Giving owners’ focus a trim
Boogaloos in downtown Fullerton is a cheerful place where youngsters can sit in colorful mini-airplanes to get their locks trimmed, take the stage in the photography studio or star in a pirate or princess birthday party.
The numbers behind the 17-month-old business aren’t so upbeat.
Monthly bills for the 4,000-square-foot site add up to about $12,500. Monthly income averages about $10,700.
Owners Dianne and Victor Nguyen have used most of their $150,000 in start-up money to remodel and cover the monthly deficits. They recently rented out their condo and moved in with relatives to conserve cash.
The couple say they will run out of money in three to six months if they can’t boost sales enough to break even. It would end their dream to run a child-friendly business, an idea nurtured even before they had their own three children.
“I just think there is something that we are missing,” says Dianne Nguyen, 36.
Her husband is equally frustrated, especially about the nearly $20,000 they spent last year for advertising with little to show for it.
“I just don’t know which way to go,” says Vic Nguyen, 31.
Customers like the concept -- most of their sales come from referrals, the partners say. They’ve had inquiries about franchising. Party bookings are up.
The Nguyens’ idea was to create a space that would be fun for kids and relaxing for adults. So Boogaloos was set up to include a mini day spa where adults could get massages, facials or other treatments while their children got haircuts. Dianne added art and music classes to keep the kids entertained.
There is a photography studio that’s used for portraits and parties. The studio has a stage where the action can be displayed on a big screen TV.
Weekends are birthday party time with pirate, rock star, princess and glamour themes, among others. Some customers have come from as far away as Palos Verdes to hold their celebrations at the salon, Dianne says.
There is also a boutique carrying Crocs footwear, clothing, toys and hair products.
It’s unclear how well each business category does because the owners say they can’t afford a bookkeeper, accountant or software to track sales and expenses. But the Nguyens do know that the art classes and the adult spa service haven’t taken off as expected.
To help make ends meet, they have kept part-time jobs, Vic as a commercial real estate mortgage broker and Dianne as a healthcare insurance consultant.
Vic tried to get a bank loan but says he was told the business had to make it to the two-year mark before it would be eligible. The owners contacted their landlord about moving to a smaller space but were turned down, Dianne says.
A few months ago, Vic says he asked his wife if she wanted to throw in the towel. Her answer: No.
“She is a firm believer this will fly and be the next Fantastic Sam’s,” Vic says.
Dianne is optimistic but 20-hour days take a toll, she says.
“When we have a slow day it’s like, ‘What are we doing this for?’ ” she says. “Then when we have a good day and I hear the good comments and I want to keep going.”
To keep the business afloat, the pair will need to make some changes, says salon business consultant Susie Carder, founder of Your Beauty Network Inc. in Carlsbad, Calif. A former salon owner, she has spent the last 15 years training salon and spa owners on how to run a profitable business.
On the plus side, Boogaloos’ owners are passionate about kids, their concept is interesting and the salon and website are well designed, she says. They are committed to the salon, working long hours seven days a week.
And, unlike many salon owners whose only training is beauty school, the pair has some knowledge of the business world.
On the downside, the business pays almost $9,000 in rent each month, there are too many business lines and no way to track vital sales and expense information. The company has reached the break-even milestone where sales cover expenses only two months since it started.
“He was looking at it like, if I put this up, people will come,” Carder says.
Her first lesson: At $9.99 to $19, the kids’ haircuts are loss leaders. The profit will come from selling parents on retail products from the boutique, birthday party bookings and other services.
“It’s like the popcorn at the movie theater, that’s where they are making the money,” Carder says.
She analyzed the salon’s sales and expenses, compared them with industry standards for a similar-sized business and came up with a plan to boost sales, market inexpensively and work intensively on the business.
Salon -- The bottom line: Monthly expenses are estimated to be $12,500, she says. The salon accounts for 32% of revenue, so it needs to cover 32% of the expenses, or $4,000 a month. If each stylist sees six clients a day, each client would have to spend $33 to make enough to cover the salon’s expenses.
The only way to do that is to set goals for the stylists, create fun incentives, train them and track their success.
Spa -- In the short term, the owners could sublease the four rooms to bring in cash and cut the time they spend on it while they work to boost their salon and party business.
