PART TWO: How “Systems” Drive Profit

This will be your last Monday Morning Wake-Up – unless …

When I started writing the MMWUs in January 2008, I was writing it exclusively for salon/spa leaders. Within a few months, I started receiving requests from general business leaders for a MMWU that they could share with their teams that didn’t have the salon/spa verbiage and advertising for salon/spa coaching and training. So, in early 2008, Strategies created a special MMWU for general business.

As many of you know, for over 22 years, Strategies has been providing coaching and training for the salon/spa industry. The general business version of the MMWU has always been the exact same text as the salon/spa MMWU without the salon/spa references and ads.

So after eight years, of sending dual MMWUs, it’s time for the general business version to ride off into the sunset after today.

We went through all the email addresses on this list and moved the all of the addresses we could identify as salon/spa over to our main email list.

IMPORTANT: Click here to continue to receive the Monday Morning Wake-up for salons, spas and medspas. You will read the same MMWU content as always, but with the words “salon/spa” in the title and text.

We hope you continue on as a reader. If not, I thank you for taking the time to read my MMWUs and hope that you found value and inspiration in them.

Neil

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Systems bring structure and discipline to the profit creation process. Accuracy and extreme attention to detail is nothing short of non-negotiable. As a business coach, I’ve seen more than my share of “garbage in – garbage out” accounting and financial reports. Blatant errors, improperly posted or categorized entries, expense line items that no one can explain, and huge miscellaneous accounts, are just a sampling of the financial nightmares that regularly occur when poorly designed systems exist. The end result is totally useless financial reports. You just can’t make the best financial decisions with bad data. And with all due respect, sloppiness in the bookkeeping office is a darn good signal that compromise exists at the leadership level. Otherwise, such nonsense would never be tolerated for even a nanosecond.

Profitability systems extend far beyond general bookkeeping. When revenues are generated, there needs to be financial systems in place to ensure proper reporting. And wherever money is spent and purchases made, financial systems must be in place. Checks and balances, there is no other way to control and drive profitability.

Remember, a system is a set of procedures that, when followed, produce a predictable and consistent outcome.

Here is a quick hit list of profitability processes that must be systemized:

• Proper categorizing of revenue streams
• Invoice entry and generation (you just can’t have errors on customer invoices)
• Accurate and timely posting of payables (improperly categorized expenses will make your profit and loss statements useless)
• Deadly accurate processing of payroll and payroll taxes
• Purchase Order system to control EVERYTHING that gets purchased (If it’s not in the budget, it doesn’t get spent)
• System to run weekly financials – complete, accurate and on time
• Review of weekly “Actual to Budget” comparison reports
• Weekly accounts payable report (who do you owe money to)
• Bill paying: What’s the cycle? Who approves what gets paid?
• Periodic update of cash-flow plan and budget
• Competitive vendor cost analysis
• Debt management and reduction
• Inventory level management
• Creation of new project budgets
• Weekly leadership team cash-flow planning meetings (procedures needed to complete the meeting in 30 minutes)
• Scoreboard updating (daily/weekly/monthly)
• Financial performance data report distribution to managers and staff
• Expense reports: Who’s approving them? Are expenses verified and legitimate?
• Office supplies: What’s the budget, the system, and who’s accountable for it?

Depending on the size of your business, this may come across as totally trivial. It’s not. There are still multitudes of salon/spas that still pay bills and write checks by hand. Today, accounting software like QuickBooks and online bill paying make hand written checks something you’d see on display at the Smithsonian Institution. Hand writing checks may have been fine for Fred Flintstone, but not for anyone doing business in today’s automated world.

Paying bills through your accounting software is a non-negotiable because of the speed and accuracy to financial reporting that computer checks and online payments deliver. Pay a bill by computer and the first thing it asks is, “Who are you paying?” Now you have vendor tracking. Next, it asks, “How much?” Now you have an expense amount. Then it asks, “What expense account should it be allocated to (i.e.: rent, office supplies, cost of goods sold, etc.).” Insert your computer checks and hit “print.” “Cash – Checking Account” on the Balance Sheet is reduced by the amount of the check and the expense is recorded on your Profit and Loss Statement. Out comes the check nicely addressed and ready for a double-window envelope.

I’ve been pounding away at running your financials weekly. The only way to do this is to totally and completely (that means 100%) automate all of your bill paying and accounting procedures. Until this is accomplished, you’re never going to see the whole picture.

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PART ONE: Disciplines of Creating Profit

Profit is simply a measurement of business performance. It’s the reward for generating revenues, doing great work and staying within budget. Job security, advancement, better benefits, being able to invest in the best training, getting the best equipment, etc., are all part of profitability. Realizing all of the amazing opportunities that profitability can deliver will require a no-compromise sense of urgency. Urgency is paramount to achieving profitability.

When a business culture takes a lethargic, lack of urgency, approach to profitability, it gets in its own way. It’s akin to letting go of the controls that allow leadership to guide business activities toward its profitability goals. The cash-flow plan is demoted to the “optional task list,” or evolves into nothing more than an annual ritual that is rarely, if ever, looked at or put into play. Reviewing financial reports or having cash-flow planning meetings happens when it happens, if at all. Financial discipline and consistency is out the window.

Profitability will not take care of itself. Leaders must not only lead by example (that means you don’t violate the budget and expect everyone else to follow it), you must keep profitability at the forefront of all decisions and actions — at all levels of the business. Sense of urgency causes a production worker to suggest a better technique or adjustment in a process to improve quality and trim costs. It causes retail staff to design a special promotion to move out that slow moving merchandise. It causes service providers to multi-task when there’s downtime rather than hire more support staff. It causes sales representatives to make that next sales call, or book that flight in advance to get the best fare.

