Considering my options

[The Grand Nudger]

Zero customers, ergo zero existing revenue.  What's wrong with your house, or their house?    

What's the worst thing that could happen to you if you defaulted on a 2-300k loan?

Is two years a realistic expectation for roi?

How long would you keep at it beyond that point?

Have you looked into franchise salons?
(it's easier to get financing)

[Mystical]

Good luck, Nymph. It's awesome that you have the drive, health, and priority to start a business! 
If you're one of the only choices in the area, maybe you'll just be giving all the stylists in the area a place to conglomerate and if that is the case, you'll need that space!! How exciting :

Proposal: can you provide face painting to kids while they wait for mom to get her hair done? 


Warning: have a lawyer review your lease please. My parents opened a salon when I was a kid, the landlord decided to up the rent because she could, and we lost it all. Even our house. :
Be very legit when it comes to contracts! 

Well wishes and good luck! Let me know if you,need any graphic artwork designs or cards or whatnot done! 

Xoxo
Luckie

[Joods]

I like the place, but I'm a bit skeptical on the profitability on that investment. Personally, I don't visit salons often unless there's a major event coming up, so I lack the experience but having been part of several start-ups in my career, I'd suggest analyzing the market very carefully first, and always have a backup plan if things don't work out.

Thank you Magi. Women like regularity - especially those who like to be pampered on a regular basis. Once they find a hair style they love, and it looks good on them too, if they find a stylist that pulls it off right every time, they tend to be regular clients. I'm also not just about hair cuts and color. I'm going to be offering other services as well. Women who get acrylic nails tend to be regular clients at 4-6 week intervals because they will always need fill-ins at about 4-6 weeks. 

Offering more than one type of service in a salon tends to bring in more business because it's like you can get all of your beauty needs taken care of at one place. Plus I will be carrying retail products as well. People can always stop in to purchase their favorite products there. Incentives are also a plus. Clients will be given a "VIP" card they can use which entitles regular clients to a 10% discount off of retail and every 6th hair cut is free. We will keep track of that and any other client information in the computer system. 

We did market analysis during senior classes at school and I will admit that as far as chain salons go - there's more than we need. I can think of three off the top of my head within a two mile radius of my house. They are all located within a half mile of each other: Great Clips, Hair Cuttery and Holiday Hair. None of them offer facials or other skin care. The nearest location to go to for a facial is ten miles north and 15 miles south, which means there is an entire demographical area that is not covered unless they want to drive way out of their way for skin care services. If I'm offering esthetician services in addition to hair care and nail care, clients are more likely to stop and check my place out.

In addition to this -I am 1.4 miles from the high school. Proms and Homecoming are sure to bring in business as well as weddings and other social events.

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Owning my own business seems so scary to me but I admire those that do it sooooo much. I really hope for the best for you with this and know we will be here to support you emotionally the whole time. Keep us updated!

I will definitely keep you updated

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I know this is going to sound super basic...but, how many customers do you -currently- serve?  Do you plan on turning a profit from customers, or from sub-renting space in the building?  In the case of the latter, how many people do you know that are currently looking to rent at a price that you could offer?

Personally, those are the only two things I;d judge -any- infrastructure investment on, if it were me....but I;m super risk adverse.  I like to sell a product before I produce it.  

Replying to your edited post...

Under PA law, chair rental for a cosmetologist is not legal so I would have to actually hire employees, which is why it is important that they come experienced and with a full book. Many private salons require this, so in this particular market, it isn't anything out of the ordinary to state as such in a job ad. 

I'm not a barber, so I cannot rent out a chair. If I was licensed as such AND I had my shop as having a dual license (both barber and cosmetologist) then and only then could I rent out a chair. There are separate requirements for a barber's license that I don't have a desire to go and get. Now if a barber wants to partner with me and co-own the salon, then we could be dually licensed to be both a barber shop and a day spa, but right now, I don't know of anyone in that field who would be interested in such a thing.

[The Grand Nudger]

Do you know anyone with a full book looking to make a move?  Wouldn't that be the primary determination for how much space you need?

