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Why Hair Salons and Day Spas Fail Every new business owner faces an uphill battle for survival. Find out what hurdles you might encounter in the salon/spa industry.

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In Start Your Own Hair Salon and Day Spa, the staff at Entrepreneur Press and writer Eileen Figure Sandlin explain how you can launch a successful full-service hair salon and day spa, a business that can be personally rewarding, makes a lot of people happy and can be very lucrative. In this edited excerpt, the authors reveal the problems that can sink even the most well-thought out business ideas.

Every new business owner faces an uphill battle for survival. In fact, financial giant Bloomberg estimates that up to 80 percent of all new small businesses fail within 18 months.

There are many reasons for these failures: outside market conditions (such as new competition or unexpected increases in the cost of doing business), financing problems, tax-related issues, poor planning, mismanagement and a host of other problems.

The SBA Online Women's Business Center offers these additional common causes of failure:

  • Inadequate cash reserves. You need at least a six-month cash reserve as a cushion to carry you through until you start making money.
  • Failure to clearly define and understand your market, your customers and your customers' buying habits. .
  • Failure to price your products or services correctly. The SBA says you can be the cheapest or the best, but if you try to be both, you'll fail.
  • Failure to anticipate cash flow adequately. Some suppliers require immediate payment when dealing with new businesses, which can quickly deplete your cash reserves. Add in the months-long wait for reimbursement for anything sold on credit, and you could be seriously cash-strapped.
  • Failure to anticipate or react to competition, technology or other changes in the marketplace. When you're busy, it's easy to look the other way while things around you are changing. But just imagine trying to cater to a young, trendy crowd in a community where the population is aging. It won't be long before you find yourself in trouble.
  • Believing you can do everything yourself. The SBA says one of the biggest challenges entrepreneurs face is being able to loosen their hands on the reins and start delegating to trusted employees. You can't do it all yourself—you must rely on those who have proven they can handle responsibility and make things happen, and then trust their judgment.

So what's a fledgling salon owner to do? To begin with, hire professionals like attorneys, accountants and business managers to assist you in the proper management and operation of your business. Because no matter how enthusiastic, how knowledgeable and how bright you may be, you're probably not an expert in every field, and your time will only stretch so far. Although in the beginning it can be pretty hard to part with the cash to pay those professional fees, it's worth it in the long run because this kind of help will allow you to focus your attention on the things you do best.

You also should seriously consider learning as much as possible about business management by taking courses at your local community college or university. Knowing at least the basics of finance, accounting, marketing and the like really can keep you grounded and help you make the right business decisions down the road.

"I really wish I would have understood business better when I started rather than just having industry-specific knowledge," says Dennis Gullo of Moments Salon and Day Spa in Mount Laurel, New Jersey. "I was an education junkie but only in the salon business. General education focusing on sound business principles is really better because [if you're like me,] no matter how successful you are, your success always feels like luck."

One big benefit you have as a prospective small-business owner is that you can rely on the insight and expertise of the many business owners who have gone before you. Certainly any person who's launched a small business can fill you in on the foibles and follies of entrepreneurship. In addition, other salon and spa owners can be a treasure trove of wisdom. So seriously consider joining one of the industry's many associations, then network at its conventions or regional meetings. You'll soon learn that even the most successful owners have been where you are and had the same concerns you have today.

Even successful salon and spa owners recognize they could have done some things better. For instance, Daryl Jenkins of HairXtreme in Chester, Virginia, says he should have paid more attention to the layout when his wife's salon was designed. "According to conventional business wisdom, you should be earning X number of dollars per square foot, which we weren't doing in the beginning," Jenkins says. "We had a lot of wasted space because everything was so spread out. Of course now it's a good thing, because customers have to go through the styling area to get to the treatment area. That creates good traffic flow that's good for business."

Sasha Rash of La Jolie in Princeton, New Jersey, admits she could have tried to separate herself more from the business in the early days. "As much as I'm a big part of the business, I'm not the whole company," she says. "I was defining myself through the company, and it would have helped if I had accepted the occasional failures more graciously and without so much angst."

Pat Millar of Millar Salon Spa Store in Clinton, New Jersey, wishes she'd had more money in the beginning to smooth the way. "It's helpful to have a lot of working capital available so you're not leveraging your personal property," Millar says. "But of course when you're younger, you take more risks. And come to think of it, I'm still a risk-taker today."

Written by business writer Eileen Figure Sandlin and edited by the experts at Entrepreneur, each Start Your Own title delivers industry-specific information for starting a business supported by expert interviews, lessons learned, and success secrets from practicing business owners in the industry.

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