Here are the essential no-compromise disciplines that must be in place to begin achieving your profitability goals:

• Can you read and understand every line item on your financial reports? This includes your Balance Sheet, Income Statement, and Statement of Cash Flows. If not, what’s your plan to learn how? This is non-negotiable.
• How often should you receive complete financial reports on your business? If it’s not at least monthly (that’s only twelve sets of financials a year) it’s not often enough.
• How much time lapses from the end of the month until you receive your financial reports? If this exceeds two weeks, it’s too long. Find out why and address it. If you have in-house bookkeeping, there’s no excuse not to have timely reports within days after the end of the month. Any good in-house accounting software and a competent bookkeeper should be able to produce timely weekly financials. This is non-negotiable.
• Do you have a cash-flow plan that guides your revenue targets and expense budgets? If not, why not? Financial reports tell you the score during and after the game ends. Your cash-flow plan is your financial playbook. Follow the plan, be fiscally responsible, and your financial reports will improve. You cannot grow a business without following a cash-flow plan. This is non-negotiable. The plan is simply a “best guess.” The more you do it and the more you live your cash-flow plan, the better you can predict the future.
• Do you have weekly cash-flow planning meetings? If not, why not? Having a cash-flow plan is pointless without comparing it to actual revenues and expenses. Are you over or behind your projections? Why? What do you need to do today or over the next week to correct or get back on track? This is why I prefer weekly over monthly financials. I don’t want to find out at the end of the month that we were overspending mid-month.
• Who attends your weekly cash-flow planning meetings? (I hope you’re still not stuck on the sharing numbers thing.) All department leaders need to be present. In larger companies with many departments, separate cash-flow meetings focusing on numbers that are key to that area need to be held weekly.
• Do employees know the score? If your response to, “Hey boss, how’re we doing?” is “Not good enough,” the people responsible for doing the work have no idea what’s going on. Scoreboards and daily huddles are non-negotiable.
• Does your company require purchase orders to control spending? If not, why not?
• Is your payroll percentage under control? What is the ideal target payroll percent for your business? What will it take to achieve this?
• Are your inventory levels under control? Money that’s tied up in excess inventory is a cash drain. What’s the plan to get inventory under control?
• If you’re a retail business, are you controlling inventory levels and turning your inventory as often as you need to? Slow inventory turns, in retail, kills cash flow.
• As the leader of your company, department or division, are you setting the right example to create a fiscally responsible business culture? If not, why not?

There is no debating that the profitability begins with the right disciplines. Creating sustainable and predictable profitability begins at the leadership level. It cannot be faked or given lip service. The no-compromise leader must live financial disciplines, inspire it and relentlessly build a culture to support it.

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You, Your Salon/Spa Business And The Path To Greatness

There is a huge difference between having the desire for success and actually achieving your definition of it. Desire is a longing for something; success is an outcome. Greatness is something else entirely. Success, based on your interpretation, is earned, while greatness is bestowed. Greatness is how your peers and the world around you define your success and that of your company.

What does greatness looks like? For a company to enter the coveted realm of greatness, its values, thinking and actions must synchronize to create an unyielding gravitational pull that draws it through levels of success to greatness. The only thing that can disrupt this gravitational pull is a compromise in the company’s values, thinking and/or actions.

Let’s explore what this gravitational pull looks like in a successful company versus a great company. Yes, there is a huge gap between success and greatness.

• Doing many things right: It has a leader (or leaders) capable of inspiring performance and consistency. It demonstrates steady sales, financial discipline and profitability. It has functional levels of authority. It delivers on its brand promise, giving it impressive customer loyalty. Employees have opportunities for growth, giving the company a reputation as an attractive place to work. The company is regarded by its peers as a worthy competitor in its marketplace or industry.
• Values and purpose driven: A company that lives in the greatness realm certainly does all of the above, but there are distinct differences. More than any other single factor, great companies are both values and purpose driven. This instills the highest degree of trust throughout the company, because intentions are clear. Values, purpose and trust create a rock-solid foundation to support a dynamic and empowering culture. The company culture is transparent – no hidden agendas exist.
• Cherish your mojo: Even in the most competitive of industries and marketplaces, a great company stands out, not only as a brand leader but in the manner in which it conducts business internally with its employees and externally with its customers. It innovates faster than the competition. It does things so differently and consistently well that it wows its customers and leaves the competition asking, “How do they do that?”
• Capacity to embrace change: Another mark of a great company is its ability to adapt, respond and change as the world it functions in evolves. Call it optimal leadership, innovation or a superbly accurate ability to predict the future, but great companies always seem to already be where the competition wants to be. Again, competitors ask, “How do they do that?”
• Successful but not great: A company can be successful, even though its leadership is a bit inconsistent, some of its systems are weak, follow-through is sometimes spotty and performance is average. It will work through challenges and find a way to grow and prosper. But a successful company will never rise to greatness as long as it continues to ignore or tolerate its propensity to be average.
• Average ‘anything’ warning lights: In fact, average anything barely stands a chance of gaining a foothold. Why is this? A great company’s values, beliefs and standards simply won’t allow it. Average anything is quickly identified and cut out. It’s no different from the values, beliefs and commitment of a world-class athlete to do everything it takes to win, including relentless training, to do it better than anyone else.
• Enduring greatness: Successful companies come and go; great companies have the capacity to endure. But to endure, great companies can never falter, even for a moment. Compromise of values, beliefs or trust is the beginning of a fall from greatness unless resolutely and completely restored. Yes, many great companies will fall from greatness and remain successful, but the magic will be gone and is unlikely to return. For greatness to endure, no-compromise leadership is not optional. It is an ongoing process. The leader of a great company must continually review the practices of the company. Companies that coast along will not achieve greatness.

In his book Small Giants: Companies that Chose to be Great Rather than Big, Bo Burlingham profiled 10 diverse companies, from a document storage and retrieval company to a delicatessen. Burlingham sought out successful companies that had the opportunity to go big but chose greatness instead. They resisted the temptation to expand beyond what the owners felt was right for their companies. Simply put, they chose to nourish and protect their greatness.

The path to greatness begins with one question … how good do you want to be? If your answer is to be the best, you chose a road less traveled, a road that will test your determination to create something worthy of admiration. Only a few go the distance; you can be one of them. Small giant or big giant, it doesn’t matter. Go for greatness.

