Sharp idea for a start-up

Author: Rebecca Knight

Moments of inspiration sometimes occur at odd times. For Joanna Meiseles, the idea for her multimillion-dollar business struck her after she took her son Ben for his first haircut.

Ms Meiseles was determined that it would be a special occasion, just as his first smile, first steps and first word had been. "Ben was my first baby," she says. "He had these beautiful golden brown curls that were halfway down his back." Planning to document the event, she strode into the salon – armed with nappy bag, camera and Ben in tow – expecting the stylists to fuss over her one-year-old baby.

Instead, they scurried into the back room; it appeared no one wanted to give her boy a haircut. After some negotiation, a stylist was summoned. She propped Ben on a swivel seat on top of a couple of telephone books. Ms Meiseles kept one hand round his waist to keep him from squirming and toppling over. "It just wasn't what I wanted it to be," she says.

Dejected, she and her son returned home. "I told my husband, 'I should open a children's hair salon'," she recalls.

Today Ms Meiseles is founder and president of Snip-its, a fast-growing franchise of children-themed hair salons in the US. The company has 62 salons – mainly in New England but also in states including Arizona, Nevada, Texas and Florida, and cuts the hair of more than 1m children annually. Last year revenues were $20m.

"When I first came up with the idea, I felt it was something I could do: it was a business that I could wrap my arms around," she says. "It's not rocket science – it's a hair salon, for crying out loud."

Ms Meiseles was born into a showbiz family in Beverly Hills, California. She was the youngest of four children, and her father was a film producer while her maternal grandfather was the actor and comedian Jack Benny. She graduated from Duke University in 1987 with a degree in African studies, before moving to Boston with her husband, a software entrepreneur, and taking a job managing an upmarket shoe store.

'It's better to be short-staffed than to give bad haircuts'

Remember who's boss. "When I first opened, the stylists were dictating how the business was run. They'd say: 'I'm not working on Saturdays or Sundays'. or
'You have to pay me time-and-a-half on weekends.' It was the tail wagging the dog. I was inexperienced and I let people tell me what to do."

Staff with care. "There are a lot of hairdressers out there. I recruit at beauty schools. I am looking for the right kind of stylist. They have to want to be there. We can train on the technical stuff."

Don't be afraid to fire people. "It takes a lot to make a business run smoothly. In the first one to two years, you have 300-400 per cent employee turnover. Then in the third year, it's maybe 10 per cent. But if someone isn't working out, let them go. It's better to be short-staffed than to give bad haircuts."

Make sure you have plenty of money. "It's hard to weather any storm if you're undercapitalised."

After seizing on the idea of tapping the $5bn US market for children's hair care, she began soliciting ideas from young mothers. Many of the hallmarks of Snip-its – from the Magic Box that dispenses a prize in exchange for a lock of hair at the end of an appointment, to the parents' chair at every styling station, to ease the anxiety of scissor-shy children – she got from those early conversations.

Over the course of two years, she raised funds to launch the business. In addition to $100,000 of her own life savings, friends and family provided $300,000. Ms Meiseles enlisted the help of a friend enrolled at Harvard Business School to assist her in writing a business plan, and consulted the owner of a children's salon in her native Los Angeles to help her determine which hair supplies were best for kids and to get advice on how to recruit and train staff.

She hired Bruce Barry, a Florida-based animator, to design the interior of the salon, which Ms Meiseles "wanted to feel as if you were walking into a Saturday morning cartoon". Bold, primary colours dominate. In the waiting area, wheels whirl and toot at a child's touch. Mr Barry also created characters – Snips, a friendly pair of scissors, the adventurous Flyer Joe Dryer and the sassy Clip-ette Sisters Marlene and Charlene – who are featured in video games and cartoons that play on screens around the salon.

When the first salon opened in 1995 at Shopper's World, a mall in Framingham, Massachusetts, it was packed from the start. But things did not run smoothly. "I spent so much time counting on success, but then the reality sets in. You have problems – a stylist who is not doing well, customers who aren't happy," she says.

Staffing was a challenge. Ms Meiseles recalls one weekend in those early months when only two of eight stylists arrived for work. On another occasion, a stylist was over-zealous with a one-year-old's first haircut. "The stylist kept cutting and cutting. When she was done, the little boy had a buzz cut. The mother was crying."

Ms Meiseles describes these as "light bulb moments". She drew up a set of customer service protocols for managing waiting times and created training materials specifying how a baby's first haircut should be done. Today the salon offers a commemorative first haircut package, complete with a photo and a certificate of bravery.

"I wanted my stylists to understand it's a special occasion," she says. "This is an important experience for the parents. It might as well be a bar mitzvah."

In its first year, Snip-its lost money, mainly because of poor expenses management, says Ms Meiseles. She did not charge enough for haircuts ($9.95 as opposed to today's $17), wage costs were high and she was paying too much in commissions. Two years later the salon made $500,000 and has been profitable ever since. She opened four more salons in Massachusetts in succeeding years and between 2003 and 2006 the five company-owned salons brought in $1.8m in revenues.

In 2003 Ms Meiseles turned the business into a franchise operation. She hired a lawyer and a newly minted business school graduate to help her build the programme and come up with extensive marketing materials and operating manuals. The key to successful franchising, she says, is choosing the right owners. In Snip-its' case, this typically means a couple with small children, because "they 'get' the concept right away".

When launching a franchisee salon the company initially invests $200,000. Royalty fees are 5 per cent in the first year and 6 per cent thereafter. There are 42 franchisee operators in 23 states, with 10 more in development. Ms Meiseles owns a 40 per cent share in the company; another 40 per cent is held by friends, family and franchisees; and 20 per cent by venture capital investors.

Last month Ms Meiseles, a mother of four, took herself out of the day-to-day running of the business, handing over the chief executive reins to Jim George, former chief operating officer.

Instead, she will concentrate on building the brand. "Right now, the focus is on growing the business using the same model of franchised hair salons," she says. "My theme song is that Ringo Starr song, 'You have to pay your dues if you want to sing the blues'. I've been doing this for 15 years, and every day it's something different."