Eric Taylor, Founder of Salon Republic
credit: Salon Republic
I studied finance at Pepperdine University in Malibu on a baseball scholarship. I wanted to be a professional baseball player, but, unfortunately, I hurt myself pretty soon after I got there, so my career in baseball was cut short and I needed to find a plan B. I’ve always been someone that thinks ahead, not in a sense of having a great strategy, but more because of the anxiety of not being what I’d like to be in the future. I kind of drew on some of my early influences, being my mom and my dad. My mom is a quite successful artist and an oil painter, who’s been able to accumulate a high-end clientele, I guess you would call them patrons in the art industry. I grew up watching her paint in her art studio and saw her prioritizing the quality of her business. As an artist, she couldn´t just paint something. It was always a question of whether she painted something that was good enough for people to spend money on. And if it wasn’t, that would mean, she wouldn’t sell anything. In other words, she wasn’t getting an hourly paycheck that she could rely upon. She had to find a way to do extraordinary work, because that was the only type of work that would sell. Only then, she would sell one or two, or five, paintings for a lot of money.
My dad was a real estate entrepreneur. He started a real estate business, which intentionally never became a big business. At his peak, he owned a few buildings, and he paid off all the debt. When he retired, he sold the buildings and had a nice nest egg. Similar to my mom, he was only successful if he did a good job of market his buildings or get a tenant to pay him rent. If he took too long to answer the phone or if he didn’t market the building properly, he wouldn´t make a lot of money. So in a very strict sense, I grew up in an environment where the amount of money that you’re making was directly proportionate to the amount of effort you put in.
I knew that if I wanted to be successful at something, it was on me to make it work. It’s not like there was enough money to waste my time after graduating from college. So I looked for businesses that had certain characteristics: an element of art and an element of necessity. I didn´t want to build something where I had to convince customers that this was something they needed. And the business idea also needed to allow a kid coming out of college, with a small budget, to have an impact. I couldn’t have chosen the airline business, because how would a kid coming out of college with no money have an impact in the airline business? Around sophomore year, I started looking into various industries and businesses and I spent a decent amount of time doing my research. I looked at things like the carwash industry or dry cleaning, but those were not interesting at all to me. At some point I started looking at the salon services industry. I was walking into salons introducing myself to the owners and just kind of started asking them questions. It was my favorite thing to do at that time. Right around that time, my girlfriend´s hairstylist moved to one of the first studio-based salons in the country. After she went and got a haircut, she called me and said “You have to check this out!”, because she knew I was looking at salons. I drove down the street, walked in the salon and I got it immediately; it totally made sense. It had all the elements of what I liked about the industry, combined with the characteristics of necessity that I was looking for. I happened to meet right there and then the barber who developed the concept originally about 10 or 15 years before. He had built about five barber shops and was struggling to constantly mitigate the arguing between the hairstylists. there was too much conflict between all the people working in the salons and he was spending all of his time as the owner and manager just trying to get everybody to getting along with each other. So he started putting partitions in between their stations. Those partitions kind of grew into fully enclosed rooms. Time passed and more and more barbers wanted to work in the barber shop after he did that, so he thought “Oh, maybe I’m onto something here.” As a result, he built the first studio-based salon in Lubbock, Texas, and filled it up very, very quickly. Then he moved to Dallas and expanded the business there.
When I met him, I told him, “Hey, look, I recently graduated from college, I studied business and finance, and I really like what you’re doing here. Would you mind if I just hang around? I’ll work for you for free.” And so I worked for him for free, while I lived in my parents’ house. I cleaned the salon and I would meet contractors at the salon to fix problems. I would also do some accounting for him; just all the different elements. It’s looks like a simple business, but there’s a lot of different elements to it. It’s a very people intensive business, and whenever you have a lot of people involved, it’s rarely something that can be standardized or computerized.
After about a year I moved back to Los Angeles to put up my own location in Studio City, which he gave me his blessing for. This location still exists, 22 years later. We now have 24 locations with about 2500 professionals in four states. Traditionally, salons have considered the role of the beauty professional as being there to support the salon, so they would look at the hairstylist as an employee. I have the opposite perspective, where the salon exists to support the beauty professional so they don’t have to invest in an own salon; giving them the push they need to get their business rolling without the need to invest in a full-on salon space. We´re a platform, where beauty professionals can come in, choose the space that works best for them and offering their service at the price point that makes most sense. They can take possession of the space and turn it into the work environment that they want. We’ve added a lot of different elements to the business, so it’s not just hairstylists. We have beauty salons, massage blades, facialist, estheticians, non-surgical medical services, brow services, waxing, lash services, all sorts of different types of services. We’re about 70% hair and about 30% other. It’s a full-service salon and we cover just about any beauty service that is out there, which is awesome. Ideally, we support them with amenities that help their business; whether it’s the towel service, that doesn’t cost them any money, or the supplying of the products at wholesale prices, which allows them to sell those products to their clients and make a lot more money. We also offer certain trainings and provide education on a weekly basis. We have technical and business classes for the beauty professionals, that they don’t need to pay for. Usually, that was something that needed to pay for personally, or they needed to be employed by a salon to get that kind of education.
