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Starting a Salon or Day Spa

From trendy hair salons to corner barber shops, this comprehensive guide shows you how to make your dream biz real.

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Editor's note: This article was excerpted from How to Starta Hair & Day Spa.

Since the dawn of the new millennium, the stock market has beenin a freefall and the economy has been in the doldrums. But it wasa good time to start a hair salon and day spa--and it still istoday.

According to Modern Salon/Vance Publishing, total salon industryrevenue is predicted to be $3.4 billion in 2005, up 11.8 percentfrom 2002. How is it possible for a service sector like the beautyindustry to continue to grow, given the state of the economy? Nodoubt because many of the services offered by salons simply cannotbe duplicated at home--or at least not duplicated well. Inaddition, in an age where people freely shell out $59.95 a monthfor unlimited cellular service or hundreds of dollars to lease thelatest SUV model with the most bells and whistles, the price of ahaircut probably doesn't seem very high considering the lift itcan give your spirits. Also, the baby boomers, who now constitutethe largest population segment in America, are more than willingand are financially able to spend money on any personal careservice they perceive will make them look younger and moreattractive.

What all this prosperity means to you is that the prospects forpeople who own personal care businesses are bright. The 2003 JobDemand Survey, distributed by the National Accrediting Commissionof Cosmetology Arts and Sciences, indicated that average totalincome (including tips) for salon owners was $53,150 in 2002,although it's possible to earn much more depending on where andhow you do business.

(And just as a side note: When we say "salon"throughout this article, we mean salon and day spa, as the title ofthe start-up kit indicates. Since the tools necessary to open bothare basically the same, it seemed redundant to say"salon/spa" over and over.)

The Opportunities

There are three ways you can make your mark on the hairindustry. You can open a franchise hair salon, in which you paymoney upfront for the privilege of opening that salon using someoneelse's established name (which gives you an instant reputation)and its resources (like advertising campaigns). You can buy anestablished salon from someone who is retiring from the business,has tired of the business, or has damaged the business and forcedit into bankruptcy (all three happen every day). A third option isto establish your own salon using your own money, your owningenuity and your own optimism that hard work and talent will winout.

There's one more option that bears mentioning here becauseit's so prevalent in the beauty business. Booth rental salonsare owned by a person (or persons) who is basically the landlordfor a group of hairstylists and other service providers workingunder his or her roof. As the landlord, the salon owner/operatorcollects a flat monthly fee from the service providers, for whichthey have the privilege of using salon space and nonremovableequipment like a styling station and chair. The renters, in turn,are considered independent contractors who must provide their ownsupplies (everything from hair dryers to perm rods), set their ownhours, book their own appointments and have their own key to thebuilding.

Operations

To begin with, you must consider your hours of operationcarefully so you can accommodate the maximum number of clientsduring the business day. You undoubtedly already know that thebeauty business isn't a 9-to-5 kind of industry. Salons are nowopen seven days a week and on some of the traditional holidays, andtheir hours may be extended around prom time or during peak weddingseason. What has driven this demand has been the proliferation oftwo--income couples who manage the demands of raising a familywhile juggling careers and managing their own personal business. Sowhile it wasn't so long ago that people wouldn't evenconsider getting a haircut on Sunday, salon hours on Sunday are nowa must (even if on an abbreviated schedule). Even day spas are openon Sundays, since this may be the only time during the week that abusy career mom can get away for some personal pampering.

Typically, hair salons in metropolitan areas are open from 10a.m. to 9 p.m. six days a week, unless the owners are enlightenedand add those Sunday hours mentioned above, and from 10 a.m. to 6p.m. in smaller communities. By design, Sunday and holiday hoursoften are the same as those of local retailers like malls anddepartment stores, and they generally run from noon to 5 p.m. Lunchhours and early evening hours tend to be the busiest times forsalons. You might also need to have special hours to accommodatespecial needs. For example, if you do a lot of wedding work,you'll probably have to be open earlier on Saturday mornings,say at 8 a.m., for the brides who have to get to church for a 10a.m. service.

Pricing

Another important part of your salon development plan is theappropriate pricing of your services. Set prices too high, andyou'll limit the number of people who can afford them; set themtoo low, and you'll limit your profit potential and possiblyput the business at risk. Of course, the price the market will bearis very much dependent on the demographics of your service area. Ifyou're in an upscale area with larger homes occupied by peoplewith more disposable income, you can price your servicesaccordingly and even offer high-end spa services. But if thesurrounding community is peopled by young working families,you'll have to forego the spa services (or offer no more thanthe bare minimum) and concentrate instead on basic haircutting andcolor services that are affordably priced.