[Joods]

Zero customers, ergo zero existing revenue.  What's wrong with your house, or their house?    

What's the worst thing that could happen to you if you defaulted on a 2-300k loan?

Is two years a realistic expectation for roi?  

How long would you keep at it beyond that point?

Have you looked into franchise salons?
(it's easier to get financing)

Okay...I can't continue to work out of my house for a few reasons: 

1. My house isn't licensed. Technically, it's not legal to do this from my house, as per the State of PA and their beautiful regulations, but as long as the neighbors don't care... I'm not too particularly worried. 
2. There isn't enough business coming or going from my house for any suspicions to be raised. And I don't want there to be any. I have friends over on the rare occasion of about one every other month or two. 
3. I could lose my license because I am not carrying malpractice or liability insurance. The few friends I do hair for don't make it worth my while to carry insurance like that. All someone has to do is call the state board and file a complaint because something happened and I could be investigated. I don't need that in my life. 

I don't know what the worst thing that could happen if I defaulted on a business loan. I'm not really thinking of failing. I'm thinking of succeeding. 

Five years is a realistic expectation for any retail business for ROI, but I am in the service industry. Not only will I have new clientelle, but I will have repeat clientelle as well. There's residual income from that. Plus I will have a nice selection of product line to purchase as well. 

I don't want to do the franchise thing. There are too many cookie-cutter type salons out there to begin with and they don't offer a full line of services that I intend to offer.

[brewer]

I say run the numbers and if feasible then go for it. It might be this spot, might be another.

I think you'll be happiest when you are your own boss. Good Luck!

[The Grand Nudger]

Okay...I can't continue to work out of my house for a few reasons: 

1. My house isn't licensed. Technically, it's not legal to do this from my house, as per the State of PA and their beautiful regulations, but as long as the neighbors don't care... I'm not too particularly worried. 

So, you're at the point where you have to either rent a station in someone else's salon, or own a salon.  Gotcha.  Just trying to wrap my head around what options you're considering, lol.  

2. There isn't enough business coming or going from my house for any suspicions to be raised. And I don't want there to be any. I have friends over on the rare occasion of about one every other month or two. 

You have expectations that your volume of business will increase, then?  Even though the market is saturated?  Do you think that a loan officer would share your confidence?  How many customers would you need to serve to cover your costs?  

3. I could lose my license because I am not carrying malpractice or liability insurance. The few friends I do hair for don't make it worth my while to carry insurance like that. All someone has to do is call the state board and file a complaint because something happened and I could be investigated. I don't need that in my life. 

Understandable.

I don't know what the worst thing that could happen if I defaulted on a business loan. I'm not really thinking of failing. I'm thinking of succeeding. 

I'd strongly caution against that, and suggest that you spend time coming up witha  worst case scenario.   It's useful to have these even if you aren't seeking financing...as it can give you an idea as to where you're heading for month by month.  We all have hopes and dreams, but most small businesses fail within the first few years (and by most, I mean a soul crushing majority).  

Five years is a realistic expectation for any retail business for ROI, but I am in the service industry. Not only will I have new clientelle, but I will have repeat clientelle as well. There's residual income from that. Plus I will have a nice selection of product line to purchase as well. 

How much of your revenue do you expect (or would you need to expect) to secure in product sales?  

I don't want to do the franchise thing. There are too many cookie-cutter type salons out there to begin with and they don't offer a full line of services that I intend to offer.

Gotcha.

[Joods]

Do you know anyone with a full book looking to make a move?  Wouldn't that be the primary determination for how much space you need?

I love that you're asking me tough questions. Keep em' coming! 

I know a few people looking to move (including educators) and who would be willing to work for me. And no...the primary determination of how much space I need depends on how many chairs I want at my shop not how many clients my shop can hold. I want no fewer than five to start. My own, plus four additional chairs. I have enough space to add more as I grow. The state requirements are: 180 square feet for the first chair and 60 sq. ft. of space per each additional chair. So If I intend to have five chairs to start, I will need 180 plus another 240 square feet in total. That's only 320 total square feet.  With this building, I have 3600 square feet to play with, which is why I can offer other services. 

