How to Create a Salon Business Plan

This is a great time to be in the salon business. With the world starting to slowly open up, demand for salon services is picking up again. But it’s also a highly competitive business. Whether you are in the beauty salon or hair salon business, to succeed, you need a solid business plan that can help you address customer demands and achieve a competitive edge.

What is a Salon Business Plan?

A salon business plan is your blueprint to guide you through the process of starting and managing your establishment. It provides a roadmap to set up, structure, and run your business. In the startup phase, the salon business plan helps you outline your key objectives with the business. It also helps you set a strategic direction for the salon.

Once you enter the growth phase, the plan helps you showcase the value of your business to potential investors and new partners.

A strategic document, the business plan is structured in different parts that include a cover page, executive summary, a mission statement and more.

Why Do I Need a Salon Business Plan?

Imagine making a huge investment in a new salon that goes bust in a couple of months because of its poor location. A concrete business plan can help you avoid making such strategic mistakes when you are in the process of going through how to open a hair salon. That’s because a business plan provides a realistic growth plan based on relevant parameters. Who is the target audience? How many people do you need to run a successful salon? What’s your unique selling point? Your business plan will make sure you have the answers before you take the next steps.

A good business plan is not just essential in the early stages of your business. It is relevant in the future as well. For example, if you want to expand your business and start a franchise, you may need to invest. Potential investors or business partners will be interested in understanding your vision and where you think your business will be in the next couple of years. This is where your business plan will be a key document to attract funds.

Getting Started

Before you put your ideas into an actionable document, you need to pause and consider a few things. First, you need to ask yourself why you’re getting into the business. What do you bring to the table? Do you have the passion and the expertise to drive a successful salon business?

Having a clear understanding of your personal motivations will enable you to develop a strong plan for your salon business.

Writing a Salon Business Plan

Ready to write a business plan? Below you will find a comprehensive guide to writing a salon business plan.

Cover Page

First, you’re going to need a cover page that captures the basic information about your business. It should include your salon’s name, address and phone number as well your name and contact information.

The cover page is useful when you’re trying to provide key information about your business. But you may also choose to skip this since you will share the information in the salon description section.

Table of Contents

A table of contents prepares the reader for what’s to come in the business plan. It’s a great way to draw interest and follow a structure for the document.

Typically, the table of contents includes an Executive Summary, Vision and Mission statement, Company overview, Market analysis, Competitor analysis, Products and Services, and Marketing strategy.

Executive Summary

The Executive Summary section outlines your salon and highlights its key factors for success. Often, potential investors only read this section to form their opinions about the business. Therefore, it’s crucial to craft an executive summary that is both engaging and persuasive.

Brevity is key when creating an executive summary. Include high-level growth plans and financial information to hook your reader. If they find the section compelling, they will continue reading for more information.

Mission Statement

The Mission Statement articulates your business purpose. It helps you express why you have set up the salon, what you have to offer and how you deliver value to your target audience. And it captures how you intend to run your business and the core competencies that set you apart.

It also provides an insight into the values that drive your business.

For all the important information the Mission Statement conveys, it needs to be short and simple enough to be understood. Let’s take an example. Here’s how Starbucks defines its mission statement: “To inspire and nurture the human spirit—one person, one cup, and one neighborhood at a time.”

Describe Your Salon

Once you have articulated your strategic vision, you need to provide specific information about your salon. This is where you get into the details about the uniqueness of your business, the problem it solves and the way it’s differentiated from the competition.

Below, you will find the specific sections you must include in this part.

Company Description

The company description provides a quick overview of your business. It describes what your company all about and its core values. This section should be brief and straightforward so the readers quickly get some background information.

Company History and Brand Story

When was the company founded? What led to its inception? These are some questions you should try and answer in the Company History and Brand Story section. When describing your Brand Story, try to make it personal. Was there a gap in the market you experienced firsthand that led you to start your own salon? Do you see industry trends gaining traction in another city or country that you feel could be the next big thing in your area?

When filling out this section, consider the milestones that you’d want to highlight to your readers. Include those and avoid adding more details that may not mean much to the audience. For example, you do not need to mention the year you bought your first supplies for the salon.