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Grow Your Business, Not Columns On The Appointment Book

I just read in the New York Post that salon industry icon Nick Arrojo is suing former stylist Paul Fox from his Varick Street salon for $3.5 million in damages for stealing five employees and his confidential client list … and opening a competing salon just 13 blocks away. The article states that Arrojo spent years training the former staffers, a fact that is touted in the former staffer’s bios at the new Paul Fox Salon. The suit states that the ex-staffers violated confidentiality and non-compete agreements.

Arrojo had a walkout … no different than the countless walkouts experienced by salon owners since the birth of the professional salon industry. Ask any gathering of salon owners if they have experienced a walk-out and all but a fortunate few will confirm they have. Like Nick Arrojo, the stories are like rubber-stamped accounts of broken trust, lost investment, plotting, collusion, stealing, lost revenue, bad-mouthing and the arduous task of rebuilding. All are stories of a business that took years to build that were blown up with their once employees, clients and cash flow relocated down the street.

The traditional approach of growing a salon is truly the definition of insanity. What most owners don’t realize is that the traditional, and inherently dysfunctional, business model feeds the walk-out scenario in a big way. Simply apply the rule of “what gets measured gets repeated”, and the traditional salon business model virtually assures the perfect conditions for a walk-out are in place. Consider the following:

• You tell stylists to “build their book.”
• You tell stylists to build their “request rate.”
• You tell them to promote “themselves.”
• You measure their success based on “their” request rate and how “booked” they are.
• You increase “their” prices based on how full “their” column is.
• You pay them a commission or sliding scale based solely on “their” sales.

Given the preceding points … how can you possibly build a viable company and brand that isn’t susceptible to the ravages of a walkout? Keep working the same business model and you keep proving that the definition of insanity is doing the same thing over and over again and expecting a different result.

Here is my five-step approach to building a business – not just columns on the appointment book:

STEP ONE: Resolve the conflict between “I/me/mine” and “We/us/team.”

• All systems, pay included, must acknowledge and reward thinking and behavior that support teamwork.
• Overhaul your company’s language and terminology. “We/us” replaces “I/me.” “Our” replaces “mine.” It’s subtle but VITAL to creating a true team-based culture.

STEP TWO: Stop tracking “Request Rate.” Request rate is your “walkout factor.”

• Do you really want to measure your company’s walkout factor?
• Do you really want to track and reward employees based on how much damage they can do should they walkout?
• Do you really get how contradictory request rate is to building a sustainable business?

Replace “request rate” tracking with first-time and existing client retention rates. It doesn’t matter who clients return to … as long as they return to the company.

STEP THREE: Eliminate “Column Vision.”
Ask your busiest stylist to look at the salon’s appointment book and tell you what he/she sees. 99.9% of the time, the answer will be “I’m booked.” All the stylist sees is his/her column. That’s the resulting mindset of request tracking, I/me/mine and commission compensation.

• Daily huddles engage team thinking and focus on team priorities.
• Scoreboards that identify team goals and track team progress to goal, replace the constant and repetitive emphasis on driving individual sales.
• Waiting lists for the already too busy service providers shift from ego and gridlock to the team sharing the workload.
• Double and triple booking to drive more business through one column on the appointment book is recognized for what it truly is … a compromise of the customer service experience.
• The busiest service providers recognize and understand that their future earning potential resides in the hours and talent available on other columns on the appointment book. (This is the foundational component of Team-Based Pay.)
• AND … it just never made sense for a salon to have some overworked stylists with waiting lists and other stylists waiting for something to do.

STEP FOUR: True teamwork is about driving Overall Company Productivity Rate.
This is a major shift from the time and inefficiency of growing columns on the appointment book. It is the ultimate culture shift from column vision and I/me/mine. Strategies catch phrases are:

• Everyone is responsible for every hour the company has available for sale.
• The skills of the entire company are available to each and every client.

Growing a viable business is about driving your Overall Company Productivity Rate. That’s why as an owner, you obsess over white space on the appointment book.
QUESTION: How quickly would that white space fill if it was a team responsibility and owners no longer had to obsess alone?
QUESTION: How much better could you pay service providers if your company consistently enjoyed the efficiency of higher productivity rates?

STEP FIVE: Your Brand IS everything
There is a radical difference between a salon filled with stylists with followings and a salon filled with clients being serviced by a team.

• The “stylists with followings” model is highly vulnerable to walkouts.
• The “clients being serviced by a team,” although not immune, is significantly less vulnerable to a walkout.
• If salons trained clients to be loyal to one stylist … then salons can train clients to enjoy the benefits of being serviced by a team of professionals.
• The stronger your brand and team-service concept – the greater client confidence in utilizing the skills and talents of the entire company.
• You may have an amazing looking salon, but if the clients that patronize your company are loyal to one service provider … you have failed to create a viable brand that attracts and retains clients. You have simply created a great space for stylists to service “their” clients until they leave.

“Sense of Urgency” for differentiation
Many stylists with client followings see little difference between working in a salon on commission and renting a booth or suite. When you factor in “column vision” thinking, they are, in many ways, functioning as an independent.

Employee-based salons have an opportunity to end the devastation of walkouts and the insanity of hostage management. To do so will require a shift to a team-based business model.

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The TEN Worst Leadership Behaviors

All leaders want their companies to perform flawlessly, but flawless performance is a rare occurrence. All leaders want their employees to believe in and support their company’s vision, but employees can find it hard to keep believing. All leaders want employees to be loyal and respectful, but loyalty and respect are something leaders earn rather than an expectation that can be controlled. All leaders want profitability and positive cash flow, but profitability and cash flow is an outcome of the leader’s financial discipline.

What happens on a leader’s watch is the leader’s responsibility. When things don’t go right, when mistakes happen, goals are missed, company cultures become contaminated and toxic, profits turn to loss, and debt increases … all these are connected to the leader’s thinking and behavior.

