Salon business plan for starting your own beauty salon service
People like feeling good about themselves, and a salon business can help them to achieve that. The Professional Beauty Association estimates the salon and spa industry contributes approximately $40 billion annually to the U.S. economy
Approximately half the industry is classified as beauty salons offering mostly hair care services. However, entrepreneurs interested in making a <strong>salon business plan</strong> have many options as to the variety and level of services offered, ranging from a hair salon to full-service spa.
Salons can be setup in innumerable ways, so the purpose of business planning is to pin down the details to improve the chances of long-term success.
Planning should always start with identifying the customer. There may be several customer persona’s depending on your target market, people over 50 years old are a very different market to the Gen X clients.
2.1 The Business
Julia’s Salon will be a licensed and registered beauty salon located near Brookhaven College, Atlanta. The business will be based on providing hair-cutting, styling, coloring, skincare and other services in the salon as well as by going to people’s homes.
Before starting a salon, it’s essential to make business plan of a salon and enlist major decisions about your start up salon. In this sample business plan for a salon, we’re providing all details of Julia’s Salon ranging from startup expenses to management structure.
The main working structure of Julia’s Salon include hairdressers, makeup artists, expert cosmetologists, and general assistants. Besides them, the business will hire sales executives, accountants, and web developers.
To ensure efficient working from the first day, the salon will be making all arrangements one week before the launch. Staff will also be hired a week before because the owner of Julia’s Salon wants to assess staff herself.
Our major customers will be the young and adult men and women of our society. Besides them, senior citizens and teens are also expected to avail our services.
2.4 Business Target
Our target is to become the most renowned salon in our vicinity and to establish an average repeat customer rate of 60% by the end of the first year.
3.1 Company Owner
Julia’s Saloon will be owned by Julia Fox. Julia is a graduate in social sciences. She has taken many courses related to beauty works. After working for three years in Sports Clips she has gained expertise in hair care and styling.
3.2 Why the salon business is being started
Julia has always remained interested in beauty and cosmetics works. It was due to her passion and interest in the industry that she got a job in a top hair care company. As Julia wanted to start a salon she took several courses relevant to the field while she was in her college.
A few months ago she started exploring business plan for salons and finally decided to initiate her own salon to generate profit through a business that is solely her passion. She believes that exceptional mission statement for a salon can lead her to the success, she is looking for.
3.3 How the salon business will be started
Julia decided to rent a large ground story to convert it into a salon. For writing a business plan for a beauty salon, she decided to hire a marketing and financial expert.
After acquiring the required licenses and registrations, Julia will purchase the required equipment such as furniture, mirrors, cosmetic tools and accessories, hair styling tools, hair treatment products, and other things.
She has also decided to hire her staff a week before the lauch so that she can assess them and they can understand the business environment and aims. To facilitate their clients, Julia’s salon will be providing services by going to their homes too. Moreover, the salon will set up a web-based system so that customers can pre-order or pay online.
The salon start up cost and requirements are given here in detail:
|Research and Development||$38,500|
|TOTAL START-UP EXPENSES||$388,200|
|Other Current Assets||$260,000|
|Start-up Expenses to Fund||$212,500|
|Start-up Assets to Fund||$1,101,000|
|TOTAL FUNDING REQUIRED||$1,313,500|
|Non-cash Assets from Start-up||$420,000|
|Cash Requirements from Start-up||$218,000|
|Additional Cash Raised||$47,500|
|Cash Balance on Starting Date||$39,500|
|Liabilities and Capital|
|Accounts Payable (Outstanding Bills)||$34,000|
|Other Current Liabilities (interest-free)||$0|
|Additional Investment Requirement||$0|
|TOTAL PLANNED INVESTMENT||$1,313,500|
|Loss at Start-up (Start-up Expenses)||$659,100|
|TOTAL CAPITAL AND LIABILITIES||$725,000|
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Services for Customers
Before formulating a salon business plan outline you must finalize which services you’ll be providing your customers because this decision of yours will be affecting the business in the long run.
