Money Matters

Opening Your Own Salon [A Resource Checklist to Determine If You Are Ready]


Do you have what it takes to open your own salon? Or are you at a loss as to where you should even begin? What you need are the general principles and practices of salon ownership and a checklist to evaluate your. With all of the media available today, resources abound when it comes to opening your own salon.

So, you’ve decided you want to open your own salon. Now what? You’ll need to form a business plan, find a location, get a loan and licenses, not to mention hire employees, decide on products and education, buy furnishings, and run the business. There are numerous resources available when it comes to exploring how to begin the process of owning a salon.

Forming a Business Plan

Forming a business plan will show you on paper how realistic your goals are. It is the chief instrument for communicating your ideas to others — businesspeople, bankers, partner, etc. First you need to ask yourself what, specifically, are your short-, medium-, and long-term objectives? Determine what services you want to offer and what volume you can realistically provide. An effective business plan can be simple and practical, and shouldn’t be formal or complicated. Establish your objectives for each goal. A business plan should include the following: a description of the business and its products and services; your market — who and where your customers are; projected income and costs for the first five years (a 10-year forecast of the economic future of the community can usually be obtained from the local Chamber of Commerce or Economic Development Agency); and your business goals and support documents, such as resumes, leases, and demographic studies.

Next, develop a series of strategic agendas, backed by practical tactics or action plans that will allow you to achieve each of your objectives. Establish an implementation process or timetable for completing your list and create a budget for your plan.

Types of Salon Ownership

The type of ownership you opt for should be determined in consultation with a tax advisor and/or lawyer.

A sole proprietorship is a business owned by one person who is in complete control of the business, receives all profits from the business, and is responsible for all debts and losses.

A partnership is a business owned by two or more persons. All costs of opening, operating, and maintaining the business are shared by the partners as agreed. Partnerships can be between persons with different management or technical skills. One maybe an excellent designer while the other may have management ability. This relationship builds on the strengths of each.

A corporation is a legal entity, with a charter or articles of incorporation describing the purposes of the corporation and the structure of the company. A corporation is actually owned by its shareholders. This structure may be used to protect personal assets or for certain tax benefits.

A franchise is more a form of operation than a form of ownership. A franchise is simply an operating agreement in which a fee is paid to a parent corporation in exchange for fixtures, promotion, advertising, education, and management techniques. The owner of a franchise agreement can be a sole proprietor, partnership, or corporation.

Finding a Location

The two major aspects in locating your business are deciding on the particular community and choosing a site within that community. In choosing a community you will consider many factors. The important concerns are:

1) Is the population base large enough to support your salon?

2) Does the community have a stable economic base that will promote a healthy environment for your business?

3) Are demographic characteristics compatible with the market you wish to serve?

You must know the demographic profile of your potential customers in order to properly evaluate a community for location. Professionals, business executives, and their families differ from blue- collar workers in their purchasing interests and needs, for example, a suburban clientele usually will differ from one that comes from a densely populated urban center; families have different interests and needs than singles; and so on.

Once you’re established in a location, you must remain aware of the community’s demographic characteristics. When you are satisfied that the community you’ve chosen has the qualities needed to support your salon, you must choose the site at which you will locate.

For a nail salon, site location is probably the most important factor for determining success. Studies have shown that poor location is one of the chief causes of all business failures. The cost of the location often reflects the volume and/or quality of the business you will do.

Also, be sure you know how much competition you will have and which services they provide.

In addition, make sure your location has:

Parking for customers and employeesRestrooms and adequate plumbingHeating and air conditioningAbility to ventilate — can you exhaust fumes and dust without contaminating another business? (There are often particular HVAC requirements for nail salons to protect staff and neighbouring businesses from salon odors.)LightingStorage space, closets, and shelves Room for an officeFor each location you consider, find out if there are any hidden expenses you will be expected to assume, such as separate water, other utilities (gas, electricity), maintenance, cleanup charges, or association fees.Good resources are your real estate agent, a real estate lawyer, your city clerk’s office, local media, and community groups such as chambers of commerce.A reputable commercial real estate broker can help you select a location, as well as assist you in negotiating a favorable—or at least acceptable—lease or rental agreement with better conditions for you.

Finding a Loan

After you have found a location, determined a suitable and affordable floor plan, determined the cost of fixtures, and estimated the capital improvements necessary, you must determine how much money you will need to borrow.

Armed with this information, you can approach a lender for a business loan. Keep in mind that the type of ownership you choose — sole proprietorship, partnership, or corporation — may affect a bank’s willingness to loan you money.

A sole proprietorship is the easiest, quickest, and cheapest way to start and run a business and it is the way most businesses start However, a bank may be reluctant to loan money to a business that is dependent upon the skills of a single person.