Here are ten of the worst leadership behaviors that, when combined, keep otherwise extraordinary companies stuck in extremely ordinary:

1. Not listening and being present: Not listening and being present in the moment when others need you to hear them is disrespectful. No one likes to be discounted or treated as irrelevant or disposable. Every text message doesn’t need to be read immediately. If you can stop and fix yourself a cup of coffee, you can stop and give an employee a few moments of your undivided attention. Leadership is about engaging with people … not being disconnected and unapproachable.
2. Showing up late: When a new coaching client shows up late for his or her first few coaching calls, it’s almost always a reflection of that leader’s pattern of showing up late. Making others wait is disrespectful and a time waster. A leader that is always on time sets the company’s tone, behavior and expectation about the value of being on time. If you have a pattern of always running late, everyone in your company knows it. No matter how great a leader you think you are, showing up late makes you less than great.
3. Breaking promises: In the moment, promises can be made with the best intentions. When you fail to deliver on even the simplest of promises, you are breaking trust. That little promise to “take care of something” may mean the world to an employee. When you give your word to do something … it is a contract. It is an expectation that you gave. Deliver your promises on time. No compromise.
4. Over committing: Every self-professed multi-tasker I’ve ever met has a track record of dropping balls off their overflowing plates. Projects are rushed. People associated with those projects are stressed and frustrated. Deadlines are either mad dashes or missed. Quality is compromised. Over committed multi-tasker leaders may be proud of their “look how much I have going on” tornado that surrounds them … but those they lead find it frustrating to deal with and nothing about it to admire.
5. Making it all about the numbers: I am not a number. My name is Neil. I love fighting for a worthy cause alongside my fellow crusaders. I believe in the human spirit and capturing its passion can achieve truly extraordinary things. I believe in my capabilities and myself … but it inspires me beyond words when others believe in me too. I am not a number. I don’t fight and give my best for a number. The number is just a score. Passion, commitment, tenacity, courage, integrity … blood and sweat … the desire to win … creates great numbers. Numbers are one dimensional … the people you lead are not. Make it all about the numbers and you’re anything but a leader.
6. Playing favorites: Every business has its key players. But when key players become favorites bestowed with special privileges, it divides the culture of the team into the haves and the have-nots. It gives the favorites a perpetual “get out of jail card” while everyone else is held to the rules and standards. Favorites are insiders and everyone else is an outsider. It’s hard to give your best and take a leader seriously when you’re treated like a second-class citizen of lesser privilege.
7. Ignoring levels of authority: It’s a natural tendency for entrepreneurial leaders to get involved in damn near everything. That’s called meddling and micro-managing. If you give individuals the authority and accountability for a department, task or project … give them clearly defined expectations and the support and resources they need — get out of their way and allow them to run with it. Be the orchestra leader and keep your hands off other people’s instruments.
8. Entitlement: You are the leader … not the king of your domain. You don’t flaunt your authority or possessions at the expense of others. You don’t show up late, avoid tasks or break rules you expect others to follow — you model the thinking and behavior you want in your culture. You don’t treat the company bank account as your personal treasure chest. You earn the right to lead a company and its people every day through your actions, decisions and behaviors.
9. Procrastinating: No-Compromise Leadership means, “If it needs to be done, get it done.” Push that project across the finish line on time. Engage issues before they become a crisis. Have that fierce conversation that’s been waiting to happen. Make that tough decision because your company will remain stuck until you do. Procrastinating is a choice to avoid. Just get it done. Laziness is something else entirely. If you’re lazy — get out of leadership because you never belonged.
10. Avoiding financial disciplines: For many leaders, there is something about numbers and financial disciplines that they equate to bad tasting medicine. In business, bad tasting medicine is dealing with tight cash flow, mounting losses and increasing debt. At Strategies, we are borderline fanatical about cash-flow planning and management because it is a non-negotiable for business success. Profit doesn’t happen by accident … profit is planned. Profit is an outcome. If you don’t have a 12-month Cash-Flow Plan to project revenues and expenses … you are leaving cash and profit up to the business gods. You are playing a dangerous and costly game with your livelihood and everyone else’s livelihood in your company.

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FIVE Growth Drivers That Can Transform Your Business

Growth doesn’t happen by accident or good luck. In business, there are Outcomes and Drivers. Outcomes are measurements and scores of the company’s ability to execute. Drivers are the mini-engines that work in unison to deliver the energy to produce the desired outcomes. The better you dial in the Drivers the more impressive the Growth Outcomes.

Here are the top five Growth Drivers that, when dialed in, can deliver next level growth beyond your wildest dreams:

Driver 1 … Productivity Rate:
In a service business, you sell time. You buy that time in the form of payroll hours. The more hours you buy from employees, the more inventory of hours you have to sell. The total of all salable hours for a day, week or month represents 100 percent of your inventory. The more focused and strategic you are at buying and selling hours, the higher your productivity rate. The optimum productivity rate target is +/-85 percent. If your total productivity rate is running below 70 percent, you’re buying too many hours because you’re operating inefficiently and not producing enough demand.

RECOMMENDATION: Productivity must be relentlessly managed daily. Schedule hours to match customer demand. Never buy hours you can’t sell. Expedite the training and ramping up of new staff by developing expert level skills in the most basic services first. If your extended training program for new talent is plagued with turnover – it’s too long and needs to be condensed. Lastly, make it your company’s battle cry that, “Everyone is responsible for every hour that’s available for sale … in all columns on the appointment book.” This is the cornerstone of the Team-Based Pay business model and something that commission fails miserably at.

Driver 2 … Referrals:
Referrals are the “brass ring” of the salon industry. A salon can spend a fortune on advertising and time working on Social Media … but the truest and most significant source of new business is through existing clients referring friends, family and co-workers to their favorite salon. Referrals are earned each and every day, not just by service providers — but by all staff members, including front desk/guest services and anyone that has client contact in any form. Yes, a great haircut and color is key, but an indifferent and grumpy employee at the front desk can turn a possible referral from an elated client into a review that sounds like, “Great haircut and color … but rude treatment at the front desk.”

RECOMMENDATION: Create a company Code of Conduct that states, “Everyone is responsible for creating extraordinary client experiences.” It should include all service providers whether the client is in their care or not. It should include front desk, guest services and call center staff, as they are the frontline of creating and maintaining every client’s experience from phone, to check-in to check-out. It should include shampoo assistants, apprentices and housekeeping staff. More than anything, earning referrals is a team sport. Anything less is a compromise.

