How to write a business plan for a hairdressing salon?

Putting together a business plan for a hairdressing salon can be daunting - especially if you're creating a business for the first time - but with this comprehensive guide, you'll have the necessary tools to do it confidently.

We will explore why writing one is so important in both starting up and growing an existing hairdressing salon, as well as what should go into making an effective plan - from its structure to content - and what tools can be used to streamline the process and avoid errors.

Without further ado, let us begin!

Why write a business plan for a hairdressing salon?

Having a clear understanding of why you want to write a business plan for your hairdressing salon will make it simpler for you to grasp the rationale behind its structure and content. So before delving into the plan's actual details, let's take a moment to remind ourselves of the primary reasons why you'd want to create a hairdressing salon business plan.

To have a clear roadmap to grow the business

Small businesses rarely experience a constant and predictable environment. Economic cycles go up and down, while the business landscape is mutating constantly with new regulations, technologies, competitors, and consumer behaviours emerging when we least expect it.

In this dynamic context, it's essential to have a clear roadmap for your hairdressing salon. Otherwise, you are navigating in the dark which is dangerous given that - as a business owner - your capital is at risk.

That's why crafting a well-thought-out business plan is crucial to ensure the long-term success and sustainability of your venture.

To create an effective business plan, you'll need to take a step-by-step approach. First, you'll have to assess your current position (if you're already in business), and then identify where you'd like your hairdressing salon to be in the next three to five years.

Once you have a clear destination for your hairdressing salon, you'll focus on three key areas:

• Resources: you'll determine the human, equipment, and capital resources needed to reach your goals successfully.
• Speed: you'll establish the optimal pace at which your business needs to grow if it is to meet its objectives within the desired timeframe.
• Risks: you'll identify and address potential risks you might encounter along the way.

By going through this process regularly, you'll be able to make informed decisions about resource allocation, paving the way for the long-term success of your business.

To anticipate future cash flows

Regularly comparing your actual financial performance to the projections in the financial forecast of your hairdressing salon's business plan gives you the ability to monitor your business's financial health and make necessary adjustments as needed.

This practice allows you to detect potential financial issues, such as unexpected cash shortfalls before they escalate into major problems. Giving you time to find additional financing or put in place corrective measures.

Additionally, it helps you identify growth opportunities, like excess cash flow that could be allocated to launch new products and services or expand into new markets.

Staying on track with these regular comparisons enables you to make well-informed decisions about the amount of financing your business might require, or the excess cash flow you can expect to generate from your main business activities.

To secure financing

A detailed business plan becomes a crucial tool when seeking financing from banks or investors for your hairdressing salon.

Investing and lending to small businesses are very risky activities given how fragile they are. Therefore, financiers have to take extra precautions before putting their capital at risk.

At a minimum, financiers will want to ensure that you have a clear roadmap and a solid understanding of your future cash flows (like we just explained above). But they will also want to ensure that your business plan fits the risk/reward profile they seek.

This will off-course vary from bank to bank and investor to investor, but as a rule of thumb. Banks will want to see a conservative financial management style (low risk), and they will use the information in your business plan to assess your borrowing capacity — the level of debt they think your business can comfortably handle — and your ability to repay the loan. This evaluation will determine whether they'll provide credit to your hairdressing salon and the terms of the agreement.

Whereas investors will carefully analyze your business plan to gauge the potential return on their investment. Their focus lies on evidence indicating your hairdressing salon's potential for high growth, profitability, and consistent cash flow generation over time.

Now that you recognize the importance of creating a business plan for your hairdressing salon, let's explore what information is required to create a compelling plan.

Information needed to create a business plan for a hairdressing salon

Drafting a hairdressing salon business plan requires research so that you can project sales, investments and cost accurately in your financial forecast, and convince the reader that there is a viable commercial opportunity to be seized.

Below, we'll focus on three critical pieces of information you should gather before starting to write your plan.

Carrying out market research for a hairdressing salon

Before you begin writing your business plan for a hairdressing salon, conducting market research is a critical step in ensuring precise and realistic financial projections.

