Today I want to talk about the difference between starting and scaling a hair salon business to a point where it can be sold. And a little bit about the journey of how you go from starting a salon to selling a salon and the different challenges around that.
It’s actually the reason why I started my financial planning firm. Because one of the things that occurred to me is people who start a hair salon and have all the passion and energy that comes from that are not always the best people to scale the salon up to a point where they become a lifestyle salon. Or to some extent, small giant businesses. And I’ve had these conversations a lot with hair salon owners who are at that very sort of early stage.
And they go, “What do you mean, I can’t scale my salon? I had the energy and the courage to start this thing. So what do you mean?” But it’s important for hair salon owners to understand the differences and also to understand a little bit about the entrepreneurial journey. And that’s what I want to talk about today.
For many of you, when you started your hair salon—or at least came up with the idea that you eventually would—it wasn’t that you necessarily created a new idea.
More than likely, you saw a problem that needed to be solved, and you were passionate about that problem.
And you had absolute conviction and belief that you could add value and do something which was going to make a difference around that.
Often that is the case. Because a lot of hair salon owners have a certain amount of bravado and belief in themselves. And I think that’s a really powerful thing. But often, too, it could have been a personal situation. For example, they wanted to change their lifestyle, they don’t want to necessarily work for someone else anymore, or they’re at a point where they have enough clients on the books to support themselves. So why give any of it to someone else? All those types of situations.
Either way, they start the hair salon. And what tends to happen, and when you start a salon, it’s fun, it’s exciting. There’s lots of optimism.
Then you get hit with some issues of complexity that you didn’t think of, and things start to become a grind.
And that’s when you realize that actually starting the hair salon was probably the easy part. You know, you have to get out there and register your business with the state, get an accountant, set up a website. Even, to some extent, land your first couple of new clients. That is the easy part.
Let’s call that Zone One. It’s when you enter into this other zone, we’ll call Zone Two, which is a real struggle. It’s the area where you usually have no money or no time.
You have a massive amount of stress, and you’re often burned out.
And that’s a very interesting place to be.
Because it’s here at this place where you hear that nine times out of 10, a salon will fail. Well, they fail because the entrepreneur who started the salon hits this zone too and doesn’t know where to go from there. And don’t get me wrong, you get some fantastic founders who can absolutely take the next step. But often a lot of people don’t know how to do that.
Starting vs. Scaling a Hair Salon
So, this is the bit that I call scale, or creating value drivers. As you start to put in some practices in your salon that get more predictability around your salon, then you start to get moving again and out from underneath that ceiling of complexity. And that’s where it becomes much more exciting again.
Because you start to see some results and create some more momentum. That’s when you can pinch yourself and say, you know what, you’re moving into a proper business. And of course, there are different contexts for what a proper business is.
But ultimately, it’s one that’s obviously generating a profit. It’s one that’s starting to generate the lifestyle that you as the entrepreneur, the founder, wanted to achieve. You’re starting to create wider value. And you’re obviously solving some problems because you’re generating income, even at your size.
You’re starting to see the fruits of your labor, and you’re starting to see the wider contribution that you can make to society.
Now at that point, you have choices. Often some people just want to create that lifestyle business. And again, that’s often where you’ve got the ability to convert revenue to cash, to create liquid cash flow really quite easily. You have more flexibility, you have fun, and you probably don’t have that many staff.
And again, there are different figures around what each stage is. You might have some staff. But at the end of the day, you can pretty much manage it yourself. And you might have a lot of leverage due to assistants and operational things like that. But again, it’s not difficult to manage. Sometimes that’s all you want to get to.
If you’re at that point and you want to take the next step, that’s where you’re thinking, “Actually, I want to scale up now to be a performance business.”
And let’s call that Zone Three. What’s interesting, even at the point of scaling a hair salon. You still go through another sort of pain or struggle. But it’s not quite as long or as painful as the initial point, when you’re going from startup into that scale-up Zone One to Zone Two. A performance salon, Zone Three, they start to create, obviously, more value, more complexity, more problems.
It’s at this point in time that you’re really starting to drive something more significant than if it gets really big. And I find that sometimes the difference between a lifestyle salon (Zone Two) and a performance salon (Zone Three) is you can really set yourself with up with leverage and processes that you can sort of take yourself out of the business.
So, if you have a really good operations person in there, an integrator, really good clear delineation between where accountability lies for revenue generation, financial management, operational gearing, all those sorts of things.
You can actually become the owner/investor instead of the owner/operator. And that is a great place to be.
Then after that, some people, those rare few like to take the next step to being Small Giants. Let’s call that Zone Four. And that’s where you have a significantly scaled salon.
Sometimes, you will have multiple salons off the back of your original one, often generating well into millions of dollars of revenue, possibly eight figures. And so that’s pretty much the journey.
To summarize it again, you’ve got startup energy, passion, great ideas, probably agility, flexibility. All those sorts of things look great, and it’s fun. Definitely something that if you want to do it, I always believe that you should just take the risk and do it.
But be very aware that you’re probably going to hit that first ceiling of complexity, that first struggle area. You may not, but probably will, from my experience. But that’s okay. As I said, there’s different things that you need to do at that point in time to be able to take the salon through that.
And there are so many resources out there. Certainly, stuff that I’m going to be doing on this podcast is designed to help people going through that stage. And I’ll certainly be bringing people onto the podcast who have been through that journey themselves and have lots of great advice and tips.
And then there are heaps of books out there. I’ll probably do a podcast episode on that alone, in terms of some of the books that have influenced my journey. And the ones that I think are probably the most applicable particularly for scaling growth in your salon.
Scaling a Hair Salon Business Is a Journey
So that’s it for today. Scaling a hair salon business is a journey, and it’s a fun one. My experience is that there are two types of entrepreneurs. There are the ones that are great at startup. And then there are the ones that are really good at scale-up. And sometimes you get the rare breed who can do both.
As always, visit our website at BrettKFellows.com. And check out the show notes for more resources that can help you succeed at your hair salon. Until next time, have a great day.
For more information about working with Brett one-on-one, please visit Oak Capital Advisors.