The four key areas to manage thriving local business

To create a thriving local business, there’s a little trick to setting business goals.

It’s about setting goals that can be measured and directly contribute to profits.

Goals that can’t be measured or don’t directly lead to profits, like “fulfilment” or “employee happiness,” tend to make it harder to improve performance based on my experience. That’s because “fulfilment” or “employee happiness” can’t be measured, so you can’t manage or improve them objectively.

Even if you manage to raise them to a certain level, it doesn’t directly contribute to profits by increasing customer spending or reducing marketing costs.

In other words, it doesn’t generate the energy needed to improve performance.

Of course, it’s great to value things like fulfilment and ideals as an owner, but when you’re just starting a local business like beauty salon and stabilizing your business is a top priority, allocating too many resources to things that don’t directly contribute to profits can hold you back. It might even lead to a decline in performance or, in some cases, force you to close your salon.

There’s no harm in focusing on fulfillment and ideals once your business is profitable.

So first, focus on making a solid profit. To do that, it’s important to diligently pursue goals that can be measured and directly contribute to profits. So, what specific goals should you set? In my case, I thoroughly manage only the four items introduced in this article.

Here, based on my experience, I’ll introduce the four items that local business like beauty massage salon owners should manage to steadily improve performance and create a thriving salon.

Four items to manage for creating a thriving beauty salon

When you break down the performance of a local business like a beauty salon, you’ll notice that it’s made up of the following four items:

  1. Attracting new customers
  2. Customer Retention rate
  3. Recruitment power
  4. Employee retention rate

To create a thriving local business like a beauty salon that I manage, let’s thoroughly manage and improve these four items.

In fact, although I manage over 10 beauty salons, I only focus on these four numbers.

Nevertheless, I’ve been able to expand to over 10 stores from scratch in three years and operate them all profitably.

So, you can imagine how critical these are in running a local business. Below, I’ll explain each of these in detail.

1, Attracting new customers

To make your local business thrive, it’s important to create a situation where new inquiries overflow.

For that reason, you must record the number of new inquiries every month and regularly check it. Then, while checking that number, you’ll come up with various measures to increase new inquiries.

Effective measures to increase new inquiries include:

  • Clearly defining your business strengths and promoting them
  • Improving your website to increase conversion rates
  • Utilizing social media, blogs, etc., to disseminate information and increase website traffic

Additionally, it’s effective to ask existing customers why they came to your business, identify the reasons for their visit, and further refine those aspects.

You’ll continue to improve your customer acquisition mechanisms until new inquiries overflow and you have a waiting list for appointments more than a month in advance.

2, Retention rate

To make your local business thrive, it’s essential to maintain a high retention rate. Even if you’re good at attracting new customers, if your retention rate is only 20%, it’s like pouring water into a bucket with a hole—it won’t fill up no matter how much time passes.

Furthermore, the retention rate needs to be highly replicable.

Depending on the abilities of individual staff members, where only a few staff members have a high retention rate while others have a low one, cannot be considered as a factor for business growth.

If those outstanding staff members leave, the business model will collapse.

Therefore, it’s important to incorporate a system that can achieve a high retention rate with high replicability into your business model.

At my salon, Kesae Total Balance, we record and manage a numerical value called the “next appointment rate” as an indicator of improving the retention rate.

It’s better to manage the repeat rate directly, but if you do that, it sometimes take over three months to collect data, and the speed of the PDCA cycle drops sharply.

On the other hand, with the next appointment rate, if you can make a reservation for the next visit on the day of the current visit, it counts as one, allowing you to optimize the system quickly.

By thoroughly refining details such as talk during customer service and treatment procedures to increase the next appointment rate by even 1%, we’ve systematized it and achieved a stable next appointment rate of over 80% regardless of which staff member provides the service.

3, Recruitment power

There are many local businesses that are suffering from a serious shortage of staffs, and many business owners are struggling with issues like “even if I use job posting sites, I can’t attract people.”

Even if you’re good at attracting new customers and have a high retention rate, if you’re short of staff, you won’t be able to increase your sales.

When it comes to recruitment, it’s too late to start when you’re short of staff. Once you’ve improved customer acquisition and retention rates, you should advertise for recruitment on a regular basis and create a situation where people who want to work at your business are waiting to join.

If you do this, when vacancies arise, you can immediately fill them by contacting candidates. So, what can you do to achieve this?

  • Create a concept that makes people want to apply for a job
  • Appeal on your company’s website’s recruitment page
  • Use all available means, such as Social Media, flyers, and advertisements, to increase exposure for job postings

Recruiting through portal sites results in high fixed monthly costs or performance-based fees, and it’s difficult to continually post job openings.

