The cutting edge: what does it take to turn a barbershop into a booming business?

Introduction

FOR MOST MEN, VENTURING, to the barbershop is a weekly ritual that goes beyond just grooming. The staying power of the local groomer, particularly the barbershop, is rooted in its position as the epicenter of candid discussions or debates about politics, sports, race. pop culture, and relationships, among other hot-button topics. Be it comical or poignant such dialogue is the reason the barbershop has long been a revered spot in African American communities. What may be surprising is that it is a growing industry. According to the Census Bureau, the barbering industry grew from $500 million to $2 billion between 2002 and 2005. As this growth continues, the demand for service is high. But only those entrepreneurs who are able to combine barbering excellence with sound business insight are poised to succeed.

Startup costs are roughly $150,000. depending on construction costs. Gross revenues for a six-chair shop in a strip mall can average between $200,000 and $350,000, depending on location, after about three years in business, says Joe Grondin, a barbering business consultant and CEO of the 23-store barbershop franchise Roosters Men's Grooming Centers (www.roostermgc.com). He adds that a barbershop can offer an enterprising barber or other investor returns of 15% to 20%.

"Even in the worst economic times, you have a strong chance of survival in the hair business," Grondin says. "There's so much room to grow and expand. Fin proof that you can take this business to whatever level you want."

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smooth operator

Corey Lee Bell Jr. offers a new business approach with The Renaissance Barbershop. Located in Durham, North Carolina, Renaissance is Bell's third barbershop. His others, Lewayne's and The Campus Barber, are located in surrounding areas.

The 29-year-old, who graduated from University of North Carolina--Chapel Hill with bachelor's degrees in African American studies and communications, pays barbers 50% of the profits they generate month to month, rather than renting out chairs. "While [the first two] businesses were making as much as $120,000 [annually], I was still collecting only $31,000 in rent from my barbers, recalls Bell, who chose to abort this structure since launching Renaissance in October 2007.

"Under this model, my barbers make about 50% more than the average barber that rents"

For 2008, Bell anticipates total revenues for all his operations to approach $400,000, with Renaissance generating nearly 60% of that figure. Intent on remaining debt free, Bell got creative in securing capital for Renaissance. He negotiated a five-year contract with his landlords, with one year rent-free. "You've got to be as proactive, creative, and as out-of-the-box as possible.

"In the beginning, I didn't want to take too many risks," continues Bell, who got his start cutting hair for friends. "Now, I have no problem taking risks because that's where the most potential comes from."

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financial snapshot

Here's an estimated breakdown for a six-chair barbershop:

* Build-out (cost will vary by location) improvements, flooring, lighting, wiring, etc.: $50,000 to $80,000

* Furniture and fixtures, including one-time equipment purchases (chairs, countertops, etc.): $50,000 to $70,000

* Rent. utilities, and maintenance fees: $3,000 to $4,000 per month

* Cleaning supplies and products used on clients : $250 per month

getting started

Learning your craft

Along with sound business planning, proper training and licensing are essential for a successful barber business. In most states, the options are limited to full-time (10 months) or part-time (two years) barber-school programs, but selective states offer a third option of a barber apprenticeship, where a novice barber trains under a seasoned barber for an 18-month period before taking the required board exam. In deciding the best method, prospective barbers should take into consideration their scheduling as well as financial needs.

In addition to his shop, Bell is a general partner of Durham, North Carolina-based Park West Barber School (www.parkwest1.com), which offers day, evening, and online classes. Bell, who works alongside managing partner Timothy McIntosh Jr. in training barbers, stresses the importance of becoming familiar with state board requirements and finding a school that best fits your needs.