The first challenge I faced when started this endeavor, was when I raised the money for it; it was extremely difficult. It was too early for banks to understand a business like this and just not the type of business that commercial banks were built to lend to. So I tried to find other partners, which I found, but they said, they were only willing to invest if I was able to raise all the money. Nobody was willing to write one big check. I got a bunch of people say yes, but when it was time for me to collect the checks, not one of them wrote a check. I eventually, after a long time, got that one person to invest in the business and give me the money, which all went into building the first location.
In hindsight, It was just a classic entrepreneur story where I had no idea what I was doing. I did things that were so dumb, that today I can only laugh about it. For example, back in the day, we used to supply the furniture for all the studios. I ordered all this stuff, and it was going to be delivered. On the day of the delivery, the truck pulls up to the salon, the delivery guy gets out of the truck, I signed off the delivery and I was waiting for him to get all of the boxes up to the second floor … which did not happen. He just dropped it on curb and was not willing to deliver it to the salon. And we´re talking about 80 huge boxes, stacked up on the sidewalk, six plus feet high, all along the busy street. I had to bring all those boxes in by myself, one by one. Or there was a time where I didn’t have enough money to have an expert coming in to lay the floor in the studios. I went on YouTube or whatever was available at the time – I might have just bought a DIY-book at Home Depot – so I could do all the janitorial myself. I was learning along the way, about all the things I just didn´t know better at the time. And a lot of that ended up being expensive, and painful.
I was the only employee for the salon for about two years, working one day at a time, 80 hours a week or more. I was doing everything; the accounting, cleaning the bathrooms. I just did whatever needed to be done, because if I didn´t do it, it would be going to cost me 1,000$ a month to get somebody to come in and clean the salon every day. And I would rather keep that 1,000$ in the business. The most important part, was the fact, that I was able to convince hairstylists to come and work there. The first salon has 40 Studios and I opened it with 20 beauty professionals, which helped me to hit about breakeven at the time. I was pretty happy about it, because if I didn´t break even, I didn’t have a lot of money to spare to pay rent to the landlord. I was really committed to take care of the beauty professionals all while trying to attract new ones – and I eventually filled it up.
credit: nice barbers
Four years after I opened the first location, I put up location number two in Beverly Hills and worked there full time for another couple of years. In those early days, when you’re trying to scale a business without a lot of resources, you’re doing every roll. And, you’re not doing many of them very well. Some of them you might be good at, but many you’re not. That´s kind of a point in the growth process of the business where you start to feel the headwinds and the friction pretty strong. It´s like the awkward growth phase of a haircut; you don’t want to hang in there very long. I was stuck in that phase for a while. I had to commit to hiring some people, even though that meant that my income was going to fall. But that’s how you get out of it. You have to commit to growing the business in making financial decisions that are costly in the short term. Four years later, I put up two more locations. By that time, I had a regional manager, each of the locations had a cleaning crew and I had a professional accountant. I was starting to delegate certain elements of the business to people who specialized in them.
Once you´re able to build an infrastructure to support a business, you need to allow the business to grow into it so you can justify the cost of the expansion. Thankfully, it’s been a pretty steadily increasing growth rate with Salon Republic and now we´re up to 24 locations today. We have 60 employees in our locations and 65 employees in a corporate office. I have a great CFO and a great CEO, which are highly paid and highly skilled people. I also have highly skilled real estate guy who talks to the landlord when there’s a problem. Interestingly, as things scaled up, it got easier on a day-to-day basis, but it also got much more consequential. If you make a bad decision, it could cost you millions of dollars in a consumed business. For example, you get to the point where you start borrowing money, because the banks are willing to lend, now that you don’t need it. So, now you have these loans, and then something like a pandemic is coming along and wiping out plans you may have. All of a sudden, you’re exposed to the risks of these kinds of black swan events.
