Business Strategy to Outlast a Recession
Profile by Sara Ren Altizer
Total Annual sales: $ 1,749,405
Average Retail/month: $13,872
Average Services/month: $131,911
5 Years Later:
Total Annual Sales: +51%
Gift Card Sales
Pre-Summit 2011: $272,000
5 Years Later, 2016: $718,327.63 +164%
Favorite SSBC Products:
When companies are built on luck there is a lot of early success, but at the first sign of trouble it can all be lost. Divine Designs was a salon company like this, a company whose fate seemed to be lost in the trials of the recession of 2008-2009. Read on to discover how Summit Salon Business Centers proven business strategies were able to assist Akashi Patidar in taking Divine Designs from $200,000 in unfunded liabilities to nearing 3 million in sales for 2016 with a double than industry average 9% net operating profit.
Divine Designs Salon & Spa was purchased in November 2008 by an absentee partner through a partnership separation agreement during the 2008-2009 Great Recession. The morale of the 60-employee base was virtually non-existent as a result of the Recession and the primary owner’s inability to control costs. This resulted in a lack of client satisfaction and low profit. At the time of purchase, Divine Design had $200,000 of unfunded liabilities and was on track to lose approximately $200,000 for FY 2009.
“I was asked to join Divine in 2011 with the role of a managing partner, but as a non-industry professional and having never been a part of a retail-personal service business, I was overwhelmed.” Akashi explains, “I had confidence that my MBA education could provide direction to this particular business, but was unsure as to where to start. Attending the salon management conference, The Summit, gave me this direction. It was when everyone that owned a similar sized operation shared their experiences with us that we figured out that the problems we were facing were not unique to our business; in fact, they were universal in this personal service industry.”
Now knowing that Summit Salon Business Center is the authority in salon business strategy, Akashi confidently partnered with Sharmaine Giorgio to help her tackle Divine Designs three biggest weaknesses: Employee morale, customer service and loss of income.
Employees had been spoiled during the growth years of 2005-2007 and as a result, customer service was non-existent. The salon had become a free-for-all by the service providers who were concerned about themselves far more than the service they were providing to customers. “It was a very self-centered philosophy and our customer service ratings showed that our guests were not pleased.” Akashi says, “The initial challenge was to instill the importance of customer service first by enacting the Disney model of Customer Service. Unfortunately, by doing so, we also had to terminate over half of our service-revenue producing staff and support staff that simply couldn’t understand our new rules of engagement with our guests.”
The previous owner’s inability to establish team responsibility had everyone reporting to themselves, as a result, there were literally fights over customers and department heads on a daily basis. “I decided to centralize management and release virtually everyone that had a management or leadership role at the facility-since they were underperforming and over compensated.” Akashi explains, “Divine Designs lost 75% of the styling team members as a result of the changes, including a 2012 walkout of the final 6 members after Summit was introduced.”
While a massive walk out of any kind in the professional beauty industry is a salon owner’s worst nightmare, the loss at Divine Designs ended up being what was needed to entirely dismantle the failing philosophy that had permeated into the business. “Our long-term employees who had remained with us were very happy with the management changes and the new processes.” Akashi explains, “Summit Level pricing and performance measures were introduced and our associates learned how to double-book and triple-book color services using paid associates. Everyone was educated in “self-marketing” through the referral program initiative which trains service providers that marketing is a joint responsibility. And finally, we provided regular one-to-one coaching sessions that allow our employees to visually recognize their successes and their areas of improvements.”
To date, the employees are now very connected to the management team and process changes are accepted without question as a result of the successful transition.
When Akashi immersed herself with the operations at Divine Designs, she was amazed by the inability of service professionals to understand the importance of customer service and customer retention as it relates to their professional goals. “These people simply never understood that a personal customer connection from entry to exit would guarantee us a long-term relationship.” Akashi says, “They were more concerned about their empty books on a daily basis than understanding why their books were empty.”
As a result of implementing the Summit Salon Systems, each employee is held to the same defining standard irrespective of their position, and everyone in the 50 employee operation is there because they want to be part of the success. “We enforce all aspects of the program.” Akashi explains, “our customer service ratings are one of the highest achievable in the consumer market. Additionally, our Google+ business review rating went from 2.0/5 in 2008 to 4.8/5 in 2015. Almost a perfect rating with over 350 reviews online.”
“After our initial decline in sales from 2008-2009, we hit bottom in 2012.” Akashi says, “our revenue dropped with the departure of our Master Stylists who simply picked up their tools and left with guests in tow. Another factor was that during the Great Recession, our repeat customers had extended their repeat color visits from 8 weeks to 14 weeks and our luxury spa service customers simply stopped receiving personal services at the spa.”
With the outstanding turnaround in the employee culture and the renewed and energized focus on customer service, the profit margin of the salon company was already turning around. However, there was still one major change that needed to take place, and that was in balancing the salon-to-spa revenue ratio. “Divine Designs was initially designed with an emphasis on salon services and a secondary emphasis on spa services.” Akashi explains, “In 2008 our salon team consisted of 30 stylists accounting for about 70% of total revenue, susceptible to these infamous “salon-walkouts” while our spa accounted for less than 20% of total revenue but was “walkout” immune since spa customers engage more with the spa amenities than individual providers. Today, our spa revenue accounts for 55% of our total revenue and our salon revenue is a much more profitable 35% of our total revenue with a very loyal core of 18 stylists.” This more efficient business structure resulted in massive growth in income for the service providers and company as a whole.
Divine Designs is one of the largest privately owned salon-spas in Central Florida, at 7,500 Square Feet and in the heart of Brandon, Florida. After the Summit Salon Systems were implemented, sales have increased an average of 15% annually for the last five years and this FY 2016 will exceed the service revenue of any prior year, including pre-recession years.
Are you ready?
If you’re ready to take your salon company to the next level, ensuring that you have the systems in place to outlast any kind of economic downturn, Akashi has some advice for you, “Do it, don’t hesitate, and implement it immediately.”