Market research grants you valuable insights into your target customer base, competitors, pricing strategies, and other crucial factors that can impact the success of your business.

In the course of this research, you may stumble upon trends that could impact your hairdressing salon.

You may discover that there is an increasing demand for more natural hairstyles, such as locs and box braids. Additionally, market research could show that there might be a trend towards more experimental hairstyles, like bright colors and multi-dimensional cuts.

Such market trends play a pivotal role in revenue forecasting, as they provide essential data regarding potential customers' spending habits and preferences.

By integrating these findings into your financial projections, you can provide investors with more accurate information, enabling them to make well-informed decisions about investing in your hairdressing salon.

Developing the sales and marketing plan for a hairdressing salon

Budgeting sales and marketing expenses is essential before creating a hairdressing salon business plan.

A comprehensive sales and marketing plan should provide an accurate projection of what actions need to be implemented to acquire and retain customers, how many people are needed to carry out these initiatives, and how much needs to be spent on promotions, advertising, and other aspects.

This helps ensure that the right amount of resources is allocated to these activities in order to hit the sales and growth objectives forecasted in your business plan.

The staffing and equipment needs of a hairdressing salon

As you embark on starting or expanding your hairdressing salon, having a clear plan for recruitment and capital expenditures (investment in equipment and real estate) is essential for ensuring your business's success.

Both the recruitment and investment plans must align with the timing and level of growth projected in your forecast, and they require appropriate funding.

A hairdressing salon might incur staffing costs such as wages for hairdressers and receptionists, as well as additional costs such as taxes and benefits. Equipment costs might include styling chairs, shampoo bowls, hairdryers, styling tools, and products such as hair colour, shampoos, and conditioners.

To create a realistic financial forecast, you also need to consider other operating expenses associated with the day-to-day running of your business, such as insurance and bookkeeping.

With all the necessary information at hand, you are ready to begin crafting your business plan and developing your financial forecast.

What goes into your hairdressing salon's financial forecast?

The financial forecast of your hairdressing salon will enable you to assess the profitability potential of your business in the coming years and how much capital is required to fund the actions planned in the business plan.

The four key outputs of a financial forecast for a hairdressing salon are:

• The profit and loss (P&L) statement,
• The projected balance sheet,
• The cash flow forecast,
• And the sources and uses table.

Let's take a closer look at each of these.

The projected P&L statement

The projected P&L statement for a hairdressing salon shows how much revenue and profits your business is expected to generate in the future.

Ideally, your hairdressing salon's P&L statement should show:

• Healthy growth - above inflation level
• Improving or stable profit margins
• Positive net profit

Expectations will vary based on the stage of your business. A startup will be expected to grow faster than an established hairdressing salon. And similarly, an established company should showcase a higher level of profitability than a new venture.

The projected balance sheet of your hairdressing salon

Your hairdressing salon's forecasted balance sheet enables the reader of your plan to assess your financial structure, working capital, and investment policy.

It is composed of three types of elements: assets, liabilities and equity:

• Assets: represent what the business owns and uses to produce cash flows. It includes resources such as cash, equipment, and accounts receivable (money owed by clients).
• Liabilities: represent funds advanced to the business by lenders and other creditors. It includes items such as accounts payable (money owed to suppliers), taxes due and loans.
• Equity: is the combination of what has been invested by the business owners and the cumulative profits and losses generated by the business to date (which are called retained earnings). Equity is a proxy for the value of the owner's stake in the business.

Your hairdressing salon's balance sheet will usually be analyzed in conjunction with the other financial statements included in your forecast.

Two key points of focus will be:

• Your hairdressing salon's liquidity: does your business have sufficient cash and short-term assets to pay what it owes over the next 12 months?
• And its solvency: does your business have the capacity to repay its debt over the medium-term?

The projected cash flow statement

A cash flow forecast for a hairdressing salon shows how much cash the business is projected to generate or consume.

