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Taking product cost out of commisson
#1
The salon I am currently at is on the fence on whether to deduct a product cost from our commission rate. Meaning the total of the service - the product cost X my commission is what I would make.

Had anyone else ran into this? I have been a NT for 10 years and have always gotten a straight commission rate based off of the total of services, but I am also new to this state (Oregon).

Thanks!
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#2
Hi Tara,
We pay based on the profit, not on the Retail amount. Our decision wasnt based on any type of industry standards...it just costs us less to do so.

For example, If a bottle of OPI Nail polish retails for $7 and our cost is $3 (not real #'s but just so you get an idea)...we pay based on $4 profit. Not $7.

Taking that further that would look like (15% hypothetical commission):
At $4 Profit = $.60 paid to you as opposed to
At $7 Full Retail = $1.05 paid to you.

As a business owner, my profit margins would be 48% vs 42%.

Those differences can add up very very fast when you take into account overhead, insuracne, payroll taxes, etc...

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#3
The fun thing about math is that you can slice it a million ways to get the same numbers. Taking out product cost is just a more complicated way of giving you a lower commission. You are told you are making 50% commission, but after chargebacks they are really paying you 40%.

You're probably better off making 40% in a high end salon with higher prices and probably better tips, than making 60% in a chop shop with low prices and bad tips.

Do the math. Don't get wrapped up in the percentages.
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#4
I can see where it makes sense to do this from an owners point of view, but when you say "it just costs us less to do so" you are also saying that it is a way to pay your employees a lower wage, therefore making it that much harder to commission out. I am not necessarily disagreeing, but I am just wanting to be convinced of a way that benefits all parties.

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#5
The salon I work in (NJ) does have slip charges. They take 2.5% off our slips at the end of the day. It's a common practice in nicer salons because if you want to have good products and have stock then you will take the hit. We are used to it here. Plus, salons that don't do it just lose money over time and possible close due to the high cost. Hope this helps...
Dee
CND Grand Master
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#6
A REALLY big problem with this lies in what they are saying those product costs are.

If the salon is buying your product, are they buying with mind to making sure those costs are the lowest possible?

Breaking cost per service down, a set of acrylics could cost anywhere from $1.00 to $13.00. So, if the salon isn't getting the best deal on your products then they could charge you $10 per service when that product could be costing them only $1.50.

And how are they planning on justifying that cost of service to you?

Ulitmately-- this is just a way to pay you less. If their math was solid, they'd have already figured this into their cost of doing business BEFORE they agreed on what they charge for services and what they were going to pay you.

Consider offering to buy your OWN products in exchange for a higher commission. I had that set up at one salon and it worked well. We bought our own products but we were 66/33%- 70/30% commission.
Maggie Franklin: Art of Nailz, Visalia CA
http://blogs.nailsmag.com/maggie
http://www.artofnailz.biz
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#7
(10-24-2013, 07:19 PM)TaraMontgomery Wrote: The salon I am currently at is on the fence on whether to deduct a product cost from our commission rate. Meaning the total of the service - the product cost X my commission is what I would make.

Had anyone else ran into this? I have been a NT for 10 years and have always gotten a straight commission rate based off of the total of services, but I am also new to this state (Oregon).

Thanks!


I am also in Oregon. Never been paid like that. I could see an owner using that as a way to pay you less. So instead of making a 60% you are making 40 or 50%. If they cant just be straight about the numbers there is a problem, in my opinion.

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