business owners... some help on offering commissions
Ok, so I am looking to hire 2-3 people asap. 1 esty and 1 massage therapist and, possibly someone for just waxing (depends on the esty I get)
Anyway, I am offering them commission and they will be employees (receiving paychecks).
I am providing everything for the esty/wax person. Massage therapist is providing own table but I am providing supplies and everything else.
"Everything" includes:
location/room
utilities
insurance/work comp
online booking/front desk
marketing (business cards, online presence, etc)
client services (coffee/tea bar, etc)
staff room/kitchenette and supplies
linen and towel service
backbar
etc etc (its late... whatever else should go on this list...?) :)
Anyway, I'm trying to decide what commission rate should be? I'm not sure I'm thinking about this right, so HELP?
My per treatment cost (including supplies, linen service, backbar) is about $5-$10 depending on service. Employers portion payroll taxes here in CA (where they bleed employers dry) is about 17% for all types of taxes. Add in the rest of the costs of having employee and running business... it seems like, per treatment, my costs are around 22-25%.
So... I was going to offer Esty 35-40% (same for wax-only esty??)
Massage therapist 45 to start, then 50/50.
10% on products sold
Does this sound right? I've never worked on commission, so I'd love to hear thoughts.
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Replies to This Discussion
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Permalink Reply by Natalie on
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I started out with 30% commission on service and 10% on products at one job- I personally thought it was low but since you have some extras I would start with whatever you are comfortable with as long as the employee agrees- 35-40 is average around me. Plus they are getting tips...
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Permalink Reply by NBSkinCare on
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Was that as an employee (ie taxes taken out for you)?
Thanks!
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Permalink Reply by Relax & Rejuvenate on
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You are mixing $ costs and % costs, so it is hard to know where you stand, especially without knowing your service prices.
In general, f you are using employees and not contractors, it is hard to pay more than 30% and still make a profit, but like with all generalizations, it can be specifically wrong for your situation.
I don't believe in % pay. I pay a fee per service (50 or 80 min, its the same fee). % pay is a relative value. Fee pay is an absolute value. I value of the work of my employees absolutely, not relatively.
It never made sense to me why someone should be paid more because a client selected a higher priced treatment and the spa had to provide higher cost products to deliver that treatment in the same time frame as a basic service.
% pay creates complications if you ever do discounts or promotions as well.
You also need to take into account fixed employee costs in the event of a slow pay period for one or more employees. CA has a higher minimum wage than federal law (and in SF it is almost $11 an hour) If your employee's commissions don't exceed Min Wage * hours worked, you have to make up the difference. And in CA, there is no provision for including any portion of tips into the MW calculation. Also, overtime is based on an 8 hour day, not a 40 hour week, so if someone's client is running late at the end of the day, you have to consider that in your fixed cost as well as your record keeping hassles.
Finally, keep in mind everything for a new business takes twice as long as you think it will (impact of advertising, reaching sales goals) and everything else ends up costing twice as much as you budgeted.
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Thanks for the info, R&R. While I don't completely understand the fee based pay (like piece-work?), I understand the point.
My lowest facial is a basic european for $70 (60 min) and it goes up from there. That's really my only 'feel good/simple' tx because the basis of my company is result-oriented, corrective, custom tx. I don't necessarily agree that the higher priced services cost more to perform, tho. In general, peels are shorter in time and less costly (less linen, less time, less product). Microderm is less costly per tx, too, unless its a full facial + micro and then its about the same as a facial.
Yes, CA makes things a bit difficult for employers. Lots of hoops :)
My business is at the point where I have to grow or become stagnant. My books are full and I'm (potentially) losing clientele because I can't rebook in a timely manner. Along with that, my city has not one center like the center I will be opening up (most people have to go to neighboring cities/coastal cities to get good massage/waxing/skin care), so my area has a high need (as my clients have expressed! :)
So, I don't want to be the biggest, I still value an intimate, small center where my clients can feel at home and not like a number, but I've got to add more hands or wither and die :) I certainly can't add any more (hands on) hours to my week.
Luckily, I have the payroll background (12 years in HR, payroll and bookkeeping), that I can handle most of that aspect! :)
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Fee per service / Piecework is pretty much the same thing. Decide how much you pay for doing X service or how much for Y service, until you run out of letters.
We like to keep things simple -- X for 50 minutes, 1.5x for 80 minute services. The only things that pay more are things that take more time (hot stone massage for the clean up time), and therapist driven upgrades since we like to reward effort.
If you are saying your higher priced treatments are so because of the higher result delivered, then you have even more reason not to pay on %. It's not the product, its not the labor-intensivity (often the opposite) so you should pay your folks for the time the spend on a service. PERIOD.
Upgrades can earn a bonus since you make even more out of it.
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Hmm, I'll have to think on that. It certainly gives a different perspective than what I was heading to.
Yes, I did think that a good way to reward upgrades (and we have a lot of upgrade options available for almost every service) was to give a higher percentage commission on add-on services. It makes sense to reward the employee for 'selling' the upgrades.
So, how do you pay for small services, such as a brow wax? set amount?
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Small or large, it's all based on the same principle -- we pay you for your time working on a client.
Waxing is $40 per hour, and each treatment has a set time standard. A 15 minute wax job pays $10, regardless of the body part being deforested.
Since a time standard is set for each service, dawdling does not get rewarded with more money for being a slow waxer. You have to run on time, or clients will be shuffled to someone else to avoid inconveniencing the clients who showed up as scheduled.
The key is the upgrade being sold. If someone books in on the Correcting Line Facial at $150, the Esty still gets the same $45 fee as if they had booked the standard facials at $125. A 50 minute facial gets compensated the same.
If the client booked in for the standard facial, but the Esty upsold the Correcting line, they get $10 upgrade bonus.
Add ons -- like ampoules or masques -- are bonused based on the price point. $5 for $25 and under, $10 for over $25. (highest price upgrade is $50)
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