I'm going to be honest with you in that there are a lot of aspects to opening a business that I wish someone would have informed me of prior to opening our salon. That is of course an understatement.
It was nearly 10 years ago, I was in my first year of graduate school, my wife was working in a small salon gaining a lot of clients and retaining them. This spawned a dream. A lot of what I'm going to tell you you probably already know but I'm going to tell you anyway, even if you feel this is common sense and I’ll not argue it isn’t, you have to be reminded of the little things. I’m just typing here, please forgive my errors, my brain speaks faster than my fingers can type.
The little things are not so little if overlooked. There is no particular order as everything I am about to mention here is important (at least from my personal experience).
I'll start by saying that you should have a properly formed business structure. I recommend incorporating as a S-Corp. If you don’t know what that is you better look it up or hire an attorney to structure your business. This is the day and age of the frivolous lawsuit, local, state ad federal audits and regulatory agencies coming around. Trust me, I’ve had three lawsuits, two audits and regular state regulatory visits in my 10 years, we have never had a bad review (of course they found something that required us pay a fee, how else do they get funded) we have won two of three lawsuits as we are in the middle of one as we speak. Granted I am in California, all government bodies are broke and need to fine the small business to fund their luxurious amenities, yet I digress. If you have any amount of success you will have people who want a piece of it or think that they can manipulate you out of a quick settlement. If you have been open one day, because you are a business owner the majority of our society assume you are loaded with cash to spare. This goes for your employees and stylists too, you are immediately and forever thought of as being loaded as the owner, after all they are “making you money”. I would die surprised if you never have the opportunity to hear a stylist use those exact or similar words to you. There's a lot of resentment stylists have for the owners, it's a skill all in an of itself to learn how to educate your employee and stylists to the harsh realities of running a business, that's another topic for another day. Back to the lawsuits and audits, regardless how insane the claim, the citation or the findings you have to defend yourself and that costs time and money. It’s a reality of owning a business. I pray it never happens to you, I do. I pray you never see an audit, a lawsuit, or regulatory agent in your life. I hope I never see another one, I’m prepared if I do. The first time one walked in our salon I wasn’t, I'll never make that mistake twice. I was once told that there are two types of business owners, those who have been sued and those who will be. Do not let that scare you, you can’t give up on dream because of what might happen, that’s just plain silly.
Please know that I am not being negative here, I absolutely LOVE owning my own salon and business, it’s not all peaches and crème, you have be willing to accept the negative as well as the positive and believe this, I could write a series of novels on the positive side of business. For every negative I have a dozen positives. Moving on…
Make sure that you have ample start up capital. Far too many salon owners, for whatever reason, feel that all they need is enough money to open the doors and the rest will come naturally. Good luck with that. Do not start your salon unless you have at bare minimum 3 to 6 months covered financially before your doors are open. Be it cash, some sort of line of credit, whatever form of reserves, liquid assessable funds you have, you have to have that cushion.
When we started our salon we did not and we almost closed before we were open. We leverages everything we had, everything! Maxed it out. We had given the landlord our 1st month's rent, paid off the contractor, had a few sinks, a few chairs, a few products, the rest was to come by a prayer. Do I feel this is a requirement, or a deal killer if you don't have 3-6 months reserves? Let me just leave it by saying we had a scary first 90 days knowing that we were relying completely on what few clients would follow my wife from her existing salon (if you don't already know you better learn that statistic) and the hope of walk-ins.
That leads me to the 2nd item and that is to have a professional help you negotiate your lease. Property managers are in business to make a profit, they are experienced to get the most out of you, obviously that's a no-brainer. I'm not saying that everyone is like this however our property management company is a very large national company, they couldn’t care less about the little guy, they knew they were working with inexperienced I dare call us entrepreneurs at the time. They took advantage of this by adding a few clauses in that had we known better, or had a professional review for us we would have gotten a much better deal. It's like a mortgage to a house, an 8 inch thick set of papers with size 8 font worded like a legal Doctor Suess poem.
At first it seemed nice as we had 90 days free rent to build out with the next 3 months lease payments being prorated of sorts until finally in month 4 after being open we would be paying our first full lease payment. Even the smaller property management firms, or individual managers will write the initial contract weighted heavily in their favor, wouldn’t you?
This is going to sound horrible, as I hate to even say this because I am a trusting person, which unfortunately has caused me great harm, do not trust anyone. Always verify and get 2nd and 3rd opinions or else be willing to accept the fate that comes with the decision you're making. In business everyone has to earn trust, never give it out at first, and never for free. We were burned on our 1st lease in regards to the annual increases and certain amenities not being covered under the total lease amount. For example, know and understand triple net's, common areas, the various insurances, taxes and other fees, charges, or payments that may be required outside of the lease amount. In our ignorance 10 years ago we assumed that the lease payment was all encompassing. Now again, you may be saying that this is all elementary, these are things that you aware of, have thought of and ready for. I'm not doubting that I'm just saying think again make sure you know all your bases are covered with your lease agreement. Our lease was very expensive yet we were still stuck paying additional fees each month for taxes, trash removal, security, and other required payments. Needless to say my 1st year's budget was a bit off.
