Table of Content

    Salon business plan for starting your own salon service

    People like feeling good about themselves, and a salon business can help them to achieve that. The Professional Association estimates the salon and spa industry contributes approximately $40 billion annually to the U.S. economy
    Approximately half the industry is classified as salon business offering mostly hair care services. However, entrepreneurs interested in making a salon business plan have many options as to the variety and level of services offered, ranging from a salon business plan to a full-service spa.
    Salons can be setup in innumerable ways, so the purpose of the salon business plan 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.

    Executive Summary

    2.1 The Business

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    Julia’s Salon will be a licensed and registered 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.

    2.2 Management

    Before starting a salon, it’s essential to make salon business plan 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.

    2.3 Customers

    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.

    Salon Business Plan - 3 Years Profit Forecast

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    Company Summary

    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 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 cosmetics works. It was due to her passion and interest in the industry that she got a job in a top 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 salon business plan and finally decided to initiate her own salon to generate profit through a business that is solely her passion. She believes that an 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 salon business plan, 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.

    Salon Business Plan - Startup Cost

    The salon start up cost and requirements are given here in detail:

    Start-up Expenses
    Legal $190,300
    Consultants $0
    Insurance $46,000
    Rent $42,000
    Research and Development $38,500
    Expensed Equipment $68,000
    Signs $3,400
    TOTAL START-UP EXPENSES $388,200
    Start-up Assets $350,000
    Cash Required $420,800
    Start-up Inventory $56,000
    Other Current Assets $260,000
    Long-term Assets $302,000
    TOTAL ASSETS $1,388,800
    Total Requirements $1,777,000
    START-UP FUNDING
    Start-up Expenses to Fund $212,500
    Start-up Assets to Fund $1,101,000
    TOTAL FUNDING REQUIRED $1,313,500
    Assets
    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
    TOTAL ASSETS $725,000
    Liabilities and Capital
    Liabilities $36,600
    Current Borrowing $0
    Long-term Liabilities $0
    Accounts Payable (Outstanding Bills) $34,000
    Other Current Liabilities (interest-free) $0
    TOTAL LIABILITIES $70,600
    Capital
    Planned Investment $1,313,500
    Investor 1 $0
    Investor 2 $0
    Other $0
    Additional Investment Requirement $0
    TOTAL PLANNED INVESTMENT $1,313,500
    Loss at Start-up (Start-up Expenses) $659,100
    TOTAL CAPITAL $654,400
    TOTAL CAPITAL AND LIABILITIES $725,000
    Total Funding $1,313,500

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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 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 salon business plan. 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.

    Note

    Before finalizing your 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 salon business plan has a lot of potential and can be extremely profitable if you plan it accurately.

    5.2 Marketing Segmentation

    Salon Business Plan - 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.

    Market Analysis
    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%
    Senior Citizens 34% 18,000 20,100 26,500 34,500 40,800 12.00%
    Teens & Kids 19% 11,400 14,500 18,300 25,400 32,000 10.00%
    Total 100% 53,800 63,500 83,500 110,400 134,000 10%
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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.

    Marketing Strategy

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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 salon business plan will help you to focus on these points.

    In this salon marketing salon business 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

    Salon Business Plan - Sales Monthly

    6.4 Sales Yearly

    Salon Business Plan - Sales Yearly

    6.5 Sales Forecast

    Salon Business Plan - Unit Sales

    Sales Forecast
    Unit Sales Year 1 Year 2 Year 3
    Hair Cutting 27,500 29,150 30,899
    Hair Styling & Coloring 36,400 38,584 40,899
    Makeup Services 21,000 22,260 23,596
    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 Cutting $78.00 $90.48 $104.96
    Hair Styling & Coloring $53.00 $61.48 $71.32
    Makeup Services $41.00 $47.56 $55.17
    Hair & Skin Care Services $48.00 $55.68 $64.59
    Sales
    Hair Cutting $2,145,000.00 $2,637,492.00 $3,243,060.16
    Hair Styling & Coloring $1,929,200.00 $2,372,144.32 $2,916,788.66
    Makeup Services $861,000.00 $1,058,685.60 $1,301,759.81
    Hair & Skin Care Services $1,104,000.00 $1,357,478.40 $1,669,155.44
    TOTAL SALES $6,039,200.00 $7,425,800.32 $9,130,764.07
    Direct Unit Costs Year 1 Year 2 Year 3
    Hair Cutting $48.00 $54.00 $57.00
    Hair Styling & Coloring $31.00 $34.00 $39.10
    Makeup Services $20.00 $23.90 $26.00
    Hair & Skin Care Services $28.00 $31.00 $33.00
    Direct Cost of Sales
    Hair Cutting $1,320,000.00 $1,574,100.00 $1,761,243.00
    Hair Styling & Coloring $1,128,400.00 $1,311,856.00 $1,599,152.46
    Makeup Services $420,000.00 $532,014.00 $613,485.60
    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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    Personnel plan

