Input needed regarding booth renter

I work at a med spa that recently decided to rent out one of our treatment rooms to an esthetician. It will be a monthly rate, the esthetician has the option to use the backbar product the business has been using on clients and retailing, or bring in her own. Our question is...we have an established database of clients which have been seen by our on-staff esthetician who is an employee, and they will mainly continue to see her. However, if they decide to schedule with our booth renter, the Dr. wants a commission split on the treatment rate. Does this sound reasonable? I've never worked in this capacity before so I am unfamiliar with how it should work. Any suggestions/ideas?

Thank you!

Tags: booth, contract, med, renter, spa

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Permalink Reply by coldsalineplexus on November 21, 2013 at 7:44pm

We could run the numbers on any percentage point - they do earn different rates depending on certain factors.  35% is fine by me for demonstrating the concept :)

Permalink Reply by Relax & Rejuvenate on November 21, 2013 at 7:48pm

but they are employees, not contractors, right?

Permalink Reply by coldsalineplexus on November 23, 2013 at 6:36am
Yes, my estheticians are employees. Massage therapists are contractors, and manicurists are renters.
Permalink Reply by Relax & Rejuvenate on November 23, 2013 at 8:14am

35% on a $100 service = $35 base pay cost, assume a 20% tip of $20

80% of clients pay by CC, so you are paying 3% on $16 just to capture their tip. Your rate may be lower, but there is also a per swipe fee, etc so call it 3% or $.48

FICA/FUTA/State Unemployment/Workers Comp = 20%, but 20% of total comp (including tip).  20% of $55 = $11

So your payroll costs on a $100 service with 20% tip = $46.48, assuming no benefits at all -- no paid time off, 401k, health insurance. Also assumes never paying anyone minimum wage for sitting around during slow season.

This also does not include commission on product sales.  If they have a goal, and 50% sales to service is a very reasonable goal, then add another $1 and change to your payroll costs per basic service.

47% ish payroll costs is a very bright Yellow light on the cost scale, almost Red (50% +)

I encourage you to use your actual numbers to determine your total payroll cost/service so you know where you really fall on the scale (below 42% is very good).

When you pay on straight commission, it is essential to have the total cost as a % of sales under control, because your pay rate is 100% variable.  There are no fixed payroll costs which lessen with volume, so you are locked into that % of service revenue going to compensation even if you double your volume.

Permalink Reply by coldsalineplexus on November 23, 2013 at 8:19am

I follow, but where did you get the $16?

Permalink Reply by Relax & Rejuvenate on November 23, 2013 at 8:40am

80% of the average tip of $20 = 100% at $16

Permalink Reply by coldsalineplexus on November 23, 2013 at 10:43am

I see.

Permalink Reply by coldsalineplexus on November 23, 2013 at 8:44pm

Now, how on earth would you deal with services getting added on?  For example, let's say the esthetician's flat fee pay is $20/hr when they are doing service.  Say they do a 90minute facial ($30) but they add a lip and brow wax (computer registers each of those as 15 minutes, therefore $5/each in flat fee, so $10)...  does that make their flat fee for that service $40?  Even though normally they would have to work 2 hours to make that?

Permalink Reply by coldsalineplexus on November 23, 2013 at 8:44pm

I should point out that this happens sometimes on the table, but also happens over the phone when booking, because the receptionists know not to add extra time.

Permalink Reply by Relax & Rejuvenate on November 25, 2013 at 7:34am

Depends on a couple of things, starting with the software you use.  Many of them allow you to plug in the fee/commission to be earned for each service and it does not have to be linear for all services.

Waxing or nails may be a lower or higher value service and you can compensate accordingly.

Add ons may or may not be compensated based on the time involved, but rather the profitability of the add on.  We pay $5 on any of our $25 enchancements (ampoules or masques), $10 on the $40 and $50 add ons.  But they take very little time. what we are rewarding is the upselling.

Does adding a lip and brow wax really add 30 minutes to the time?  

If you have ever worked in a restaurant, think of your treatment room as a four topper.  The faster you can move them through (turns/productivity) and the bigger their ticket is (wine + dessert) the more you make in a shorter amount of time, leaving that space free to generate more revenue.

Spas are just another retail concept -- even if the majority of what you do is services.  Retail is all about sales/square foot and gross margin/square foot.

If brow and lip waxes increase those without adding a proportional amount of time to the treatment, then it is OK to compensate them disproportionately higher since you are encouraging greater sales/square ft.

Permalink Reply by coldsalineplexus on December 15, 2013 at 5:55pm

Mind if we run another example?

Let's say I have determined $14/hr as my flat rate.  So a 30 minute service compensates at $7, a 60 minute service at $14, and a 90 minute service at $21.  And a 15 minute service compensates at $3.50, for that matter (even though I consider 30 minutes reasonable for brows). 

Now let's say that a $25 upgrade (upgrade from base model to our most popular facial) compensates at $5, just like at your spa.  The way we would do that in our software is by changing the type of service on the schedule and adding an add-on called "modification" or "adjustment" that rings 100% to the service provider, and having the front desk adjust the amount to $5 and the payor (for just that one add-on service) to the studio itself (easiest for us because our check-out screen allows multiple payors).  Or just add it on at the end of the day as a lump sum called "modification" or "upgrades."  Either way.  

Now, in those terms, could you please explain the upgrades for brow and lip waxes, and what exactly you mean by "it is OK to compensate them disproportionately higher since you are encouraging greater sales/square ft."??  With our regular menu prices of $25 and $15 respectively for brow and lip, I am reading this as meaning that we don't add extra time, but we do pay out more than the $7 or $3.50 we would pay out under normal circumstances.  How do you calculate how much more?  AND what about in situations where it does require a little extra time?  For example, a client books a Brazilian which will book for 30 minutes, compensate at $7 (YIKES, my commission-trained mind reels at the thought of completing a Braz for $7), and then they ask to add brows.  The service provider has time to do it, but it means adding an extra 15 minutes.  SO do they get $3.50 for that brow (because that's how they would usually be compensated for that service), or do they make more (and if so, how much more) because it was an upgrade on the existing service?  Thoughts?

Permalink Reply by coldsalineplexus on December 21, 2013 at 7:27am

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