2 MONEY In: L4 MAKING MONEY 2

Factors Influencing Commission Structures

Commission structures vary depending on several factors: 1. Length of employment 2. KPIs (Key Performance Indicators/performance goals) 3. Total sales volume 4. Business affordability

Flat Rate Commission

A commission structure where an employee earns the same percentage every pay cycle. This rate does not change unless the employer officially adjusts it.

Pre-calculation Deductions

A practice where businesses deduct service charges or product costs from the total service price before calculating commission. This results in commission being earned on the net remaining amount.

Sliding Scale (Tiered) Commission

A structure in which the commission percentage increases once specific sales goals are achieved; higher sales levels trigger a higher commission rate.

Typical Small Business Profit Margins

Small businesses generally operate with a profit margin of approximately 5-10\%. This reflects that businesses often retain less profit than generally expected.

Impact of Business Profit Margins

Profit margins directly affect employee earnings by influencing: - Commission structures - Promotional opportunities - Service charges

Business Owner Financial Realities

Not all owners make significant money immediately; many spend years building the business and reinvesting profits back into the company.

Growing Income in the Beauty Industry

Increasing earnings in this field requires four key elements: 1. Time 2. Consistent effort 3. Skill development 4. Building a loyal client base

Factors Influencing Commission Variability

Commission structures often vary based on several key factors:

1. Length of employment

2. KPIs (performance goals)

3. Total sales volume

4. Business affordability

True or False: A flat rate commission changes with each pay cycle.

False. A flat rate commission means you earn the same percentage every pay cycle; it does not change unless the employer officially adjusts the rate.

Deductions Before Commission Calculation

Many businesses deduct service charges or product fees from the total service price before calculating commission. Consequently, the commission is based on the net remaining amount rather than the full price.

Sliding Scale (Tiered) Commission

A structure where the commission percentage increases once specific sales goals are met, allowing employees to earn a higher percentage as they sell more.

Typical Small Business Profit Margin

Small businesses usually operate with a profit margin of approximately 5-10\%. This indicates that businesses retain significantly less profit than most people assume.

How Profit Margins Affect Employee Earnings

Business profit margins directly impact an employee's financial growth by determining:

• Commission structures
• Promotional opportunities
• Service charge policies

True or False: All business owners make a large amount of money immediately.

False. Many business owners spend years building their company and reinvesting profits rather than taking large personal salaries.

Requirements for Growing Income in the Beauty Industry

Increasing earnings in this field is a gradual process that requires:

• Time
• Consistent effort
• Skill development
• Building a loyal client base