Location

In this section, include information about your salon’s location. Where is it situated? Are there any location advantages to drive people to your salon? For example, if your salon is easy to access by public transport in a town where car parking is a challenge, it may turn out to be an advantage for your business.

Salon Environment

Research shows relaxed customers are willing to pay 10-15% more than tense clients. Salon environment plays an important part in helping clients feel relaxed. And this makes it important for you to focus on creating the right ambiance.

In this section, include information about the salon environment you can offer your clientele. Do you offer a relaxing drink when customers enter your salon? Do you use essential oils or candles for a soothing experience? These are good things to mention in this section.

Convenience

Customers going to a hair or beauty salon expect a hassle-free experience. As a business owner, it pays to focus on this aspect. To start with, is it easy for clients to book an appointment? Does a team member speak another language when communicating with non-native English-speaking clients? These are some of the details that will go into this section.

Reputation

In the service industry, positive word of mouth can significantly benefit your business. Highlighting your salon’s reputation can effectively demonstrate its future potential. How can you convey your salon’s strong reputation? Consider including details about exceptionally positive reviews and any awards you have received in the past.

Services and Product Lines

The services and products you provide to your clients are crucial in distinguishing your salon from the competition. Therefore, it is essential to clearly outline the benefits that your products and services offer to customers.

In this section, highlight the different services customers can expect at your salon. Mention any new product lines you have on offer. You can also mention if there is any exclusive product line you’re currently developing, along with a timeline.

Hair Salon Services

If you own a hair salon, you can use this section to describe the various services you offer your customers.

Here are some examples of services you can include:

• Haircuts and styling
• Hair coloring
• Hair extensions
• Perms and relaxers

Beauty Salon Services

If you own a beauty salon, you can use this section to describe the various services you offer your customers.

Here are some examples of services you can include:

• Nail care
• Foot care
• Waxing
• Eye care
• Makeup

What Problem Does the Salon Solve?

As a salon business owner, providing great service to customers at all times is your key business priority. However, it cannot be the only goal that differentiates your business. By finding a problem that your salon can solve for your clientele, you can build a truly customer-centric business.

Let’s take an example. A growing number of eco-conscious customers are looking for natural beauty products and services. But they cannot find a salon that can meet their expectations. Is this a problem you can solve for them? This information is useful to showcase how your salon is truly differentiated.

How Does Your Salon Provide a Solution to the Problem?

Identifying a problem to be solved is just the first step. Once you have found the problem, you must figure out how your salon will help solve it for your customers. Otherwise, you will not be able to take advantage of a customer need to offer products and services your clients truly value.

Let’s take the same example and see how your business can provide the right solutions. Eco-conscious customers looking for all-natural products will choose your salon if you can provide an organic product range that is not tested on animals. You can even go further and offer them a truly organic experience by offering 100% organic snacks as they wait for their appointment.

The information you provide in this section shows you have considered all the steps you need to take to leverage an unmet customer need.

The Salon Business

If you have a salon business that includes both hair and beauty, it’s important to include that information in your business plan. Describe how you manage and operate the two businesses and how they come together to form a business as a whole.

The Hair Salon Business

In this specific section, you can describe the hair salon business in detail. How long have you been running this business? How many people do you employ? What’s the unique selling point? These are just some of the questions you must attempt to answer to provide a clear description of your business.

The Beauty Salon Business

For the beauty salon business section, you can follow the same format as that of the hair salon business. This section needs to be detailed as well to clearly demonstrate how you run this business.

Separate sections for the hair and beauty salon businesses will help you flesh out a comprehensive business plan and explain how the two operate.

Business Organization and Management Model

Your salon business is only as good as the people who help you run it. That’s why it’s important to create a solid organization and management model that highlights all the people who are responsible for your business growth.

The business organization and management model should include the number of employees, their roles, salon partnerships and management structure. It should be transparent in explaining how each employee, partner and vendor play a part in providing customer service and retaining clients for the salon.

Hair Salon Organization Example

In many cases, a hair salon owner has prior experience in the business as a former stylist. In other cases, the owner may have had experience in a more supervisory role, overseeing the operational side of things. In such a case, the owner may choose to take up additional responsibilities as the salon manager. Other than the owner and the manager, hairstylists play a key role in running the salon.

