In an industry that continues to resist economic downturn, grow year over year at an average rate of 3.2% and produces close to $60 billion annually, why are so many barbershops still struggling with profitability?
The beauty industry seems to be recession proof, growing almost double digits between 2008 and 2012 while the world at large scrambled through the greatest recession since the great depression.
Hair salons are seeing profit margins of up to 7.7% since 2011 and. the projection through 2019, per the Small Business Development Center (SBDC), that profit margin will stay in the mid 5% range or higher even as the market balloons to over 1.3 million operators.
So again, I ask you, what’s up with the barbershop profit margin? Why are so many still struggling to keep the lights on?
And the answer may shock you – BUT – it comes down to 6 key things that most barbershops just aren’t doing. Either they are not paying attention or they’re simply not aware of the damage they’re causing by remaining in the dark.
There are 6 reasons why barbershops continue to struggle even in a growing market.
1. Barbershops Don’t Engage
Gone are the days when you could simply hang up your shingle in the neighborhood and just wait for the folks who need haircuts to walk through the doors. The fact is that most hair salons also cater to men in a big way and quite frankly they’re eating the barbershop’s lunch.
And, while barbershops make up only 5% of the locations compared to hair salons, they still increase at a rate of 10% each year. What that means is that the competition for the consumers’ dollars gets harder every year.
So, which barbershops are winning on this super competitive landscape? That’s simple: It’s the ones that employ deliberate strategies to engage their customers on a deeper level.
Most barbershops still run like the “back-in-the-day” neighborhood spot where you came to talk about sports and chicks while you got a cool haircut. But, that paradigm has shifted tremendously.
With the Internet connecting everyone to everything, the bigger companies will use their deep pockets to engage the customers where they are. It’s the reason the major chains produce around 20% of the total revenue; they know they must engage and they have the means to do it.
It doesn’t mean that the smaller barbershops are shut out of the game; but, it does mean that they need to take a page out of the big boys’ playbook and run with it.
Whether that means that you start a loyalty program, a group on Facebook, actively solicit customer feedback or ask permission to drop value in their inbox regularly or all the above – it doesn’t matter; you just must engage them at a level deeper than a revolving door.
2. Barbershops Don’t Retail
Profitable barbershops will see 10%-20% of their gross revenue come through product sales. This begs the question: why won’t barbershops sell retail?
The irony is that a huge part of turning clients (even men that go to barbershops) into raving fans, comes from what you’re able to help them accomplish with their hair after they leave your barbershop.
Your value doesn’t stop when you take the cape off; it continues long after that – right up until the next visit. But, only if you’re consistently recommending at home care. This is one of the main ways that hair salons steal market share from barbershops; they recommend at home care to their clients and the ones that are on their game will go as far as educating their client about the reasons behind at home care.
Like I said, eating the barbershop’s lunch: YOUR lunch!
For barbershops to become profitable, they will undoubtedly have to get into the retail game. It could mean the difference between the life and death of your business. And if you manage to stay afloat without a focus on retail, it will be an excruciating journey until you fold.
That’s why when you choose to partner with Frederick Benjamin, you’ll always be in the know about developing retail trends so you stay ahead of an ever-changing market. We want to help put you on the map in a major way.
Not retailing yet? Join the Frederick Benjamin groomer network and apply to our wholesale program today!
3. Barbershops Don’t Have a Promotion & Incentive Machine
It’s rare that I walk into a barbershop and know immediately what promotion is running and more often than not, there isn’t one. At least not one that is clear to the customer.
Show me a profitable barbershop and I will show you one that is on target with promotions and incentives. As a salon business coach for over a decade, one of the major misses for salons is the failure to always be running a promotion. To make matters worse, they typically do not know what kind of promotions or incentives to run and when to run them.
Now, hair salons by enlarge are in a better situation that most barbershops because they at least have had some awareness of the resources available to create a solid promotion and incentive machine.