The cash flow statement is divided into 3 main areas:

• The operating cash flow shows how much cash is generated or consumed by the operations (running the business)
• The investing cash flow shows how much cash is being invested in capital expenditure (equipment, real estate, etc.)
• The financing cash flow shows how much cash is raised or distributed to investors and lenders

Looking at the cash flow forecast helps you to ensure that your business has enough cash to keep running, and can help you anticipate potential cash shortfalls.

It is also a best practice to include a monthly cash flow statement in the appendices of your hairdressing salon business plan so that the readers can view the impact of seasonality on your business cash position and generation.

The initial financing plan

The sources and uses table or initial financing plan is a key component of your business plan when starting a hairdressing salon.

It shows where the capital needed to set up the business will come from (sources) and how it will be spent (uses).

This table helps size the investment required to set up the hairdressing salon, and understand how risks will be distributed between the business owners, and the financiers.

The sources and uses table also highlights what the starting cash position will be. This is key for startups as the business needs to have sufficient funding to sustain operations until the break-even point is reached.

Now that you have a clear understanding of what will go into the financial forecast of your hairdressing salon business plan, let's have a look at the written part of the plan.

The written part of a hairdressing salon business plan

The written part of a hairdressing salon business plan plays a key role: it lays out the plan of action you intend to execute to seize the commercial opportunity you've identified on the market and provides the context needed for the reader to decide if they believe your plan to be achievable and your financial forecast to be realistic.

The written part of a hairdressing salon business plan is composed of 7 main sections:

1. The executive summary
2. The presentation of the company
3. The products and services
4. The market analysis
5. The strategy
6. The operations
7. The financial plan

Let's go through the content of each section in more detail!

1. The executive summary

In your hairdressing salon's business plan, the first section is the executive summary — a captivating overview of your plan that aims to pique the reader's interest and leave them eager to learn more about your business.

When crafting the executive summary, start with an introduction to your business, including its name, concept, location, how long it has been running, and what sets it apart. Briefly mention the products and services you plan to offer and your target customer profile.

Following that, provide an overview of the addressable market for your hairdressing salon, current trends, and potential growth opportunities.

Next, include a summary of key financial figures like projected revenues, profits, and cash flows.

Finally, in the "ask" section, detail any funding requirements you may have.

2. The presentation of the company

In your hairdressing salon business plan, the second section should focus on the structure and ownership, location, and management team of your company.

In the structure and ownership part, you'll provide an overview of the business's legal structure, details about the owners, and their respective investments and ownership shares. This clarity is crucial, especially if you're seeking financing, as it helps the reader understand which legal entity will receive the funds and who controls the business.

Moving on to the location part, you'll offer an overview of the company's premises and their surroundings. Explain why this particular location is of interest, highlighting factors like catchment area, accessibility, and nearby amenities.

When describing the location of your hairdressing salon, you could emphasize how it is situated in a densely populated area. You may be able to point out that it is in close proximity to other businesses that serve a similar market, such as beauty salons and spas. Additionally, you could highlight the fact that the salon is easily accessible due to its close proximity to public transportation and parking. Finally, you might mention that the area has a vibrant nightlife, which could bring in additional customers.

Finally, you should introduce your management team. Describe each member's role, background, and experience.

Don't forget to emphasize any past successes achieved by the management team and how long they've been working together. Demonstrating their track record and teamwork will help potential lenders or investors gain confidence in their leadership and ability to execute the business plan.

3. The products and services section

The products and services section of your hairdressing salon business plan should include a detailed description of what your company sells to its customers. 

For example, your hairdressing salon could offer a variety of services such as haircuts, styling, coloring, and perms. Additionally, you could offer specialized treatments such as deep conditioning, scalp treatments, and hair extensions. Finally, your salon could offer a selection of retail products such as shampoos, conditioners, and styling products, allowing customers to extend their salon experience at home. These services and products offer customers the ability to personalize their look, improve the condition of their hair, and have access to quality styling products.

The reader will want to understand what makes your hairdressing salon unique from other businesses in this competitive market.

When drafting this section, you should be precise about the categories of products or services you sell, the clients you are targeting and the channels that you are targeting them through. 

