How to Budget Setting Up a Hairdressing Salon

OK....all that training is over and a few years of experience completed. Are you going to work for someone for ever?

Why not go on your own? A hairdressers clients are generally said to be very loyal. Truth is, they're worried silly of not finding another hairdresser so they'll follow you if they can so you already have a reasonable client base unless you want to move miles away.

Now....let's realise this.....you're an artists eh? .....but......You've also got to be a business person and that means learning some new stuff that doesn't require a comb or a dryer.

Financial Budgets a bit of planning and a bit of bookkeeping. Oh!...there's also a bit of employment law to mull over.

Find an accountant that can help you initially and they might even help you a bit with a budget. Why do you need a budget? So you can assess the cost of the start up. Maybe you know friends that did it...ask them.

Do a calculation on premises rent, business tax type payments, cost of all the equipment you need to have as well as all the costs that will apply even if you had no money coming in. The computer system, advertising, staff basic pay, employers contribution for national insurance and boring stuff like that.

Just remember, don't count the capital costs (equipment) as an annual cost because you can write that cost over the expected lifetime of the item. Say a dryer need to replace every four years, that means the annual cost is one fourth.

Your local business link or Chamber of Commerce will also give you a lot of start up advice as will your Bank. Once you arrive at a total sum you should also set aside a sum to buy moving stock such as shampoos, conditioners, hair sprays etc.

Break down the costs to the following categories.

Sales; What you plan to bring in as revenue. (back to that later)

Cost of Sales; These costs are those that you will have so that you can perform the main function of the business that creates your revenue. As an example, you can't make a sale without having to pay an operative a salary or use shampoo or rollers or hair spray,

Overheads; These costs are items like Rent, business tax, electricity, water, bank interest on a loan or overdraft, bank charges, Director's fees, marketing and advertising, depreciation of the fixed assets etc. (it can be argued that depreciation should be elsewhere)

The budget should look like this mathematical equation.

Sales
less cost of sales (or above the line costs)
equals gross profit.

Gross profit
less overheads ( or below the line costs)
equals net profit before tax.

Another way is to budget only for the costs, decide on a profit margin, add that to your costs and that is what you need to achieve in sales. You could break that down by operative, by day, by week or month.

Every day, week or month you must compare what each item came to relative to your budget. Are your costs higher than you budgeted for or lower? Are you achieving the sales figure you need to achieve to make the profit you want? If not, you need to adjust the budget and compare again after the next period.

The computer systems available these days can do most of that for you and it's vital that you check things at least monthly otherwise before you know it, you're losing money and you're back where you started, working for someone else minus your investment and a little bit older.

Next I'll discuss the marketing and advertising for a new hairdressing salon.