Driver 3 … Rebooking:
Rebooking is “Salon Business 101.” Haircuts grow out. Hair color grows out. One facial or massage doesn’t fix skin issues. To complete an otherwise perfect professional service and not give a client the recommended maintenance cycle — and rebook the client’s next visit or two — is simply allowing growth opportunities to walk out the door. Rebooking is THE most potent Growth Driver because it feeds two other Critical Numbers … Productivity Rate and Client Retention Rate (First-time and Existing).

RECOMMENDATION: All it takes to drive impressive rebooking numbers is a system that links stylists to check-out at the front desk. The stylist gives the client a verbal and written pre-book maintenance cycle with the next visit date … and that goes to guest services at check-out. Guest services says, “[stylist’s name] recommends that your next cut/color be done on [date]. Do you prefer the morning or afternoon?” That’s all there is to it. The one phrase that should be banned from the rebooking process is, “Would you like to book your next appointment?” That’s a YES/NO answer.

Here’s a screenshot from a Strategies coaching client who uses Millennium that shows a rock-star rebook rate of +/-90 percent. In the bottom left “Rebook” box, you can see that this salon had an 87 percent rebook rate for the month of February 2014. Out of 804 client check-outs, 699 clients have rebooked a future appointment. Bravo to YOU Salon in Ellicott City, MD. YOU Salon is a Team-Based Pay company and consistently achieves +/-90 percent rebook rates.

Driver 4 … Client Retention Rates:
There are two measurements to Client Retention. The first is the conversion rate of first-time clients to a second visit. First-time client retention rate is the ratio of the total number of first-time clients in a specific month that return within 90 days from the end of that month. If you average 100 first-time clients a month and 35 of them return within 90 days, you have an unimpressive first-time client retention rate of 35 percent. This means that 65 percent of first-visit clients were not impressed enough to return. What does Strategies consider impressive? Impressive is 50 percent or higher. Rock star status begins at 65 percent.

The second measurement is Existing Client Retention Rate. This is the ratio of how many multiple-visit clients in a specific month return within 90 days from the end of that month. If you average 1,400 existing client visits a month and 1,190 return within 90 days, you have an acceptable existing client retention rate of 85 percent and a client base attrition rate of 15 percent. In this example, 210 existing clients failed to return.

RECOMMENDATION: Retention rates are a direct measurement of how well your customer service and experience systems are working. If you have a low number of first-time clients per month, a first-time retention rate below 35 percent, and an existing client retention rate below 85 percent … red warning lights are flashing and demanding immediate and decisive action. It’s time to totally rebuild your phone scripts, front desk/guest services procedures, consultations, service conclusion procedures (recap, recommendations for service and retail, and rebook). Any service providers with low first and existing clients retention rates must be retrained. If retention rates are seriously ugly, they should be on your competition’s payroll

Driver 5 … Retail Recommendations:
Ever since the 1970s when professional product retailing became mainstream in salons, the, “I’m an artist — not a salesperson” excuse to growing extraordinary retail sales has plagued the industry. The truth is, historical approaches to selling professional products in salons just don’t work and actually feed frustration. Retail commissions motivate the few, not the many. Too many stylists just opt out of the retail game. Front desk staff can’t close sales without recommendations. The result is that mass quantities of clients are walking out of salons with great hair and no professional products to maintain it. That’s why the vast majority of salons struggle to get retail sales over 10% of gross revenues.

The standard routine is for salon owners to set retail goals of approximately 10% retail to service sales. They measure the results and the results are typically the same; two out of ten stylists recommend and sell retail while the eight out of ten do little to nothing. For an industry that loves its professional products, it is incomprehensible why the simple and professional practice of conducting a rather straight-forward “This is what I recommend for home care …” process meets with such widespread stylist indifference.

RECOMMENDATION: Tracking a stylist’s retail sales percentage and average retail ticket is essentially tracking “the outcome” and not “the driver.” The driver that creates impressive retail sales is the number of verbal and written retail recommendations going with clients to check-out where guest services can “close” the retail sales and rebook future services. Track each stylist’s verbal and written retail recommendations that go to check-out and you’ll be tracking the real driver of retail sales. Strategies has a simple system called “The Happiness System” that accomplishes this task. For information on The Happiness System, contact Bruce Hourigan at 800.417.4848 ext. 203.

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No-Compromise Leadership Choices Drive Consistency

No-compromise leadership = Consistency across all four business outcomes (Productivity, Profitability, Staff Retention and Customer Loyalty). It’s such a simple equation. Yet, within its simplicity is a profound message to all who lead, or seek to lead others. The rich word for me here is consistency. Consistency is perhaps the most challenging aspect of no-compromise leadership to comprehend and live because how one leads is influenced by the leader’s collective abilities, beliefs, behavior styles, perceptions and life experiences.

How long your voyage to no-compromise leadership will take depends on current behavior patterns. Some people are natural achievers while others are procrastinators. There are those who obsess over every minor detail in their quest for perfection. In leadership positions they can bog things down by micro-managing everything. At the other end of the spectrum are those who hate the details and do all they can to avoid them. In leadership positions, they can wreak havoc by communicating in such broad brush stokes that the outcomes they desire are vague and open to broad interpretation … if achieved at all. For a company’s performance and culture to be consistent, its leader must be a model of consistency. This is non-negotiable. It is one’s commitment and ability to be consistent that defines the no-compromise leader.

No-compromise thinking is like an internal compass that guides your leadership behavior in the right direction. No matter which direction you face, it points toward leadership consistency.

By connecting “consistency” to the four business outcomes, it defines a leadership mission of the highest order. Consider the equation as the first line of your job description. Now, take it a step further and consider it the first line of any job description in your company. What would the performance of your company look like if everyone were held accountable for creating and maintaining consistency across the four business outcomes?

So, what does living no-compromise leadership look and feel like? I would have to say it’s the sum of all no-compromise moments, choices, actions, communications and decisions. Given this, how does a leader seeking to practice no-compromise leadership behave? No-compromise leadership is more than just a philosophy or cool business battle cry. It’s stepping outside your comfort zone, looking within for possible motivators and blind spots, and analyzing why a certain decision, course of action, or behavior is chosen. Something as simple as how you conduct your day-to-day time management of what you intend to do, versus what actually gets done, contains a whole host of no-compromise moments and chosen behaviors ranging from high achievement to total procrastination.