If you choose a partnership, you must create a written agreement before going into business together. Banks are more likely to invest in a partnership than a sole proprietorship, especially if one partner has experience and/or money.

The bank will request certain information, which should already be included in your business plan. To process a loan application, it will generally need a 12-month projection of earnings, your profit and cash flow statement, and your five-year projection of earnings.

It is important to note that you should not sign a rental agreement until you have received your loan approval. Your accountant should advise you of the operating capital needed to open the salon and to pay the expenses of your business for at least six months. Generally, you must be willing to invest some of your own money in the salon for an institution to grant a loan.

Obtaining the Right Licenses

Most cities and counties require business operators to obtain various licenses or permits. These may include:

  • Business license, obtained from the city or county
  • Establishment license from the state board of cosmetology (your salon must meet its requirements, which

You may want to hire an expert in designing salon space as opposed to a general cabinetmaker.

The majority of your decorating budget will be spent on big basics, such as carpeting or floor tiles, wall coverings, furniture, and lighting. The remainder will be spent on the finishing touches.

Working with a budget means taking care of the essentials first. Find out if you need a permit for the kind of ventilation system you want to use, or to install electric fixtures or plumbing. Find out if a special restroom for the handicapped is required.

Before you start, make a “wish fist” of everything you want or would like to have in your salon, then balance your ideal decorated salon with your budget. Be sure to take into consideration all of the services you want to offer and the number of stations for each service. Consider all aspects including the reception and retail areas.

When it comes to buying furniture, look at function, form, and quality. Tables should have all the storage space and compartments you need, and should look good and blend with your existing decor.

Besides manicuring tables and equipment, you’ll need to equip your reception area. You can include fixtures such as partitions, paneling, signage, storage shelves and/or cabinets, lighting, and all shelves, tables, stands, wall systems, and showcases and related hardware for product display.

Hiring Employees

Your next critical activity will be hiring your employees. Your employees must reflect the image and professionalism you want for your salon. There are several positions you may need to fill, including a receptionist, a salon manager, and (of course) nail technicians.

First, you must prepare a job description for each salon position — receptionist, nail technician, other technicians, and even for a manager if you decide to have one.

In as much detail as possible, identify what skills, attributes, and duties will be expected for each position. You must then create a questionnaire that addresses and covers the essential qualities and skills you want in an employee. As a minimum, you will want to:

  • Check references.
  • Acquire a good understanding of the person’s work habits (punctuality, ab­sences, willingness to take on extra work, and personal grooming).
  • Acquire an idea of the individual’s relationship with coworkers and customers. You must also evaluate the person’s interpersonal skills.
  • Know the level of technical skills required by the position you are seeking to fill.

Next, you will need a job application form. You can purchase generic printed applications from your local office supply store or you can have a printer prepare your own personally designed application on your letterhead with your logo, which is recommended since it indicates a degree of professionalism to potential employees.

There are a variety of ways to compensate employees. The standard com­pensation methods are:

Straight salary: The straight hourly salary is the simplest method to administer and must conform to the federal minimum wage level. This is the least common compensation method for nail techs. The main drawback to a straight salary is the lack of incentive for the technician. But, there are some advantages to the salon owner, such as having someone available during set hours for walk-ins or emergencies. However, a straight salary limits the nail techs’ opportunities to increase their income.

Straight percentage commission: Once the technician has achieved a certain customer base and level of income, it may be in the salon owner’s (and employee’s) best interest to go to a straight commission schedule may include providing a water supply, drinking water, hand washing and toilet facilities, and properly maintained equipment)

  • The required license for each nail technician for your state

Salon Decor

Customers who walk through your doors are there to treat themselves. They’ll want to be comfortable, so the way you furnish your salon will have plenty to do with your clientele.

Getting Started: A Checklist for Potential Salon Owners

Do you have what it takes to open your own salon? The most important ingredient to your eventual success will be the soundness of the planning you did. But if you’ve done your homework well, your losses or setbacks will be minimal, Here’s a basic checklist to go through to make sure you are ready.

Do you have a business plan? A business plan is a detailed roadmap outlining every conceivable aspect of your proposed business venture. This is the order of the plan as it should appear on the bound copy, title page; statement of purpose; table of contents (prepared last); description of business; market analysis; market strategy; design and development plans; operations plan; management structure; timetables and schedules; potential pitfalls; community benefit? financial data; and supporting documents.

Have you decided to run your own business or form a partnership? Remember; a sole proprietorship means you have complete control of the business, while a partnership means all costs including opening, operating, and maintaining the salon are shared.

