In its 23rd year, the SALON TODAY 200, the landmark salon business recognition program, debuts a new category—Salon Leadership. Up until now, our editors hadn’t ever considered leadership as its own category, because we assumed that excellent leaders would need to master a number of the best practices we already evaluate to lead their teams to growth.
Much like a conductor leads the different components of an orchestra—the brass, the winds, the strings and the percussion—into perfect harmony, a salon and spa owner must direct different departments of the business toward success. At the same time, the leader and the management team must also set the operational structure for everything from employee education to customer service to retention and referral programs. The leader must select the salon’s technology tools, determine compensation and benefit programs, set up inventory, and design retail programs and displays. A strong leader also directs the salon’s culture, decides how the salon will participate in philanthropic efforts, all while being on the lookout for new services and products to add to the salon’s offerings.
So, why did we decide it was necessary to honor leadership with its own category? After reporting on, analyzing and working with great salon and spa leaders across the country, we’ve determined that the very best focus beyond their finely tuned business operations, turning their study inward so they constantly develop themselves as better leaders. They don’t stop there—the best leaders also create opportunities within their organizations to continuously develop team members, growing new leaders within their organizations.
For 2020, our new Salon Leadership category analyzes what these salon conductors read, what classes they take, how they leverage the assistance of coaches and how they are developing internal leaders.
CLASS OF 2020: THE OVERALL SYMPHONY
While the bulk of our coverage of the 2020 SALON TODAY 200 focuses on the individual data and pearls of wisdom from each of this year’s honorees, when we look at their data as a collective group, the harmony illustrates the overall professional beauty industry in a moment in time.
In calendar year 2018, the overall ST200 brought in total gross sales of $398,260,000 ($64 million more than last year’s ST200 class). That means, on average, this year’s honorees rang up $1,931,303 in service and product sales in 2018 (on average $260,000 more in overall sales than last year’s ST200 class). As a group, the ST200 grew their revenue from 2017 to 2018 by 17%, a bit higher than the 15% growth rate of last year’s class. Collectively, these salons rung up 4,580,000 client tickets last year.
At the end of the summer, applications representing states across the U.S. flooded our offices, with a handful (3%) hailing from Canada. After judging was complete, the South tallied 46% of the honorees, with the Midwest claiming 25%; the West counting 15%; the Northeast representing 11%.
To be able to enter the 2020 SALON TODAY 200, salons and spas had to generate annual service and product sales revenues of at least $250,000 since 2017. After meeting that threshold, the ST200 represents salons of all sizes, with 8% accruing 2018 sales of $250,000 to $499,999; 28% earning between $500,000 and $999,999; 40% tallying $1,000,000 to $1,999,999 and 24% bringing in totals of $2,000,000 or more. Almost two-thirds of the 2020 ST200 honorees earned gross revenues of $1 million or more.
Although many statistics from the ST200 go up and down year to year, the breakdown of expenditures remains relatively unchanged year to year. It continues to remain an important guideline for owners to measure their own P&L statements against. Labor costs continue to top the list, representing on average 47% of the salon’s budget, followed by supply costs (10%); rent/mortgage (7%); profit (7%); taxes (5%); owner compensation (5%); marketing/advertising (3%); education/training (3%); employee benefits (3%); utilities (2%); insurance (2%); professional services (2%) and telecommunications (1%).
When it comes to sales in the salon, hair color and cutting services continue to be the largest revenue categories among the ST200, although the gap between the two has widened with color services representing 40% of gross revenue and cutting services capturing 29%. Making up the rest of the gross revenue is retail sales (15%); skin care/body care/spa services (7%); chemical service sales (3%) and nail services (3%).
THE PORTRAIT OF A SOLOIST
By examining the collective data from all the ST200 honorees, we are able to sketch what salon success looks like. The average ST200 salon and spa:
Launched their salon dream by opening their business in 2008. The majority are relatively younger businesses, with 63% opening since 2005. The longer a salon has been open though, the greater the likelihood of having higher revenue levels.
Operates one location. Seventy-one percent of the ST200 honorees have only one location. Last year, 76% had single-location businesses, so more of the honorees this year have branched out. Of those that have more than one location, they operate on average three sites.
Leases their space. Although 77% of the honorees lease their space, the number of salons/spas owning their space has continued to grow each year.
Occupies an average of 4,223 square feet. This number is up by an average of 330 square feet from last year. As the salon square footage increases so do the average gross revenues.
Considers themselves a salon and spa. At 97%, almost all of the 2020 honorees define themselves as a salon and spa business.
Seeks business advice. In this year’s ST200, 59% (up from 55% in 2019) say they have consulted a business coach—that number has grown steadily since 2013.
Networks with peers. At 66%, most ST200 honorees report being members of one association or more. The Professional Beauty Association, Intercoiffure, 2 to 10, Cosmetologists Chicago, ISPA, Green Circle and Summit Salons are popular choices.
Tallies $1M in sales or more. ST200 honorees earned an average of $1,931,303 in gross revenue in 2018. ST200 honorees in the West average $1.69 million in sales, while the salons/spas in the South average $2.07 million, the Midwest $2.07 million and the Northeast $1.46 million.
Is efficient. The average sales per foot was $457 for the ST200 honorees in 2018, up from $444 in 2017. Higher revenue salons tend to have higher sales per square foot than lower revenue salons, but there is no statistically significant difference per region.
Is steadily growing. The ST200 honorees experienced an average increase in sales of 17% from 2017 to 2018, up from 15% last year. Salons in the Northeast experienced stronger growth (20%) than salons in the South (17%), West (15%) and Midwest (12%).
Is very busy. On average, the ST200 honoree rang up 22,929 transactions, with the average transaction tallying $92. The number of average transactions were up 13% from last year the average ticket was up 3%. The average price for a shampoo, cut and style was $55.29; the average price for a single-process color was $78.20; the average price for a basic manicure was $29.37 (up 3.6% from last year) and for a 60-minute facial was $84.25 (up 5% from last year).
Employs 34 workers. This number increased by one employee over last year. Salons growing $2 million or more have three times the number of employees as those with $1-$1.9 million in revenue..
Is commission based. On average, 61% of the staff of the ST200 are paid through commission.
On average, three in five (61%) of owners of the ST200 report that they work in their businesses, performing services. This is down from 65% last year. Of the owners who do perform, they spend an average of 23 hours a week on the appointment books.
As seen in past year almost all (99%) report holding regular staff meetings—55% hold them monthly, while 23% meet quarterly, 13% weekly, and 8% huddle daily.
At 49%, just less than half of the ST200 honorees report having non-compete or non-solicitation contracts in-house. That number has continued to grow the past three years. Among those who have non-compete/non-solicitation contracts, 31% have defended them in court.
All of the ST200 track Key Performance Indicators (KPIs) with the most popular being average ticket, productivity, client count, client retention, and percentage of clients pre-booked. Salons with $2 million or more in revenue place more importance on productivity, while smaller salons ($500,000 to $999,000) are split between average ticket and productivity as their favorite KPI.
When asked what management areas they felt most in control of, ST200 honorees responded retail commission, service payroll, education and training expenses, non-service payroll and advertising. They felt least in control of inventory and shrinkage, as well as the cost of service supplies, including backbar and color.
During the past five years, little has changed when it comes to what keeps owners tossing and turning at night. Top concerns included their inability to reduce expenses and their ability to keep service staff busy, followed by threat of a walkout, not understanding how to improve profitability, and ineffective salon managers. One exception, they are less concerned about their local economy and aren’t as worried about finding available financing for expansions.
Now, check out the profiles of each honoree by clicking on the different best practice categories: