A Definitive Guide To Buying A Hair SalonJune 23, 2020The salon industry in the US is huge and is a vital contributor to its private sector economy. From the perspective of an entrepreneur; investing in a hair salon is considered a relatively safe business. This is because hair and beauty salons continue to bring in financial returns even during recession periods. Following the first quarter of the 2008 global financial crisis, the salon industry was one of the most stable private sector industries yielding a mild dip of only 0.1 percent in revenue. The low-risk phenomenon associated with salons is commonly known as the Lipstick Effect. It argues that individuals continue to buy and consume beauty and hair care products because they prefer the sense of immediate gratification that comes with making small scale investments. In a bad economy, sometimes the smaller perks in life are what keep people going. Despite the good omens, buying a hair salon is not a walk in the park. It’s a good idea to buy an existing business with all the equipment and staff ready to serve. However, there are certain elements that you need to keep in mind when purchasing an existing salon. An informed decision will ensure that you don’t end up worrying too much about improving salon sales or scratching your head trying to figure out marketing strategies. Follow our savvy guide below and make yourself the best decision. Know your role If you’ve made the decision to purchase an existing hair salon, you’ll need to start thinking from the perspective of a business owner. What do you have to do to keep the business running? The first step is to determine any obvious or hidden reasons for the sale of the salon. Is it making less profit? Are the sales dropping? Knowing this will tell you how much you’ll have to invest in the marketing and PR of the business. Keep in mind the amount that you’ll be spending on inventory because that will most likely not be mentioned in the asking price. Figure out the revenue the salon packs in from their services and products and decide whether you’ll need to be upselling your salon services. The sales situation will give you a ballpark for the profit margins. Additionally, determine if the property lease agreements will be transferred to you once you become the legal owner. Know when they need to be renewed and if the lease conditions will remain the same. Small cues like this can be huge lifesavers before you’ve begun your heavy investment march. Assess the profit margin A hair salon that’s financially profitable is a good sign. Someone who’s interested in making investments in a fully-functional business will definitely use the profit margin as a scale of measurement. But if the salon is spending more money than it’s raking up in revenues, then it might not be a worthwhile investment. This is because the onus will lay on you to come up with innovative salon marketing strategies. You might get tired waiting for the business to break even and boosting salon sales will just take a toll on your budget. If you wish to carry on with the purchase for whatever personal reasons, remember to put some extra cash aside for marketing projects. Market research When venturing out in unfamiliar territory, it’s best to keep your eyes and ears open. Do your research and figure out your target market and industry competitors. Businesses grow when they’re able to unlock newer markets. Many investors tend to misjudge the size of their market and that can only be subverted when you’re on top of your game. Additionally, learn how the location of your hair salon affects its visibility and customer flow. If you’re situated in a quiet neighborhood with an older demographic then you might not get many fresh and hip customers looking for edgy haircuts and styling. If you wish to seek advice on the marketing aspects of your business, think about contacting a professional service. Sort out employee issues A huge benefit of buying an established hair salon is that you’ll take over all existing employees. This will probably save you tons of cash that will otherwise be spent on training and onboarding new members. Besides, well-experienced employees might be a crucial factor in returning customers because they would already have a preference for a particular serviceperson. Experienced and well-settled employees can also boost salon revenue with their product upselling tactics. As a side note, get in touch with your HR person and figure out any turnover or performance related problems. Also, ensure that employees don’t have to face a break on their employment record because that might just create legal problems for you down the road. Sorting out employee and other standard human resource issues is part of you improving on the weaker areas of your salon business. Staff quality is of primary importance in a hair salon business and you don’t want to risk that. Legal requirements Linked to the aspect of employee issues is the mandatory requirement for hair professionals to be licensed. It’s illegal to practice cosmetology without the right qualifications across most states. Many young hairstylists might be eager to kick start their profession but you cannot compensate them for whatever amount of money for their services. Do a thorough check and ensure all your hair stylists have their cosmetology license. The legal requirements vary from one state to another so make sure you do your research. The good news is that the salon that you’re buying may already feature licensed professionals. Retain them if you can. However, there may be other non-licensed workers performing sideline tasks for the salon who don’t actually do haircuts and treatments. A relatively simple task like shampooing the hair requires licensing too. Buying an established hair salon might seem like a better option than starting from scratch but the process comes with its own share of caveats. Don’t get sucked into making major investments without gaining knowledge of what you’re doing! Reach out to Salon Income Booster for help. We’ll guide you over everything needed to run a hair salon efficiently and how to deploy marketing strategies for maximum sales.