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This article has been written by Aditi Sahu pursuing the Diploma in Business Laws for In-House Counsels from LawSikho. This article has been edited by Zigishu Singh (Associate, Lawsikho) and Dipshi Swara (Senior Associate, Lawsikho).

Introduction

The core purpose of every beauty salon is to provide a haven for consumers to escape the stresses of everyday life. It is a place where beauty salon owners may treat their customers like royalty and let them relax.

While stylists, therapists, nail technicians, and other salon employees must keep informed about the latest treatments and trends, they must also ensure that their clients are in a safe atmosphere.

The risks associated with starting a salon

When you have an effective management organizational structure, owning and operating a salon may be a profitable business. If you’re considering starting a salon, it’s a wonderful business to start but there are several problems that salon owners may face while starting a business. After all, no business can exist without some element of risk. Some of the risk associated with starting a salon business is:

1. Hiring Staff:

Salon owners may find recruiting staff for a business to be a difficult operation. Yet, various circumstances have made this procedure rather unique when compared to other businesses. There are various types of services available in a salon; this implies you’ll need to hire professionals to provide many services to the customers. The owner has to analyze whether the staff he/ she recruits has potential or not, this is a very difficult part and risky as well, because improper recruitment may prove to be detrimental for your business.

2. Products used:

Many customers will come to your salon requesting specific products. You risk losing them as clients if the product is out of stock. Stocking up on a range of products to fulfill your consumers’ needs, on the other hand, will be costly.

3Customers Loyalty:

As running a salon is such a challenging business, it can be difficult to attract and retain loyal consumers. There’s a high possibility that there will be another salon down the road that provides identical services.

4. Price Distortion:

Newly opened salons may cut their rates to attract more customers, making it nearly impossible for you to make a profit. The price distortion will adversely affect the long-term goal of the business, because, if a business is not making any profit, then it will be difficult for them to expand their business in the future.

5Maintaining Consistent Income:

The erratic outcomes of endorsement (i.e. advertisement) are a cause for concern because it leads to inconsistent income levels. Depending on endorsement, salon owners record varying income amounts each month. Long-term planning might be challenging when income is inconsistent.

6. High Operating Costs:

Salons require a wide range of energy-intensive equipment. As a result, the energy cost will rise and diminish the estimated sales revenue.

7. Employee Resignation:

A high rate of Employee resignation could be a great concern for a salon owner. Some staff members quit their jobs after realizing that they don’t get paid according to their service. Due to a shortage of experienced employees, the delivery of service will suffer and customers have to wait for a longer duration and this could be a bad experience for them. Customers who have had a bad experience are also reluctant to come again.

What needs to be done to mitigate the risk of a salon business?

When you first decide to establish your own company, you must realize that risk management will be a constant companion on your journey to success. We all want to believe that everything will go smoothly. The plain truth is that your route to success is much more likely to be filled with peaks and troughs, and your ability to maximize the peaks while smoothing out the troughs will go a long way toward determining your company’s future success.

Consequently, the vast majority of small enterprises fail during the first few years of operation. However, you can take steps to guarantee that your company’s risks are minimized while its success is maximized, such as:

  • Better education, not only in your chosen aesthetics career but also in business principle;
  • Make use of the expertise of specialists in domains where you are lacking (eg. accountants, lawyers, business coaches, etc.);
  • Create and stick to a fully accountable business plan;
  • Create and keep a completely accountable risk management plan, and stick to it when it comes to managing risks.

The majority of business owners are aware of the first three points above, even if they have chosen not to act on them – but have you ever documented the risks you believe could affect your business and devised a plan to mitigate each of them?

We have complete control over our thoughts and performance, the risks associated with our actions are the easiest to handle. They could, however, be considered the most challenging because it can be tough to analyze one’s performance and to honestly accept change to improve. This is why the following advice, such as education and, most crucially, a business plan with accountability (ideally with the help of a business coach or another third party) are so crucial. The most difficult risks to handle are those that are beyond your control. Staff, customers, suppliers, and landlords can all have a significant impact on the success of your company. Thus, certain measures to be taken in respect of Staff, customers, suppliers, and landlords:

1. Staff

A chain is only as strong as its weakest link,” no matter how skilled or qualified you are. You must keep investing in your employees’ skills and education to build a stronger team that works for you and reduce the chances of things going wrong. To begin, make certain that you recruit the best individual available. This does not always imply the most experienced employee, but rather the one that is eager to learn and enjoys their work. Following that, you must create a career plan for each employee, which includes education and advancement. Your employees will feel valued, and as a result, they will arrive at work with a pleasant attitude.

Most essentially, you must adhere to processes so that every member of your team understands what is expected of them and is held accountable for it. The most successful businesses have these procedures properly documented and provided to every employee, allowing not only current employees to understand what is expected of them, but also new employees to seamlessly integrate into the company. This has the extra benefit of increasing the value of your business to potential buyers when you’re ready to sell!

2. Customers

When interacting with customers, there are several measures to take that skilled beauty therapists should consider such as:

  • Customer consultation in depth;
  • Transparency;
  • Client business cards;
  • Consent forms signed;
  • Disclaimer: Before and after photographs are for illustration purposes only;
  • Broad insurance coverage and understanding of what to do in the event of a claim;
  • If you don’t want to treat a customer for any reason, be prepared to say no.