The services as mentioned in Julia’s Salon business plan are given in detail here.
Our major beauty salon service will comprise of works related to hair. However, we’ll also offer some other services as described here:
Hair Cutting: Our primary service will be cutting the hairs of people of all ages and gender. We’ll hire haircut experts so that every customer will be able to get the look of their desire.
Hair Styling & Coloring: We will hire experts who will be able to make several hairstyles according to the customer’s looks and desires. Moreover, we’ll also provide services like hair coloring, highlights, color blending, hair shadowing, etc.
Makeup Services: We will provide makeup services for parties and usual events.
Hair & Skin Care Services: Our third major service will be providing hair treatments such as Fusio-Dose and protein treatment. Moreover, we’ll also be offering services in skincare and treatment like manicures, pedicures.
Salon Marketing Analysis
Before you start a salon you must know what are objectives of a beauty salon business. Generally, the aim is to satisfy your customers by enhancing their looks, and that is only possible when you have studied the market and market trends thoroughly.
Before finalizing your beauty salon business plan template, you must research on what are the traditions, norms and modern fashions that are arising in your target market. Only then you will be able to recognize customers’ demands and decide what aspects to include in your salon business plan to meet the expectations of your customers.
5.1 Market Trends
Hair salons are one of those businesses that are flourishing in the market for a long time. Currently, 972,000 such businesses are running in the United States. According to the IBISWorld report, the business has seen a 1.4% growth rate over the period of the last five years. The industry is responsible for employing more than 1,352k people and has generated a revenue of $47bn in only 2019. To summarize, the business has a lot of potential and can be extremely profitable if you plan it accurately.
5.2 Marketing Segmentation
The detailed marketing segmentation of our target audience is as follows:
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5.2.1 Young & Adults: Our first target group will be young adults between 18 and 35 years of age. The people of this age run after the latest fashions and styles. That’s why we’ll be coming up with hairstyles, coloring and makeup techniques that are popular in people of this age group.
5.2.2 Senior Citizens: Our second target group comprises of citizens above 35 years of age. Since such people are interested in acquiring decent looks while following their norms and traditions thus we’ll be carrying out research to provide services of their interest.
5.2.3 Teens & Kids: Our third target group is expected to be accompanied by other target groups. For this group, we’ll be providing hairstyles and services that are liked by children and teens.
|Potential Customers||Growth||Year 1||Year 2||Year 3||Year 4||Year 5||CAGR|
|Young & Adults||47%||24,400||28,900||38,700||50,500||61,200||11.00%|
|Teens & Kids||19%||11,400||14,500||18,300||25,400||32,000||10.00%|
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5.3 Business Target
- To balance startup expenses by earned profits by the end of the first fifteen months
- To achieve the net profit margin of $10k per month by the end of the first year
- To maintain customer repeat rate of 60% by the end of the first year
- To maintain an average rating of 4.6 by the end of the first year
5.4 Product Pricing
Our prices will be in the same ranges as that of our competitors, however, to get introduced to a wide group of people we’ll be offering several discounts in the first three months.
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This section should describe how you are going to find your ideal client and make sure they become aware of your products and services. Once you have found your clients, how will you attract and retain them? If you have a bricks and mortar business, is the location good for your type of clients? Does your ideal client read traditional printed advertising or are they more focussed on digital marketing. If online is important, describe the process your clients go through to make a purchase. Is it quick and easy? Starting a beauty salon business plan will help you to focus on these points.
In this salon marketing plan sample we are providing the competitive aspects of Julia’s Salon as well as the advertising schemes, the salon will be employing to attract more and more customers.
6.1 Competitive Analysis
Our biggest competitive advantage is our top-class service. We’ll use high-quality material with extreme care to serve our customers. Secondly, our staff is expert in their respective domains. Besides, we’re highly customer-care oriented and we’ll always be ready to do unlimited modifications to satisfy our customers. Lastly, we’re providing home services because senior citizens usually want to have such tasks done at their own homes.