There are also other requirements that I must make sure my shop has before I can even open my doors. An inspector from the state board of cosmetology must review my floor plans and let me know that it is acceptable before I can proceed with any sort of business proposal to get a loan. I also need to apply for a license for my actual shop. Yes - the shop must have its own license. Mine license doesn't cover that. 

There are many steps to this process but I wanna do it. I'm only in my 40's. I'm still young enough to get at least 20 good years out of being a salon owner. 

If you are curious... here: 

Board Laws and Regulations for the Pennsylvania State Board of Cosmetology

[The Grand Nudger]

You only need as many chairs as you have employees...though, right?  Maybe a few extra for expansion or any process that somebody has to sit and wait for and an employee can use the time to serve another customer...but.....there has to be some solid number that you base this on?

So, some amount of space x is required per chair, x amount of chairs required per employee, x number of prospective employees, equals total required space (not counting common areas/office,facilities). 

Right? I can't see how else you'd quantify whether or not a building was too big or too small to service your 2-300k loan over 2 years. Too big, and it's wasted capital outlay (which, importantly, would be better used covering for loss or shortfalls), too small, and it won't be enough to pay down the principle.

[Joods]

Okay...I can't continue to work out of my house for a few reasons: 

1. My house isn't licensed. Technically, it's not legal to do this from my house, as per the State of PA and their beautiful regulations, but as long as the neighbors don't care... I'm not too particularly worried. 

So, you're at the point where you have to either rent a station in someone else's salon, or own a salon.  Gotcha.  Just trying to wrap my head around what options you're considering, lol.  

LOL... I get it... and I want you to ask me these kinds of questions because you could absolutely touch on something I might miss. And I don't want to miss anything. 

So... I explained that I can't rent a chair. I'd have to be an employee. I've already tried that in a chain salon and I did not like how they structured their commission and hourly pay for a brand new employee. It wasn't right that they hold someone without a following, to the same SPH (Services Per Hour) as a seasoned stylist with a following. There was no way for me to ever get any commission based off of that and I was frustrated by it. 

2. There isn't enough business coming or going from my house for any suspicions to be raised. And I don't want there to be any. I have friends over on the rare occasion of about one every other month or two. 

You have expectations that your volume of business will increase, then?  Even though the market is saturated?  Do you think that a loan officer would share your confidence?  How many customers would you need to serve to cover your costs?  

I do have that expectation that my business will increase and grow. As people come to know me by my work and how well I perform it, then yes... I will grow, as will my employees. People find a stylist they like after spending a lot of the time dissatisfied with ones who just can't seem to get that cut just right. And when they find someone who can, they will always look for them no matter where they go. In this day and age, many clients are connected to their stylists on facebook and twitter so that if a stylist leaves one location, they can tweet or send a post out to their clients letting them know where they went to. One of my former educators worked in a salon during the day and taught at night. She said her clients will often travel up to two hours to find out where she went to because she's that damn good. She always had a client in her chair. 

I honestly don't know what a loan officer would think, but I'm planning on doing some market research in this area and including that in my business proposal. As far as customers needed to cover costs: Well there are a lot of variables to consider for that question such as what type(s) of services will the clients be getting and how often? How much electric and water will I be using each month - that's going to affect how much my utility costs will be. How many different types of products do I intend to keep on my backbar? 

Clearly if all I offer is mens hair cuts at $20 a piece, then it would be much easier to do the math. Moreso if I knew how much my utility bills were going to cost each month. The former business that occupied that space was a furniture consignment shop. Obviously they didn't have the water or electric use that I will have. I could probably triple their bills and still not even come close to what I may be spending a month on water, electricty and gas. There's also internet and cable to consider as well. Gotta be online now a days to stay in business. I will have a website where clients can book appointments and order products so if they run out of shampoo or conditioner, they can alert me and I can set it aside for when they come in to buy it. They can also be notified of monthly specials via email, facebook and twitter. All of this is part of advertising, which has to be in my business proposal as well. I have to think about how I'm going to advertise my business and who I'd like to reach. 