When setting prices, you must consider the three factors thatwill influence your prices: labor and supplies, overhead, andprofit. Labor costs for salons include salary and benefits costsfor both your stylist/spa staff and administrative people(including your manager, receptionist and other support staff).Your own salary is included as a part of this cost. This cost isgenerally expressed as a price per hour and can vary depending onthe amount of time it takes your employees to cut hair or performother services.

Next, you need to consider your overhead costs, which consist ofall costs required to operate the business other than labor. Thisincludes your mortgage or lease payment, utilities, and so on.It's reasonable to estimate that your overhead will be from 40to 50 percent of your labor and materials cost. (This figure can beadjusted later as you accumulate financial data.) So let's saywhen you tally up all your labor and materials costs for the year,you arrive at a figure of $100,000. Your estimated overheadexpenses (at 45 percent) would be $45,000. This would give you anoverhead rate of 45 percent.

The last part of the pricing equation is profit. Salon ownersgenerally can expect to have a net profit of 11 to 15 percent(although you can certainly make this profit figure higher or loweras you see fit). To arrive at the net profit you want, you have toadd a markup percentage factor to your services so you'llarrive at the approximate gross amount you'll earn.

One way to simplify the process of setting prices to the extremeis to figure out how much the salon needs to make for the year anddo the math to arrive there. For instance, let's assume youwant the salon to make $52,000 per year. Here are the calculationsyou'd use to figure out your prices:

$52,000/52 weeks = $1,000 per week
$1,000/100 hours the salon is open each week = $10/hr
Add a 10 percent profit margin = $11/hr

Types of Salon Services

On the hair salon side, the most sought-after service is, ofcourse, haircutting and styling. This includes everything fromstyles created with a blow dryer, curling iron or hand scrunchingto tried-and-true roller/dryer sets for the "mature"clientele. Popular color services include highlighting,lowlighting, glazing, corrective coloring, dimensional specialeffects, and hair and scalp treatments. Texture services includepermanent waves, partial or spot perms, spiral perms and anti-curltreatments. Braiding, which has made a strong comeback in manyparts of the country, falls into a category of its own. Finally,special occasion hairstyling, for events like proms and weddings,round out the typical hair services menu.

Although technically it's an aesthetic service, nail andfoot care is often offered in hair salons. Nail servicesinclude:

  • Manicures (both traditional and French manicures)
  • Pedicures
  • Nail wrapping
  • Acrylic nail application
  • Sculpted nail application
  • Nail tipping
  • Paraffin treatments
  • Skin exfoliation and hand/foot massage are often part of themanicure and pedicure processes.

Whether you offer nail services is entirely dependent on thesize of your salon and whether you can afford both the equipmentand the salary of a nail technician at the outset. Today's nailclient is used to visiting shops devoted only to nail services, soshe won't be surprised if you don't offer manicures,acrylic nails and tipping. But you may be able to get her to leaveher regular manicurist if she sees that you're offering thesame service at your cool new salon. At the very least, you shouldoffer haircuts and styling, basic perms, straightening treatmentsand highlighting.

Types of Spa Services

As mentioned before, spa services are a rapidly growing segmentof the personal care industry. The range of services is trulydazzling, but basically, aesthetic services offered at a day spafall into three categories: skin and body care, hair removal andmakeup. (Technically, there is a fourth category--nailservices--but as we just mentioned, nail services have crossed overinto the beauty mainstream and are no longer considered just a spaservice. However, when offered in a spa setting, nail services tendto be higher priced than in a salon.) Skin- and body-care spaservices include:

  • Facials and body exfoliation (which may involve the use of saltglows, body polish, enzyme peels, and body masks like mud orparaffin)
  • Massage (full body massage, facial and/or hand/footmassage)
  • Wraps and packs (used to combat cellulite and reduce waterretention)
  • Hydrotherapy treatments (whirlpool baths, Scotch hose--a typeof massage that uses a hose to direct streams of water on theclient to improve circulation--and hot tub treatments)
  • Body tanning (self-tanners and tanning beds)
  • Hair-removal services include:
  • Electrolysis
  • Waxing (face, legs, arms, bikini, back and underarms)
  • Eyebrow arching
  • Makeup services include:
  • Cosmetics application
  • Color analysis
  • Eyelash tinting
  • Eyebrow tinting
  • Ear piercing

When determining which of these spa services to offer, it'simportant to weigh factors like equipment cost against potentialprofitability. For instance, you may want to offer hydrotherapy inyour new day spa. But hydrotherapy services require the greatestoutlay of cash for equipment and facility development. So it mightbe a better idea to limit your spa services initially to massage(which doesn't require as much equipment) and/or facials.

