[gap height=”15″]
In last month’s article (which is available for reading 24/7/365 at istmagazine.com), I provided details on 3 Keys to Salon Success: Equipment, Employees, and Pricing.
[gap height=”15″]
I began by quoting the brilliant Danish philosopher Soren Kierkegaard, who stated that “Life can only be understood backwards; but it must be lived forwards.”
[gap height=”15″]
And I, too, have found that it is only when we look back, over past successes and failures that we truly learn to appreciate the value of these experiences – the wisdom they provide and the courage they instill to persevere.
[gap height=”15″]
Before moving forward with the next set of “keys”, I believe that I should first ensure that you have a firm grasp of your true business model. Based on decades of my own experiences, I share with you now several insights into the dynamics that drive our industry, as well as a few proven sales strategies to help you achieve success in the Sun Business.
[gap height=”15″]
Strategies for a Service-Based Business
[gap height=”15″]
A tanning salon is a service-based business, and the majority of services you offer are attendant-free. That is, they do not require the expense of paying an employee to render or perform the actual service. Most salons generate 75%+ of all revenue from the services performed on the premises, including UV-tanning, spray-tanning, red-light sessions, infrared saunas, teeth-whitening, etc. The balance of your income is typically from the sale of related retail products.
[gap height=”15″]
Since expenses such as rent, labor, insurance, etc., will not vary greatly whether you have 100 or 1,000 customers visiting your facility each month; you should develop sales strategies that will generate income for your business regardless of how often your customers actually use your services.
[gap height=”15″]
Take a cue from the health club industry. Most successful health clubs have thousands of paying members, yet, typically less than 40% actually use the club’s services on a regular basis. To be sure, every health club in America would go out of business if members paid only when they actually used the facilities. At the same time, the club owners are not upset with members who work out every day. In fact, it is these steady, active customers who help spread word-of-mouth advertising for the business and provide additional selling opportunities.
[gap height=”15″]
The same logic holds true for most tanning businesses. There are so many factors that can affect actual salon foot traffic: bad weather, traffic, hectic schedules, family responsibilities, etc. Therefore, it makes sense to focus your sales efforts on selling long-term memberships rather than just single sessions or short-term packages.
[gap height=”15″]
And while a beautiful, full-body tan (in addition to making a person look and feel great), is the net goal of all salon customers, in reality, the raw “commodity” that we actually sell them is TIME.
[gap height=”15″]
Now, all you have to determine is how much time you have available to sell – and how much that time actually costs you.
[gap height=”15″]
For example, let’s assume that your salon’s fixed monthly overhead, including rent, labor, loan payments, etc. is $10,000 ($120,000 annually). When developing price points for your memberships, you should focus first on the fastest and most effective strategies to generate enough revenue to cover your entire annual fixed overhead. Once you have achieved that, profits will follow.
[gap height=”15″]
To help achieve your true potential, begin by focusing on selling member-ships that generate the maximum dollar amount per customer, per year.
[gap height=”15″]
For example purposes, let’s use a Level-1 membership program at $20 per month. Accordingly, when customers pay this amount every month for a full year, it will generate $240 in revenue. If just 500 of your customers did this, it would produce $120,000 in annual revenue.
[gap height=”15″]
In addition to offering attractive price points for each membership level, you also need to provide your customers with incentives to become members – and absolutely no reason to ever quit.
[gap height=”15″]
For example, each month that your customers pay their $20 Level-1 monthly membership fee, you could include a $10 salon spending credit as a bonus. The credit may be used to purchase skin care products, eyewear, accessories, upgrades and other services on your menu. In this way, you have provided your customers with a $10 discount that, in reality, costs you just a few dollars. And if you have capable salespeople, they will be able to upsell the customers when they use their discount. Furthermore, you have also provided an incentive for your customers to remain loyal and maintain their memberships, as well as an effective marketing tool to combat even the deepest discounters.
[gap height=”15″]
You can apply this strategy to each level of service offered and increase the salon spending credit in accordance with the monthly membership fee.
[gap height=”15″]
To guarantee long-term memberships, you could also provide an additional salon spending credit equal to the full value of a one-month membership to those who maintain their memberships for six consecutive months. (In essence, buy six months and get one month free!)
[gap height=”15″]
Achieving Your Financial Goals
[gap height=”15″]
Once you establish the strategies to cover your fixed overhead, you can then focus on achieving your financial goals.
[gap height=”15″]
For example, if your goal is $120,000 per year in annual income (while also covering $120,000 in annual overhead), your business needs to generate $240,000 each year. That $240,000 is equal to 1,000 customers spending $240 per year in your business – or an average of $20 per month.
[gap height=”15″]
Is this achievable? I would venture a safe bet that your salon has price points ranging from $19 to $69 per month for tanning and related services. You probably also have a well-stocked inventory of lotions that sell from $20-$200 per bottle (with very attractive margins). And, you probably have an active database of 750-2,000 customers.
[gap height=”15″]
To help achieve your true potential, begin by focusing on selling memberships that generate the maximum dollar amount per customer, per year. Determine the actual number of active “paying” customers by analyzing your database, and then calculate how much each customer spends per year in your business. Then, develop strategies that present the most opportunities for increasing sales.
[gap height=”15″]
For example, you may find that the majority of your customers currently spend $60 to $80 per year. If you could develop sales programs that encouraged this group to spend just $24 more per year ($2 per month), it will have a dramatic and immediate impact on your bottom line.
[gap height=”15″]
You now have 4 Keys to Success and a better understanding of how to sell to a true, service-based business model.
[gap height=”15″][gap height=”15″]
