october 008 - Stylist and Salon Newspapers

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2008
How to Know When the Time is Right to Grow
By Jayne Morehouse
If you’re a salon or spa owner, have you
considered opening a second location?
If so, perhaps you’ve had questions.
How do you know when the time is right?
What are the reasons to grow into additional
locations, as opposed to adding on to your
existing space?
To get some answers from the pros who
have been there and done that, we asked
some of the leaders of the International Salon
Spa Business Network—formerly known as
the International Chain Salon Association—
to share their insights, experience and advice.
“It’s time to consider growing when you’ve
reached a couple of milestones. First, when
you are at maximum capacity at your existing
location and second, when you have the
cash flow to support a second unit,” explained
Charles Penzone, chairman of Charles Penzone,
Inc. in Columbus, Ohio, and secretary
for the network. “That means you need to
look carefully at how many hours a week your
chairs are occupied and producing revenue.
Look at the dollars you are generating per
square foot and how much more you could
generate if you double shifted your stations.
If you’re close to maximum earning potential
and occupancy for most chairs for most of the
hours you are open, then it might be time to
consider opening another location.”
Added Bob Floreak of Acuity Human
Resources LLC, a company that consults with
members of the network, including Philip
Pelusi Salons, “When you’ve decided to grow,
it’s critical to focus on your culture. The biggest
issue that affects growth as salons move
from one or two locations to multiple locations
is that they start to lose the small business
culture. ...What that means is the burden
of more employees creates the increased
likelihood of additional employee relations
issues, turnover and even legal challenges,
because it becomes more difficult to manage
a large number of employees. To improve
the potential for success and to mitigate the
possibility of employee relations and [human
resources] issues, companies need to train
their managers on the basics of performance
management and labor compliance as well as
adopt defined [human resources] policies and
procedures.”
Once you do decide to grow, Gordon Logan,
president of the International Salon Spa
Business Network and CEO of Sport Clips,
a Georgetown, Texas-based sports themed
company offering salons for men and boys
with more than 500 units across the country,
offers these steps to success:
1. Develop a thorough business plan.
Excel spreadsheets are great for this, since
you can change the assumptions to see what
impact client counts, average service tickets,
retail sales, etc. have on your bottom line.
Factor in additional costs of two locations:
communications, training, etc. Be realistic
about build-out costs, you don’t want to under-estimate
the cost to open. Improvements
to the space, equipment, store front sign, supplies,
inventory for resale, marketing costs to
get the word out, ... etc. all have to taken into
consideration.
“Banks loan to those who have a realistic
business plan that is not overly optimistic.
Develop worst-case best-case scenarios to see
what happens if everything doesn’t go just
like you hope it will. Be prepared for setbacks
by factoring some cushion into your working
capital allowances.”
2. Once you finish your business plan,
talk to your banker. Don’t be discouraged
if he says no. Many times, you have to talk
to several lenders before you find one who
understands our industry and has faith in
your ability to operate multiple locations.
Check into Small Business Administration
loans. They are perfect for owner-operators,
are usually easier to obtain unless you have a
substantial net worth.
3. Make sure you have a management
system in place. Running two or more locations
is more complicated than just one. You
can’t replicate yourself, so you have to have
systems in place and you need to document
them well, so someone else can do it in your
place.
4. Train your manager to run the new
location. If you don’t have someone in your
salon that is capable of running your next
salon, you need to hire someone or develop
someone presently on your team. Invest in
outside seminars on leadership and management,
building a team, coaching and counseling,
etc. Attend workshops at hair shows on
management. Have your manager-to-be run
your existing location for a few weeks to see if
they are capable and like being in a leadership
role, before taking the reins full time.
5. Join trade associations, like the
International Salon Spa Business Network,
where you can learn from and network with
others who have opened new locations.
6. Have a strong point-of-sale computer
system, so you can monitor performance
and inventory, etc. at any time from
your home office and your new manager can
use the performance reports to coach and
counsel the team.
7. Develop a stylist recruiting program.
You will have more stations to fill with
new locations. Talk to school owners to let
them know you are planning a new location.
8. Organize your training. You can’t do
it all one-on-one by yourself any more. Use
outside resources, like product manufacturers,
distributors, etc., to supplement your
in-house resources.
9. Be prepared to work harder than
ever until you get everything under control
and cash flow positive. Expect it to be harder
than you ever imagined.
Concluded Penzone, “Carefully studying
your numbers will give you the best roadmap.
Putting a location in just so you can
grow isn’t always the best move to make. In
fact, sometime if you already have multiple
locations, you’ll become more efficient and
more profitable by reducing your number
of locations. Growing can be terrific, but
downsizing might be the most prudent decision,
depending on your financial position.
Remember, over the long run, profitability is
what matters.”
6 | OCTOBER 2008 | CALIFORNIA STYLIST & SALON
Jayne Morehouse is public relations director for the International Salon Spa
Business Network. For more information, call 866-444-4272, visit www.
salonspanetwork.org or join the network’s next conference on May 31-June
2, 2009 at The Ritz-Carlton Hotel in Amelia Island, Florida.
NP Sacramento 2.5x11.indd 1 8/5/08 2:21:23 PM