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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.




system_gears2Systems 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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Please share your thoughts with me about today’s Monday Morning Wake-Up. Click below to comment.

Pass this e-mail on to your business colleagues, managers and friends. They will appreciate it.


How to “Dial-In” Your Business Performance

airplane_cabin2You 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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Please share your thoughts with me about today’s Monday Morning Wake-Up. Click below to comment.

Pass this e-mail on to your business colleagues, managers and friends. They will appreciate it.


Choosing Your Business Model: Employee or Independent Contractor

A business model is best described as a schematic that defines all of the working features, components and capabilities that will drive the business.
If you want your business to deliver consistent quality and growth potential … those elements must be built into its business model. If you want your business to deliver flexibility with minimal management oversight, those elements must be built into that business model. Just like a Ford F-150 truck will never perform like a Ferrari 488 GTB, a business model can only perform the functions it was designed to deliver. A McDonalds will never perform to the standards of a Chef Gordon Ramsey restaurant.

An independent contractor (booth rental or suite) business model will never perform like an employee-based business model. The two business models are diametrically opposed and, by design, conflict with each other. The employee-based model generates revenues through a coordinated process of delivering services and products to the company’s customers. The independent contractor model generates revenues through rental fees collected from independent contractors that service their own customers, add-on services for independent contractors and potential retail sales.

For the record, Strategies supports, coaches and provides training for the employee-based business model. Why? Because the employee-based business model offers unlimited growth opportunity for both employees and owners … if they master the leadership and systems the model requires. We don’t have anything against the independent contractor business model other than the fact that its revenue is rent-based and therefore extremely limited in growth and resale value potential.

Here are some No-Compromise Leadership insights in understanding and selecting the right business model for your company:

  • To lead or not to lead: All service businesses are labor intensive. Employees need to be lead. Employees need to be trained and developed. Employees need structure, systems, feedback, inspiration and accountability. If these requirements get you excited and you’re up for the challenge of leading and growing a company, choose the employee-based business model. If any of these requirements turn you off, choose the independent contractor business model.
  • Build a brand or build a mall: Building a viable business is really about building a recognizable company brand that separates you from the competition. Your brand defines what your company stands for. Your brand defines your commitment to quality. Your brand defines your company’s promise to its customers. When renting space to independent contractors, the only control you have over your brand is location, the physical space, décor and how selective you are to those you rent space to.
  • Employee headaches vs. renter headaches: Many owners that turn to the independent contractor business model do so to eliminate employee headaches including people management, payroll tax liabilities and the need to hire and fire. Well guess what? Renter headaches simply replace employee headaches. Some renters don’t show up. Some renters don’t know how to keep their space clean. Some renters just don’t fit in with other renters and, just like firing an employee; you need to terminate their lease. And there are renters that don’t pay rent on time or get so far behind in their rent that it causes cash-flow problems for the business. Each business model brings its own collection of people headaches.
  • Build people or collect rent: Hiring and developing service employees into productive team contributors is the work of leadership. Sure, every now and then you hire a clunker … but for the most part, you are a key player in coaching and guiding employees on their career path. Do your job well by creating a dynamic team-based culture, and those employees will give many years of service in return. For leaders, there is no greater joy than seeing the career process unfold. If this excites you, choose the employee-based business model. If this does nothing for you, choose the independent contractor business model.
  • Ensure quality and service experience or “it’s not your problem”: By design, employee-based businesses have to ensure the quality execution of services and customer service experience. Investing in training for skill-certification and customer service development is non-negotiable. Performance standards, like monitoring first-time and existing client retention rates, pre-book and re-book percentages and product recommendations, are non-negotiable. Daily huddles, performance reviews, mentor programs and the like are all non-negotiable. If you don’t want any of this to be your problem, choose the independent contractor business model.
  • Customer database vs. tenant list: One of the most valuable assets a service business has is its customer database. In an employee-based business model, there is one, and only one, customer database … and that lives in the company’s computer system. In an independent contractor business model, independent contractors own their customer list. The business has no right or claim to the independent contractors’ customer list. Therefore, the only list the business has is its tenant list. The value of a tenant list pales in comparison to the value of a company’s customer database. If you’re satisfied with the value of tenant list, choose the independent contractor business model.
  • IRS and defining worker status: The key word in “independent contractor” is independent. Independent contractors, or those who rent or lease space from the business, are not employees and cannot be treated or managed in any way whatsoever like an employee. You cannot classify workers as “1099 independent contractors” and set work schedules, performance standards or any other trappings of an employee-based business simply to avoid payroll taxes. You cannot lease space to workers and exercise any control over how and when they work. There is no legal loophole in the tax or labor laws that will allow a business to treat and manage workers like employees while avoiding payroll taxes. If your lease/rental business is really a not so cleverly disguised employee-based business, the tax, penalty and interest costs can and will be devastating.
  • Value when it’s time to get out: The employee-based business model most certainly is more complex and more work than the independent contractor business model. As stated earlier, the employee-based business model offers unlimited growth opportunity for owners … if owners master the leadership and systems the model requires. Growing a recognizable brand, growing a true team-based/employee-based culture, growing a customer database, managing an impressive and healthy Balance Sheet … and generating predictable revenue and net profit … builds a resale value that will far exceed any potential resale value of a rent-based business. If you’re fine owning a business that has limited resale value potential, choose the independent contractor business model.

