Over the past 20+ years, we have helped over 10,000 entrepreneurs and business owners create business plans to start and grow their hair salons. On this page, we will first give you some background information with regards to the importance of business planning. We will then go through a hair salon business plan template step-by-step so you can create your plan today.
What Is a Business Plan?
A business plan provides a snapshot of your hair salon as it stands today, and lays out your growth plan for the next five years. It explains your business’ goals and your strategy for reaching them. It also includes market research to support your plans.
Why You Need a Business Plan
If you’re looking to start a hair salon or grow your existing hair salon you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your hair salon in order to improve your chances of success. Your hair salon business plan is a living document that should be updated annually as your company grows and changes.
Source of Funding for Hair Salons
With regards to funding, the main sources of funding for a hair salon are bank loans and angel investors. With regards to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to confirm that your financials are reasonable. But they will want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a hair salon business.
The second most common form of funding for a hair salon is angel investors. Angel investors are wealthy individuals who will write you a check. They will either take equity in return for their funding, or, like a bank, they will give you a loan. Venture capitalists will not fund a hair salon. They might consider funding a chain of hair salons, but never an individual location. This is because most venture capitalists are looking for millions of dollars in return when they make an investment, and an individual location could never achieve such results.
Hair Salon Business Plan Template
Your hair salon business plan should include 10 sections as follows:
Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.
The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of hair salon you are operating and the status; for example, are you a startup, do you have a hair salon with existing customers and revenues that you would like to grow, or are you operating a chain of hair salons.
Next, provide an overview of each of the subsequent sections of your plan. For example, give a brief overview of the hair salon industry. Discuss the type of hair salon you are operating. Detail your direct competitors. Give an overview of your target customers. Provide a snapshot of your hair salon’s marketing plan. Identify the key members of your team. And offer an overview of your financial plan.
In your company analysis, you will detail the type of hair salon you are operating.
For example, you might operate one of the following types:
- Hair salon focusing strictly on hair cuts and hair styling
- Hair salon offering other salon services (nails, skin)
- Hair salon offering products
- Combination of the above types
In addition to explaining the type of hair salon you operate, the Company Analysis section of your business plan needs to provide background on your business.
Include answers to question such as:
- When and why did you start your hair salon business?
- What milestones have you achieved to date? Milestones could include sales goals you’ve reached, new store openings, etc.
- Your legal structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.
In your industry analysis, you need to provide an overview of the hair salon business.
While this may seem unnecessary, it serves multiple purposes.
First, researching the hair salon industry educates you. It helps you understand the market in which you are operating.
Secondly, market research can improve your strategy particularly if your research identifies market trends. For example, if there was a trend towards a new type of hair or hair service, it would be helpful to ensure your plan included offering such services.
The third reason for market research is to prove to readers that you are an expert in your industry. By conducting the hair salon industry research and presenting it in your plan, you achieve just that.
The following questions should be answered in the industry analysis section of your hair salon business plan:
- How big is the hair salon business (in dollars)?
- Is the market declining or increasing?
- Who are the key competitors in the market?
- Who are the key suppliers in the market?
- What trends are affecting the industry?
- What is the industry’s growth forecast over the next 5 – 10 years?
- What is the relevant market size? That is, how big is the potential market for your hair salon. You can extrapolate such as figure by assessing the size of the market in the entire country and then applying that figure to your local population.
The customer analysis section of your hair salon plan must detail the customers you serve and/or expect to serve.
The following are examples of customer segments: college students, sports enthusiasts, soccer moms, techies, teens, baby boomers, etc.
As you can imagine, the customer segment(s) you choose will have a great impact on the type of hair salon you operate. Clearly baby boomers would want a different atmosphere, pricing and product options, and would respond to different marketing promotions than teens.
Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, include a discussion of the ages, genders, locations and income levels of the customers you seek to serve. Because most hair salons primarily serve customers living in their same city or town, such demographic information is easy to find on government websites.
Psychographic profiles explain the wants and needs of your target customers. The more you can understand and define these needs, the better you will do in attracting and retaining your customers.
Your competitive analysis should identify your indirect and direct competitors and then focus on the latter.
Direct competitors are other hair salons.