4. The market analysis

When you present your market analysis in your hairdressing salon business plan, it's crucial to include detailed information about customers' demographics and segmentation, target market, competition, barriers to entry, and any relevant regulations.

The main objective of this section is to help the reader understand the size and attractiveness of the market while demonstrating your solid understanding of the industry.

Begin with the demographics and segmentation subsection, providing an overview of the addressable market for your hairdressing salon, the key trends in the marketplace, and introducing different customer segments along with their preferences in terms of purchasing habits and budgets.

Next, focus on your target market, zooming in on the specific customer segments your hairdressing salon aims to serve and explaining how your products and services fulfil their distinct needs.

For example, your target market might include busy working professionals. These customers may have limited time to style their hair, and may not have the skill set to do it themselves. They may also be looking for a salon with a professional, stylish atmosphere, and a wide range of services.

Then proceed to the competition subsection, where you introduce your main competitors and highlight what sets you apart from them.

Finally, conclude your market analysis with an overview of the key regulations applicable to your hairdressing salon.

5. The strategy section

When writing the strategy section of a business plan for your hairdressing salon, it is essential to include information about your competitive edge, pricing strategy, sales & marketing plan, milestones, and risks and mitigants.

The competitive edge subsection should explain what sets your company apart from its competitors. This part is especially key if you are writing the business plan of a startup, as you have to make a name for yourself in the marketplace against established players.

The pricing strategy subsection should demonstrate how you intend to remain profitable while still offering competitive prices to your customers.

The sales & marketing plan should outline how you intend to reach out and acquire new customers, as well as retain existing ones with loyalty programs or special offers. 

The milestones subsection should outline what your company has achieved to date, and its main objectives for the years to come - along with dates so that everyone involved has clear expectations of when progress can be expected.

The risks and mitigants subsection should list the main risks that jeopardize the execution of your plan and explain what measures you have taken to minimize these. This is essential in order for investors or lenders to feel secure in investing in your venture.

Your hairdressing salon faces a variety of risks. For example, there may be a risk of injury to your staff or clients due to the use of sharp tools and chemicals. It is important to ensure that staff are trained properly and that the salon is kept clean and safe to reduce this risk. Additionally, there might be a risk of financial loss due to theft or damage to your equipment or property. To reduce this risk, it is important to have a secure system for storing valuable items and to have appropriate insurance in place to cover any losses.

6. The operations section

In your business plan, it's also essential to provide a detailed overview of the operations of your hairdressing salon.

Start by covering your team, highlighting key roles and your recruitment plan to support the expected growth. Outline the qualifications and experience required for each role and your intended recruitment methods, whether through job boards, referrals, or headhunters.

Next, clearly state your hairdressing salon's operating hours, allowing the reader to assess staffing levels adequately. Additionally, mention any plans for varying opening times during peak seasons and how you'll handle customer queries outside normal operating hours.

Then, shift your focus to the key assets and intellectual property (IP) necessary for your business. If you rely on licenses, trademarks, physical structures like equipment or property, or lease agreements, make sure to include them in this section.

You may have key assets such as a reception desk, styling chairs, and a hair wash sink. Additionally, you could have intellectual property such as a logo or a website. These assets and IP might be key components of your business, helping you to attract customers and create a recognizable brand.

Lastly, include a list of suppliers you plan to work with, detailing their services and main commercial terms, such as price, payment terms, and contract duration. Investors are interested in understanding why you've chosen specific suppliers, which may be due to higher-quality products or established relationships from previous ventures.

7. The presentation of the financial plan

The financial plan section is where we will include the financial forecast we discussed earlier in this guide.

Now that you have a clear idea of what goes into a hairdressing salon business plan, let's look at some of the tools you can use to create yours efficiently.

What tool should I use to write my hairdressing salon's business plan?

In this section, we will be reviewing the two main options for writing a hairdressing salon business plan efficiently:

• Using specialized software,
• Outsourcing the drafting to the business plan writer.

Using an online business plan software for your hairdressing salon's business plan

Using online business planning software is the most efficient and modern way to create a hairdressing salon business plan.

