As salons across the country continue to pick up their metaphorical pieces and re-prioritize with new perspective, we spent time with Sam Paik, chief financial officer for LBP’s Prestige Hair Group which includes salon brands like R+Co, IGK, InCommon Beauty and V76, for his unique insights into how salons can save, scale and strategize.
MODERN SALON: Small-business owners everywhere are feeling the squeeze. In what has been the most unpredictable earning environment our industry has ever faced, what advice do you have for salon owners looking to rebuild?
SAM PAIK: No matter what business you’re in, right now more than ever, cash is king. I recommend salon owners be in the mindset of negotiating reductions in rates or overall concessions with their vendors. From your internet provider to water delivery to snow removal, call the vendors you work with to see what they can do for you. I’ve spoken with salons who were able to press pause on monthly rent payments in exchange for a lease extension—meaning they needed relief for months January and February, and worked with their landlord to add on those months to the end of their lease. In addition to conserving as much cash as possible, it’s equally important to find ways to generate it. For those who offer them, prioritizing gift card sales is a great way to bring in cash now and guarantee a future customer by providing services later; affiliate programs are a great low-risk and high-return way to generate income by recommending professional products that you know and love, without the investment of purchasing added inventory. In areas hardest hit with mandatory salon closures, particularly in California, salons in our network were able to keep their businesses afloat with the revenue generated through their R+Co Love affiliate sales.
MODERN SALON: What are go-to areas to cut expenses?
SAM PAIK: It’s important to evaluate cost reductions in a measured way, rather than just slashing. Assess each expense by categorizing them into three buckets: maintenance, growth and “nice to haves.” Prioritize your maintenance costs, assess ROI on any growth spend, and then cut the rest—there isn’t room for “nice to haves.” You can continue to invest in your business, but have that come in the form of investing in staff, education and marketing. Be wary of putting money in illiquid assets like décor, furniture and furnishings. Now is likely not the time for a full salon renovation if a fresh coat of paint can do the trick; consider it adding lipstick but forgoing the facelift.
MODERN SALON: Every business is going to have its own unique set of challenges and opportunities, but what’s one exercise all salon owners can benefit from?
SAM PAIK: Setting strategic objectives will serve as a business owner’s North Star. Strategic objectives help guide your decision making throughout the year and help avoid getting distracted by the “Shiny Penny Syndrome.” It’s important to be flexible in the way you reach that objective, but you have to have the discipline to get there. I look at it like this: If I am driving cross country and need to get to New York by Saturday for a friend’s wedding, it’s okay if my route changes along the way, but I have to get there by Saturday. I can be flexible and take a detour, but I have a goal and a deadline—that’s my North Star. It’s also important to have periodic meetings, at least every three months, to see how close you are to meeting those objectives. Sure, I can stop to see the sights as long as I get to New York by Saturday. If I won’t make it there, then I can’t stop. Unless your world changes, you shouldn’t change your objectives, maybe just adjust your route.
MODERN SALON: How else has the pandemic shifted the salon business?
SAM PAIK: In the past, businesses looked to diversify their revenue distribution channels as a way to grow. But now, it’s a necessity to avoid your business being too concentrated in one area. Let’s say your salon is the only salon that offers hair extensions in your zip code—so business is booming—that doesn’t mean you stop offering all other services, as concentration can backfire. What if a neighboring salon opens up and you’re no longer the go-to? You’d have to rebuild your clientele and reestablish your reputation in other services. That’s why it’s important to diversify your business’ revenue distribution channels. The primary sources of revenue for a salon are always going to be services and products. Some salons have found a way to offer and monetize virtual consultations and appointments. But a natural fit for this industry is diversifying how customers can buy product through you. The beauty of an affiliate program like R+Co Love is it spans zip codes—you could be based in Virginia and sell product to someone in Oregon, without ever needing to purchase actual inventory.
MODERN SALON: What is one of your North Star strategic objectives?
SAM PAIK: Hope is a very important element in decision making, especially as it relates to sticking to strategic objectives. Always believe there is a tomorrow. Don’t sell off all your equipment, don’t sever your marketing efforts completely, or burn any relationships in an effort to generate more cash flow now—this won’t help you in the long-run. Even if times are tough, you need to value your employee and company culture. People matter—this is a core principal of every organization I lead. Provide your team with opportunities, engage them, educate them, get them invested in the business and they will be loyal to you. Whether it’s rallying the team to be hair models and you use iPhones for the content; or working with your product manufacturer to provide virtual education to ignite inspiration while sharpening skills; even gamifying an incentive for your stylists to promote your salon’s affiliate link—seek out ways to motivate the staff, instill confidence in the team and they will be loyal to you.
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Originally posted on Salon Today