Be sure you have figured out what type of salon you want to open. Specifically, you’ll need to know what services you want to offer and whether you have competition. If so, you may want to think about offering unique or specialty services.

Have you selected a name for your salon? Selecting a name is important to you and particularly relative to advertising.

Have you decided on a location? Scouting not only in the city you desire but surrounding ones as well will give you a better idea of the market you’ll be serving and who your competitors are.

Have you determined how much money you will need to borrow? First, you must find a location, determine a suitable and affordable floor plan, determine the cost of fixtures, and estimate the capital improvements necessary.

Do you have the right licenses?

You’ll need a business license, which you can obtain from the city or county an establishment license from your state board of cosmetology and the required license for each nail technician.

Have you decided what kind of decor you want for your salon? Do you want to hire an expert to design your salon space or a general cabinetmaker? Have you made a budget which outlines how much you’ll need for the essentials and finishing touches?

Have you decided which employees you want to hire? Or will you run a booth rental salon? Do you have a comprehensive job description prepared for each position? Do you have a job application form?

Have you determined Sow you will compensate employees? Will you offer straight salary percentage commission, some combination of those, or booth rental?

Do you have an advertising campaign in mind? This will be crucial in developing and recruiting new clients. Besides word of mouth, other forms of promoting your salon are through direct mailing, newspaper and magazine ads/television and radio ads, billboards, and various other public relations efforts.

Are you prepared for the day- to-day operations? You must be prepared to handle all issues that arise and need to keep abreast of topics such as tax laws, job safety, labor laws, managing employees, business insurance, and recordkeeping.

Do you know whom to turn to for different kinds of advice? An accountant can tell you what a bark is likely to lend you, inform you about types of business ownership, and evaluate your rental agreement. An insurance agent will provide advice on insurance needed to safely open and operate your business A lawyer can advise you on the legal obligations of business ownership. A distributor sales consultant is the link between the manufacturers of products and equipment and the salon.

Sometimes a salon owner will provide a “draw,” which is an amount that she guarantees an employee will be paid monthly. However, the employee must earn that amount. A dual percentage system allows the nail techni­cian to make a different percentage for different services, while a sliding percentage allows the nail technician to increase her percentage as her gross earnings increase.

Booth rental: If you rent space in your salon to nail technicians, they are not considered employees. The booth renting nail technician pays the owner a flat rental (just like any tenant). Normally, a technician renting space from a salon supplies her own furniture, teleph0one, advertising, supplies, towels, insurance, laundering — just about everything. However, this is all subject to negotiation and should be all spelled out in a formal, mutually signed contract. The technician also normally sets his or her own working hours.

Advertising and Promotion

To keep up with rising expenses and to improve your overall profitability, you will always need to be actively involved in developing and recruiting new customers.

During your initial planning process, you identified your target clientele and the services you want to offer. If you are just starting out, you cannot count on word-of-mouth referrals and shouldn’t count on walk-ins or someone finding you by chance. You must take the initiative to actively cultivate new customers.

The best form of advertising is word of mouth. Satisfied clients tell others about your salon, as do unsatisfied clients. Advertising in the printed media can be very effective. Direct mail advertising involves sending postcards or flyers to prospective clients encouraging them to try your salon. Daily or weekly newspaper ads can create an image in the consumers’ minds through the repetition of your name and logo. Magazines or periodicals that reach the types of clientele you are trying to attract can also be effective.

Television and radio ads can be effective but costly. Billboards, bus stop seats, and public relations efforts, including holding styling shows or fund- raising events for charity, can also promote your professional pursuits.

Involvement in community affairs, the chamber of commerce, or service organizations can also promote your personal and professional image in the area.

Plan a yearly advertising budget and stick to it. Alternate expensive forms of advertising with inexpensive methods. If one form of advertising works, repeat it. If something fails, drop it. Consider surveying your clients once a year for their opinions about your services, your community image, and your advertising program.

Salon Operation

Many day-to-day tasks and functions are necessary to maintain a smooth regularity in your salon. To be successful you must be prepared to handle all issues that arise, including such common business annoyances as bounced checks and customer complaints.

Continuing training is vital if you and your employees are to stay abreast of changes and developments in your field. Trade shows are excellent sources of information.

You will also have questions and need advice on topics such as tax laws, job safety, labor laws, managing employees, business insurance, marketing, and record keeping, to name a few. When in need of assistance, it is best to contact your local chamber of commerce or the associations listed.

Remember, as with any business, you will need to grow and withstand the competitive nature of the marketplace. As a salon owner, you must be prepared to give all you’ve got to the building of your business. But most importantly, be prepared to take risks and enjoy the challenges.

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