It is not uncommon for salon business owners to wonder whether or not they need to write a business plan. But successful business owners in this industry will tell you one thing for sure: A practical business plan is a necessity for any salon business. They will also tell you that a business plan is a blueprint for your entrepreneurial journey.
Note that a business plan isn’t a single, static, and rigid document that’s nothing more than an item in the “new business starter pack”. It is not a document you write and then set aside once your business is up and running. Rather, it is a document that you should write when starting the business and revise regularly as the business develops and as the industry evolves. You may even have multiple business plans attached to your bigger picture, and then be adding new plans as your priorities change. Now that is the basic idea behind a salon business plan.
Let’s get back to the elephant in the room: Do salon owners need to write business plans? The answer is a big YES! Here are 7 good reasons you should write a business plan for your new or existing salon business:
1. It puts to test the feasibility of your business idea
When starting a salon business or re-launching an existing business, how do you know for sure whether your new ideas are feasible? Of course, there isn’t a way of knowing for sure if your idea will work unless you go out and implement it. But that shouldn’t be an excuse to go into the business blindly. You need to test the feasibility of an idea before implementing it in order to identify its loopholes early on and improve its chances of success. A comprehensive business plan is your safety net in that regard.
Your plan will push you to ask yourself the hard questions that many over-ambitious new business owners avoid, and that in many cases lead to their downfall. It will, for example, force you to seriously research the uniqueness and practicability of your new ideas. That will not only help you iron out the kinks but also come up with insightful answers to possible challenges in the foreseeable future. And because you will most likely write and discard many plans before getting your perfect final draft, the practice of writing all those drafts will help you articulate your business vision in more realistic terms.
Lastly, on testing the feasibility of your business idea, a good business plan will give you a broader understanding of your initial operational and financial objectives. You will understand budgeting, taxation, payroll, pricing, and market planning a little bit better, and that will give your business a smoother startup period.
2. Helps you avoid the rookie mistakes that kill many startup salons
Over half of new salon businesses fail within the first five years. The key reasons for this unfortunate trend include, among others:
- Most new salon owners are over-ambitious. They are too desperate for a unique selling proposition that they offer “A-class” services that no one wants or is willing to pay for. A comprehensive salon business plan will help you identify and remove unwanted, unaffordable, untenable, and unrealistic services from your salon menu.
- Insufficient initial capital and consequent cash flow problems. Imagine, for example, starting your salon’s renovation project and then running out of money in the middle. Your business will have very slim chances of survival. A good plan will tell you early on which projects you can afford to take on at any one given time and to prioritize projects based on their impact on your profitability.
- Gaps in the team. Many salon owners hire the wrong people to help them actualize their vision. Some people are impeccably talented, but they simply are a bad fit for their employer’s brand. Others fit seamlessly with their workplace culture, but they aren’t adequately skilled as stylists or cosmetologists. This underscores the importance of finding the right balance of talent and business culture. A good plan will help you find this balance by highlighting gaps in your hiring process.
- Unforeseen stiff competition. The process of writing your business plan will necessitate that you size up your competition through a thorough competitive analysis. You will have a better shot at success if you know exactly who and what you are up against.
- Improper pricing. Your business suffers when your prices are too high or too low. A good plan will help you nail your pricing right from the onset.
Bottom line: You will avoid many fatal rookie mistakes by identifying them early on and finding research-driven answers to each one of them.
3. Helps you find your niche
The process of writing a business plan will push you to know more about your industry. You will need to define and “meet” your prospective customers, be it on social media or social gatherings. Even if you don’t necessarily have to talk with them, you need to hang around them in order to see how they behave and the kind of beauty services they need. That gives you better ideas for writing your perfect unique selling proposition.
Note that your business should not be “suitable for everybody” if you want it to succeed. If you have a generic offer, you will have such a hard time trying to convince clients why they should choose you over the competition. You would rather narrow down your target market in order to provide unbeatable value to a few suitable clients. Besides, it is much easier and effective to market your salon to an audience that truly values what you do. Effective marketing leads to higher conversion rates, higher average client expenditure, enhanced client retention rates, and more revenue.
If you are an owner or a manager of an existing salon, you could really use the help of salon software when writing your business plan and defining your niche. With software, you don’t need to take a wild guess regarding who your ideal client is or which niche to pursue. The software will collect and analyze client data based on their home address, gender, age bracket, profession, and income level. It becomes easier for you to cut out a niche for your business when you know which demographic is most interested in your services. You can also use the software to design and send questionnaires to your existing clients, asking them why they like your services, the marketing approaches they identify with the most, how you can improve your services, and what you need to include in your future marketing plans.
4. Helps you define your brand identity
Your brand identity is how your target client sees and perceives your business. Note that whether or not you define your brand identity, clients will always have their own perceptions. It is, therefore, important to point people towards the perception you want them to have regarding your salon. You can do that right from the onset by writing a business plan that comprehensively addresses all factors that affect your salon’s brand image. Some of these factors include your mission, brand personality, business values, your unique proposition, and brand voice. You can also include things such as your logo and brand colors in your initial business plan.
5. It improves your chances of securing funding
Unless you have deep enough pockets to finance your business idea all by yourself, you will require funding from a venture capitalist, a bank, or an angel investor. None of these institutions or investors will give you their money without first seeing your planned business trajectory. They want to see your market studies, your key financial statements, your budget, and market forecasts. Simply put, they want to see and be convinced by your business plan before giving you their money.
Your business plan is your most important business growth compass. It is your most reliable foundation for strategic planning, budgeting, project prioritization, and goal-setting. As time-consuming and tedious as writing a business plan could be, you just cannot afford not to have one!