Consider the following situations:

• You’re in your office working on a project with a deadline that impacts the entire company. A team member enters with a pressing issue he wants to discuss. How do you determine the right no-compromise leadership choice in this situation? How do you process the situation to make the best no-compromise decision? Is it a compromise if you stop working on that critical project to address another seemingly pressing issue? Is it a compromise to turn the team member away? The no-compromise leadership way would be to say, “I want to give my undivided attention to your issue. Can we meet at 8:00am tomorrow morning?”
• You discover that one of your managers has been fudging some reports. It’s the 26th of the month and the team really wants to hit goal. A serious bonus payout is on the line. What would the no-compromise leader do in this situation? A decision to compromise and accept the fudged numbers opens up serious issues of integrity, trust and the consequences that go with that decision. The no-compromise decision to expose the fudged reports is the right decision, even if the consequences are unpleasant.
• A high school principal witnesses a star football player skipping school the day before the big game. Knowing that any disciplinary action would have tremendous impact on the team, the school and the popularity of this leader – what would the no-compromise leader do? He must do as Coach Carter did at Richmond High School when his basketball players failed to uphold their signed contracts to attend class and maintain grades. Carter banned all basketball activities. The no-compromise principal must take disciplinary action – even if it means losing the big game.
• A doctor makes a decision to write a prescription for a patient, influenced heavily by the kickback from the drug company and not the needs of the patient. Was the doctor following his internal no-compromise compass? Clearly not. The doctor had the opportunity to make the right choice, but a decision to compromise was made instead. If this doctor is the leader of the medical practice, his decision to compromise for a monetary kickback set a new acceptable behavior pattern for all to follow. He contaminated his company’s culture.
• A waitress in a restaurant decides to pocket a $10 bill from a customer, in a business that pools tips, because the customer was very demanding and difficult. The waitress felt “entitled” to take the money, but her entitlement thinking guided her into making a decision that compromised one of the core teamwork policies of the restaurant. Her chosen behavior shifted from “we, us, team, the company,” to, “I/me.” The decision took no more than a nano-second to make, but the contamination to the team culture created a breech of trust that will linger for a long time.

The antonym of consistency is inconsistency. From a leadership standpoint, the quest for either begins with a choice. To incorporate No-Compromise Leadership into your daily leadership life, you have to make a choice between no-compromise and compromise – between striving for consistency or allowing and accepting inconsistency.

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How To Keep Long-Term Staff Engaged

Employee turnover is the age-old nemesis for all business owners. Recruiting, the hiring process, training and skill development are time consuming and costly. The real wildcard in the recruitment process is hoping that the new hires will adapt and fit into the company’s unique culture. At the other end of the spectrum are your long-term staff members. These employees have been with you through the good times and the not so good times. They’ve seen you at your best and, most certainly, they have seen you at your worst. They know the game, get their work done and represent the heart and soul of your company.

Like any long-term relationship, long-term staff members can present a unique set of potential challenges for leaders. At the top of the list is resistance to change. Because senior staff members typically require less oversight, they tend to settle into their routines and their own modified methods of getting their work done … better known as settling into their comfort zones. Once their comfort zones are furnished and landscaped to their liking, very often, even minor changes to workflow, work schedules or the introduction of new systems, is met with resistance.

Here are some No-Compromise Leadership strategies to keep your long-term staff members engaged, adaptable and in the game of growing the company:

• The “Drift Factor”: Long-term staff know every nuance, nook and cranny of the business they work in. They know your leadership patterns and what they can and can’t get away with. Their performance and behavior can easily and gradually drift outside of acceptable norms therefore establishing a double standard when it comes to adhering to systems, company procedures and rules that other staff are held accountable to. When drift occurs with long-term staff, the company culture is compromised. GOTTA DO: Because long-term staff are natural mentors, leaders must monitor and address drift quickly. In most cases, the drift is not intentional. The longer a leader waits to address performance and behavioral drift issues, the more embedded the drift becomes.
• Long-term employees are not “maintenance free”: Long-term staff are not like “Old Faithful” that always spouts right on cue. The predictability of long-term staff makes it so easy for leaders to focus attention on developing new staff and other projects while unintentionally ignoring their most productive team members. It is not uncommon for long-term staff to feel under appreciated and their contribution taken for granted. GOTTA DO: Long-term employees require some time and attention to stay engaged and on their game. Like all employees, they need periodic performance reviews. They thrive on receiving kudos for jobs well done. Some like being included in the planning of change initiatives. Most of all, they need to feel respected and appreciated. A little TLC maintenance will go a long way.
• Adhering to a higher standard: Long-term staff are a natural quality control system that keeps the bar set high for younger staff. They have the experience and knowledge to mentor and inspire. When long-term staff evolve into change resistors, pot-stirrers or simply become indifferent to the company and its vision, they can do serious damage to moral and the company culture. GOTTA DO: Long-term employees must be held to the highest standards of performance and behavior. They are your company’s elite … your best. They are also your highest paid employees. GOTTA DO: Relentlessly communicate, reinforce and hold long-term staff to the highest standard of performance and behavior to the point where they honor and respect their role in the company hierarchy.
• Expectations and absolute clarity: Because they are long-term employees, the expectations for all aspects of their work and position in the company should be communicated with absolute clarity. Absolute clarity eliminates the wiggle room and “but I thought” stuff that gets in the way of progress. GOTTA DO: Clarified expectations and absolute clarity keeps the long-term staff focused, results-driven, committed and disciplined. Disciplined is not a dirty word or something overly restrictive. It is simply a commitment to doing it to the best of one’s ability.
• Mentors must change first: Just as leaders must be the change they want to see in their companies, long-term employees must be the first to embrace change. Again, when the drift factor sets in, long-term staff become the change resistors and roadblocks to growth. And when they drift too far, pulling them back in can be a drama-filled and ugly process. GOTTA DO: It is the leader’s responsibility to keep long-term staff engaged and committed to the goals and vision of the company. Have them participate in planning new initiatives, hiring new staff and creating new systems. The more you keep them at the forefront of change, the faster they adapt and lead others.
• Reality of life and work: Just as youth, drive and determination is the essence of career growth and climbing the success ladder … years of great service, time and age are part of the lifecycle for all of us. There comes a time when slowing down and cutting back is unavoidable. There are no easy answers when today’s productivity is no comparison to one’s best years. GOTTA DO: No one wants to be told, or admit, that their best years are behind them. It’s even harder when a long-term employee’s current rate of pay, isn’t buying the company the level of performance it once did. In business as in sports, great players hang on as long as they can. For leaders, honor the contribution and years of service for long-term employees as long as you can, but sooner or later, all employees and all leaders need to step aside to make room for the next generation.