Exclusive Report: Rental Realities
The employee-based and independent contractor business model is a hotly debated and emotional topic. To bring perspective and clarity to the subject, Modern Salon developed an exclusive report entitled “Rental Realities.” It is one of the best and incredibly balanced reports ever prepared. I urge all owners, potential owners, employees and independents to read the report. Here is the link:

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Please share your thoughts with me about today’s Monday Morning Wake-Up. Click below to comment.

Pass this e-mail on to your business colleagues, managers and friends. They will appreciate it.


Customer Service Is All About Sense of Urgency

do_it_nowSense of urgency takes on new meaning and purpose when discussing the Customer Satisfaction Business Outcome. Think about the times you walked into a business and waited for someone to notice and take care of you. OK, now think about the times you waited while watching employees talk to one another and were totally oblivious to your presence. How about those times you sat in a restaurant watching other tables being served that were seated after you? What about that customer service representative that promised to call you back in an hour … and never did? These are all symptoms of a breakdown in sense of urgency.

Sense of urgency and customer satisfaction are inseparable. If your business fails to deliver on a customer expectation, it will show in your first-time and existing client retention rates. It’s that black and white. Nothing infuriates clients more than shoddy or substandard service. If a business fails to deliver on its quality and experience promise, it must be regarded as a breach of contract. Likewise, attention to detail, amazing service and the efforts any business makes to exceed the ordinary and deliver the extraordinary is what truly defines world-class brand.

The ability to consistently deliver quality and extraordinary experiences is, without question, a reflection of a company’s culture and systems. Here’s an interesting question to ponder: When you’ve experienced true no-compromise, high sense of urgency, service from a company, were you experiencing the culture and systems of the business, or the service and work ethic of an individual who functions with a sense of urgency? A customer satisfaction driven employee may hide a company’s warts once or twice, but eventually the company’s true culture and lack of urgency to satisfy its customers will be exposed for customers to see.

Here’s a hit list of no-compromise strategies you can use to create a sense of urgency to drive the Customer Service Business Outcome in your company:

  • Videotape staff servicing customers: Video doesn’t lie. It shows what’s real. The videotaping must be positioned as a learning exercise – not a “catch people doing something wrong” witch hunt. Watching their own behavior, posture, body language, attire … and the visual responses from customers … can be a real wake-up call. Video can be an important tool to communicate the need to change in a compelling way that service employees can truly feel and internalize.
  • Take a tour: Take staff on a tour of your facility and have them take notes of everything they see and observe that would either support or detract from customer satisfaction. When it comes to customer satisfaction … everyone is responsible. When the “It’s not my job to do that” line contaminates your culture, the Customer Satisfaction Outcome is compromised. Time for a Neilism: Why is it that only owners and leaders can see the dirt that is obviously invisible to employees? Be sure to have the debriefing and strategies meeting afterward to define a decisive plan of action to improve customer satisfaction.
  • Service is like a Broadway play: Every successful Broadway play demands that every actor knows his or her lines and to be in the right spot on cue. There is a sense of urgency to relentlessly rehearse until everyone gets it right and every scene is executed flawlessly – not just on opening night, but every night. How many of your employees know their lines and cues? How many employees can execute those lines and cues flawlessly every day? Anything less than every time/every day is a compromise.
  • Define your standards: Create your company’s own “Non-Negotiable Customer Satisfaction Standards.” How quickly can the phone be answered? How long will a client be allowed to wait? How will clients be greeted? How will consultations be executed? What’s the procedure for concluding a service, including pre-book and product recommendations? What’s each and every individual’s responsibility for ensuring that what clients see and hear is only what they’re supposed to see and hear? What conversation topics are off limits? What is an acceptable dress code? You and your team should have no trouble expanding on this list.
  • Visual cues: If you have a call center or telephone sales office, install call sequencing monitors so employees can see how many customers are on hold, for how long and how many calls were lost. Mount the monitors so all employees can see them. Nothing creates urgency more than seeing the action live.
  • Consistency is like a steady drumbeat: Make “sense of urgency” issues and strategies part of your daily huddle. Keep them short and focused. The intent is to keep the drumbeat pace “urgent.” These daily verbal reminders will ultimately shape your customer satisfaction culture.
  • Cheerleading a little nudge: The no-compromise leader never hesitates to use the tried and true method of cheerleading employees with the “let’s pick up the pace – we’ve got customers to satisfy.” When direct instruction or wake-up calls are needed, don’t hesitate. I’m not suggesting that you turn into a Marine drill sergeant, it just never hurts to apply a little leadership nudge, or more, when necessary.
  • Customer satisfaction and shared accountability: Accountability is not a word to be feared. Accountability is about a commitment to doing it right and doing it on time. Accountability is a commitment to achieving the highest level of consistency. If your company’s brand promise is to deliver value, consistency and extraordinary client experiences, then accountability must be embedded as a core value that is shared and protected by each and every employee. No compromise.

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Please share your thoughts with me about today’s Monday Morning Wake-Up. Click below to comment.

Pass this e-mail on to your business colleagues, managers and friends. They will appreciate it.

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