Another important factor to consider when deciding which spaservices you'll offer is that many of them require a wet room.This includes the hydrotherapies mentioned above, as well as anybody masks, exfoliation treatments and other body treatments thatmust be rinsed off after application. Even if you decide not tooffer hydro services when you first open, you should at least planto include a wet room in your initial plans or you'll always belimited to "dry" services--unless, of course, you move tonew digs or expand your existing location.

Because the concept of a day spa implies a day of pamperingsimilar to what you might enjoy on a spa vacation or a cruise ship,it's common for spa owners to offer packages of services.Generally speaking, packages should consist of at least threecomplementary services, or in the case of hydrotherapy treatments,one hydro service and up to four "dry" services. Spaindustry insiders recommend offering half-day packages that runabout three hours and full-day, five-hour packages that include 30minutes to an hour for a light lunch.

A Day in the Life

Even though no two days tend to be alike for salon ownersbecause the needs of their clients (not to mention their employees)vary so widely, there are certain tasks you can expect to performon a regular basis. To begin with, you'll probably spend a lotof time on the telephone every day, helping to book appointments,ordering supplies, talking to salespeople, arranging for in-shop oroffsite training, and so on. You'll also have to make up workschedules (then juggle them to accommodate employees' scheduledtime off and personal needs), track receivables, monitor costs,dream up new advertising and marketing strategies, and possiblycreate daily or weekly specials that can be emailed to your regularcustomers to lure them in for additional services. On the personnelside, you'll hire new employees, visit beauty schools to trollfor hot prospects, conduct performance reviews, mentor youngstylists and/or aesthetics technicians with minimal experience,consult with stylists or colorists whose efforts go awry, andmediate when tempers flare between staff members. And of course, ifyou're also a licensed practicing cosmetologist, you'll bestyling hair, applying color and rolling perms.

Sounds like a lot for one person to do, doesn't it? Well, itis--and that's why many salon owners (even those whose salonsare quite small) often hire a salon manager to take over some ofthe administrative duties. This is a particularly good idea if youintend to continue to work behind the chair, since hairstylingchores alone can take up a lot of your time every day. And whileit's possible to slip in some administrative work whileyou're waiting for someone's perm to process or a lateclient to arrive, it can be difficult to switch gears and giveadministrative tasks like balancing the books the fullconcentration they need.

Marketing

The main thing that will influence business in your salon willbe economics. After all, when the economy is riding high, peopleare willing and able to spend money on more expensive salonservices, services that can easily be done at home, and luxury spaservices like full-body massage and body wraps. But when theeconomy is slumping, those services may be considered a luxuryrather than a necessity. As a result, customers may cut back on thefrequency of their salon visits, or they may opt only for the basicservices provided by one of the budget-conscious nationalchains.

One way to avoid being caught up a creek without a paddle is toresearch your target market's economic base carefully. Ifyou've done your market research well so far, you already havesome idea of the average income levels in your neighborhood. Nowyou need to look at data like the percentage of people who areemployed full time and the types of jobs they hold. If the localmarket is driven by a lot of blue-collar, heavy industry jobs, adownturn in the economy could make cash tight and affect yourability to keep customers. Luckily, most people still use salonservices, even if it's just for a basic cut, when times aretough, but they may go longer between services. So make a phonecall to your city's economic development office now to get ahandle on the health of local industry.

Your Salon's Website

Just as you'll access other companies' websites forinformation about their products and services, you'll want bothprospective and repeat clients to be able to find you incyberspace. Your website will be crucial to your marketing effortsand can be used for everything from posting your hours and drivingdirections to selling salon services.

Spas come off particularly well in a cyber tour. Well-decoratedprivate treatment rooms can communicate a feeling of soothingrelaxation even on screen, while suggesting that a resort-styleoasis of serene tranquility is no more than a phone call away.

Because your Website is virtual advertising that's availableon demand 24 hours a day, it's important to spend a fair amountof time considering what it should say. (We're assuming thatyour site will be an "online brochure" with multiplepages rather than an electronic business card.) The best way todetermine content is by thinking like a customer and answering thequestions you think he or she would have when searching for a newsalon or spa. Here are examples of the kinds of questions aprospective salon/spa customer might have:

Salon

  • Do you provide initial consultations? Is there a charge?
  • Can you give me the same hairstyle as (name of celebrity)?
  • What's the latest look?
  • Are your stylists experienced? Where did they study/train?
  • What do your services cost?
  • Do you sell gift certificates?
  • What hair-care product lines do you carry?
  • Which credit/debit cards do you accept?
  • Where are you located?
  • What are your hours?
  • How can I reach you?

