June 14, 2024

Creating a Successful Salon Business Plan: A Step-by-Step Guide

Creating a Successful Salon Business Plan: A Step-by-Step Guide

Every business should start as a business plan. This essential document will ensure you have covered all of your bases before you start trading. If you want your business to be successful, it’s worthwhile to start with a business plan.

We often think of a business plan as being a requirement for raising funding, but it can achieve so much more than this. Even if you have no plans to seek out money from investors, you can benefit from organising your thoughts with a comprehensive business plan.

When it comes to salons, it’s no secret that there is no shortage of competition. And yet new salons are opening all the time. What gives these business owners confidence in the face of such fierce competition? 

More often than not, it is the research they have completed in advance of opening their salon that will confirm they have a viable business idea. With a business plan on your side, you can be confident you’ve thought of everything.

In this guide, we’re looking at the role of the business plan in starting a salon business and how you can write a compelling business plan that will help to guide your business activities.

What is a business plan?

What is a business plan?

First things first, what exactly is a business plan? In short, this is a document that outlines the plans for a new business. In order to write a business plan, you need to do your research and consider different hypotheticals. This allows you to determine if you have a viable business idea or not.

Far too many businesses get started without a business plan and eventually run into financial trouble. This is often because they have underestimated the competition or have overestimated the potential profit margins.

By creating a business plan, you will have a clear understanding of what it will cost to start and run your business. You’ll also know how much money you can stand to make and what it will take to grow your business. And finally, it will also give you an accurate measure of when it will be time to scale your business.

In short, no salon should get started without a business plan in place. Even if you don’t intend to raise finance, it can be helpful to collect your thoughts and make sure you have considered everything before you take the plunge.

How can a business plan help you?

How can a business plan help you?

A business plan is the best way to gather your thoughts before you launch. It can also help to put you back on track if you find yourself being pulled in opposite directions. It can also help you to define the parameters of when it is time to scale.

Some business owners never share their business plan with anyone. It can be a purely personal document that helps to give you a laser focus on what is important to you.

For those going into business with another person, this document can help to make sure you are both on the same page. It’s easy to assume that you both have the same vision for the business, but when you see this in black and white, it will quickly become obvious if you have contrasting objectives.

A business plan can also be a helpful document to return to as your business grows. It can start to feel like your business is growing out of your control and you don’t have any power over its direction. When this happens, you can return to the business plan to understand why you started your salon in the first place. This will often help to refocus your goals and allow you to get clean on what you are hoping to achieve.

And finally, another great reason to write a business plan is to gather support. You can use your business plan to secure a bank loan in the early stages when you don’t have any trading history to share. You could use this plan to secure investment. Or you could simply share your business plan with experts and mentors who will be able to advise you on areas where you could improve.

What should you include in a business plan?

What should you include in a business plan?

Now that you know why you need a business plan, let’s look in more detail at what should be included. You should be able to find a business plan template online that will make light work of getting your thoughts together.

These are the sections that all business plans should include to ensure they cover all of the bases:

Mission statement

The mission statement is a short and clear sentence or two that explains what you are planning to do. It should be brief and concise, giving the reader an immediate understanding of what you plan to offer.

It could also explain why you are opening your business and what hole in the market you hope to fill. Salons are often unique in that it is the talent of the individual stylists that keeps people coming back time and time again. This is more difficult to define in business terms, but it is essentially your USP.

Other things you might mention in your mission statement include things about how you will set yourself apart from the competition. Every salon experience is unique, so have a think about what will make yours special.

Overview of your products or services

You might think your offering is obvious, but until you sit down and try to articulate it, you won’t be able to market it effectively to customers. As part of your business plan, create an overview of the products or services you plan to offer. You might also include details about services you hope to offer in the future, as this will give you a template to enable you to scale your business. Writing your business plan with a growth mindset will help to set yourself up for success.

Organisation and management

Organisation and management

Who will work in the salon and what makes them uniquely qualified to do so. If you are starting out solo, this should be a profile covering your experience and training. If you will need to hire individuals to fill key roles, you can use this opportunity to write their job descriptions.