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Ten Must-Do’s To Eliminate Owner Stress

There are many reasons we entrepreneurs decide to set out on our own and start our own companies. We are driven by a vision to build something special and create our own destinies. We do it to create growth opportunities for ourselves and for those that choose to follow us and believe in our vision. Of course we do it for a financial reward and return on investment. We are willing to assume financial risks in the form of debt and obligations that require our signature to personally guaranty that, no matter what, all will be paid in full. We are the visionaries, the dreamers … the relentlessly passionate ones crazy enough to try and beat the odds of building a successful company.

Of all the reasons we start our own companies, one that is not on the list is to be stressed out. As we all know, there are times when the stress of ownership can be overwhelming and debilitating. There is the stress of making both big and tough decisions. There is the financial stress of paying bills, meeting payroll, making loan payments and being current on taxes. There is that crushing stress of debt that gets out of control. And then there’s the stress of leading and managing people. Heck … you’re probably getting stressed just reading about the things that get you stressed out.

The good news is that there are ways to minimize ownership stress – if you’re willing to practice very specific No-Compromise Leadership disciplines.

Here are my ten life-tested must-do’s to avoid and eliminate stress:

1. Never use square pegs for round holes: Of course you’re going to be stressed if trying to use square pegs that don’t have a chance of fitting your company’s round holes. Square pegs come in the form of potential new hires that don’t fit your company’s culture. This also includes senior staff members whose performance, attitude and resistance to change have fallen out of alignment with your company’s culture, values, teamwork and standards. If you’re getting some “red flags” during the interview process, it’s mostly likely from the square edges on the prospective hire’s peg. Avoid the potential stress and don’t hire. If senior staff members are not performing and behaving in ways that support and mentor younger team players, thoroughly address it early to avoid the stress later.
2. If it’s broken now… fix it now: If a system or approach to doing business isn’t giving you the results you need and want, then it’s broken and needs fixing now. No-Compromise Leaders know that nothing in business ever fixes itself. It just gets progressively worse … and progressively more stressful. This means that the stress of something not working will only become more stressful if you don’t address and fix it now. Fear of change and what may happen feeds stress. Procrastination feeds stress. Fix it now, is about accomplishment … and when you accomplish things, you are less stressed.
3. There are 100 pennies in a dollar: If you keep spending more pennies than there are in a dollar, you’re going to bring on your own financial crisis. Borrowing more money to offset a pattern of losing money is like bringing in heavy equipment to dig a deeper financial hole. Using credit cards to finance operations, or getting behind in taxes, is what I call digging your own grand canyon of debt. Cash-flow plans and budgets are non-negotiable financial disciplines in business. If you don’t like this level of discipline, then enjoy the financial stress of mounting losses and debt. So much of the financial stress we see in business coaching is the result of avoiding financial disciplines.
4. Cash reserves keep you calm and patient: Part of the cash-flow planning and financial discipline process is building your company’s cash reserve. Like all forms of saving money, it takes time and commitment to put cash aside in a separate bank account. Cash that accumulates in your operating checking account is going to get spent. Stash cash away in a company savings or money market account so it’s not easy to get to. I always refer to cash reserves as stress-relieving “sleep good at night money.” I’d rather have the stress of hitting our revenue goals to create profit and cash reserves than the stress of making money to cover this week’s payroll.
5. Your company will change with or without you: Leaders are all about leading change … except when it comes to the leader’s ability to anticipate and respond to change. Leaders can be stubborn and inflexible, even when their companies are screaming for change. The sobering reality is that change will occur with or without the leader’s involvement. Staff discontent intensifies when leaders avoid, procrastinate or outright refuse to change. Sometimes leaders “check out” and stop paying attention to what’s really happening. Leaders always want their companies to change … but that change process cannot begin if the leader does not change first. Look in the mirror and have a fierce conversation with yourself about what you need to own in what’s not working in your company. A lot of stress can be eliminated if you work on changing yourself first.
6. You can’t make everyone happy: Every business needs structure, systems, accountability and the ability to change and adapt to the needs within it as well as the world around it. As much as leaders and employees recognize the importance of “embracing change” … change can trigger resistance and push back. Change happens because the company needs to adjust, fix a problem or get better. As the leader, you cannot avoid or delay implementing change because the change is going to confront resistance and rock the boat. That’s stressful. It is your responsibility to communicate the why, what and how of change to help others understand. Most will. Some will not. You can’t stress over those that prefer yesterday over a better tomorrow.
7. Share the load: One of my favorite Neilism’s is, “If I can’t sleep at night – no one sleeps at night.” Yes, the ultimate responsibility of the company rests on your shoulders … but that doesn’t mean you have to carry the entire workload of getting work done. The more responsibilities you share with those around you, the more capable and empowered they become … leaving you to focus on the more important leadership priorities and tasks. Let go of some of the control and you’ll help those around you grow. Being the orchestra leader is a hell of a lot less stressful than trying to play all the instruments at the same time. Share control. Be less stressed.
8. Decide rather than obsess: Yes, there will always be those tough decisions to make where the choices are complex and the results unknown. The longer you obsess over making a decision, the more stressed you become. Weigh your options and probable outcomes. One of those funky choices will always have a slightly better chance of succeeding than the others. That’s the one you pick. Don’t pick the easier choice over the better, yet more difficult, choice. More often than not, the easier choice lacks the horsepower to accomplish the task. Pick, and run with, the best choice. Put everything you have into making it succeed. Obsessing feeds stress. Getting the work done eliminates stress.
9. See something … say something: This isn’t just a saying for Homeland Security; it’s what leaders that pay attention do. Every leader sees stuff in their company that drives them crazy. The more stuff you see … the more stressed you get until you blurt out something like, “Why can’t they just do their jobs.” If you see something in your company that’s not right … address it respectfully and thoroughly. I’m not suggesting that you pounce on everything, I’m suggesting that you be both aware and present enough to engage in the perpetual process of inspect and correct. Even more powerful is to instill the “see something … say something” behavior into your company culture. The more eyes that identify issues and potential problems, the better the execution of work. I’d rather be stressed over the process of improvement than being stressed watching the same problems occur over and over again.
10. Knives need to be sharpened … so do leaders: Leadership and clarity are inseparable. However, the deeper leaders get into their work, the more they lose that higher level of clarity on how all the moving parts interact to move the company forward. A business coach keeps you focused. A business coach helps you see what your eyes can’t. A business coach helps you understand your options so you can make the best decisions. A business coach holds you accountable. I hope you consider using a Strategies Coach to keep you and your leadership skills sharp. Here’s a link to learn more: www.strategies.com/coaching-consulting