Other employees may include receptionists, maintenance workers, and assistants.

Beauty Salon Organization Example

A beauty salon may have a structure similar to that of a hair salon. The owner may have prior experience as a stylist or as a salon manager. In case of the latter, the owner may continue managing the salon and supervising the staff.

Many beauty salons use a booth rental system to hire employees. According to this system, the stylists are responsible for bringing customers, paying their own taxes, maintaining an inventory and managing insurance, among others. The salon is only responsible for providing a facility where the staff can work.

Multiple Income Stream Revenue Model

The COVID-19 pandemic has been especially hard on service-based businesses such as salons. Many salon owners suffered huge losses leading to an eventual shutdown of their business. The crisis has highlighted the need for multiple income sources to stay afloat. That’s why many salon owners are adding multiple income streams to their business.

But what is a multiple income stream revenue model? And what does it mean for your salon business?

Revenue streams are sources from which businesses earn money. These could be from the sale of goods or through service offerings. For a salon business, the primary source of revenue is service. But there are other sources of income that can prove helpful. For example, if you have a good website and social media presence, you can sell ad space to beauty and haircare brands and add an additional income stream. Another example is expanding your services to offer training to other stylists that can bring in extra capital for your business.

By making a revenue plan, you equip your business for the future. You identify opportunities to innovate and create a solid business that aligns with your goals.

Hair Salon Income Streams

As discussed, adding more income streams is a great idea for your business. If you own a hair salon, here are some income streams you can explore:

• Subscription model: You charge a fee for a certain period rather than per transaction.
• Advertising model: You promote brands both in-store and online.
• Freemium model: You offer some services for free and a fee for the “premium” services.
• Third-party licensing model: You allow third parties to use your patented product.
• Renting/Leasing model: You rent out your assets (products or real estate) for a fee.

Beauty Salon Income Streams

Let’s now look at some income streams for your beauty salon business.

• Markup revenue model: You buy products from a seller, add your markup, and sell them to consumers.
• Free-for-service model: You provide services to an audience beyond your traditional clientele.
• Affiliate model: You promote products on your social media pages and make a commission based on clicks and sales.
• Production revenue model: You build and launch your own line of products.
• E-commerce revenue model: You leverage e-commerce to provide an online purchase experience.

Funding for Hair and Beauty Salons

Running a successful salon, of course, comes at a price. As a small business owner, you may not always have the means to execute your growth plans. This is where funding can support your business goals.

Before seeking funds, it’s important for you to make a financing plan. Start by considering all major expenses. These may include payroll, rent, equipment, inventory, and insurance. How much does each component cost you today? Is there a possibility to reduce these expenses without compromising quality? What are your near and long-term business goals? How much do you need to achieve your targets? These are all important questions to ask yourself before you start thinking about securing funds.

Once you have done the math, you can explore these funding sources:

• SBA loans: These have low interest rates and quick payback periods but require a strong credit score to qualify.
• Small business and microloans: These can be up to $50,000, but you’re going to need a concrete business plan.
• Alternative lenders provide rapid access to capital. Consider options such as asset-based loans, term loans, and business lines of credit.
• Equipment funding: These are best suited when you cannot afford to pay for all your equipment in one go.

You can find more funding options here in this article.

Target Market and Customer Analysis

A salon can be a highly profitable business if you provide the right products and services to your customers. But what is the right service for your customers? What do they want to spend their money on? A clear target market and customer analysis will help you understand this better and create a business plan based on real customer needs.

The first step is to gain an insight into who your target audience is. Deep dive into the profiles you can target with your business. What are the market demographics, what do they do, and what type of services do they have in mind? For example, if you are planning to open a hair salon in an area with an African-American population, could you provide expert braiding and weaving services that they will value?

The next step is to understand the market dynamics that will impact your business. Here, you need to do your research well. For example, what are the local area laws and regulations that you must comply with while running your beauty salon? Are there any special permits that you must procure before you open the shop? A comprehensive market analysis will help you find answers and avoid hassles later.

Competition Analysis

A key component of any business plan is thorough competition analysis. This is especially important when you enter the highly competitive salon industry. The first thing you must do is identify all the salons in the area where you want to set up your business.