    To get an idea of how much you’ll need to spend on your salon business plan, 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 business 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

    Personnel Plan
    Year 1 Year 2 Year 3
    Accountant $21,000 $23,100 $25,410
    Sales Executive $20,000 $22,000 $24,200
    Hairdressers/Hairstylists/Hair Coloring Experts $140,000 $154,000 $169,400
    Cosmetologist $29,000 $31,900 $35,090
    Manicure/Pedicure Specialist $44,000 $48,400 $53,240
    Makeup Artists $55,000 $60,500 $66,550
    Drivers $39,000 $42,900 $47,190
    Cleaner $16,000 $17,600 $19,360
    Web Developer $18,000 $19,800 $21,780
    Customer Representative $18,000 $19,800 $21,780
    General Assistants $50,000 $55,000 $60,500
    Total Salaries $269,000 $495,000 $544,500

    Financial Plan

    The last step before starting your salon is to craft a detailed map showing and analyzing the investment group business plan for salon, costs of equipment, payrolls, taxes, and other expenses. A financial plan for a salon business plan 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

    General Assumptions
    Year 1 Year 2 Year 3
    Plan Month 1 2 3
    Current Interest Rate 8.11% 8.90% 9.30%
    Long-term Interest Rate 8.40% 9.04% 9.60%
    Tax Rate 24.70% 26.20% 27.00%
    Other 0 0 0

    8.2 Brake-even Analysis

    Salon Business Plan - Brake-even Analysis

    Brake-Even Analysis
    Monthly Units Break-even 5335
    Monthly Revenue Break-even $138,200
    Assumptions:
    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
    Sales $6,039,200 $7,425,800 $9,130,764
    Direct Cost of Sales $3,512,400 $4,173,750 $4,826,693
    Other $0 $0 $0
    TOTAL COST OF SALES $3,512,400 $4,173,750 $4,826,693
    Gross Margin $2,526,800 $3,252,050 $4,304,071
    Gross Margin % 41.84% 43.79% 47.14%
    Expenses
    Payroll $269,000 $495,000 $544,500
    Sales and Marketing and Other Expenses $120,000 $128,000 $136,000
    Depreciation $2,530 $2,670 $2,880
    Leased Equipment $0 $0 $0
    Utilities $4,100 $4,350 $4,990
    Insurance $2,400 $2,720 $2,940
    Rent $5,400 $5,900 $6,400
    Payroll Taxes $43,000 $47,800 $52,100
    Other $0 $0 $0
    Total Operating Expenses $446,430 $686,440 $749,810
    Profit Before Interest and Taxes $2,080,370 $2,565,610 $3,554,261
    EBITDA $2,080,370 $2,565,610 $3,554,261
    Interest Expense $0 $0 $0
    Taxes Incurred $416,074 $513,122 $710,852
    Net Profit $1,664,296 $2,052,488 $2,843,408
    Net Profit/Sales 27.56% 27.64% 31.14%

    8.3.1 Profit Monthly

    Salon Business Plan - Profit Monthly

    8.3.2 Profit Yearly

    Salon Business Plan - Profit Yearly

    8.3.3 Gross Margin Monthly

    Salon Business Plan - Gross Margin Monthly

    8.3.4 Gross Margin Yearly

    Salon Business Plan - Gross Margin Yearly

    8.4 Projected Cash Flow

    Salon Business Plan - Projected Cash Flow

    Pro Forma Cash Flow
    Cash Received Year 1 Year 2 Year 3
    Cash from Operations
    Cash Sales $53,400 $57,672 $63,400
    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
    Cash Spending $37,200 $39,000 $42,000
    Bill Payments $20,050 $21,480 $22,300
    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
    Dividends $0 $0 $0
    SUBTOTAL CASH SPENT $55,300 $62,450 $67,500
    Net Cash Flow $13,300 $15,400 $17,300
    Cash Balance $27,600 $30,100 $36,400

