Salons, barbershops, and other beauty-based businesses can do well even in poor economic times. However, running a successful beauty business is dependent on several factors.
Apart from providing high-quality services, you need to ensure that you’re aware of all the financial requirements and have plans in place to take care of them.
Essential Steps Before Starting Your Business
It’s impossible to overstate how much you’ll need a business plan before taking any steps in pursuit of your beauty business. A business plan allows you to clearly state the purpose of your business, your target clients, the budget, marketing plans, the company’s potential growth, and the standard operational costs.
Then, as you document these, you’ll dig into details that you likely wouldn’t have considered without the plan.
It would be best if you decided on the location of your potential business and the size of the salon or barbershop. That information will influence a few of the costs that we will discuss later and your options for financing.
The Set Costs of a Beauty Business
As you might have expected, you can’t just choose a location and start operating a beauty business. You’ll need to ensure that you’re adhering to the various regulations of your specific state. If you’re not sure what those are, contact the local Occupational and Professional Licensing Division. There are also costs associated with setting up your business or location and ensuring that any staff you hire remains compliant. Here are some figures to keep in mind:
- Certification – This cost varies according to your location but can be confirmed with your local authorities.
- License – A license for a beauty-based business can cost up to $12,000 if you don’t already have a cosmetology license. For a product-based business, there are costs associated with obtaining patents and ensuring that your product meets regulatory standards.
- Insurance – It’s mandatory to ensure your store, but the cost can range from $450 – $2900 depending on the type of insurance you undertake.
- Purchasing a location – If you plan on owning the site outright, this can cost from $40,000 to $250,000 for a place that is already a salon. Building something from scratch will likely be twice that figure.
- Legal fees – Generally, these fees are $200 per hour, so the final cost will vary as your lawyer helps with regulatory matters.
- The equipment – Unless the space you’ve chosen comes with salon equipment; you’ll need to get your own. Including styling chairs, hood dryers, coloring stations, and such, you can require as much as $27,000.
- Inventory and Supplies – Depending on the type of beauty business, the startup supplies and inventory can be as little as $100 hundred for a service-based business to upwards of $20,000 for a product-based. If you offer a variety of products or expect a large client base, you can expect that your supply costs will be closer to the upper end of this range.
- A website – Studies show that most consumers find their next purchase online, so it’s a good idea to have a website set up. A website can be free if you know how to do it but can cost up to $10,000.
- Possible renovations – If your space is not up to scratch, you may need as much as $32,000 to fix any issues.
- Signs and marketing – These can cost you up to $7,000 depending on your skill level and how you want to market your Black-owned beauty business specifically.
- A computer system – Having a designated system and effective point-of-sale program can cost up to $5,000 to set up.
- Start-up cash – Experts recommend having at least $500 on hand for the start of your first business day.
The Recurring Costs of A Beauty Business
Once you’ve started your beauty business, the ongoing costs will be another consideration for you. The ongoing cost is the money you’ll need to spend on a scheduled basis to keep your business running. Here are some of the general expenses.
- Rent, lease, or mortgage – These costs can vary based on the location and size of your building but aim for up to $4,000 per month.
- Utilities – These can range from $600 – $4,000.
- Employee wages – Wages can be a large portion of your monthly expenses, so research what’s typical in the industry.
- Marketing – Continuous marketing helps grow your client base, including $30 for a simple campaign in your budget and $4,000 for more complex ones.
- Credit card processing fees – The exact number will vary, but each transaction can cost 1.5% and 3% depending on the provider.
- Taxes – The figure will vary, but payroll or self-employment taxes can be as much as 7.6% of your sales.
- Cleaning costs – Many businesses use cleaning services to ensure the hygiene of their surroundings, which can cost up to $200 per month.
- Insurance payments – This is applicable if you’ve negotiated a monthly fee.
- Repairs and maintenance – The upkeep of your business is essential, so budget $500 monthly for that.
- Emergency funds – If the unexpected occurs, an emergency fund of about $500 per month can help.
- Legal fees – Again, the actual costs can vary based on the legal services you need throughout the year.
Other Important Considerations
As you can see, there are several costs associated with starting and running a successful beauty business. First, it will be imperative to secure financing, so you’ll know where you have a source for your start-up costs. Some people seek help from friends or associates, while others get access to a business loan. Whichever you choose, you must consider your loan repayment in the costs of running the business.
Bear in mind that the first year or two can be challenging for a new business, so repaying a large loan during this time can be difficult, depending on your business model.
While there’s a demand for Black-owned beauty businesses, you can’t only count on that fact to run your business successfully. The key will always be carefully managing your finances while meeting the needs of your clientele. It’s essential to have a plan before taking steps to start your own beauty business. A support structure can also make a difference in the first few years, so make sure you have a good team behind you that can offer advice and help when necessary.