Indirect competitors are other options that customers have to purchase from you that aren’t direct competitors. This includes products (hair polish, hair files, etc.) they can purchase from supermarkets and other retailers both offline and online. You need to mention such competition to show you understand that not everyone in your target market frequents a hair salon on a regular basis or at all.
With regards to direct competition, you want to detail the other hair salons with which you compete. Most likely, your direct competitors will be hair salons located close to your location.
For each such competitor, provide an overview of their businesses and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as:
- What types of customers do they serve?
- What services do they offer?
- What products do they offer?
- What is their pricing (premium, low, etc.)?
- What are they good at?
- What are their weaknesses?
With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to stand outside your competitors’ locations and ask customers as they leave what they like most and least about them.
The final part of your competitive analysis section is to document your areas of competitive advantage. For example:
- Will you provide superior hair salon services?
- Will you provide superior hair salon products?
- Will you provide hair salon services that your competitors don’t offer?
- Will you make it easier or faster for customers to acquire your products?
- Will you provide better customer service?
- Will you offer better pricing?
Think about ways you will outperform your competition and document them in this section of your plan.
Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a hair salon business plan, your marketing plan should include the following:
Product: in the product section you should reiterate the type of hair salon that you documented in your Company Analysis. Then, detail the specific services you will be offering.
Price: Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your marketing plan, you are presenting the menu items you offer and their prices.
Place: Place refers to the location of your hair salon. Document your location and mention how the location will impact your success. For example, is your hair salon located next to a heavily populated office building, or gym, etc. Discuss how your location might provide a steady stream of customers.
Promotions: the final part of your hair salon marketing plan is the promotions section. Here you will document how you will drive customers to your location(s). The following are some promotional methods you might consider:
- Making your hair salon’s front store extra appealing to attract passing customers
- Developing and marketing your website
- Social media marketing (advertising and organic posts)
- Advertising in local papers and magazines
- Reaching out to local bloggers and websites
- Partnerships with local organizations
- Local radio advertising
- Banner ads at local venues
Also think about your hair salon’s Unique Selling Proposition (USP), which should answer why customers should choose you over other hair salons. Make sure your USP is reflected in your marketing.
While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.
Everyday short-term processes include all of the tasks involved in running your hair salon such as serving customers, procuring supplies, keeping the hair salon clean, etc.
Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to serve your 1,000th customer, or when you hope to reach $X in sales. It could also be when you expect to hire your Xth employee or launch a new location.
To demonstrate your hair salon’s ability to succeed as a business, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.
Ideally you and/or your team members have direct experience in the hair salon business. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.
If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act like mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in hair salons and/or successfully running retail and small businesses.
Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet and cash flow statements.
Income Statement: an income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenues and then subtracts your costs to show whether you turned a profit or not.
In developing your income statement, you need to devise assumptions. For example, will you serve 20 customers per day or 50? Will your average price point be $50 or $100? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.
Balance Sheets: While balance sheets include much information, to simplify them to the key items you need to know about, balance sheets show your assets and liabilities. For instance, if you spend $100,000 on building out your hair salon, that will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a bank writes you a check for $100.000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.
Cash Flow Statement: Your cash flow statement will help determine how much money you need to start or grow your business, and make sure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt. For example, let’s say a company approached you with a massive $100,000 hair salon contract to provide hair salon services to their employees. Let’s assume the contract would cost you $50,000 to fulfill. Well, in most cases, you would have to pay that $50,000 now for supplies, employee salaries, etc. But let’s say the company didn’t pay you for 180 days. During that 180 day period, you could run out of money.
In developing your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a hair salon:
- Location build-out including design fees, construction, etc.
- Cost of equipment like chairs, washing equipment, etc.
- Payroll or salaries paid to staff
- Business insurance
- Licenses and permits
- Legal expenses
Getting the numbers right for your hair salon business plan’s financials is the key to creating a compelling and valuable plan and, therefore, to the successful launch of your salon. The “right” type of numbers depends on who you are targeting the plan at. Consider the different needs of investors and lenders and what they want out of the financial section of your business plan.