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How to “Dial-In” Your Business Performance

You have expectations for how your business performs. You want to maintain an optimal productivity rate while delivering extraordinary customer service. You want a great culture that inspires your team to go above and beyond. You want predictable revenue growth, a manageable payroll, controlled expenses, a cash reserve … and a respectable net profit. Most of all, you want to enjoy being the leader of your own company and not be stressed out putting out fires, dealing with problem employees and struggling to pay bills.

The difference between achieving your performance expectations and being stressed out and struggling is the attention you give to “dialing in” the operational functions of your business. “Dialing in” means finding that optimal setting that achieves the desired performance. Think of leading your business like being at the control panel of a Boeing 787 Dreamliner. There are multiple data screens, throttles, flight controls, dials, switches, levers and gauges. Each one needs to be set just right for takeoff, cruising altitude and landing. However, like in business, there are variables like wind speed, wind direction, temperature, the weight of the plane with passengers, baggage, cargo, fuel and more … that require a host of settings to be dialed in for current and future conditions.

Here are six strategies to help you keep your business dialed in for optimal performance:

1. No autopilot in business: The one function that a 787 Dreamliner has that your business never will is an autopilot. There never will be a “set it and forget it” switch in business. Yet, more businesses get into trouble because their leaders weren’t paying attention to the readouts on their control panels. A business on autopilot is the equivalent of putting out the welcome mat for a cash crisis, quality issues, low productivity, waste and staff turnover. It sounds like, “How was this happening and I didn’t see it coming?” Well, it happened because you, the leader, weren’t paying attention to, and dialing in, your company’s control panel. In business, it doesn’t take long to go from flying high to crisis. So … stop pretending that your business has an autopilot. It doesn’t.
2. No pilot license if you don’t know how to fly: Anyone can start a business. Not everyone can lead and grow a business. As a passenger on a commercial aircraft, my expectation is that the pilot and co-pilot are fully qualified to fly. In contrast, too many business owners lack the financial and leadership skills to run a company. That’s why eight of ten business startups fail. No one would fly if eight out ten flights crashed. Leaders MUST know the functionality of each and every gauge, switch, dial and lever on their company’s control panel. The less you know about how to dial-in your control panel … the more exposed and vulnerable you are to experiencing the ugly side of business.
3. No pick and choose: Remember, as leader, your primary responsibility is to keep your company’s control panel dialed in. In my many years of coaching leaders, the most common problem I see is how leaders get comfortable working only a few settings on their control panel and avoid the settings they don’t understand or fear. It sounds like, “Hey, I played with that setting once and almost had a walk-out.” There are certain settings on your control panel that represent those “tough decisions” that every business must make when situations dictate. Procrastinating out of fear and uncertainty usually translates into having to make bigger and more drastic setting adjustments later. In almost every case, had incremental adjustments been made to keep the control panel dialed in to current reality, there would be less of a need to make drastic adjustments … and therefore less stress to adjust those settings you’re not overly fond of.
4. Gotta have a flight plan: Growing a business is all about planning and goal setting. Every aspect of your plan and every goal requires different settings on your control panel to keep it dialed in. Is your control panel dialed in to address the hiring, training and development of new staff? Is it dialed in to meet the demands of the new service or product launch? Is it dialed in to achieve today’s goals in order to hit your monthly goals? Is it dialed in to meet your pre-book, productivity and client retention goals? Is it dialed in to manage expenses and create profit? Every aspect of achieving your company’s performance, operational growth and goal plan not only dictates the recommended settings on your control panel … it is a constant reminder that those recommended settings must be relentlessly tweaked and fine-tuned to keep it dialed in.
5. The daily dial-in: So, you begin your day at your control panel. Is it dialed in to address current reality? If someone calls in sick, you need to dial-in different settings to compensate. If an employee quits, you need to reset and dial-in to compensate. If your team lost focus and fell off your game, you need to tweak the settings to get dialed in again. A major storm, broken water pipe, broken equipment, power outage and a host of other unforeseen disruptions all require you to adjust and dial in your control panel. There are forces constantly at work that interfere with your plans and goals. The daily dial-in is a non-negotiable business practice. Not doing the daily dial-in is like switching on your imaginary autopilot.
6. Never a leaderless control panel: The intent of this control panel analogy is to establish the correlation between your role as a leader and the perpetual daily need to adjust your company’s systems, strategies, finances, information flow, resources and a host of other leadership disciplines to dial-in your best chances of achieving your performance expectations. Therefore, every second that your company’s control panel goes unattended … the dial-in process ceases … and outcomes are left to chance. It’s the exact same reason the use of handheld mobile phones while driving is prohibited. That split second your attention shifts away from the road to your phone can be deadly. Pay attention to your company’s control panel. Never allow it to go unattended for a second. No compromise!

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