The next step is to zoom in on each salon and figure out what they have on offer. The more thorough you are in this step, the easier it is for you to zero in on your competitive differentiation. Is there a service none of the salons offer customers today that you can provide? Is there a challenge clients face when choosing the salons that you can solve?

Marketing Analysis and Activities Plan

Because it’s a highly competitive industry, you need a strategy to get the word out and draw customers to your salon. Your marketing analysis will help you design a plan that aligns with your business goals. Built on the elements of market, customer, and competition analyses, the marketing plan will help you set realistic goals and metrics to measure success.

The products you offer and the prices of your services are important elements of your marketing analysis. You could have the most exciting products that still won’t sell because their prices are exponentially higher than what your competitors offer. Or you could be selling products that customers don’t want to buy. Your marketing plan will help you find the sweet spot where your products and price points make the most sense for your business — and your customers.

Next, you need to figure out how you can get the word out so you’re able to reach more customers. Here are some potential marketing activities for you to explore:

• Offer referral discounts
• Tie up with social media influencers
• Manage online reviews
• Boost social media presence
• Sell products online
• Partner with local schools, clubs, and other business owners
• Offer flash sales online
• Produce video content on YouTube

Major Targets, Expectations and Milestones to Achieve

The objective of a business plan is to help you realize your goals. And that’s difficult to achieve without a clear outline of your targets, expectations, and milestones.

When setting targets, expectations, and milestones, it’s important to be realistic. Otherwise, you risk failing to meet your goals. For example, setting a target of 5,000 new customers in the first quarter of starting your salon is both ambitious and unrealistic.

Appendix

If you have additional documents to share more information about your products, services, or marketing plan, you may choose to include an appendix. This is an optional section that you may also choose to skip if you feel you have covered everything in the salon business plan.

Tips for Creating a Salon Business Plan

As you can probably tell, creating a business plan takes time, effort, and homework. And this applies whether you are looking at how to open a nail salon or other segments in the same industry. Some elements may feel straightforward, while others will require you to do research and ask yourself some serious questions about your goals. Below you can find some useful tips to create a business plan for your salon.

Don’t Delay

Before you hit the ground running, take some time to develop your business plan. Do this first because it will save you time and energy later.

Keep the Plan Up to Date

Your business plan needs to be updated from time to time to reflect changing market dynamics and the changes you must make to achieve your goals.

Make Sure Your Business Plan is Focused

You may have ten brilliant ideas to take your business to the next level, but it’s easy to get distracted. Make sure your salon business plan is focused so you know where your priorities lie.

What is the difference between a hair salon and a beauty salon?

Hair salons provide hair care and hairstyling services. Beauty salons provide hair care and additional services related to skin health, foot care, aromatherapy, and facial aesthetics among others.

How do I start a salon business plan?

To begin, it’s essential to understand your motivations for entering the salon business and to define your goals. Determine how you can provide value and what services your salon will deliver to clients. After you have clarity on these points, develop a salon business plan that includes key sections such as an Executive Summary, Mission Statement, Company Description, and a list of Products and Services you plan to offer.

How much does it cost to start a salon business?

While the costs differ based on location, you should set aside approximately $65,000 to start your salon business. This will cover key expenses such as licenses ($500-$12,000), legal fees ($1,00-$5,000) and equipment ($5,000-$30,000). With a comprehensive business plan, you’ll be able to figure out how much each component will cost you.

How much does it cost to run a salon monthly?

While the costs differ based on the area, you should set aside approximately $6,000 a month to operate your salon. Some of your monthly expenses would include insurance ($50-$1,000 a month), marketing expenses ($100-$500 a month), products ($100-$600 a month), and cleaning ($50-$200 a month) among others. With a salon business plan, you will have a clearer idea about how much you need to spend every month.

Is owning a salon profitable?

The profitability of a salon is influenced by several factors that should be addressed in a salon business plan. With the right location and services, owning a salon can be a lucrative venture over time.

What is the best business structure for a hair salon?

For a hair salon, the ideal business structure would include an owner who has prior experience as a stylist or salon manager. Employees may include hairstylists, receptionists, assistants and maintenance workers.

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