Ideally, it would be best to create a situation where job applications come in continuously with zero advertising costs or a few hundred dollars per month through your company’s job page on your website.

4, Employee retention rate

Generally, the beauty salon industry that we are in has a turnover rate of over 60%, but if you’re experiencing turnover at this level, it’s challenging to stabilize your performance.

If the turnover rate remains high, business owners will be exhausted by managing staff, and the business will become weary.

Additionally, if the store manager leaves with the staff, it could have a devastating impact on cash flow, and the more stores you operate, the more unstable the business becomes due to staffing issues.

Increasing employee retention not only significantly reduces the psychological burden on business owners but is also essential for stabilizing the business.

The solution is simple. It is thoroughly investigating the circumstances of staff turnover, identify and anylyse the causes, and then build an employment environment that ensures it never happens again.

At Kesae Total Balance I manage, we’ve established a work environment with a one to three customer a day, flexi time, and a salary of around 2,000 to 4,000 per month.

By basing our employment environment on these three pillars, we’ve created a system and process where the employee retention rate is close to 100%.

By the way, depending on the business model and characteristics of each business, the focus may differ, so blindly copying ours would be meaningless.

The answer to staffing issues always lies within your own company, so analyse what’s happening internally and eliminate the causes of turnover one by one.

Once you’ve thoroughly managed and improved the four items above, it’s time to make a system and process with manuals and rules. By doing so, you’ll create a growth formula unique to your business that is replicable.

When each process is documented in a manual so that any employee or owner can replicate it, the quality of service provided to customers becomes stable.

Also, by clarifying internal rules, employees can work comfortably while adhering to the minimum rules, reducing turnover.

Even if things seem to be going well by chance, without replicable formula, it is not sustainable. Rather, it could actually make the business unstable.

I’ve seen many business owners who, just after finally achieving their dream of expanding to multiple stores, found themselves back at where they were at before expansion after being hit by mass resignations.

Even if you achieve balances by chance, but lack replicable formula, then in the medium to long term, a business will never be stablised.

To ensure steady growth and stability, creating a system and process through manuals and rules and the replicability they bring are essential.

Replicability through systems

If you can make this strong, you’ll be able to easily expand to two or three locations.

First, start by questioning common practices and build a thriving system based on principles and rules.

As for what business owners should do to create a thriving local business, it’s extremely simple: thoroughly manage and improve the four items introduced in this articles.

Then, create the system and process that incorporate the good practices with manuals and rules. It might be exaggerating to say, but, I think everything else is unnecessary.

In fact, you can grow your business to a nationwide scale within a few years.

A thriving system and process is built on principles and rules.

Question all common practices and cultural norms you’ve been following without thought and evaluate them from the perspective of whether they contribute to the four items.

For example, while morning meetings, end-of-day meetings, and meetings outside of business hours might be good if they improve performance, if they don’t directly reflect numbers, they shouldn’t be done. This level of judgement is crucial.

If you set the frequency and structure of these meetings before your company’s systems for customer acquisition and recruitment are in place, you’ll waste time and may stress out your employees, which could lead to turnover.

In a business where I used to work, there were morning meetings where employees were made to read the company’s philosophy. I’ve been proudly reading it since I joined.

However, I don’t think new or younger employees could fully internalize the philosophy as their own.

Personally, I’m grateful for the growth I’ve experienced at this workplace, but if I were to run my own business, I wouldn’t make employees read the philosophy, nor would I hold morning meetings.

There were also meetings held late or outside of business hours, but I didn’t think they contributed to profits, so I didn’t consider them indicators of an excellent company.

At Kesae Total Balance, we don’t have morning meetings, end-of-day meetings, or even meals together.

Regarding meals, I even question whether it’s enjoyable to eat with your boss. I think it’s more enjoyable to spend private time with family and friends, so I tell my employees that they’re welcome to have meals among themselves, but they don’t need to invite me.

I think it’s enough for business owners to attend when asked by employees. Through detailed rule-making based on the four items, Kesae Total Balance basically doesn’t experience turnover.

The factors hindering the growth of your local business may be the common-sense behaviours you’ve been following or the internal culture you’ve been implementing without questioning.

If you determine that something doesn’t contribute to improving the four items, morning meetings, end-of-day meetings, meetings, or meals together are unnecessary. Pursuing fulfillment or employee happiness may also sometimes be unnecessary.

Business owners are not employees. As the only decision-makers who can create manuals and rules top-down within the organisation, they should not create rules that deviate from the principles of management. Otherwise, the organisation will surely break down.

By thoroughly managing the four items and honestly facing them with open mind, I hope each of you will explore a system and process for growth based on logic, not by chance.