There are several advantages to using specialized software:

• You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
• You are guided through the writing process by detailed instructions and examples for each part of the plan
• You can access a library of dozens of complete business plan samples and templates for inspiration
• You get a professional business plan, formatted and ready to be sent to your bank or investors
• You can easily track your actual financial performance against your financial forecast
• You can create scenarios to stress test your forecast's main assumptions
• You can easily update your forecast as time goes by to maintain visibility on future cash flows
• You have a friendly support team on standby to assist you when you are stuck

If you're interested in using this type of solution, you can try The Business Plan Shop for free by signing up here.

Hiring a business plan writer to write your hairdressing salon's business plan

Outsourcing your hairdressing salon business plan to a business plan writer can also be a viable option.

Business plan writers are skilled in creating error-free business plans and accurate financial forecasts. Moreover, hiring a consultant can save you valuable time, allowing you to focus on day-to-day business operations.

However, it's essential to be aware that hiring business plan writers will be expensive, as you're not only paying for their time but also the software they use and their profit margin.

Based on experience, you should budget at least £1.5k ($2.0k) excluding tax for a comprehensive business plan, and more if you require changes after initial discussions with lenders or investors.

Also, exercise caution when seeking investment. Investors prefer their funds to be directed towards business growth rather than spent on consulting fees. Therefore, the amount you spend on business plan writing services and other consulting services should be insignificant compared to the amount raised.

Keep in mind that one drawback is that you usually don't own the business plan itself; you only receive the output, while the actual document is saved in the consultant's business planning software. This can make it challenging to update the document without retaining the consultant's services.

For these reasons, carefully consider outsourcing your hairdressing salon business plan to a business plan writer, weighing the advantages and disadvantages of seeking outside assistance.

Why not create your hairdressing salon's business plan using Word or Excel?

I must advise against using Microsoft Excel and Word (or their Google, Apple, or open-source equivalents) to write your hairdressing salon business plan. Let me explain why.

Firstly, creating an accurate and error-free financial forecast on Excel (or any spreadsheet) is highly technical and requires a strong grasp of accounting principles and financial modelling skills. It is, therefore, unlikely that anyone will fully trust your numbers unless you have both a degree in finance and accounting and significant financial modelling experience, like us at The Business Plan Shop.

Secondly, relying on spreadsheets is inefficient. While it may have been the only option in the past, technology has advanced significantly, and software can now perform these tasks much faster and with greater accuracy. With the rise of AI, software can even help us detect mistakes in forecasts and analyze the numbers for better decision-making.

And with the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.

Moreover, software makes it easier to compare actuals versus forecasts and maintain up-to-date forecasts to keep visibility on future cash flows, as we discussed earlier in this guide. This task is cumbersome when using spreadsheets.

Now, let's talk about the written part of your hairdressing salon business plan. While it may be less error-prone, using software can bring tremendous gains in productivity. Word processors, for example, lack instructions and examples for each part of your business plan. They also won't automatically update your numbers when changes occur in your forecast, and they don't handle formatting for you.

Overall, while Word or Excel may seem viable for some entrepreneurs to create a business plan, it's by far becoming an antiquated way of doing things.

Takeaways

1. Using business plan software is a modern and cost-effective way of writing and maintaining business plans.
2. A business plan is not a one-shot exercise as maintaining it current is the only way to keep visibility on your future cash flows.
3. A business plan has 2 main parts: a financial forecast outlining the funding requirements of your hairdressing salon and the expected growth, profits and cash flows for the next 3 to 5 years; and a written part which gives the reader the information needed to decide if they believe the forecast is achievable.

We hope that this in-depth guide met your expectations and that you now have a clear understanding of how to write your hairdressing salon business plan. Do not hesitate to contact our friendly team if you have questions additional questions we haven't addressed here.

Also on The Business Plan Shop

• How to write a business plan to secure a bank loan?
• Business plan length
• Business plan formatting guide
• Strategic plan and business plan
• Key steps to write a business plan?
• Top mistakes to avoid in your business plan

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