In countries where you cannot operate on commission only or on a ‘rent a chair basis’ pricing of services has to take into account :-

• Not only the award wages.

but also

• Long service leave
• Superannuation
• Maternity leave
• Sick leave
• Annual leave
• Potential redundancy payments
• Whether to you use staff other than your qualified hairdressers to perform the shampooing and conditioning then you should add their costs into this equation.
• Etc etc

Only when you have added up and accounted for all of these costs can you then divide them by the hours that the qualified hairdresser will work in a 12 month period. These hours must be adjusted to take into account

• All holidays that the employee is entitled to
• An allocation for sickness
• Or any other leave the government can think of.

When you have concluded this exercise  you will have the cost per hour of a stylist.  Many years ago we expected the senior stylist to generate three time their costs, then it dropped to twice as more costs were added by the government of the day. These costs have to be recovered or you will go broke. The under recovery of costs in this area has led to more salon closures than any other factor.

I personally believe it is very difficult to run a profitable Hairdressing business if the stylist does not generate at least twice his or her costs. I know many outlets where they try to operate with less productive stylists, or use retail sales to compensate, or where the owner works their butt off just to keeps the business functioning. How often have you heard “I had a better lifestyle when I was a stylist working for someone else?” Don’t let this happen to you.

Over the years salon pricing has gone from charging a fee for every part of the visit

Eg      Shampoo              $A

Conditioner           $B

Hair Cut                $C

Blowave                $D

Hairspray              $E

Hair Colour Temporary                      $F

Hair Colour Semi-permanent               $G

Hair Colour Permanent/Tint                $H

Bleach                                                $I

Followed by the banquet type pricing where most services included shampooing, conditioning, blow-wave and hairspray.    Our industry has been through these cycles many times and in many countries.

One question that arises is do we charge on the user pays basis or banquet method. In user pays we use branded products to confirm what they are paying for, or on banquet we use no name brands to minimise the associated costs.

Many owners try to lower costs by using a blend of apprentices or specialty shampoo staff. Some tend to move on staff once they have become qualified and are entitled to a higher income to maintain the balance.

Others change their staffing levels day by day based on the anticipated customer flow history. Many retired hairdressers enjoy working just one or two days a week for some pocket money.

Our pricing must be supported by

The ability of our staff

The staffs desire to please

The environment we offer

Availability

Which all comes together to offer a pleasant experience as well as a great hairstyle to our clients. Your best money generator will usually not be your most qualified staff member but the one who gives their client the greatest feeling of personal well being.

Ken Ellis

The Advisory Board,  Shared Help

Many would be importers locate an interesting product from a low production cost country and wish to create a business around it.

Before importing your first shipment you should

Check the market for competitive products

Investigate their pricing at as many levels as possible. (Eg landed cost – price to wholesaler – price to consumer and all the margins to each stage of distribution.

Gain knowledge of how the products are distributed (eg direct from the importer or via a manufactures representative/wholesaler.

Investigate your competitors policies to both the wholesaler and retailer ( eg what is their credit period – what product guarantees do they offer – do they have sales incentives for the wholesaler or retailer over and above their standard margin – what are their delivery times – do they have stocks in every state – what are their promotional activities – do they advertise or not – if using a wholesaler what incentive plans are used for motivating their sale force

Do you have a better or possibly cheaper product? Be very honest when answering this question because if you let enthusiasm cloud your judgment you could pay a very heavy financial penalty.

How good is your agreement with your supplier – are you to be the sole agent for your country – what minimum purchases do you have to make in a 12 month period – how long is the agreement for – what penalty clauses could apply to you – what guarantees do they offer re the quality and consistency of their products –

Once you are happy that you have completed your homework to the best of your ability and you still feel that your business model is suitable then test the market with your first shipment – supply only to a limited area where you personally can visit every retailer that stocks your product range and where you can gain as much feed back from their sales staff and their customers. This information should then be compared with your assumptions in your business model. If changes are required and you can make them while still maintaining your profit targets then implement then and again seek feed back. Once the retail outlet owner and his staff are happy with recommending/promoting you product then it is time to develop your role out plan. One State or even a part of a State at a time allows you to ensure that you don’t create a situation where you are unable to keep up with the demand, meet your promises to outlets or have to borrow too much money.

What has been the history of the exchange rates between the two countries- has it been consistent – are there any anticipated changes either positive or negative – what negative impact could your business model withstand – what monetary reserves would you have to cover you during an adverse period –

A business model totally reliant on imports has a far greater risk factor than if you also have a local activity which is based on a local product/service to protect your income during adverse times. Sometimes a joint venture with a company that is locally based can be to the advantage of both participants.

There are no guarantees in business however the more complete and detailed your research the greater the chance of succeeding by eliminating or anticipating the many challenges

Global warming regulations.

