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White PaperTo begin, you must consider your hours of operation carefully so you can accommodate the maximum number of clients during the business day. You undoubtedly already know that the some businesses including the beauty business isn’t a 9-5 kind of industry. Salons are now open seven days a week and on some of the traditional holidays, and their hours may be extended around prom time or during the peak wedding season. PricingAn important part of your business development is the appropriate pricing of your services. Set prices too high, and you’ll limit the number of people who can afford them; set them too low and you’ll limit your profit potential attracting perhaps the wrong client and possibly put the business at risk. Of course, the price the market will bear is very much dependent on the demographics of your service area. If you’re in an upscale area with larger homes occupied by people with more disposable income, you can price your services accordingly and even offer high-end spa services. But if the surrounding community is peopled by young working families, you’ll have to forego the spa services and concentrate instead on basic haircutting and color services that are affordably priced.When setting prices you must consider the factors that will influence your prices: labor and supplies, overhead, and profit. Labor costs for salons include salary and benefits costs for both your stylist/spa staff and administrative people. Your own salary should be included as part of this cost. This cost is generally expressed as a price per hour and can vary depending on the amount of time it takes your employees to cut hair or perform other services. In the commission-based model, each stylist receives a percentage of what he or she brings in, depending on the state laws. As seen in Forbes, commissions typically range from 35% to 60%. Some salons use a graduated commission scale to encourage stylists to lure more customers. For example, a stylist might keep 40% of the first $1,000 she brings in per week, and 5% more for each additional $1,000. If you’re paying more than 50% in commissions, you’re not making any money. Next you need to consider your overhead costs, which consist of all costs required to operate the business other than labor. This includes your mortgage or lease payment, utilities, and so on. It’s reasonable to estimate that your overhead will be from 40 to 50 percent of your labor and materials cost. The last part of the equation is profit. As seen in Entrepreneur, salon owners generally can expect to have a net profit of 11 to 15 percent. To arrive at the net profit you want, you have to add a markup percentage factor to your services so you’ll arrive at the approximate gross amount you’ll earn. One way to simplify the process of setting prices to the extreme is to figure out how much the salon needs to make for the year and do the math to arrive there. For instance, let’s assume you want the salon to make $52,000 per year. Here are the calculations you’d use to figure out your prices:
Whether you offer nail services is entirely dependent on the size of your salon and whether you can afford both the equipment and the salary of a nail technician at the outset. Today’s nail client is used to visiting shops devoted only to nail services, so she won’t be surprised if you don’t offer manicures, acrylic nails and tipping. But you may be able to get her to leave her regular manicurist if she sees that you’re offering the same service at your new salon. At the very least, you should offer haircuts and styling, basic perms, straightening treatments and highlighting. Choosing Spa ServicesWhen determining salon and spa services to offer, it’s important to weigh factors like equipment cost against potential profitability. For instance, you may want to offer hydrotherapy in your new salon. But hydrotherapy services require the greatest outlay of cash for equipment and facility development. So it might be a better idea to limit your spa services initially to massage and facials.Spa services can include:
A Day in the Life for a Salon OwnerEven though no two days tend to be alike for salon owners because needs of their clients vary so widely, there are certain tasks you can expect to perform on a regular basis. To begin with, you’ll probably spend a lot of time on the telephone every day, helping to book appointments, ordering supplies, talking to salespeople, arranging for in-shop or off site training, and so on. You’ll also have to make up work schedules, track receivables, monitor costs, dream up new advertising and marketing strategies, and possibly create daily or weekly specials that can be emailed to your regular customers to lure them in for additional services. On the personnel side, you’ll hire new employees, visit beauty schools to troll for hot prospects, conduct performance reviews, mentor young stylists and/or aesthetics technicians with minimal experience, consult with stylists or colorists whose efforts go awry, and mediate when tempers flare between staff members. If you are also a licensed practicing cosmetologist, you’ll be styling hair, applying color and rolling perms.Sounds like a lot for one person to do. Well it is, and that is why many salon owners often hire a salon manager to take over some of the administrative duties. This is a particularly good idea if you intend to continue to work behind the chair, since hairstyling chores alone can take up a lot of your time every day. And while it is possible to slip in some administrative tasks while you are waiting for someone’s perm to process or a late client to arrive, it can be difficult to switch gears and give administrative tasks like balancing the books the full concentration they need. The main thing that will influence business in your salon will be economics. After all, when the economy is riding high, people are willing and able to spend money on more expensive salon services, services that can easily be done at home, and luxury spa services like full-body massage and body wraps. But when the economy is slumping, those services may be considered a luxury rather than a necessity. As a result, customers may cut back on the frequency of their salon visits, or they may opt only for the basic services provided by one of the budget-conscious national chains. One thing to do is research your target market’s economic base carefully. If you’ve done your market research well so far, you already have some idea of the average income levels in your neighborhood. Now you need to look at data like the percentage of people who are employed full time and the types of jobs they hold. If the local market is driven by a lot of blue-collar, heavy industry jobs, a downturn in the economy could make cash tight and affect your ability to keep customers. Luckily most people still use salon services, even if it’s just for a basic cut, when times are tough, but they may go longer between services. So make a phone call to your city’s economic development office now to get a handle on the health of local industry. Day-To-Day FunctionsOne of the more