth from my success in business. And I’m 45 years old with a toddler. I want to spend time with my son.”
Neff set investing parameters: to qualify to buy in, employees had to be working at the salon for at least two years and be on the salon’s leadership team.
“These are people showing me they already care about the salon,” Neff says. She felt two of them had earned stock without having to buy in, so she gave them shares. One additional team member has expressed interest in investing. Neff adds that her salon is a little big for this purpose—a $1 million or $2 million salon would be the ideal size for investment opportunities.
“To own just 1 percent of my salon,” she explains, “you have to invest a lot of money.” She plans to look into franchising her business as an alternative concept.
More Revenue: A Product Line
With Neff, the wheels keep turning. Eventually they rolled into the idea of creating a boutique hair product line, which she turned into a reality. The line launched in September 2021. Recently she added an unscented version of the shampoo and conditioner, reflecting her own scent-free product life due to her battle against both migraines and infertility.
“I wanted a clean product line with sustainable packaging,” Neff says. The collection of the two choices in shampoo and conditioner, plus two scented candles, is available online as well as in the salon, which is where most of the purchases take place.
“I wasn’t too worried about how competitive the line would be,” Neff notes. “I’m laid back about that. I never want to force brands on my team. If they believe in the product, they’ll recommend it. If they prefer one of our other lines, I’m okay with that.”
Just as Neff wants her team to benefit from quarterly profits or a transfer of ownership, she hopes her product sales can help other entrepreneurs. She has pledged to donate 1% of the product line’s profits to BIGAUSTIN, which provides coaching, business planning, and funding solutions to women entrepreneurs in Texas.
“I was once that woman,” Neff reports. “If it weren’t for BIGAUSTIN helping me with funding, I wouldn't be here today.” Since the product line has not hit its break-even point yet, Neff is considering, for 2023, changing her pledge from 1% of profits to 1% of sales.
“I didn’t realize how much it cost to launch a product line!” she says. “You need a website, PR people, photography—it’s a lot of money.”
Neff doesn’t get stressed over that. Following her own advice, she’s playing the long game and staying confident in her data-based, forward-thinking business approach.
For reprint and licensing requests for this article, Click here.