Cash tipping is becoming more antiquated in our highly digital world, and credit card tipping only causes delays and processing fees. Terry McKim, the director of marketing at Lords & Ladies Salons, and venture capitalist David Tashjian, came together to tackle tips with Tippy, a digital tipping platform made specifically for salons.
McKim came up with the idea to modernize tipping during a meeting with the stylists at Lords & Ladies. One of the salon’s most successful hairdressers burst into tears while explaining that her bank wouldn’t let her take out a mortgage on her home. Her cash tips were noncompliant, meaning she had no official record of her tip earnings to show the bank. McKim says that’s when the lightbulb went off.
Cue Tippy, an app that's designed to streamline the tipping process for any salon in the US, and to make tipping compliant—there is even a feature that creates an e-file of earnings for stylists to export to the bank when applying for a loan. When a salon signs up for Tippy, it’s sent a separate kiosk to sit beside their POS. All tip transactions are made from that device. Stylists download the Tippy app, set up their account, and connect to the kiosk in the salon and their personal bank account. With tipping digitized, clients are saved a trip to the ATM, processing fees are removed for salons, and managing tips is easier for stylists.
While recording tips means that they will be taxed, Tippy offers features to make up for the loss. When a client pays for their service at the kiosk, they swipe a second time to give a tip. The screen shows a picture of the stylist and a suggested tip amount relating to the price of the service performed. “The customer knows that the tip is going to directly to the stylist, and the stylist is immediately seeing it, so it is the digital process of tucking cash in their apron,” Tashjian says. The proof is in the numbers: In the beta tests at Lords & Ladies, tips went up over 30 percent, in effect almost replacing the tax.
Alongside growing Tippy, bringing compliant tipping to cosmetology schools is also at the top of the list for McKim and Tashjian. The discounted fee clients pay for their service goes to the school, not to the student. Students also don’t have a W2, because they technically aren’t employees, so many accept tips under the table. “It’s teaching students how to take tips the wrong way,” Tashjian says. The duo collaborated with lawyers and will start beta tests on a possible compliant tipping solution in a few schools, which they plan to launch in the fall.
“If we can help students to not have to work that extra job and focus on their craft and the industry, it will empower them more than just financially. It will empower them to be a part of the industry and continue the education and get the best job they can,” McKim says.