You’ve saved up or borrowed money to follow your dream and start your own hair or beauty salon. You’ve decorated your salon beautifully, got your logo, price lists and website designed and you open for business.
You do a launch party and get what seems like a lot of interest but the euphoria soon dies down and one cold Tuesday morning you are sitting in the salon with no clients, waiting for the phone to ring.
An unfortunate and familiar story and one that sends doubt running through your veins as you sit wondering when you will be able to start earning money out of your business.
Know Your Numbers
Easier said than done when you start-up but estimating your costs is essential when you are opening a new salon. You can predict what money you might be able to make, but reality is always different. And, although you may have got your startup capital costs sorted, you then have cash flow to factor in.
This is the amount of money you need to set up your business. ie. Get it to the point where you open your doors. This would include furniture and fixtures, stock, supplies and signage and all other things you need simply to get your business to the point where you can trade.
We have a magic number that we work to of between £20,000 and £30,000, but it can be done for a lot cheaper than that, especially of you start small by taking on a room in a complementary (but not competing) salon. This may seem like a lot of money but you can guarantee there will be costs that you may not have figured in, such as rent deposits, legals fees, insurances and licences, etc.
The second number (which is probably more important) is the amount of money you will lose before you start to make a profit. This could well turn out to be around the same amount as your startup costs (that’s what I account for). So, in your first year, you could expect to lose up to another £20,000 because your sales are lower than your costs.
But, don’t underestimate the time it takes to get your business making profit. When we opened one of our salons, we had a great start for the first month and half, followed by a very quiet four months, sometimes only taking 40% in sales of our weekly costs. It took us around 18 months to get the salon regularly making a profit.
Snippets Of Experiential Advice
- Don’t splash all your cash on your salon fit-out. I have seen a number of salons with some great kit, beautiful furniture, but no cash coming through the door. Keep your costs low and start small, especially if it leaves you with a buffer in your bank account.
- If you really think you can run a beauty salon better than other people, why not buy a salon that’s not doing that well? This is actually my preference, as long as the salon position is okay and the market and customer base is there. Very often, it doesn’t take too long to turn a business around and you will be starting with a customer base already in place. This allows for income and also a marketable database. IE. You are buying the goodwill and transforming the disgruntled clients into loyal customers with your superior salon.
- Always add at least 50% onto your cost estimates and work on the assumption your sales will be 30% less than you think they will. It may be more disheartening to start with but you will be working to a more realistic business plan, making you more conscientious. The chances are, these figures will be closer to reality than your original estimates.
When you start a new salon, positive attitude and entrepreneurship qualities are essential – but don’t be reckless when it comes to cash. This not only includes income from the sales you make but also ensuring you turn it into profit.
Most businesses fail because they run out of cash. Controlling costs but making sure you have cash in the bank as a buffer is a key ingredient in allowing your business to flourish.