But in regards to the day-to-day business: as long as you are the kind of person who likes to run a business and manage people, it actually becomes easier. Not everybody is cut out for that – and not everybody wants that. People oftentimes get themselves in trouble when they think that they want one thing, but they don’t realize what is required to get to it or how to maintain it. People like to talk about self-awareness a lot, but they obviously need to be realistic and aware about what it takes to achieve all these goals. It seems like freedom and flexibility to be able to go to the beach whenever I want. But most of the time, people don´t realize, that running a business like mine, means that I also become a slave to it. Because that’s really what I am. Don´t say you want to escape a 9 to 5, if you´re not willing to work more like a 7 to 9, or even more. Getting to the point where I was able to get some sense of freedom and flexibility, took me a couple of years. In the beginning there was just business and grinding. Honestly, I didn’t even really understand it back then. I just had an assumption of what I thought it was going to be like. I’ve always been a very dutiful and responsible person. And growing up with ambitious parents like mine, definitely prepared me somewhat for what it meant to go out on my own. But there was still so much I had to learn along the way – also by making a lot of mistakes. I chose to create something, and then to take care of it, in order to get the life that I wanted to end up with.
One of the things that surprised me early on, was how few people in their respective professions are very good at what they do. For example, attorneys. I assumed that if you have a law degree and you pass the bar, that you are good enough to do certain things. And that’s simply not true. I would say there’s probably 20% of attorneys, who I would trust to do basic things. Some people just aren’t very good at what they do. Maybe because they don’t care. Maybe because they don’t have to be, because somehow, they continue to get clients. The same goes for accountants and architects, for almost anything. They might have gotten a certificate or a license, but that doesn´t mean anything, if you´re not able to take care of your clients and support them in a way that makes them feel being in good hands.
The first lawyer that I got was absolutely horrible! She obviously had her license to practice law, but she did a horrible job serving me as her client. But I didn’t know enough to recognize it. When I signed a long-term lease for the first salon, it turned out that she had not done a lot of leases before, even though she said she did. But she said it as an attempt to win me as a client. I also had bad accountants, bad architects. The difficult part is, that is really hard to tell. If you’re not an engineer, how will you know if the engineer you’re interviewing is going to be a good engineer? You just assume that he knows what he’s doing.
Nowadays, I don’t hire anyone anymore. I have people with this expertise working for me full time. I have a great CFO, who is more skilled in accounting than any accountant we could ever hire. But we still need auditors and we still need tax people. So now it´s part of his job to find the best auditors and tax people. I trust him with this. I put a lot of effort into finding him though, and I pay him very well. Same goes for our head of real estate. He knows more than just about all the brokers out there. But he, of course, can’t be the main point of contact for all the landlords when looking for new spaces, so he has to hire the broker network. And there’s nobody better to hire the broker network, then a true professional and expert on real estate. That’s really why things got a lot easier for me. If you do a good job of hiring on the essential human infrastructure inside the company, you no longer have to do things that you’re not an expert in. I still very much see what’s going on, which is very important to me. I am that kind of a CEO; I never trust 100%. I want to be aware of things. I don’t think that’s a wise thing to ever trust 100%. I trust 90%, and keep the other 10% of a held back to make sure that they’re doing their job. Because my role is first and foremost my duty to the company to make sure that we’re performing and executing properly.
Putting up a facility that can run profitably in the long term, is really what business is about. I have a tremendous amount of respect and admiration for the beauty professionals and what they do, but it’s very different from what I do. From my perspective, it’s about cramming the desires of a customer into the ability to supply it in a way that makes sense. I don´t have to cut the customers´ hair myself, as long as I know how to arrange the business and the customer is satisfied and gets what he’s paying for.
Running a hair salon business, without being a hairstylist by trade myself, is both a challenge and an advantage. One of the reasons I liked this concept to begin with, was the fact that I was a business minded person with a sense of style, art and humanity. Sometimes, the business side gets a bad reputation for being too numbers oriented, although it really is not. In order to be successful in business, you need to be very human. I actually see it as an advantage that I wasn’t somebody who first intended to be a hairstylist, then became a hairstylist, learned all the skills of being hairstylist, and then tried to transition into being a salon owner and business person. Those are very different things. It’s kind of like the difference of being the oil painter and the gallery owner. Two very different skill sets are required to make it work. They can complement each other, but creating art and selling art are two different skill sets. And so, I think that I am a pretty good salon owner and I think I recognize pretty well what the beauty professionals need. I do understand what makes them happy and what makes them successful. And I have done a pretty good job of figuring out how to satisfy that in them.
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