3. I could lose my license because I am not carrying malpractice or liability insurance. The few friends I do hair for don't make it worth my while to carry insurance like that. All someone has to do is call the state board and file a complaint because something happened and I could be investigated. I don't need that in my life. 

Understandable.

I don't know what the worst thing that could happen if I defaulted on a business loan. I'm not really thinking of failing. I'm thinking of succeeding. 

I'd strongly caution against that, and suggest that you spend time coming up witha  worst case scenario.   It's useful to have these even if you aren't seeking financing...as it can give you an idea as to where you're heading for month by month.  We all have hopes and dreams, but most small businesses fail within the first few years (and by most, I mean a soul crushing majority).

I wouldn't even know how to do that, but if you have suggestions or advice on how to prepare for that, I'm open to listening to you. I want to succeed, not fail but you are right... gotta prepare for anything to happen. 

Five years is a realistic expectation for any retail business for ROI, but I am in the service industry. Not only will I have new clientelle, but I will have repeat clientelle as well. There's residual income from that. Plus I will have a nice selection of product line to purchase as well. 

How much of your revenue do you expect (or would you need to expect) to secure in product sales?  

Product sales will probably only account for 10-15% of my revenue as the primary focus is on services. When I worked at (that horrible chain salon) I was selling approximately $500-600 worth of retail each week because of how I did it. I will always educate my clients first before selling them something I don't think they need. They in turn will buy what I do suggest, no matter the cost. 

I don't want to do the franchise thing. There are too many cookie-cutter type salons out there to begin with and they don't offer a full line of services that I intend to offer.

 Gotcha.

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You only need as many chairs as you have employees...though, right?  Maybe a few extra for expansion or any process that somebody has to sit and wait for and an employee can use the time to serve another customer...but.....there has to be some solid number that you base this on?

So, some amount of space x is required per chair, x amount of chairs required per employee, x number of prospective employees, equals total required space (not counting common areas/office,facilities). 

Right?  I can't see how else you'd quantify whether or not a building was too big or too small to service your 2-300k loan over 2 years.  Too big, and it's wasted capital outlay (which, importantly, would be better used covering for loss or shortfalls), too small, and it won't be enough to pay down the principle.

Yes... I could very well put more chairs in my shop and it would actually be very beneficial for an employee if she was processing color on someone's head, to actually take a hair cut in the mean time. I have actually thought about this. There will be a color bar in the back of the shop for chemical services. No color will be applied at the stylist stations. All of that will be done back on the linoleum flooring in case color gets dropped on the floor. There will be special stain-resistant tiles down just for that purpose. While the client is sitting there letting her color process, the stylist is free to sit a hair cut in her chair. 

I'm not sure how to explain the second part of your other question (what I bolded). Hair care services don't work in the way of solid numbers because not all hair care costs are the same. A $20 hair cut utilizes a stylists own personal pair of shears and/or clippers and will use a dime-sized amount of shampoo and conditioner back at the shampoo bowl. So as far as product usage on a hair cut goes - my cost will be minimal. As for a stylists shears and clippers -  I don't provide those to her. She must come with them, as is expected. Her shears are not my cost to bear. Compare that $20 hair cut to a $150 color job. My cost comes in the form of gloves, caps (if tinting and using this method), foils, color, developer, shampoo, conditioner and lightener (if needed). Those items are NOT reusable. They are considered consumable products and must be replaced on a regular basis. The color bowls, tint brushes, towels, stylist aprons, capes, gowns (recommended so the client doesn't get color on their shirt) - are all things my shop will need and can be reused, but will always need to be replaced over time. 

Also keep in mind that there will be other things going on in my shop. Nail care - manicures and pedicures will be happening. Skin care - waxing and facials. Costs for all those vary as there are consumable and reusable items as well.