3 winning commission structures

What is the right commission structure for my business?

It’s one of the most frequently asked questions and one of the biggest problems within the hair salon and barber shop sector: What is the right commission structure for my business?

We spoke to David Drew and asked him how he advises salon owners. David is an Impact Business Coach and is the Chairman of The Hair & Barber Council so is well placed to advise with years of experience in the industry.

“Setting the right commission structure is both very complex, and very difficult to precisely answer, as there isn’t any one system or structure that will work for all owners across the sector.”

The BIG Question is why are you offering Commission and / or bonus and for what? In my humble opinion, there are far too many salon and barber businesses that don’t pay enough attention to this critically important issue, and consequently don’t have either effective, motivational or profit-driving commission structures/systems in place!  

1. % only commission

This is the most popular commission structure as it is easy too use and for both owners and staff to understand. A staff member is paid a % of all revenues they make. This can be done as a % of total or you can have different % amounts for different categories e.g X% on colour services and y% on retail

“The challenge with a one dimensional commission percentage’s paid of an individual’s turnover based on a service price is that they earn commission on  all revenues even if the business itself is not hitting target or achieving profitability” says David. You could have the business losing money but a staff member earning hundreds of pounds in commission which does’t feel right."

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2. % commission above a £ earning

This commission model works on the basis of a staff member having to earn a certain amount before any commission structure is activated.

This is often expressed in terms of their salary i.e “you need to bring in revenues equivalent to twice your salary before any commissions are available.

Once that threshold has been passed, you are then eligible for a tiered bonus structure.

Staff member A is paid £2,000 a month.

They receive £0 commission on revenues between £0 and £4000

Between £4000 and £5000 they receive 10%

Between £5000 and £7000 they receive 20%

Therefore Staff member A makes £7000 of revenue which means they are paid a salary of £2000 plus commission of £500

This encourages staff to keep earning and keep filling their column and recommending home care and treatments as every extra £ they make for the business helps them towards a commission target.

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3. Commission on KPIs

This structure is all focused on achievement of KPIs that help the business achieve their goal. When done correctly and where staff can see their targets and their progress, this can be very powerful.

David says “I believe, these structures need to be a business tool, to be positioned for each hair professional, barber professional, beauty professional, to help them to change their individual beliefs and behaviours, and focus on rewarding their specific business KPi’s, being achieved.

I would suggest Individual KPI’s as follows;

• Average Service Bill  = Target Amount must be at least £10pounds in value above the individual’s most popular service
• Re-booking rate (%)
• Average occupancy  (%)
• Number of Home-Care (retail) units sold:
• Backwash paid service treatments provided/achieved:

According to David the advantage of this model is that “it’s motivating for the individuals, and consequently is very effective at driving business growth and profitability as you pay them for achieving targets that impact your business”

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