Sublet or Hire Employee; how to proceed?

Hi everyone,

I'm a solo practice esthy and since having my daughter in Feb 2013 I have scaled back in my studio. Prior to having my daughter I reached a point in business where I needed to think about hiring an employee. The thought scared me so I put it off. :(

I didn't know where to start; how to go about it financially, set-up, etc etc etc.

Now that I have my daughter, my goal is to be a mostly stay at home mama with 'billable' working hours only 12 hours/week. As a result, my net income is suffering. (Expected, but the hit was harder to take than I previously thought.)

So my question is double-fold:

1. Do I sublet my small studio (14x20 room) to another esthy the days I am not scheduled.

1a. If I sublet, how do I manage the business signage, confusion for clients, etc.

2. If I decide to take on an employee, how would I even go about doing that with regards to payroll, government taxes, hiring set-up, etc, etc etc.

Thanks in advance!

Replies to This Discussion

Permalink Reply by coldsalineplexus on July 15, 2013 at 3:19pm

Congratulations on your new baby!!

Have you considered bringing someone in as an independent contractor and doing a % split? You don't have to do anything fancy for taxes this way - just provide them with a 1099 at the end of the year stating how much you have paid out to them.

I think this is preferable to either renting or hiring an employee. IF they are listed as an employee, you are on the hook for all the payroll taxes, and you aren't even there to supervise how they are doing their treatments. If you go rental, you lose in the long run because you aren't making any more even when they are booked solid during their hours. IC is a happy compromise - just make sure your contract is clear about who supplies which products, equipment, etc.

Good luck!

Permalink Reply by Kyong on July 15, 2013 at 3:37pm

Thank you, Christine. She is a huge blessing in our lives!

I'm not familiar with the concept of IC. How does that work in terms of products, marketing, credit card machines, etc?

Permalink Reply by Monica Grajales on July 15, 2013 at 3:20pm

I would sublet BUT with the following stipulations:

- no signage outside.This is very easy to do as I personally have rented rooms within doctors offices, etc and they have never allowed me to have my own signage.

- She can create her own marketing material, website, FB page, flyers for reception area, whatever, and will have to bring and build her own clientele

- it would be easier if you could have your own days and her own days (not hours within the same day) and clarify to clients that there are 2 businesses running under the same roof.

- you both will have to work by appt only to avoid confusion. If this is not possible (renting the room from a salon), specify that you are both completely independent from each other.

-I would not share products/sales if subletting. Independent business means just that.

- a contract is a must

Best wishes

Permalink Reply by Kyong on July 15, 2013 at 3:42pm

Monica, Thank you for your feedback.

I would def require the subletter to have scheduled days, and be a completely separate business entity.

Of the two option, sublet and employee, this is the 'easiest' and most practical at this point.

Any suggestions as to how to guard against public backlash/negativity if (for some reason) clients aren't happy with the subletter's services? I just worry, being in the same Unit, that people will get confused...

Permalink Reply by Monica Grajales on July 15, 2013 at 4:00pm

well, there are lots of things to think about. I liked the suggestion that Christine offered as well. But both suggestions come with pros and cons.

In order for me to provide more info, who do you rent from? salon? private office?

Permalink Reply by Kyong on July 15, 2013 at 4:11pm

I'm not familiar with the concept of IC in the beauty business. I'm confused about if they are an IC, then they have their or business, so how does that differ from the Subletting concept?

Would they be working under my biz and get a %?

If so, then i would need/supply:

supplies/marketing/equipment/products/Retail
a stationary POS machine...(right now i use QB on my laptop and take it back and forth from home with me.)

My single room studio is located in a professional building. I have signage on the outside of the building as well as a sign on my interior business door.There is a shared waiting area and public bathrooms.

Permalink Reply by Monica Grajales on July 15, 2013 at 4:33pm

IC: you provide EVERYTHING, including insurance and pay them a % of what they make. For example: a facial is $100 and they get 40% (or $40) for the facial. You keep $60.

Pros: it's easy; they also need to get their own insurance naming you as well

Cons: difficult to control because they feel like they are their own business (when really they're not)

may affect your business if they don't do a great job

Sublet: they are a separate business altogether; even they need to get their own credit card processing (if they want to)

Pros: THEY provide everything they need; you just get a check the beginning of the month

Cons: conflict about scheduling may arise and about how marketing is done - this is why you need a well written contract

As a sublet, you can have a stipulation on written contract that signage outside is a no-no. She can create her own marketing material stating that her business is inside your business. I met someone renting a room in a salon. Her business was called "Pretty Me Up of Salon Concepts". Salon Concepts was the name of the salon, but her business was Pretty Me Up. In her biz cards and all marketing material, she specified that she was located inside another business. Her business name was nowhere to be found outside or inside the salon. So it is doable. I also rented rooms in medical offices and I wasn't even allowed to promote my business from within their office. Of course, this was not ideal for me, but people do it all the time. As long as it is clear with no surprises.

You can let your clients know ahead of time that this situation will arise. Your customers should not be going to her and vice versa. Two separate businesses. And working by appt only is the best way for both of you to manage the scheduling issue.

Permalink Reply by coldsalineplexus on July 15, 2013 at 4:34pm

A contractor is just that: someone that you work with on the basis of a contract that you have both signed.

Your Independent Contractor agreement must cover who is covering what expenses, when everyone has access to the room, and how everyone gets paid/accepts payment.

The main difference is that an IC can work under a % agreement and a renter will pay you a straight rent. I have some renters who I love, but now t hat they are so busy, I have a twinge of regret that I did not make them IC's instead and take a %.