In the long run, she would like to see them shift the focus in two ways. First, trim the menu of services and rename the offerings to appeal to the parents bringing their kids in for haircuts. Some examples: Stress Buster Facial, Mother’s Helper Rejuvenation treatment, Mommy Miracle -- names that evoke relaxation, an increase in energy or a reduction in signs of aging. She also recommends they use furniture and decorative touches to better separate the spa entrance so that clients who aren’t bringing kids for cuts will also feel comfortable using the facility. They should also set up facial and massage programs that reward frequent users.
Parties -- This is where the business can build a profitable division, she says. Market parties by mailing postcards to children ahead of their birthdays and offering referral rewards. Tie services together by offering a free facial for two party booking referrals or having birthday kids register at the boutique for gifts, she says.
Photography studio -- This needs to go, because the Nguyens are being distracted by too many business lines. Lease the studio to a photographer and consider providing referrals for a percentage of sales.
Boutique -- The salon has an environmentally friendly line of hair products that will appeal to local families, she says. But the clothing is an expensive inventory that won’t move unless someone knows exactly the size they need. Impulse items, such as jewelry for moms and daughters, will move faster and be more profitable, she says.
“Otherwise, that’s $20,000 that sitting there, not working for you,” Carder says.
She was adamant that the owners buy salon business software that enables them to track client patterns, sales and expenses by lines and employee. She recommends Milano Spa & Salon Software by Milano Systems.
She also set up a weekly business development schedule that has the Nguyens spending at least two hours each day on a different aspect of the business.
Carder also would like to see the owners put all their efforts into the company. The outside jobs provide a cushion that means they don’t have the do-or-die incentive to make the business work.
“End the madness and get really committed,” Carder says. “They have enough customer flow. They need to work to leverage that and work smarter, not harder.”
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Boogaloos Kids Salon, Studio & Parties
Business
Haircuts for kids, birthday parties and art classes, photography studio, boutique, adult mini-spa.
Owners
Dianne and Victor Nguyen
History
Founded: August 2006
Location: Fullerton
Start-up funds: $150,000 from sale of house and family loans
Company snapshot
Sales (2007): $130,000
Employees: Two full-time, seven part-time
Main business challenge
How to market with limited money to boost stagnant sales.
Goal
To become a nationally recognized franchise company.
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Weekly business development schedule
To make sure that Boogaloo’s owners take time to work on their business, not just in it, consultant Susie Carder suggests they carve out two hours a day to focus on basics.
Monday
Retail inventory and marketing. Meet with vendors, order, count inventory, analyze retail sales, adjust goals.
Tuesday
Team meetings and sales planning. Set up sales sheets with goals and actual sales for each business line and each employee on a weekly, monthly and quarterly basis. Update sales goals, work on incentive plans, teach team members how to sell more products and how to track their own performance.
Wednesday
Operations. This is crucial if the owners want to franchise the concept. Even if they don’t, it’s important to put in writing all processes, including things such as interview procedures, cleaning and banking.
Thursday
Marketing. The owners need to communicate how their business is different and better than the competition’s. Part of this is doing a better job conveying their original goal, to provide a place where parents can relax while their kids have fun.
Friday
Finances. Plan and strategize. Review plans together.
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Expert’s tips
Salon consultant Susie Carder recommends that the business owners take several steps to immediately bring in more customers, revenue and accountability including:
Don’t rely on outside jobs; focus on saving the salon.
Create a sales, marketing, financial and operations plan for each business line.
Boost quantity of child haircuts and focus on parents as the true clients.
Buy specialty software to track sales and other key data daily.
Sublease spa space and photo studio.
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Meet the expert: Susie Carder
Susie Carder, a former salon owner, founded Carlsbad, Calif.-based Your Beauty Network Inc. ( www.ybn.com) in 2000 to create business tools and solutions that help salon and spa owners. She is a judge for the Global Salon Business Awards, a program of the nonprofit foundation Business Education for Salons Today that was started by Paula Kent Meehan, founder of hair-care company Redken 5th Avenue NYC. In 1997, Carder published her book, “Passion: A Salon Professional’s Handbook for Building a Successful Business.”