This step will also help you to see what skills you have at your disposal and what you might need to outsource. For example, you might discover that there is no one on the team that is confident with marketing, so you might need to hire a freelancer or an agency to do this. You could also look to hire another stylist with this skillset.

Competitor analysis

Now that you know exactly what you plan to offer, you can now look at who are your direct and indirect competitors. Understanding their businesses will give you a better understanding of your own.

Competitor analysis might be stressful and this is often the part that business owners want to avoid, but it is vital that you know exactly what you are up against. You might be envious of your competitors because of their success, or you might be frustrated that they are so successful when they are doing things so obviously wrong.

Your competitor analysis is your chance to explore how you can set yourself apart from the competitor and offer something unique. This will form the basis of your marketing plans.

Pricing structure

Pricing structure

Now you know what you are planning to offer and who you are competing against, you can now set your prices. Your pricing structure will form a huge part of how your customers perceive you.

If you set your prices too high, you won’t be able to compete with the better known and cheaper salons out there. Conversely, if you set your prices too high, you could run the risk of devaluing your business and giving customers reason to doubt your services.

Customers have expectations that need to be met. And while it can be tempting to steal business by offering prices that are cheaper than everyone else, this could lead customers to question your credentials and the quality of the service.

Analysis of running costs

You might not have a head for numbers, but you absolutely need to get your head around your running costs. Your running costs will include your startup costs, initial investments and ongoing operational costs.

If you are operating a mobile service, your running costs will be lower but not non-existent. Be realistic instead of optimising about how much it will cost to run your business. You should also consider what will happen to your business if prices for certain things increase.

It can feel like your business plan is all doom and gloom, but there is value in anticipating the unexpected. Your business will be much more resilient and less likely to fail if you have already thought about the potential hazards facing your business.

Financial forecasts

Financial forecasts

Once you know your pricing structure and operating costs, you can then start to forecast how much money your business stands to make. You can run different financial forecasts based on different levels of booking capacity.

You might look at how your business will perform when you are 20% booked, 50% booked and 75% booked. It’s also worth looking at what your business looks like when you are at 100% booking capacity. This will help you to determine what factors need to be satisfied before you scale your business.

It’s all too common for business owners to start to scale their business at the first sign of success. When the business grows too quickly to keep up with demand, the costs quickly outpace the income and the entire business can be in jeopardy.

This is a common reason for otherwise successful businesses to fail. To avoid this fate, you can crunch the numbers to determine how long you need to be booked to capacity before you think about scaling.

Remember that scaling can mean very different things. It could mean raising your prices, adding more chairs to your salon, opening a new location, or offering new services. It could also mean a venture into new avenues such as teaching.

Marketing plans

Every business should start with some sort of marketing plan. Outline the key activities and how you will assess the success of each marketing idea. Popular marketing channels for salons include social media, local SEO and local advertising. Consider the cost of running these marketing channels and what it will mean for your profit margins.

You can also take into account how promotions will impact your earnings. While they might help to bring in new customers, they won’t be generating the same revenue as a customer paying full price. It is vital to think about how this will impact your revenue.

Sources of funding

Sources of funding

Outline where you will get the money for your salon business and how this investment will be spent. If this investment needs to be repaid, you’ll need to factor this into your profit forecasts.

If you’ll be using your business plan to generate funding, you need to be clear about how much you are asking for, what it will be spent on, and how it will be repaid or recouped by the lender. If you’re selling a stake in your business, think about how the investor will be compensated.

SWOT analysis

A great way to stress test your business plan is by conducting a SWOT analysis. This stands for Strengths, Weaknesses, Opportunities and Threats. Strengths and weaknesses are internal factors while opportunities and threats are external factors. Here are some examples of what might be included in each section:

  • Strengths: well known stylist in the local area with a strong social media following
  • Weaknesses: no experience in other digital marketing channels
  • Opportunities: partnerships with local businesses to cross-promote services
  • Threats: competitors are able to offer big discounts due to size of salon

Be detailed in your approach and make sure you have considered all possible angles. This is a section you might want to re-visit if you are looking for new avenues for potential growth.

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