Thriving Stylist Podcast: Episode #378 - When Should a Salon Owner Reduce Commissions?

Release Date: March 24, 2025
Host: Britt Seva

Introduction

In Episode #378 of the Thriving Stylist Podcast, host Britt Seva delves into a controversial and critical topic within the salon industry: when should a salon owner reduce commissions. Recognizing the delicate balance between maintaining profitability and keeping talented stylists motivated, Britt provides an in-depth analysis of commission structures, common pitfalls, and strategic solutions to foster a thriving salon environment.

The Importance of a Strategic Commission Model

Britt begins by addressing the prevalent issue many salon owners face—overcompensation of stylists and its detrimental effects on both the business and high-performing employees.

“Most salons and the way they're run and are structured are run in a way that fundamentally doesn't allow top performers to continue to grow.”
— Britt Seva [07:15]

She emphasizes that traditional commission models often limit growth opportunities for both the salon and its stylists, leading to frustrations and high turnover rates among top talent.

Common Commission Models and Their Flaws

Britt critiques traditional commission structures, highlighting how they can create conflicts and financial instability within salons:

1. Fixed Percentage Commissions:

   • Example: Stylists earn 40% while owners take 60%.
   • Problem: Stylists may feel undervalued, especially if the owner's larger share doesn't correlate with their contributions.

2. Capped Commissions:

   • Issue: Limits on earnings can demotivate high performers who wish to earn more based on their productivity.

3. Over-Reliance on Top Performers:

   • High performers may end up subsidizing lower performers, which is unsustainable and breeds resentment.

“I do not think any stylist stays any place just for the money. I think any stylist leaves any place just for the money.”
— Britt Seva [09:30]

Introducing the Profit of Profit (PoP) Model

To address these issues, Britt introduces the Profit of Profit (PoP) model, a fair and sustainable commission structure that benefits both salon owners and stylists.

• Key Features:
  • Stylists earn between 70% to 80% commission based on the profit their services generate.
  • Owners maintain a protected margin, ensuring salon profitability regardless of individual stylists' earnings.

“In thriving Leadership method, we have a set of calculators that will help you to dial this into a science.”
— Britt Seva [18:45]

This model ensures that stylists are rewarded proportionally to their productivity, while owners retain enough profit to sustain and grow the business.

Key Commission Mistakes to Avoid

Britt outlines several common mistakes salon owners make when setting commissions:

1. Aligning Commissions with Competitors:

   • Mistake: Matching other salons' commission rates without considering individual business needs.
   • Insight: Driven stylists prioritize growth opportunities and a supportive environment over mere commission percentages.

2. Starting with High Initial Commissions:

   • Problem: Offering high commissions (e.g., 40%) without a clear growth path can force owners to dip into profits to sustain payments.

3. Capping Commissions:

   • Consequence: Limits the earning potential of stylists, leading to dissatisfaction and turnover.

“The biggest thing I think is a mistake, and I've said it several times, is capping commissions.”
— Britt Seva [27:10]

Guidelines for Reducing Commissions

When it's necessary to adjust commission structures, Britt provides clear guidelines to ensure the process is handled respectfully and effectively:

1. Non-Reduction for Existing Team Members Without Qualifying Events:

   • Owners should avoid reducing commissions for current stylists unless specific conditions are met.

2. Impacting New Hires with New Structures:

   • Implement new commission models exclusively for new team members, preserving existing agreements for current stylists.

3. Introducing Qualifying Events:

   • Qualifying Events include:
     • A stylist taking a leave of absence with reduced demand upon return.
     • A stylist choosing to go part-time, resulting in decreased monthly revenue.
     • A sustained decline in a stylist’s production over six consecutive months without improvement efforts.

“You can't have uncapped commissions without having these qualifying events.”
— Britt Seva [32:45]

Qualifying Events for Commission Reduction

Britt elaborates on the qualifying events that justify commission adjustments, emphasizing fairness and transparency:

1. Decreased Demand Post-Leave:

   • When a stylist returns from leave and their client demand has dropped, necessitating a commission review.

2. Transition to Part-Time:

   • If a stylist reduces their hours, resulting in lower revenue generation.

3. Consistent Decline in Production:

   • Persistent underperformance without signs of improvement or effort to enhance productivity.

“This is about creating opportunity, not creating guilt based major hand holding, not holding stylists accountable.”
— Britt Seva [35:20]

Practical Implementation and Real-Life Examples

Britt shares real-life examples and success stories from salons that have successfully implemented the PoP model:

• Case Study:

  • A salon co-owned by two partners struggled to turn a profit six years after opening.
  • After adopting the PoP model, they were able to realize why their previous structure was unsustainable and implemented changes that led to profitability and increased stylist satisfaction.

• X Club Success Stories:

  • Numerous stylists have increased their income while reducing their schedules, illustrating the model's flexibility and effectiveness.

“We have a few hundred stylists who have reduced their schedule by 20% or more and sustained or increased their income.”
— Britt Seva [45:10]

Conclusion and Key Takeaways

Britt concludes the episode by reiterating the importance of a fair, transparent, and sustainable commission model:

• Focus on Opportunity:

  • Shift the conversation from commission percentages to growth paths and opportunities for stylists to advance and increase their earnings.

• Transparency and Communication:

  • Be upfront with stylists about how commissions are calculated and the conditions under which adjustments may occur.

• Adaptability:

  • Salons must remain flexible and responsive to changes in both the business environment and individual stylist performance.

“Am I doing right by my senior people? Does my model make sense for my mid range stylists, my junior people, is this business sustainable for me?”
— Britt Seva [50:30]

By adopting strategies like the PoP model and avoiding common commission pitfalls, salon owners can create a profitable and harmonious work environment that encourages both business growth and stylist satisfaction.

Final Thoughts

Episode #378 of the Thriving Stylist Podcast offers invaluable insights for salon owners grappling with commission structures. Britt Seva provides a comprehensive roadmap to reassess and revamp compensation models, ensuring sustainability and fostering a motivated, loyal team of stylists. For salon owners looking to enhance their business operations and empower their employees, this episode serves as a crucial guide.

For more detailed strategies and tools, visit thrivingstylist.com/xclub.