Spa

  • Are your spa employees licensed?
  • Are your masseuses male or female?
  • Are hyrdo treatments better than massage?
  • How do you sanitize your equipment?
  • How long will my treatment take?
  • What do you charge?
  • May I take a tour of your facility?

Location

Choosing a location for your salon is one of the most importantdecisions you'll make in the early stages of establishing yournew business. Obviously, you'll want to locate it in an areathat's easily accessible by highway or byway, with plenty oftraffic (both foot and the four-wheeled variety) and parking. Thesurrounding area should be attractive, well-lighted and safe. Thereshould also be other retail businesses nearby (as opposed tocommercial areas like industrial parks or a regional airport)because they can generate business for you even as they attractcustomers through their own doors.

Typically, salons operate out of three types of establishments:Free-standing buildings, storefront properties and shopping centerslike strip malls. Occasionally, salons are located in malls, butit's actually more common for them to operate out of afree-standing building located on the perimeter or an"outlot" of the mall property because the rent is so highinside the mall. They're also sometimes found on the groundfloor of office buildings in large metropolitan areas where thereis a significant amount of foot traffic during the business day.However, such locations may not be optimal if they're in anurban area that doesn't have much traffic in the evenings or onweekends.

There's one other type of property that deserves seriousconsideration when you're looking for a place to set up shop. Afacility that once served as a beauty salon may be a good choicefor your new location. The good news is, a lot of theinfrastructure you'll need, including extra plumbing, specialelectrical outlets, and maybe even fixtures like salon stations andthe reception desk, may already be onsite and available forpurchase with the building. The bad news is, there might be areally good reason why the salon closed, like there's too muchcompetition in the area, the location is crummy, or the previousowner had a poor reputation among clients and in the community. Thesame goes for a salon that's currently in business but is upfor sale.

Size of Your Shop

Salons usually range from 1,200 to 2,000 square feet, althoughsmall spaces can be considerably smaller (fewer than 1,000 squarefeet). You'll need four separate areas in your hair salon:Reception and retail, shampoo, cutting/service, and storage. Thelargest of these, of course, should be your salon services area,which should take up about 50 percent of the floor space. About 20percent of the space should be allotted for retail/reception, 10percent for the shampoo area, and the remaining 20 percent forstorage and an employee break/lunch room area. The employee/clientrestroom and your office also should be located in this area. Ifspace permits, you may wish to provide a one-person changing roomfor customers who are having treatments like color or perms.Otherwise, the restroom can serve as a changing room. Be sure toput a large hamper in the changing room/bathroom for collectingsoiled smocks. Any retail products you sell should be displayed inthe reception area and placed near the cash register for easyaccess.

The shampoo area is usually located toward the back of the salonand is equipped with shampoo sinks (either free-standing or affixedto the wall) and chairs. Each station should also have a "backbar," or cabinet, for storing products used in the salon, likeshampoos, conditioners and deep-conditioning treatments. Naturally,these should be the same products you sell in the retail area, andyour stylists should be trained to discuss each product used withthe client as a way to spur sales.

Layout

If you decide to include spa services as part of your salon,then the overall layout of your salon should be created by aprofessional designer or an architect. That's because unlike ahair salon, which tends to be a large open area with few partitionsor walls, a spa needs to be somewhat compartmentalized. However, ifyou've worked in or visited enough spas in the course of yourcareer, or you have good visualization skills, you may already havea good idea of how you want your spa to look. In that case, it maybe possible to work with a draftsperson to draw up plans for thespa, and then hire someone to build the space for you.

Spas are usually divided into a series of rooms that are used aschanging and showering facilities, treatment rooms, consultationrooms (for discussing treatment options and post-treatment care),and so on. The consultation room may also be used as an office whennot in use by an aesthetician and a client, although we'llassume you will have your main office in the salon area. There alsoshould be a retail area that's separate from the hairsalon's retail area (so customers aren't confused ordistracted by products that don't relate to spa items). The spaand the salon can share a reception area, however, as long asit's centrally located and easily accessible to both sides ofthe business. Ideally, the reception area will be in the center,with the salon and the spa radiating out to either side. Ifpossible, incorporate a supply room into your spa area. Ifthat's not possible, spa products can share storage space withsalon products, but strive to keep them separate and organized foreasy accessibility.

