As a salon owner who also works as a stylist, Mitchell Eubanks approaches ownership from a stylist’s point of view, and he believes his team members shouldn’t have to wait to get their tips until their paycheck.
But paying out tips at Mitchell Wade Hair Salon in Oviedo, Florida—especially those that came through on credit card transactions—was requiring Eubanks to play banker, and it was screwing up his cash flow.
“For example, when a client paid for a service on a Friday or Saturday, we sometimes don’t get the deposit from the credit card company until Monday, so I was floating that money,” he said. “And, I was being coached by my accountant that this was a bad practice.”
Eubanks considered banning tips on credit cards because of the high merchant fees, but he knows the majority of clients rely on their plastic and being able to tip on their card. He also didn’t relish the idea of hosting an ATM in his reception area, so he resigned himself to the fact that paying the fees on tips was simply a cost of doing business.
At last year’s Data-Driven Salon Summit, Eubanks met Terry McKim and David Tashjian, the CIO/founder and CEO/president of Tippy, a tipping platform built specifically for the beauty industry. The platform offers clients the convenience of tipping service providers on a credit card, and the gratuity is deposited directly into the service provider’s bank account and is available the next business day.
Eubanks brought Tippy into the salon shortly thereafter and found it has been a win for his clients, his team members and him.
McKim, who worked for eight years as director of marketing for the Lords & Ladies Salons in Reading, Pennsylvania, recognized the need for a tipping platform.
“My goal was to bring back the personalization and instant gratification of tipping to financially empower stylists,” he says.
Here’s how it works: After a client pays for a service, they are invited to use the client-facing kiosk to leave a tip. Based on the ticket total, Tippy suggests either different dollar amounts or different percentages, which help clients with the math. If more than one service provider worked with the client that day, the client can opt to split the tip among team members. The client swipes the card again, and a small convenience fee is added to the tip amount to cover the credit card processing fee. The service provider receives a notification on their phone through the Tippy app, and the tip is added to their daily piggy bank, allowing them to track tip totals throughout the day.
Because Tippy is a stand-alone system, it doesn’t matter which software management system a salon uses. The annual fee covers the cost of the equipment and is a fraction of what a typical salon pays in merchant fees annually, so it saves the salon owner money throughout the year.
Tip income through Tippy is tracked and reported, which requires stylists to be compliant on paying taxes. While that might be a deterrent for service providers who aren’t exactly honest with the IRS, McKim and Tashjian say Tippy gets overall tips up an average of more than 30%, and net tips (annual tips minus merchant fees) up 21%.
“That’s due to a few different factors—the tipping screen is personalized with pictures of the service providers that worked with the client that day, and the suggested tipping amounts on the screen are a gentle reminder what clients should be tipping for good service,” Tashjian says.
“In addition, our stylists’ phones ping when the tip goes into the account, and often they’ll call out a thank you to the client for their generosity as they are leaving, so clients quickly realize that their stylist knows how much tip they left them,” Eubanks says.
For stylists, reporting their full income, including tips, documents that they are earning more each year, which can be helpful when qualifying for financing for a car or house. As an added bonus, many stylists using Tippy find it’s easier to save money.
“I love that the tip goes directly into my back account and I get to see it grow and build. When I got cash (tips), I felt like it was free money and I spent it like crazy, and now I find I don’t spend as much and I can watch it grow,” says Talia Hightower, a master stylist with Mitchell Wade Hair Salon.
“The whole team has been really pleased since we brought Tippy on board—the stylists are getting more tips and saving money, the front desk doesn’t have to track cash tips all day, and I’m no longer playing banker or paying merchant fees on tips,” Eubanks says. “Plus, Tippy’s customer service is awesome—one of our team members recommended allowing clients to split the tip between service providers, and they created that feature right away.”