6.2 Sales Strategy
- We’ll ensure a strong web presence
- We’ll advertise us through Facebook and Instagram
- We’ll get featured in magazines and local newspapers
- We’ll offer a 20% discount on hair treatment services for the first month
6.3 Sales Monthly
6.4 Sales Yearly
6.5 Sales Forecast
|Unit Sales||Year 1||Year 2||Year 3|
|Hair Styling & Coloring||36,400||38,584||40,899|
|Hair & Skin Care Services||23,000||24,380||25,843|
|TOTAL UNIT SALES||107,900||114,374||121,236|
|Unit Prices||Year 1||Year 2||Year 3|
|Hair Styling & Coloring||$53.00||$61.48||$71.32|
|Hair & Skin Care Services||$48.00||$55.68||$64.59|
|Hair Styling & Coloring||$1,929,200.00||$2,372,144.32||$2,916,788.66|
|Hair & Skin Care Services||$1,104,000.00||$1,357,478.40||$1,669,155.44|
|Direct Unit Costs||Year 1||Year 2||Year 3|
|Hair Styling & Coloring||$31.00||$34.00||$39.10|
|Hair & Skin Care Services||$28.00||$31.00||$33.00|
|Direct Cost of Sales|
|Hair Styling & Coloring||$1,128,400.00||$1,311,856.00||$1,599,152.46|
|Hair & Skin Care Services||$644,000.00||$755,780.00||$852,812.40|
|Subtotal Direct Cost of Sales||$3,512,400.00||$4,173,750.00||$4,826,693.46|
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To get an idea of how much you’ll need to spend on your salon business, you must first create a list of salon equipment with price and a list showing your employees, their job responsibilities and salaries.
7.1 Company Staff
Julia will manage the salon herself and hire the following people
- 1 Accountant to take financial records
- 1 Sales Executive to carry out the company’s sales strategy plan
- 5 Hairdressers/Hairstylists/ Hair Coloring Experts to do clients hair
- 2 Makeup Artists to do client’s makeover
- 1 Cosmetologist to do with hair and skin treatments
- 2 Manicure/Pedicure Specialist
- 4 General Assistants to carry out general tasks
- 2 Drivers to provide transport
- 1 Cleaner
- 1 Web Developer to manage company’s sites
- 1 Customer Representative to receive customers
7.2 Average Salary of Employees
|Year 1||Year 2||Year 3|
|Hairdressers/Hairstylists/Hair Coloring Experts||$140,000||$154,000||$169,400|
The last step before starting your salon is to craft a detailed map showing and analyzing investments, costs of equipment, payrolls, taxes, and other expenses. A financial plan for a beauty salon must contain all the financial statements, details of projected profit and loss and measures to achieve estimated profits.
We’re providing a sample of Julia’s financial plan for anyone who wants to benefit. However, it is highly recommended to seek help from a financial advisor to have an accurate financial plan according to your figures.