Right for Investors
The numbers that investors want to see are realistic, but conservative, projections that still show a return that they feel is required by the level of risk they will take on by investing and by the opportunities to use their money elsewhere that they will give up (their opportunity risk). You lower the risk that investors feel they are taking on by showing proof of the management team’s experience, well-thought out marketing and operations plans, a quantifiable customer target market with demonstrated needs that the services of your salon will fulfill, and a competitive landscape which presents an opportunity for your business to steal some market share from the current players. Within the financial section, you support this lower risk by explaining your revenue assumptions in a way that shows a gradual build up to profitability and a rationale for how the number of customers you expect is reasonable.
For some businesses, the return required by investors is only fully realized in the event of the sale of the business. However, an investor in a salon with modest dreams of being a local leader and an ongoing concern may show significant investor return through dividends paid out as the cash becomes available. For most investors, the return must be significantly greater than that of a safe investment like certificates of deposit or treasury bonds or mutual funds. Investors personally interested in your success (like family or friends) may not require as high of a annual return, while professional investors will be serious about a high return.
Right for Lenders
Lenders are most interested in the safe return of their principal with interest over time, and will not care so much about the absolute value of the company, beyond the value of its assets which can be seized and liquidated in the case of a loan default. To show lenders the numbers they want to see, the financial plan shows the business becoming cash flow positive relatively quickly to allow for these payments to begin, and for this situation to continue throughout the years after that point. Lenders will be interested in the value of assets that are being purchased (such as equipment, inventory, and real estate) and cautious lenders will want these assets to act as collateral and to limit their loan to this amount, unless personal assets are also offered as collateral. Lenders will share many of the same concerns as investors – that the rest of the plan is well-thought out, that financial assumptions are reasonable and conservative, and that the management team has the experience to lead.
Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your hair salon’s design blueprint or location lease.
Summary & Keys to Hair Salon Success
Putting together a business plan for your hair salon is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will really understand the hair salon business, your competition and your customers. You will have developed a marketing plan and will really understand what it takes to launch and grow a successful hair salon.
Finally, in addition to completing your business plan, be sure to pay special attention to the following factors that often define success for hair salon businesses:
- Make sure all of your clients are thrilled with your services
- Keep your hair salon clean at all times
- Provide excellent communications with current and prospective clients
- Embrace new technology, particularly social media to engage your clients and get them to return to your hair salon
- Focus on growing revenues, but also on profits, by keeping a close eye on costs
- Hire the right team, train them well and treat them well so their performance is strong and they are loyal to your business
Here are some additional keys to a winning hair salon business plan:
Employees Who Will Make Customers Into Clients
Cutting and styling hair is a very personal service for many women and a growing amount of men. These customers often develop personal relationships with their stylists. Starting as a small operation, you will most likely need employees who will build these relationships and make your customers into clients who value their connection with the stylist.
When hiring, look first for experience and a track record of having an ongoing client base. Also, look beyond technical skill to social qualities which will make customers want to keep returning to this person. And because you’d like to keep the employee with you for the long haul, look for those who are less likely to quit. Your new hires should be relatively settled in the area and in their lives. They should be satisfied with the salary and other incentives you can offer them to stay.
Space and Capacity Decisions
The amount of space that you need flows from the service capacity you want for your salon. Be careful to not have too many extra stations and stylists waiting around or to lose too many customers due to long wait times or filled appointment schedules. Extra stations mean you overspent on equipment and on real estate, but turning away customers will have you kicking yourself for not getting a larger space or designing the space more efficiently. Remember that you cannot control the flow of traffic entirely as not all customers will make appointments ahead of time. Customers will have to wait sometimes and you will have idle capacity at other times. Projecting the right number of stylist stations is a gamble, but one that is the first step for all of your other financial projections of cost and revenue.
Hair Care Products
Start choosing products you would like to use in your salon early to build relationships with the distributors of those products. Ideally, you can sell the products that your stylists use in order to cut down on your supply cost and to create an additional revenue stream for the salon. You may want to work with your top stylists to choose these products, as they will be the best salespeople for products they believe in. Also, consider that customers will be more interested in your salon’s expert guidance on these products than in making their own choices from a vast array of products. The choices they have should be relatively straightforward depending on the type of product they want, their type of hair, and their budget.
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