    8.5 Projected Balance Sheet

    Pro Forma Balance Sheet
    Assets Year 1 Year 2 Year 3
    Current Assets
    Cash $250,500 $280,560 $315,340
    Accounts Receivable $21,300 $23,856 $26,814
    Inventory $4,410 $4,939 $5,540
    Other Current Assets $900 $900 $900
    TOTAL CURRENT ASSETS $302,400 $338,688 $380,685
    Long-term Assets
    Long-term Assets $10,000 $10,000 $10,000
    Accumulated Depreciation $15,400 $17,248 $19,404
    TOTAL LONG-TERM ASSETS $19,100 $21,392 $24,066
    TOTAL ASSETS $311,300 $348,656 $392,238
    Liabilities and Capital Year 4 Year 5 Year 6
    Current Liabilities
    Accounts Payable $19,900 $22,288 $25,052
    Current Borrowing $0 $0 $0
    Other Current Liabilities $0 $0 $0
    SUBTOTAL CURRENT LIABILITIES $14,200 $15,904 $17,876
    Long-term Liabilities $0 $0 $0
    TOTAL LIABILITIES $14,950 $16,744 $18,820
    Paid-in Capital $30,000 $30,000 $30,000
    Retained Earnings $119,200 $129,928 $142,921
    Earnings $180,200 $196,418 $216,060
    TOTAL CAPITAL $291,200 $317,408 $349,149
    TOTAL LIABILITIES AND CAPITAL $308,600 $336,374 $370,011
    Net Worth $282,300 $307,707 $338,478

    8.6 Business Ratios

    Ratio Analysis
    Year 1 Year 2 Year 3 INDUSTRY PROFILE
    Sales Growth 7.08% 7.84% 8.69% 3.00%
    Percent of Total Assets
    Accounts Receivable 9.12% 10.10% 11.20% 9.80%
    Inventory 5.35% 5.93% 6.57% 9.90%
    Other Current Assets 2.50% 2.77% 3.07% 2.40%
    Total Current Assets 151.00% 154.00% 157.00% 160.00%
    Long-term Assets 11.20% 12.03% 13.09% 12.30%
    TOTAL ASSETS 100.00% 100.00% 100.00% 100.00%
    Current Liabilities 4.53% 4.57% 4.61% 4.46%
    Long-term Liabilities 0.00% 0.00% 0.00% 0.00%
    Total Liabilities 7.02% 7.08% 7.14% 7.40%
    NET WORTH 103.80% 104.63% 105.59% 112.00%
    Percent of Sales
    Sales 100.00% 100.00% 100.00% 100.00%
    Gross Margin 98.04% 100.69% 103.51% 98.00%
    Selling, General & Administrative Expenses 91.20% 93.66% 96.28% 98.30%
    Advertising Expenses 1.88% 1.93% 1.98% 1.40%
    Profit Before Interest and Taxes 43.10% 44.26% 45.50% 33.50%
    Main Ratios
    Current 37.65 39.1 40.0775 33
    Quick 33.4 35.4 36.285 35
    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.
    Activity Ratios
    Accounts Receivable Turnover 7.5 7.8 8.112 N.A.
    Collection Days 100 100 100 N.A.
    Inventory Turnover 36.8 38.64 40.572 N.A.
    Accounts Payable Turnover 16.1 16.8 17.3 N.A.
    Payment Days 27 27 27 N.A.
    Total Asset Turnover 2.55 2.72 2.8 N.A.
    Debt Ratios
    Debt to Net Worth -0.05 -0.05 -0.06 N.A.
    Current Liab. to Liab. 1 1 1 N.A.
    Liquidity Ratios
    Net Working Capital $214,500 $226,512 $239,197 N.A.
    Interest Coverage 0 0 0 N.A.
    Additional Ratios
    Assets to Sales 0.77 0.847 0.9317 N.A.
    Current Debt/Total Assets 2% 1% 0% N.A.
    Acid Test 29.1 29.9 32.7 N.A.
    Sales/Net Worth 2.2 2.2 2.3 N.A.
    Dividend Payout 0 0 0 N.A.

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