8.1 Important Assumptions
|Year 1||Year 2||Year 3|
|Current Interest Rate||8.11%||8.90%||9.30%|
|Long-term Interest Rate||8.40%||9.04%||9.60%|
8.2 Brake-even Analysis
|Monthly Units Break-even||5335|
|Monthly Revenue Break-even||$138,200|
|Average Per-Unit Revenue||$253.30|
|Average Per-Unit Variable Cost||$0.72|
|Estimated Monthly Fixed Cost||$171,000|
8.3 Projected Profit and Loss
|Pro Forma Profit And Loss|
|Year 1||Year 2||Year 3|
|Direct Cost of Sales||$3,512,400||$4,173,750||$4,826,693|
|TOTAL COST OF SALES||$3,512,400||$4,173,750||$4,826,693|
|Gross Margin %||41.84%||43.79%||47.14%|
|Sales and Marketing and Other Expenses||$120,000||$128,000||$136,000|
|Total Operating Expenses||$446,430||$686,440||$749,810|
|Profit Before Interest and Taxes||$2,080,370||$2,565,610||$3,554,261|
8.3.1 Profit Monthly
8.3.2 Profit Yearly
8.3.3 Gross Margin Monthly
8.3.4 Gross Margin Yearly
8.4 Projected Cash Flow
|Pro Forma Cash Flow|
|Cash Received||Year 1||Year 2||Year 3|
|Cash from Operations|
|Cash from Receivables||$11,000||$11,880||$12,830|
|SUBTOTAL CASH FROM OPERATIONS||$64,400||$69,400||$76,230|
|Additional Cash Received|
|Sales Tax, VAT, HST/GST Received||$0||$0||$0|
|New Current Borrowing||$0||$0||$0|
|New Other Liabilities (interest-free)||$0||$0||$0|
|New Long-term Liabilities||$0||$0||$0|
|Sales of Other Current Assets||$0||$0||$0|
|Sales of Long-term Assets||$0||$0||$0|
|New Investment Received||$0||$0||$0|
|SUBTOTAL CASH RECEIVED||$58,200||$60,100||$63,200|
|Expenditures||Year 1||Year 2||Year 3|
|Expenditures from Operations|
|SUBTOTAL SPENT ON OPERATIONS||$48,300||$52,100||$54,900|
|Additional Cash Spent|
|Sales Tax, VAT, HST/GST Paid Out||$0||$0||$0|
|Principal Repayment of Current Borrowing||$0||$0||$0|
|Other Liabilities Principal Repayment||$0||$0||$0|
|Long-term Liabilities Principal Repayment||$0||$0||$0|
|Purchase Other Current Assets||$0||$0||$0|
|Purchase Long-term Assets||$0||$0||$0|
|SUBTOTAL CASH SPENT||$55,300||$62,450||$67,500|
|Net Cash Flow||$13,300||$15,400||$17,300|
8.5 Projected Balance Sheet
|Pro Forma Balance Sheet|
|Assets||Year 1||Year 2||Year 3|
|Other Current Assets||$900||$900||$900|
|TOTAL CURRENT ASSETS||$302,400||$338,688||$380,685|
|TOTAL LONG-TERM ASSETS||$19,100||$21,392||$24,066|
|Liabilities and Capital||Year 4||Year 5||Year 6|
|Other Current Liabilities||$0||$0||$0|
|SUBTOTAL CURRENT LIABILITIES||$14,200||$15,904||$17,876|
|TOTAL LIABILITIES AND CAPITAL||$308,600||$336,374||$370,011|
8.6 Business Ratios
|Year 1||Year 2||Year 3||INDUSTRY PROFILE|
|Percent of Total Assets|
|Other Current Assets||2.50%||2.77%||3.07%||2.40%|
|Total Current Assets||151.00%||154.00%||157.00%||160.00%|
|Percent of Sales|
|Selling, General & Administrative Expenses||91.20%||93.66%||96.28%||98.30%|
|Profit Before Interest and Taxes||43.10%||44.26%||45.50%||33.50%|
|Total Debt to Total Assets||0.34%||0.23%||-0.07%||0.48%|
|Pre-tax Return on Net Worth||75.02%||78.77%||82.71%||73.30%|
|Pre-tax Return on Assets||91.05%||95.60%||100.38%||112.00%|
|Additional Ratios||Year 1||Year 2||Year 3|
|Net Profit Margin||36.04%||37.16%||38.31%||N.A.|
|Return on Equity||59.10%||60.93%||62.82%||N.A.|
|Accounts Receivable Turnover||7.5||7.8||8.112||N.A.|
|Accounts Payable Turnover||16.1||16.8||17.3||N.A.|
|Total Asset Turnover||2.55||2.72||2.8||N.A.|
|Debt to Net Worth||-0.05||-0.05||-0.06||N.A.|
|Current Liab. to Liab.||1||1||1||N.A.|
|Net Working Capital||$214,500||$226,512||$239,197||N.A.|
|Assets to Sales||0.77||0.847||0.9317||N.A.|
|Current Debt/Total Assets||2%||1%||0%||N.A.|