Can you afford to go solo?
Many hairstylists leap into booth rental without thinking. Sometimes it works out because they had good instincts, and sometimes it fails because they didn't have a plan and a vision in place.
Booth renting can be the best thing that ever happened to you or the worst. You can control everything you do, but you also have the responsibility of doing everything. There are questions you should ask yourself before leaping into renting a chair in any facility.
How many clients do you service in a week? Or a month?
Generally, to make a profit in booth rental, you need to have at least 400 clients. Meaning you have to see a minimum of 30-60 clients a month. Depending on how much you charge and how many days you work, this can vary, but it's a good number to keep in mind. Remember, not all your clients may follow you; this is an excellent time to evaluate who you want to follow you. You need to be aware of this and have a plan in place to fill those gaps.
What is your client retention rate?
The current national average is 45%. Yuck! If you are in tune with your targeting and provide quality service, it's easy to increase your percentage. A well-trained and educated service provider typically achieves retention rates of 80-90%. No one is perfect, so very rarely do people hit 100%, primarily due to people moving away and lifestyle changes. If you have a low retention rate, you need to identify the source of the problem, and I recommend doing so while working under someone else. They will have the resources to give you and the education and skills training you may need.
What is your monthly total service sales?
The total service sales you produce are a significant number, but from the average 60% the salon owner is keeping, their profit is very little. The salon owner is paying for your payroll taxes, supplies, marketing, and, as mentioned above, your education. You might not realize overhead costs until you are out in the world alone and trying to do everything, and then getting frustrated because you're not making all the money you thought the owner did. Once you are out and renting a chair, evaluating your service totals, and considering how much of that is profit, in some cases, it evens out to still being a 40% commission, but you are doing all the work. It's cool if you want that. You need to be honest with yourself about it.
How much money are you generating in tips monthly?
You should be logging and keeping track of tips, especially if you ever want to buy a house. You can get approved for a larger home loan if you can verify your income from tips.
What is the average cost of hair products you use monthly?
Separated by categories, this will give you an idea of what your expenses will be like. Don't forget small items like foils and gloves; these things add up quickly. Create a spreadsheet to log the costs for a month; this will help create a budget.
What are your expenses?
As I mentioned above, there is a possibility that not all of your clients will find you unless you are skilled at planning and communicating with them (more on planning in a post to come). As a result, your income may take a hit until you rebuild it. You need to make sure you can float yourself in the meantime, or you'll become frustrated and put undue stress on your family and significant other.
How much can you afford, and how much are you willing to pay for rent?
The market value sometimes determines this in your area or the area you are considering for rent. Please do your research and ensure it's within your budget—the more upscale the salon, the higher the rent typically is. The monthly or weekly rent is generally determined the same way we value homes or apartments. So if the salon owner's rent and overhead for the space are high, she will then divide that by the number of chairs in her space. Again, it depends on the area you are looking at.
Will you need an assistant?
If you book for a half-hour, you will need help. Otherwise, you need to account for 15 minutes after every client to cash them out, rebook, and sell them retail. This is where having an assistant can be particularly helpful. You can also look for a booth rental salon that provides a receptionist, which again costs the owner money so that she will add that to the rent. Either way, if you think about it, it will cost you money. It ultimately comes down to what you prefer. I like to make sure my schedule isn't too tight. I want to have opportunities in my schedule for add-ons or up-selling.
Do your service totals allow for an assistant?
If you hire an assistant, you must also consider the minimum wage in your state and pay their employment taxes. Figure out what your state requires before you get someone's hopes up, and then find out you can't afford them. Remember, you have to spend money to make money, and if you have an assistant, you will have an opportunity to run a second column. Meaning you can double and triple-book clients because your assistant can help with the workload. (Spoiler Alert! I have a whole post coming about assistants and assistant programs.)
How much will an individual medical insurance plan cost you?
Some states require you to provide health insurance, and if you don't, you will have to pay a fee at tax time. I highly recommend contacting someone to get info on what you would need to pay for out-of-pocket medical insurance. As a booth renter in the state and the federal government's eyes, you will be considered self-employed; therefore, you have to provide your own medical insurance.
Who will handle your record-keeping, or what software will you use?
With the latest technology advancements, it can be quite affordable to keep track of your own books. You still need to have an accountant to file, but you can use services like QuickBooks Self-Employed to manage and track expenses. Additionally, consider using online booking software to help manage your schedule and send reminder texts to clients.
If your Salon Landlord does not provide towels and capes, how will you handle that?
The first salon I rented at didn't provide towels or capes, and there was no laundry facility on site. So, I would have to look at my book and ensure I had enough for the day, and then go home at night to wash, dry, and fold for the next day. Some salon owners in the booth rental model work behind the chair as well, and they don't want to bring home laundry at night, so they do provide laundry facilities. Again, that depends on where you rent. Make sure to ask this question when you meet with the owner if you decide to rent a booth. They don't have to provide it; it's an amenity.
What is your marketing plan for obtaining new clients?
Social media has made it so easy to market and promote yourself online. Never in our history has it been easy to get out in front of clients and build a business. You still need a marketing strategy, and you need to know who you are targeting. Even if you have a full book, you still need a marketing plan and a consistent flow of new clients to sustain your business. Things happen in life, and you don't want to wake up one day and realize you have no clients. If you don't have a marketing plan or a social media marketing plan, you will slowly bleed out.
How much will liability insurance cost you?
Liability insurance coverage is based on what your owner requires for coverage and the amount of money you make. As a self-employed business owner, you need to have liability insurance. If your salon burns down because you are not an employee, the salon owners' insurance doesn't have to replace your tools, retail, or hair color. Your liability insurance is what will cover you in this instance. Call your auto insurance provider occasionally; they may offer you discounts. Some companies also cater specifically to beauty professionals.
What percentage of sales are run through a credit card processing machine? How much will the fees be? And what service do you plan on using?
Square has made it so easy to take credit cards. They have some other nifty features, and they now do payroll services! So if you have an assistant, you can run everything through their system. I don't recommend Venmo. It is intended for a friend-to-friend exchange, so if someone disputes a charge, they will give it to them even if they did receive that service; then, you are out of that income.
What type of environment do you want to rent in?
(ex, What values, vision, or other aspects of a work environment do you desire?) Salon culture is essential; Your vibe attracts your tribe. If you and your clients don't fit into the culture, you will stick out, and your clients will notice. You want to feel good about going to work every day, so find something that aligns with what you are trying to build.
How much money will you have to set aside annually for ongoing education (both professional and business-related)?
Set a budget, and put that money aside for the following year. Our industry trends change so quickly these days. If you don't have a budget for education to advance yourself as a stylist and a businessperson, you will get left behind. I usually budget anywhere between $3,000 $5,000 a year on education. Throughout the year, I create a list and set educational goals. Then, in October, I start researching when things are held and how much they will cost. This is so I have an idea in my head before the holiday season to try to make enough to take all the classes on my list. On the first day of the year, I plan out all my primary education and spread it throughout the year. If you use Square for credit card processing, depending on how much you swipe in services, they will approve you for a small business loan and then take a percentage of your future daily deposit to pay it back.
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