Tom Schmidt on trust, karma and doubling the size of his company in three months
In the last quarter of 2003, Tom Schmidt moved his company’s offices up the street from Urban Retreat, his original salon and spa business in Minneapolis, and boosted his office staff to 12 from two. He opened the Pagoda, a spa and hair salon in Uptown. He opened a second Schmidty’s, his salon and spa exclusively for men, in the downtown Minneapolis Marshall Field’s store. He plans to add a half-dozen more Schmidty’s locally before raising money and expanding around the country.
When asked how he’s done it, he laughs, grimaces, brushes his hair off his forehead, shakes his head and says, “Let’s just say it’s been an interesting year.” He dreams about someday retiring and just doing funky haircuts again — on dogs.
“I keep imagining these little niches. I don’t know why. I dream about them.
I believe that the spa end of the industry has not been pursued here the way it has in other cities. So I just decided I needed to do something about it. I was not being the most intelligent person in the world. I was just noticing.
As a hairdresser for 30 years, my clientele is starting to age. At our age, we want more service, less chaos. I geared the Pagoda to our aging clientele. We consciously are making Urban Retreat feel younger.
I’d been looking for a location for the Pagoda for six years. I was involved in a couple of deals that didn’t come through. Then the old library came up from sale. Nothing there really fit it before, but our business fits. Its size, it’s 12,000 square feet. Its wonderful location. It’s well known, with lots of charm and character. I just had a feeling.
I found a business partner. He’s a commercial real estate guy. I asked him if he’d help us find a site. He slowly came into the business. We couldn’t get the financing. It cost over $4 million for the total project. The buildout was more than $2 million. The heating, air conditioning, plumbing, all that is very, very important for a spa. He’s more involved that he ever thought he’d be. He took an equity stake.
I have another partner in Schmidty’s. Having business partners is a new phase in my life, and one of the more challenging parts. I do things based on intuition. The bank and partners are very difficult to me. They don’t do things that way. Not only now do I have to keep customers happy and staff happy. Now it’s partners that I have to keep happy.
Communication is everything. I just want people to trust me. I’m a trustable person and I trust others. I just don’t get how people don’t automatically trust, but they need information.
There’s a part of me that wants to believe in people. That’s the last thing I want to lose. People say they get jaded, but if I lose that I don’t know where I’m going to go.
You might get slapped. You might lose money. But what’s the worst thing that’s going to happen? I’m never going to get myself in a position where I’ll go broke. What’s the most I could gain—I don’t know. That’s the better question.
I’m amazed by Schmidty’s. We doubled the company overnight with the second Schmidty’s and Pagoda. We’ll be between $8- and $9 million this year. We did $4 million last year.
I think karma is helping me out here. I believe what goes around comes around. People don’t come along and buy hair salons and let you retire someday. No one’s going to buy Urban Retreat from me. I do believe that Schmidty’s is my karma.
I was watching the market. Thirty years ago, the barber was important then. The barber industry was even bigger than the beauty industry. That faded over time, but where did men go? They started going to stylists and salons. They went to where their wife went, but they didn’t like it.
I just watched this and it kind of started eating at me. One day about two years ago I was looking across the street from Urban Retreat, and a for sale sign was up, and I thought what a perfect place to try it. I got in trouble. I was financing out of Urban Retreat, out of my personal pocket, and I got some money from the bank. I didn’t expect it to cost as much as it did, $400,000. I oversimplify everything in my mind.
That was a very important lesson, on a small scale. It was a good practice session for the Pagoda.
Schmidty’s was just busy overnight. We did way better than I could have imagined. We then had all sorts of people wanting to invest, wanting to franchise. So we decided to open a number of them, first corporate and then we’ll decide whether we’d do franchising. In my mind I want to open eight to 12, at least five to six local. I think Maple Grove, Woodbury are wonderful locations. 50th and France in Edina, Grand Avenue in St. Paul.
Schmidty’s is my retirement. Pagoda is my ego. I’ve always wanted to be the best. I feel that Pagoda is stretching out to get there. But the real money and the future of the business is Schmidty’s. I really believe the future is the men’s business because it’s been abandoned.
Right now with everything going on and how hard it all is, I don’t think about the far future. I’m just trying to get from one thing to the next. I’ve always had the capability of working hard. Working hard for me has always been my backup to working smart. I’ve been so far able to do a little of both.
When this is all over, I want to open a dog business someday. Doing really funky haircuts on dogs would be really cool, not the traditional cuts.
[contact] Tom Schmidt owns Urban Retreat, the Pagoda and Schmidty’s in Minneapolis: 612.825.5222; www.pagodaspa.com
— Interview by Beth Ewen