3. Suppliers

The goods you utilize have a big impact on the level of your client satisfaction. While the beauty therapy industry is swamped with concepts and products, you must do your homework to ensure that you only use products  that you have faith and believe will deliver the best outcomes for your clients.

Use only reliable or well-recommended companies. Don’t be persuaded by salespeople to start doing something you’re not qualified to do, haven’t had much training in, or don’t feel comfortable doing. At the end of the day, the salesperson walks away with your money, but you’re left with the unknown product’s hazards.

When considering the risks that your organization may face, it can be exhausting to examine all of the numerous factors, especially when working with third-party vendors. Salon owners may frequently face dangers that are beyond their control, but it’s vital to realize that some areas can be addressed using the following tips: 

  • Every relationship you enter should be approached with prudence;
  • Investigate on your own;
  • When possible, seek the guidance of experts;
  • You’ll have a better chance of ensuring that your salon thrives today and in the future if you follow the following suggestions and incorporate the significant contributions of others.

4. Landlord or Location of the business premises

The location of your salon where the business is carried out is in many situations one of the most important factors in its success. While it is true that in real estate, location is everything, there are other factors to consider before signing a lease.

One of the biggest problems is that most business owners are so eager to move into their “perfect” site that they overlook the fact that a lease is a legal contract that can expose the business owner to significant responsibility. Tenant-landlord legal responsibilities are now commonly transferred to the tenant in lease agreements.

Apart from insurance obligations, landlords might impose stringent legal restrictions on other aspects of your tenancy, such as what type of furnishings you can install, how and when you can trade, and so on. Before signing a lease, keep in mind that it is a legal contract with significant implications for your business, so obtain legal counsel and suggestions before signing. Beyond the Lease, there are a few apparent factors to consider about the location of your business, such as:

  • Potential limitations and bye-laws applicable to the location;
  • Consider the nature of the leased location;
  • Parking and transportation are both simple and convenient;
  • Water supply and electricity backups;
  • Limitations on access

Suggestions: how to avoid risks while starting a salon business

Do you wish to get into the growing hair care industry and other services that go along with it? This sector of the economy is rapidly expanding. When opening your salon, don’t make some common blunders that will cause you to lose consumers to competition. For example, many entrepreneurs make the error of opening a new salon without first conducting market research. They have no clue who they want to target in terms of demographics. As a result, their marketing strategies, if any, lack direction.

To avoid risk, adopt some measures, such as:

1. Knowing your Business Plan:

A business plan is essential for staying on track as you begin the process of developing and promoting your salon. Make sure the current plan covers every element of the salon’s operations. Not only should the plan include how to cover the funds, but also plan how you intend to continue in the market.

2. Decide the Source of Funding:

It’s a significant mistake to open your salon without first figuring out how to fund it. You can get a loan from a regular bank. You can also form a partnership with investors. Get a good estimate of how much money you’ll need to get started.

3. Consult with a Mentor:

Business people with a lot of expertise can assist you, how to run a successful salon? Find a business mentor who works in the salon sector. When you’re in danger, you’ll obtain your answers to the queries.

4. Taking the help of an Accountant:

An accountant is a person who keeps track of the funds allocated to a project. Make sure your business hires a trained accountant to keep track of your income and expenses. The account will assist you in paying your taxes, which is critical to prevent legal complications.

5. Choose an appropriate location for a Salon Business:

The location of your Salon may make or ruin your business. People like to visit locations that provide basic amenities such as car parking and easy access from major highways.

Choose a location with a lot of foot traffic. In addition, the position must be extremely visible. Above all, the salon should be in a neighborhood where your target customers live. 

6. Research the Market:

It’s risky to start a salon in a hurry without first assessing the market and potential clients. As time goes on, you lose sight of many parts of the business and lose your sense of direction.

Solicit information on your local market, including your competitors and the services they provide, your target clients and their economic, educational, and other backgrounds, and so on.

7. Having a sufficient budget for marketing your business:

Without allocating a certain amount of money to marketing, no business can survive in a competitive market. Many new and established businesses in your niche compete directly with your salon. One goal of marketing is to make your services more visible in the market and among your target audience.

As a result, one of the most important suggestions for starting a salon business is to put aside a marketing budget. You have to use that money to start an advertising campaign in local newspapers, on television, on billboards, and for the distribution of promotional items, among other things.

8. Hiring Right Staff for the Salon:

Another big blunder made by salon owners is that they hardly care about recruiting their personnel based on certain criteria. Make sure that your personnel are smart, well-mannered, and have a pleasant demeanor. They should be eager to assist your clients. When hiring, pay attention to the personality of the employees.

Conclusion

When an individual wants to start a salon business, he or she may face these above challenges regarding proper staff, profit-making, allocation of funds, maintaining quality service, maintaining customer loyalty, etc. if these challenges are not solved appropriately then it will be risky for the business irrespective of new or existing business. The business owner cannot ignore the risk factor for the growth of the business. To avoid risk, measures should be taken in the early stages.

References

  1. https://www.thehartford.com/professional-liability-insurance/risk-management-hair-beauty/injury
  2.  https://www.ajg.com.au/news-and-insights/beauty-therapy-insurance
  3.  https://www.businessnewsdaily.com/8647-opening-salon-tips.html
  4.  https://queueme.io/resources/salon/top-15-challenges-faced-by-salon-owners.html
  5. https://www.designhill.com/design-blog/mistakes-to-avoid-when-starting-your-own-salon/

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