challenging aspects of being a salon owner will be hiring and retaining good employees. This can seem like a daunting task, not just because both of these responsibilities can be very time-consuming, but also because there’s so much riding on employees’ skills. After all, your employees will be the front-line representatives of the business you have lovingly and painstakingly cobbled out of little more than some loans, some ingenuity and a lot of “shear” determination. Their ability and talent, as well as their attitudes and work ethic, will influence every aspect of the business, from client retention rate to the bottom line.Here’s a rundown of the salon and spa employees you’re likely to need for the day-to-day functioning of your new business. Owner/Operator You’re an employee too, so you’re first on the list. Your day-to-day responsibilities will include the overseeing of operations, making sure customer service is a top priority, making financial decisions, checking salon product and retail product inventory, handling personnel matters, hiring new staff, and assessing employee performance. All of this in addition to providing salon services if you’re a licensed, practicing cosmetologist. Salon Manager While it may be tempting to try to undertake all the management tasks of the new salon yourself rather than hiring a salon manager, try to resist the urge. Unless your salon is extremely small, the price you’ll pay for a manager’s salary is worth it. The manager can handle tasks like paperwork, record-keeping, employee scheduling and purchasing. He or she will also oversee salon maintenance and handle facility management issues. This person should have the authority to act on your behalf in your absence. Hairstylist/Cosmetologist Your stylists are at the heart of your salon staff. Every state requires stylists to be licensed cosmetologists, so you’ll want to check their credentials when they apply for a job. A cosmetology license typically allows the holder to cut and color hair and give manicures and facials. Ordinarily, additional licensing is necessary for services like massage therapy, but its possible your cosmetologist will be permitted to give hand and foot massages without extra licenses. Check with you state’s board of cosmetology to see what the requirements are. Shampoo/Salon Assistant This is the person who shampoos clients’ hair while the stylist is finishing up another client. He or she may also fold towels, sweep up hair clippings and provide other general assistance around the shop. Often these assistants are newly minted cosmetology graduates who are looking for experience in the industry, or licensed assistants who haven’t yet completed enough hours to become a fully licensed stylist. Receptionist In addition to greeting customers as they arrive, the receptionist answers the phone, books appointments, gives directions, cashes out customers and performs various other customer service duties like making coffee or even hanging up coats for clients. Manicurist As previously noted the manicurist may be part of either the hair salon or spa staff. This professional provides services like manicures; pedicures and acrylic nail application and tipping and must be a licensed cosmetologist. Aesthetician This is one of the most skilled people on your spa staff. Aestheticians hold a special license from the state so they can provide services like facials, waxing, massage and other specialty body-care services. Quite often this person also does makeup consultations and application, especially if there’s not room in the budget to hire a dedicated makeup artist. Electrologist This person provides hair removal services and needs an electrologist license in many states. Independent Contractors The independent contractor is a person who is not on your payroll but provides certain services in your salon, including hairstyling and manicuring. This type of business arrangement most commonly occurs when a cosmetologist rents space from you, but is responsible for everything from buying his or her own tools and supplies to paying taxes on earned income. Your WebsiteJust as you’ll access other companies’ websites for information about their products and services, you’ll want both prospective and repeat clients to be able to find you in cyberspace. Your website will be crucial to your marketing efforts and can be used for everything from posting your hours and driving directions to selling salon services.Spas come off particularly well in a cyber tour. Well-decorated private treatment rooms can communicate a feeling of soothing relaxation even on screen, while suggesting that a resort-style oasis of serene tranquility is no more than a phone call away. Because your website is virtual advertising, that’s available on demand 24 hours a day, it’s important to spend a fair amount of time considering what it should say. The best way to determine content is by thinking like a customer and answering the questions you think he or she would have when searching for a new salon or spa. Here are examples of the kinds of questions a prospective salon or spa customer might have: Salon
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Location, Location, LocationChoosing a location for your salon is one of the most important decisions you’ll make in the early stages of establishing your new business. Obviously, you’ll want to locate it in an area that’s easily accessible by highway or byway, with plenty of traffic and parking. The surrounding area should be attractive, well-lighted and safe. There should also be other retail businesses nearby because they can generate business for you even as they attract customers through their own doors.Typically, salons operate out of three types of establishments: Free-standing buildings, storefront properties and shopping centers like strip malls. Occasionally, salons are located in malls, but it’s actually more common for them to operate out of a free-standing building located on the perimeter or an “outlot” of the mall property because the rent is so high inside the mall. They’re also sometimes found on the ground floor of office buildings in large metropolitan areas where there is a significant amount of foot traffic during the business day. However, such locations may not be optimal if they’re in an urban area that doesn’t have much traffic in the evenings or on weekends. There’s one other type of property that deserves serious consideration when you’re looking for a place to set up shop. A facility that once served as a beauty salon may be a good choice for your new location. The good news is, a lot of the infrastructure you’ll need, including extra plumbing, special electrical outlets, and maybe even fixtures like salon stations and the reception desk, may already be onsite and available for purchase with the building. This bad news is, there might be a really good reason why the salon closed, like there’s too much competition in the area, the location is bad, or the previous owner had a poor reputation among clients and in the community. The same goes for a salon that’s currently in business but is up for sale. [ Back to White Papers ] |