NB How many green projects have now faltered.

Mining super profit taxes (RSPT)

NB Will all the planned projects still be continued?

Insulation debacle

NB So many businesses were adversely affected that the Federal government is looking at paying compensation.

Tabcorp/Tatts re Victorian Pokies.

NB These companies are now planning legal action against the Victorian Government.

Alcopop Taxes

NB Why just these products. Did it stop people drinking or just changed what they drank?

are a warning that any business that can be influenced by government decisions whether Council, State or Federal should be short term and with minimal capital investment. It is not whether the taxes are socially acceptable or not but rather the impact they can have on the viability of your venture.

Your plan should ensure that most costs are variable according to sales/income volumes.

Try to avoid unionised staff because they are not that flexible enough for this type of venture. Consider contractors as an alternative for while you will pay more you flexibility is more assured.

Avoid long term leases for buildings or equipment.

Structure your company in a manner that allows you to go into bankruptcy if you have to at a minimum exposure to you or your family.

This is not an area for building a future upon but rather an entrepreneurial make a dollar while you can.

The famous investor Warren Buffet will not invest where governments have the power to change the basis upon which you have created your business model. Imagine the impact of a new or additional tax upon your planned profitability and cash flow.

I doubt if Tabcorp or Tatts had planned to lose their Pokies franchise in Victoria.

As you make money transfer it into secure assts such as property or blue chip shares don’t be tempted to spend it because loss of cash flow is a quick death compared to lack of profitability.

Many developers use the above tactics when forming their project companies and that is why you see them go bankrupt and yet appear again a few years later with another project.

This is where an accurate position specification is worth its weight in gold. You start with a great benchmark against which to measure the compatibility of the applicant to the position you are trying to fill.

Many poor decisions are made and don’t last because either the applicant is trying to sell the employer on employing them because they need the money or the employer is trying to sell the applicant because they are finding it difficult to obtain staff.

Something to consider – “There is nothing such as bad staff only bad bosses” It is the boss who employs the staff member, directs their activities and monitors their performance. Some call it selection – direction – control. When I hear bosses complaining about the performance of staff members and over a long period I know who the company should de-hire ( The Boss)

If you own the company or are the most senior executive those staff and their performance are both a reflection of you and the methods of selection you use.

If you are a mid tier executive the same applies to you but you have the added challenge of also operating in a position where somebody is observing your choices and possibly critiquing your selections.

One of the greatest challenges is where a mid tier executive has two people compatible with the position and has to make a choice between the two and if one has greater educational qualifications than the other. You are now at the stage of attitude and compatibility with your team. They easy way out is to choose the one with the greater educational qualifications because if they don’t work out then those above will admit anyone could have made that mistake but if you choose the one with less educational qualifications and they fail the question becomes how could you choose that one over the other. For me attitude is the separating criteria -to the task, to life, to responsibility, to being a part of a team was how I would finally make my selection. In life you will make some good decisions and some not so good but it is about percentages and you must minimise the bad decisions.

Ken

As in “ So you want to succeed” write down both the question and the circumstances surrounding it. You may feel it is a pain to write down these challenges but it will help you learn from the experience. Just left to our memory both our circumstance and the input we receive after the decision will cloud our understanding of the circumstances surrounding the initial decision. This is as much about learning about yourself and how you make decisions as it is a guide how to make better decisions in the future.

Frequently when we have to make decisions they are not just a simple yes or no process. Frequently we have options where one decision may be the best in the short term but not in the long term another may produce emotional satisfaction while another may be financially rewarding. Our understanding of our own moral code can also become an influencing factor in making the decision. All of these must be considered if it is an important decision not just whether to take sugar or not in your coffee.

Some people when they are young make decisions without considering the potential moral consequences only to pay a high price later in life when this one decision can be used against you. This is not a presentation of what is right and what is wrong but just being aware that important decisions are worth spending some time and effort considering.

If it is a personal decision then its emotional impact on you and others you care for have to be taken into account but also must be your personal goals and whether the decision will contribute to you achieving these goals or not. These decisions can be hard but you must be honest with yourself and if your goal is in conflict with others then try to make it as palatable for them as you can and you might achieve both the pursuit of your goals and keeping your friends/family with you.

If it is a business decision then the gathering of information upon which to make the decision is of vital importance. The better the quality of information the greater chance of making the best decision. Some find it a pain to spend the time gathering the information and prefer to go by the seat of their pants but that vehicle one day may leave you only with the seat of your pants.

The process is similar to personal decisions but has far less emotional considerations. Again usually you have options such as

The quick fix

The cheapest

The ultimate

The most cost effective

Most businesses are looking for the most cost effective solution because it combines both a consideration of the ultimate and the cheapest.

Ken