The peace of mind that insurance promises is only as good as the coverage you secure for your business. While a disaster can put you under great stress, the greater disaster is discovering your insurance doesn’t cover your losses, preventing you from rebuilding your salon or spa. SALON TODAY recently quizzed Megan Davidson, account executive with ABD Insurance and Financial Services, about securing the best property insurance.

 ST: What are basic issues a small business owner should consider when insuring property?

Davidson: First, be sure to insure your property at replacement value, the amount it would cost you to replace everything. Instead of depreciated value, or book value.

Also, make sure to secure loss of business income coverage, which helps replace lost income in the event of physical damage to insured property and/or premises. Work with your insurance broker to determine adequate business income limits. By completing business income worksheets, you can determine how large your exposure to lost income is, how long it might potentially take to rebuild, and how long before your sales are restored to 100 percent, if there is concern about lost income after the property is restored, as sales take time to rebuild to 100 percent, business income coverage can apply to that period by using an “Extended Period of Indemnity” endorsement.

ST: How often should an owner reassess their coverage?

Davidson: At a minimum, annually. But review it anytime you’ve made a change to your operation.

ST: What business events should trigger an owner to re-examine her coverage?

Davidson: Events such as the addition of a new location; the expansion of existing space; remodeling of existing space; and changes in property value, location or estimated sales. Also, contact your broker when you’ve added new services—not all insurance policies are created equal, and professional liability might not apply to new services offered. Another event is the change in owner ship—this should lead to a discussion about business continuation with your agent for potential purchase of “Key Man Life” so the surviving partners can buy out the ownership of the deceased partner.

ST: What’s the biggest mistake small business owners make when it comes to insuring their property?

Davidson: Not insuring the loss of business income and reporting property values at depreciated values instead of the value to replace old equipment with new. Trying to save money by not purchasing business income coverage for lost revenue can be deadly to the health of a business if there is a loss.

To ensure the solvency of your insurer, be sure to check their A.M. Best Financial Bating. This information can be obtained from your insurance broker or online at An insurer is rated in two different ways and should score both an A or better and a VIII or better.


According to Phil Fennell, founder of Programs in Salon Excellence and owner of Experience The Salon in Pensacola, Florida, the average stylist works at a 50-percent production efficiency. Boosting that ratio by just a few percentage points for each of your staffers not only helps you grow your business and realize more profitability, but can help you recapture lost sales and save your business in a walkout situation.

Work through the following step-by-step plan with each of your employees to help them realize their maximum production efficiency.

Chart Goals: “For so many of the younger generation, time is more important than money. So you have to uncover what truly motivates each of them,” says Fennell. Ask each stylist what a great year would mean for her. Does it mean buying a new car? Gaining independence and moving into an apartment? Chart out when she will be able to achieve that goal with her current production efficiency, then show her how much faster she’ll achieve it with small increases in the percentage of production efficiency.

Build a Tool Box: Fennell advises giving staff members the tools necessary to help them increase their number of sessions and build the value of those sessions. For example, stylists can recommend each client return at five-week intervals and encourage pre-booking. Or they can boost each ticket by polishing their retail skills and placing three recommended products at the counter during checkout. Whatever your tools, make them simple and clear-cut.

Aggressive Marketing: To help each staff member grow his or her client roster, Fennell suggests his proven 25-15 referral program. Supported through brochures and mirror talkers, the program allows stylists to offer a 25-percent discount to any new referral for her first-time services. The referring client also is rewarded with a discount equaling the total dollar amount of the discounts earned by their referrals. “We have some clients who never pay a penny for their services because they’ve referred so many new customers.”

Fennell encourages owners to consider the discount as an investment in the salon’s future. ‘‘For example, if a new client spends $100 at your salon, she receives $25 and the referring client earns $25. If that new client is retained, she eventually will bring in on average $500 to $800 or more in a year. That’s a 1,000-percent return on your $50 investment.”

Incentives of Consequence: Fennell recommends holding one-on-one sessions with each stylist as often as twice a month. “We review seven key indicators, including the stylist’s number of active clients, her active client retention rate, her new clients per month, her new client retention rate, her average frequency of visits, and her average ticket for both service and retail.”

Fennell always shows these indicators to staff members in two ways: how much the stylist will make at the end of the year if all indicators remain the same and how much the individual could make if each is slightly improved upon.


Each emergency action plan is unique to the events a salon may face. Here are pointers and sources for creating your own action plan.

Forecasting Trouble: Earthquake, tornado, hurricane, flood—the first step in any disaster plan is to determine the type of disasters that may afflict your area, if you’re not sure, contact your local American Red Cross, which can help you not only identify possibilities but will provide specific recommendations for planning for each.

Face the Fire: All salons are in danger of fire. Consider drafting a separate fire preparedness plan, blueprinting evacuation routes and planning evacuation drills for your staff. For advice on creating a detailed plan, visit the National Fire Protection Association’s website at

Communication Central: In the event of an emergency, one of your first actions is communication. The American Red Cross advises owners to keep phone lists of their staff and clients with them, and provide copies to management.

If you have a voicemail system, designate one remote number on which you can record messages for employees. Arrange for programmable call forwarding on your main business line.

Back Up Your Livelihood: One of your most valuable assets is your intelligence. Back up your client files, staff files and manuals often and store copies off-site in a secure location. Use UL-listed surge protectors and battery backup systems, which protect sensitive equipment and prevent a computer crash in the event of a power outage.

Emergency Contacts: Customers do have heart attacks, strokes, and sometimes even give birth in public places. Consider asking each of your clients to supply you with an emergency contact number in the event something happens to them in your facility.

Response Team: Designate staff members from each department to serve as an emergency response team. Pay for their CPR and first aid training at your local Red Cross location, and make sure at least two emergency response members are on-site during all business hours.

Emergency Supplies: Purchase a weather radio so you can listen for information about severe weather and learn the protective actions to take. Always keep on hand a flashlight with extra batteries, a first aid kit, tools, and enough food and water for employees and clients if there should be a period of unexpected confinement.

Media Plan: Prepare a plan with contact names and numbers for local media before something tragic happens at your salon. If something does happen, designate a single spokesperson, draft key messages and consult an attorney before releasing any information that may come back to harm you.




For reprint and licensing requests for this article, Click here.

Read more about