"We were in business hell." That's how Krista Harvey, owner of Studio7 Salon and Spa in Ames, Iowa, described her salon's situation a few years ago. She purchased a pre-existing salon in 2008, renamed it, then designed a new salon and spa in 2010, closing the previous one. She had a very carefully-planned vision for her business and within three years she outgrew the staff and numbers that she had planned for.
"As exciting as that could’ve been, we were not able to celebrate," Harvey says. "One day, I sat with two of my original employees as they explained their serious concerns about their future at the company. They had no idea that I was sinking mentally, emotionally and monetarily."
Her original vision was to provide a safe, secure, educational environment that took care of her team and clients. She found herself researching how to keep her salon alive, and that's when she stumbled upon Strategies' Team-Based Pay model. She looked at the case studies that Strategies shared and decided to sign up for the complimentary coaching call.
"On the other end of the phone was this voice that spoke to me not as a sales person but as someone I could trust and look up to. I needed help and I took a leap of faith to sign up for the membership." Harvey described the coaching calls as exciting and exhausting, because she was working through major restructuring that her business needed.
She recalls reaching out to one salon owner mentioned in a Strategies case study and he told her, "It's not more work, it's all the work you should have been doing in the first place." Essentially, Harvey was learning that she needed to give less time to hairdressing and more time to being a leader in the salon. "I had $26,000 in IRS debt and had employee paychecks that wouldn’t clear," Harvey says. "I couldn’t afford to pay myself so I lived off tips and my husband’s income. I hired a manager whom I wasn’t sure if I could pay to help me with the responsibilities of the bookwork and writing systems. She was a saving grace though. We chatted with our coach each week then applied her advice as much as we could."
Next, Harvey went to her first Strategies Incubator course and left feeling inspired and ready to take on the new path that had been laid out for her.
IMPLEMENTING THE TEAM-BASED PAY SYSTEM
There was some hesitation from the Studio7 Salon team when Harvey announced that they were transitioning from the financially-draining commission model to team-based pay. She had a Strategies coach come to the salon to help with the initial conversion process. The key to successfully making this change without any team members deciding to quit was Harvey’s ability to communicate the reality of the current situation, her plans for improving and her heartfelt reasons for wanting to improve the salon environment for all of them. Through monthly team meetings, performance reviews and the delegation of responsibilities to those that were ready for it, Harvey could feel the trust building.
One day Harvey's office manager slipped a paper on her desk that said, 'Congratulations, you did it!' It was the payoff from the salon's tax debt.
"We celebrated each victory with our team, no matter how small or big," Harvey says. "We had a savings account, we were getting paid, we could afford to give raises, we were seeing pre-booking rates going up, we were all focused and moving forward with our vision."
Some team members wanted more responsibility so Harvey started committees and created inventory specialist positions. As a team, they developed new job descriptions, formed systems and procedures, and refined manuals. One by one, team members would come into Harvey's office at random and share their vision of where they saw themselves in the company.
"Lightbulbs were turning on and I could see the momentum building," Harvey says.
THE POWER OF CULTURE
When helping a salon implement team-based pay, Strategies stresses the importance of building a strong team culture. The salon staff has to work well together as a team for the financial structure to succeed. Harvey led her team to create new systems that they all created together. Instead of having team meetings where everybody vented about what was wrong, the team shifted toward a new norm of solving problems and establishing core values. Plus, there is a monthly Team Bonus that team members get for working well towards these goals. It creates an incentive and reward for being a part of a positive environment.
"Our culture was unstable, secretive and undefined," Harvey says. "Now we have core values that we talk about every day. As a team, we decided what we wanted to define us. Now we protect our culture and share it with our clients."
NUMBERS DON'T LIE
Studio7 Salon and Spa was named the 2016 Team-Based Pay Business of the Year for successfully implementing a culture and systems that led to increased profitability.
"We are an open book company," Harvey says. "There are no hidden numbers and no shame in making profit one month and not the next. Our goal is always profit but now if we don’t have a great month, we make a game plan to make the next month better. We celebrate our victories with team bonuses and letting our team know that we are a healthier company, which drives their careers to greatness."
Studio 7 Salon and Spa's Landmark Achievements Under Team-Based Pay:
• Payroll: The salon has gone from 50-55% of total revenue going to payroll to 25-30%.
• Prebooking Rates: In the past three years, the salon's prebooking rate has gone from 40% to 60%.
• New Client Retention: Studio7 had been stuck at a 25-30% client retention rate for about two years, but now it is at 48% and rising.
• Culture Shift: Harvey has learned to focus about 75% of the team's energy on culture and with her leadership, the rest falls into place.
• Net Profit: When Harvey started Strategies coaching, her salon was at -5% profit and losing money. Now Studio7 is at 14.5% profit and growing.