Separate treatment rooms are needed for wet and dry services.While good overhead lighting is needed in treatment rooms bothbefore and after services are rendered, it should be softlydiffused. During procedures like massage and hydrotherapy, theoverhead lights should be turned off and an alternate, softer lightsource should be turned on to create an atmosphere of relaxationand peace. Adequate ventilation is also a must, as is hot and coldrunning water so aestheticians can mix dry products or dampentowels during treatment without leaving the room. Finally, thetreatment room should have its own sound system, on which relaxingmusic or nature's sounds should be played. No rap or heavymetal!

Personnel

One of the more challenging aspects of being a salon owner willbe hiring and retaining good employees. This can seem like adaunting task, not just because both of these responsibilities canbe very time-consuming, but also because there's so much ridingon employees' skills. After all, your employees will be thefront-line representatives of the business you have lovingly andpainstakingly cobbled out of little more than some loans, someingenuity and a lot of "shear" determination. Theirability and talent, as well as their attitudes and work ethic, willinfluence every aspect of the business, from client retention rateto the bottom line.

Here's a rundown of the salon and spa employees you'relikely to need for the day-to-day functioning of your newbusiness.

Owner/Operator. You're an employee, too, soyou're first on the list. Your day-to-day responsibilities willinclude overseeing operations, making sure customer service is atop priority, making financial decisions, checking salon productand retail product inventory, handling personnel matters, hiringnew staff, and assessing employee performance. All of this is inaddition to providing salon services if you're a licensed,practicing cosmetologist.

Salon Manager. While it may be tempting to try toundertake all the management tasks of the new salon yourself ratherthan hiring a salon manager, try to resist the urge. Unless yoursalon is extremely small, the price you'll pay for amanager's salary is worth it. The manager can handle myriadtasks like paperwork, record-keeping, employee scheduling andpurchasing. He or she will also oversee salon maintenance andhandle facility management issues. This person should have theauthority to act on your behalf in your absence long-termsuccess."

Hairstylist/Cosmetologist. Your stylists are at the heartof your salon staff. Every state requires stylists to be licensedcosmetologists, so you'll want to check their credentials whenthey apply for a job. A cosmetology license typically allows theholder to cut and color hair and give manicures and facials.Ordinarily, additional licensing is necessary for services likemassage therapy, but it's possible your cosmetologist will bepermitted to give hand and foot massages without extra licenses.Check with your state's board of cosmetology to see what therequirements are.

Shampoo/Salon Assistant. This is the person who shampoosclients' hair while the stylist is finishing up another client.He or she may also fold towels, sweep up hair clippings and provideother general assistance around the shop. Often these assistantsare newly minted cosmetology graduates who are looking forexperience in the industry, or licensed assistants who haven'tyet completed enough hours to become a fully licensed stylist.

Receptionist. In addition to greeting customers as theyarrive, the receptionist answers the phone, books appointments,gives directions, cashes out customers and performs various othercustomer service duties like making coffee or even hanging up coatsfor clients.

Manicurist. As previously noted, the manicurist may bepart of either the hair salon or spa staff. This professionalprovides services like manicures, pedicures and acrylic nailapplication and tipping and must be a licensed cosmetologist.

Aesthetician. This is one of the most skilled people onyour spa staff. Aestheticians hold a special license from the stateso they can provide services like facials, waxing, massage andother specialty body-care services like Scotch hose therapy. Quiteoften this person also does makeup consultations and application,especially if there's not room in the budget to hire adedicated makeup artist.

Massage Therapist. Although an aesthetician can providemany massage services, a massage therapist has a higher level oftraining and additional expertise. Most states require theseprofessionals to hold a massage therapist license

Electrologist. This person provides hair removal servicesand needs an electrologist license in many states.

Independent Contractors. The independent contractor is aperson who is not on your payroll but provides certain services inyour salon, including hairstyling and manicuring. This type ofbusiness arrangement most commonly occurs when a cosmetologistrents space from you (known as booth rental), but is responsiblefor everything from buying his or her own tools and supplies topaying taxes on earned income.

Resources

For an industry that offers such specialized services, it'samazing how much information there is in print and in cyberspaceabout both the hair salon and the day spa industries. The Internetis an especially rich source of background information, businesstips and marketing know-how, much of which is posted by people whoare themselves in the industry. We've presented some usefulresources here, but the list is by no means exhaustive. Also,please note that all contact information was current and accurateat the time of publication.

Associations

Beauty Institutes

Publications

Editor's note: This article was excerpted from How to Starta Hair & Day Spa.

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