When I say Machine, I mean just that; imagine walking into your barbershop everyday knowing that you have a game plan. For instance, how many barbershops do you think had a game plan for the slow business they will see after the Thanksgiving and Christmas holidays?
If you are a profitable barbershop you did AND if I was your business coach, you would have started running a pre-booking promotion on Black Friday. It’s the surefire way to fill in the gaps for January and February until the business picks up again.
When you have a promotion and incentive machine, nothing is left to chance and there are no times in your barbershop that you’re not running something which by the way also keeps your customers engaged as well as gives you more opportunities to sell retail.
If you’re doing it right, you’re running a total of 6-8 promotions/incentives per year.
4. Barbershops Don’t Leverage Relationships
I’m not sure but “leverage relationships” may be the dirtiest words in the beauty industry PERIOD. I remember the first time I said it to one of my clients; she said “oh no Dean, I can’t do that.” To which I responded, “why not?” That’s what all smart and progressive business owners do.
Look, it isn’t a bad thing; in fact, what good is building a relationship if you can’t leverage it in some way? I didn’t say use people, I said leverage. It’s not like you aren’t providing a ton of value to your customers; and because of that, there is absolutely nothing wrong with requesting value thrown back your way (besides their money I mean).
One of the paramount ingredients for a healthy relationship is reciprocity and that is what it means to leverage your customer relationships. The main way that profitable barbershops do this is to implement a referral program. One where they reward the customer who referred new clients as well as the new client on the first visit.
It’s a simple yet powerful formula; one that is a staple at every chain. It is so much more effective, economically sound and dare I say – easy to gain new clients this way. What could be more powerful than a raving fan telling others why they should come to you. It’s like deploying your own private business building army.
5. Barbershops Don’t Create Value
Don’t get me wrong; this has absolutely nothing to do with your physical skillset as a barber. But, it has everything to do with the perceived value of your service. From the way, you dress to the décor and cleanliness of your barbershop to the way you and your team interact with customers – all of that creates a perceived value in your customers’ minds.
Whether you’re aware of it or not, you’re leaving a lot of money on the table if you don’t deliberately focus on how you show up as a brand. That equity is your value and it could make or break your business—literally.
There’s a reason why the big boys and many hair salons that I’ve worked with have a customer service routine that they follow to the letter. I mean, it is obvious that your value isn’t just in the haircuts. In fact, while your clients may all leave with a great haircut, most of them come for the ambience, the comradery and the atmosphere you create. That’s value; and the higher your customer perceives that value, the more money they will spend with you.
And it will give you a lot more leverage in the relationship to ask for a higher level of reciprocity. You’re probably starting to notice by now that all of these elements go hand-in-hand.
Profitable barbershops all follow this mantra: for every dollar, a customer spends, you must make them feel like they spent $100. Now that’s creating value!
6. Barbershops Don’t Deliver Convenience
The two reasons why people buy anything are Value and Convenience. We’ve already discussed Value; now let’s address Convenience. Regardless of what format it takes, Convenience makes it easy for clients to say yes. I myself am very susceptible to a convenient option.
When I say, barbershops don’t create convenience, what I mean is this: most barbershops don’t make it super easy for their clients to engage, buy retail, understand promotions, send you new clients or to perceive your offering as high value.
Are you getting the picture?
If we took them one by one, convenience might look something like this:
Firstly, taking the time to plan your goals and targets for a whole year would clear up a lot of clutter.
Secondly, putting signage all over your barbershop is not only engaging but will easily direct to your retail area and clearly tell your clients what’s going on in your barbershop.
And thirdly, your clients would only be too happy to reciprocate in a big way because you’ve created high value and delivered it conveniently.
While there are many ways to go about this, the formula is essentially the same.
If barbershops continue to overlook these elements, their businesses will continue to suffer and struggle to reach profitability.
About the Author
Dean L. Forbes is a Life & Business Success Coach who’s been coaching and growing beauty professionals for over a decade. His system has helped dozens of innovative business owners achieve amazing breakthrough results in their lives and businesses. Dean is the difference that makes the difference on your road to success.
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