How to Start a Small Hair Salon Business

In 2010, there were over 827,000 hair salons in the United States.

In the U.S., about 70,000 haircare salons generated $19 billion in annual sales in 2010, according to a 2011 Industry Overview by Hoover's, a Dun & Bradstreet company. The 50 largest companies generate about 15 percent of revenue, but that doesn't mean there aren't solid opportunities for a small salon to excel using niche marketing techniques, solid customer service and taking advantage of eco-friendly products, according to an IbisWorld industry report.

Difficulty:

Moderately Challenging

Instructions

1. When visiting salons, pay particular attention to how the reception area is set up. Comstock/Comstock/Getty Images

   Visit as many hair salons as you can. Make notes of what you like and don't like about the location, the layout, signage, curb appeal, service offerings and lobby. Talk with owners whenever possible for input on interior designers, contractors, suppliers and for helpful hints.

2. The SBDC offers classes on developing a business plan, finding funding, personnel law, taxes and many other topics. George Doyle/Stockbyte/Getty Images

   Develop a business plan and a budget for your business. Your local Small Business Development Center (SBDC) of the U.S. Small Business Administration (SBA) has consultants who can help you for free. The SBDC also has inexpensive, instructor-led small business startup classes and free online courses.

3. A Cosmetologist must have her license displayed prominently. BananaStock/BananaStock/Getty Images

   Find out what permits, licenses and rules are required in your locale. For example, San Antonio, Texas, publishes an entire rule book for salon owners. Typically, a salon owner needs to register a business name, get a tax identification number and a salon license. Each stylist and aesthetician must have a cosmetologist license displayed at her workstation. The SBA has an online tool that allows you to find out exactly what paperwork is required in your city.

4. Make a list of your location "must haves". Then find a realtor who can show you options for leasing or purchasing a building and who can negotiate deals for you. If commercial vacancies are high, as they may be during a recession, the leasee generally has more buying power. Also, unless you find an outstanding purchase opportunity, it's generally wiser to lease until you see how the business does.

5. Determine your salon format. Options include purchasing or leasing space, hiring employees, working solo, or renting out booth space to subcontractors. Renting out booths is typically more cost-effective. Hiring employees has a higher profit potential if you grow, but requires more paperwork.

6. If you schedule your grand opening with your local chamber of commerce, its good-will ambassadors are likely to attend. Creatas/Creatas/Getty Images

   Set up your space and promote it with a grand opening. Use a professional event planner or elicit the help of a detail-oriented friend or coworker. Vendors frequently have "platform teachers" who "perform" at conventions. Ask your vendors if they can send a hair "design star" to your grand opening. Send out press releases outlining the planned festivities. Involve neighboring businesses, such as florists, caterers or lingerie shops, in collaborative marketing to save on advertising costs and to build a more grand event. Hold drawings for door prizes. Gather the names, phone numbers and emails from the drawing to build a customer data base.

Tips & Warnings

• Have at least three to six months of operating capital on hand to cover expenses.

• Negotiate the best terms possible with vendors. If a vendor knows there is competition for your business, they may offer very good terms to get you to use their products.

References

• SBA.gov: Starting a Business
• SBA.gov: Search for Business Licenses and Permits
• Hoovers: Hair Salons; Industry Description
• IbisWorld: Hair and Nail Salons; May 09, 2011
• Texas Department of Licensing and Regulation: Cosmetology Forms

Resources

• Professional Beauty Association: How the Salon Industry is Responding ... Recession; March 9, 2009