"The school's pass-fail ratio, availability of business courses, catering to diverse hair types, and instructor credentials are just some of the factors you should consider in choosing a program," Bell says.

resources

* The Beauty Schools Directory (www.beautyschoolsdirectory.com)

* Milady's Standard Textbook of Professional Barber-Styling (Milady; $112.95) can help barbers prepare for the board exam * The National Association of Barber Boards of America (www.nationalbarberboards.com) provides information on respective state board regulations

4 things to consider

1. Accounting: To chart growth and as a safeguard against theft, impeccable bookkeeping is essential, says Leaha Crawford with Nevada-based MR Bookkeeping and Tax Services. Hire accounting and legal experts to ensure proper filing requirements for your business, "In a small business with a lot of cash transactions, if you get in the habit of writing checks and making daily deposits, you'll have a better idea of how your business is doing," Crawford says.

2. Marketing: Creative promotional strategies and activities can help establish your shop's reputation within the community, "Marketing is probably the second most important element when opening a shop," says Craig "Mr. Taper" Logan, a veteran barber and editor of Barbers Only Magazine (www.barbersonlymagazine.com). Toy drives, back-to-school specials, and senior citizen discounts, are just some of the ways Calvin "Tito" Hudson Jr., owner of the Las Vegas-based Classic Cuts, builds his shop's brand.

3. Online: Using the digital space is key, says Janis Stevenson, a business development adviser with the Nevada Small Business Development Center. While Bell has a Website (therenaissancebarbershop.com), Hudson relies on a MySpace page (myspace.com/classiccuts06) to promote his business. "Either way, it's excellent marketing when those not familiar with your work or business can see it instantly," Bell says.

4. Longevity: The business plan is more than a document to help you secure funding--it is a management tool to help you set and achieve long-term success. Revisit and update your business plan as often as is necessary, Include goals for the next one, three, and five years.

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hoop dreams

What happens in Vegas stays in Vegas. But if you open a barbershop with a basketball court in the center, then the word is sure to get out. Calvin "Tito" Hudson Jr. and his Las Vegas-based Classic Cuts gained attention when it opened in Sin City two years ago. Replicating a basketball arena, the innovative design comes complete with Wi-Fi connectivity, DirectTV, and a 16-speaker surround sound audio system. It's not uncommon to see teenagers and adults shooting hoops or watching one of four plasma televisions as they wait their turn.

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"I wanted to re-create the exciting atmosphere of a basketball game," says Hudson, who spent $150,000 in startup costs (initial estimates were $80,000) to cover construction materials and labor, as well as purchase barbering equipment and entertainment systems.

Hudson saved $75,000, and when the budget climbed to $150,000, he borrowed the difference from family members.

Hudson gives his barbers, who sign annual contracts, an option to choose between a rental or a commission system. He says he either charges more than $250 per week for a chair (compared to average rates of $160) or retains about 20% of their profits. In 2007, Classic Cuts generated $200,000 in revenues.

"If you're on commission, the more heads you cut, the more money you make," says Hudson, whose creativity in the front and back of the office has helped him clinch a solid victory.

doing your homework

"Small business owners tend to have the technical knowledge of their trade but not the business side of it," says Janis Stevenson with the NSBDC. To avoid surprises, she suggests that barbers learn everything they can about scouting out the perfect location; hiring talented barbers; acquiring reasonably priced, quality equipment and products; and implementing effective advertising tactics.

resources

* Against the Grain Magazine (www.againstthegrainmag.com), an industry trade publication

* Barbers Only Magazine (www.barbersonlymagazine.com) a trade publication and online community

setting up shop

"If you can do it yourself, do it," says Craig "Mr. Taper" Logan with Barbers Only Magazine. Logan says prospective barbershop owners should be prepared to secure their own funds if necessary. "Banks don't usually give loans to barbershop owners," he says. Instead of relying on financial institutions, Logan recommends using personal savings and private loans from family and friends. Of course, building clientele and generating revenue is a gradual process, which is why Logan cautions shop owners to take their time developing their business to avoid careless mistakes or misappropriations. While launching your own barbershop is ideal, purchasing a franchise is another option.