Which leads me to my next topic: your financial strategy. I already stated you need at least 3 to 6 months financial reserves before your doors open. It goes well beyond that. Sadly I can admit to having talked with, taught, learned from and worked with countless first-time salon owners (and other small business owners) who could not give me their 1st months, quarter, or yearly budget or other forecasts. Some would not know what a P&L, Balance sheet or chart of accounts were if they bit them in the buttocks. Having also worked very closely with longtime salon owners and major salon franchise owners whose names I know for a fact you would recognize, they would be willing and able to tell you practically an hourly breakdown in regards to what they are brining in and what they need to bring in in order to be successful, where it all goes and what percentage goes where.
It's not the most entertaining time that you'll spend as a business owner mulling over the books and I swear if I hear someone else say I can only do “stylist math” I'm not sure what I'll do! What exactly is “stylist math” anyway?
If you need to hire someone to help you do this then do it, even if you are 100% confident you can accurately run your books, hire a CPA or book keeper. Yes, it is an additional expense, but it’s an investment should you ever get audited. Trust me on this one, from experience. I did our books (completely) the first three years, we had our first payroll audit and I was ripped a part. I had missed and not fully understood a change in the employment laws for my state, nothing major but it resulted in fines that I could have avoided and saved by either hiring someone to do it for me, or as I now do, hire someone to check and correct my work once a month (or quarter).
Too many business owners try to do everything, which a vast majority of the time means that they are not truly accomplishing anything. Don't get me wrong you have the obligation to know every aspect of your business; even those aspects that bore you to tears or that may not be your strong suit. Allowing a trained professional to start you off the right way is vital.
You better have a very solid budget, financial analysis, forecasting and booking keep structure down solid before you open your doors. There is no way that you can successfully run a salon without having a solid grasp on where you are and where you need to go financially. If nothing else I would recommend purchasing a business planning software. If you have never written a business plan before use the software to guide you step-by-step through the process. It’s challenging and will better make you think of business aspects you may not have thought about before. Every legitimate business plan has a major section that covers all the financials. I have recently rewritten our business plan, as my strategic planning and prospects change regularly; my business plan is 57 pages long. I’ll promise you this if you needed to know anything about my business, where it's been, where it is and where it's going I can tell you. A business plan is not just for startups, you need to revisit your business plan at least once a year, your mission statement and vision statement as well! Do it! I was told one time that in business you can't know where you're going if you don't know where you been. Before you open the doors to your new salon you better have a solid business plan, marketing plan, legal entity foundation, systems, and financial structural design (of course each of these go many levels deep and detailed).
Understand your states employment law (all laws for that matter), or hire someone to coach you through it. I took a class offered by the Franchise Tax Board and IRS and I grilled them with 1001 questions to make sure I understood what I needed to understand. Had it not been for that class I would have lost one of our hearings and over $30K! I received 133 citations from one audit, because I knew what to look for I fought it and I got 113 dropped! I did make a few mistakes by not forcing our employees to clock out for a lunch or breaks, of course they took a lunch and far too many breaks in my opinion but it was on the clock, in my state by law they have to clock out ever so often and for lunch (it's not that cut and dry, but I'll save you from the specifics). I paid the state for a lot of lunches. Had I not known the law I would have paid over $30k instead of a couple hundred. It's an embarrassing mistake, I knew the clock out law but I failed to enforce it, little things mean a lot!
You better know the difference, all the pros and cons of whatever payroll structure you choose to start with. If its booth rental, commission, hourly, salaried plus commission, hourly plus commission, team-based pay, or any other. You better have a solid grasp on how it works and why you're using the method you are using and more importantly why it is the best method for your salon based on your strategic business plan.
To help you I recommend investing in a reputable salon point of sales and tracking software. There are many out there, do your research for the one that best fits your needs. I wish I earned royalties or commissions; however, we use a software called Millennium. Over the years I've used 3 others and researched as many as I could find, in my personal opinion this software covers everything that I need as a salon owner. It has a great to point of sale software, client database, employee database, scheduling, and very important it has a multitude of valuable reports, oh that the heavens for these reports! It has security, practically anything you can think of a salon and salon owner would need or want and much more. Do your own due diligence but make sure you have a good system.
Obviously I can go in to more detail about any of these experiences, I’ll spare you an even longer novel. I can’t believe how long this is now, I apologize for the garrulous rant here.
Trust me understand that none of these “issues” that are briefly covered here are new to you or are new aspects of your business that you haven't considered. If some are new, then wonderful. If I have caused you to rethink some aspects of your business, then mission accomplished. If you disagree with any of this, I’m sure you have your reasons. I would like to know what they are. I have so much to learn, I make sure I learn something new each and everyday! That is what gets me excited is that our industry (hair and business) is constantly changing, if you are not constantly changing and continuously learning and growing you’re dying. You can’t stand still in this industry or you will be left behind. It’s really that simple. Enough with the platitudes. I’d love to chat more, I promise I’ll try not to type another novel. |
