Is Your Business Keeping You Awake At Night?

A perfect storm of negative drivers is disrupting hairdressing businesses nationwide.

by CATHERINE | THE COST OF DOING BUSINESS

Hairdressing businesses – many still carrying debts arising from the pandemic – are currently grappling with high energy bills, increased employment costs and cautious consumer spending. Pouring fuel onto the fire are rising borrowing costs, which squeeze margins and place more businesses in financial distress. With the era of cheap money over, business challenges are becoming more difficult to resolve.

The Bank of England has raised UK interest rates 14 times since December 2021 in a bid to control inflation. At the time of going to press, rates stand at 5.25 per cent, up from zero a few years back. Consequently, the cost of raising or refinancing loans has shot up and businesses that loaded up on debt at rock-bottom rates are facing a “financial reality check”, says Julie Palmer, a managing partner at turnaround specialists Begbies Traynor. Consumer-facing sectors such as hairdressing, hospitality, retail and leisure have been hit particularly hard, she says. Alarmingly, the number of insolvencies in 2023 was the highest it’s been since 1993 and 52 per cent more than in 2021, according to the Office for National Statistics.

The impact is being most widely felt as a ‘chill’ on investment and growth, as borrowing becomes more difficult, says the Federation of Small Businesses (FSB). The trade group says would-be borrowers increasingly report being asked for personal guarantees against loans, even for relatively small amounts, which prevents many from going ahead. It also found three in 10 small firms that recently applied for were rejected. “Many small businesses are waiting until interest rates start to fall once again before investing in anything that isn’t core to their business,” says policy chair Tina McKenzie.

“Politicians and policymakers should remember that small firms have been the driving force behind our recovery from past recessions, and this time around it’ll be no different, if they are given the right conditions to start up, scale up, and prosper.” Tina McKenzie, Policy Chair, Federation of Small Businesses 

For many hairdressing business owners, however, investment and future growth have long been a pipe dream; it’s the here and now that’s keeping them awake at night: “Will I be able to meet payroll this Wednesday? How many clients might cancel this week? Will our income be big enough to cover ourexpenses? Is it slightly down right now? Is that a trend? How does it compare to last week, month, quarter, year?” These daily struggles can literally take over your life and have you questioning the very reasons you went into business in the first place. No wonder we’ve seen a rise in so-called director fatigue, where owner-managers shut or sell their businesses and re-join the labour market for an easier life. 

CASE STUDY

“It’s been impossible for me to get funding.” Sheona Will, owner, Bloom Lifestyle, nationwide

“I had run a business for 22 years with two others when in 2019 we decided to go our separate ways. I took on the Glasgow salon, which I called Bloom Lifestyle, and in 2020 I opened my Aberdeen salon. I managed to survive Covid and all the lockdowns and in 2022 I was invited by Keune to open their flagship salon at Keune HQ in London. So, three salons in three years, all fully employed.

“Some of the challenges are the same as they’ve always been: recruitment, salon culture, mindset, etc. But I also feel like the sand has shifted beneath our feet somewhat, and there are areas where I used to be confident and now I’m not so sure.

“It’s very difficult to secure any kind of funding to open a salon nowadays or just to cut yourself some slack. In my previous business, where we’d been trading for over 20 years, it might have been different, but I only have Covid accounts so it’s impossible to get a bank loan or an overdraft. I’ve had to be really creative with my finances, which has piled on the pressure.  

“Then there’s the changing attitudes towards employment. We have our graduate programme, which takes NVQ Level 2 and 3 hairdressers and gets them up our own internal standard, then we have our stylists, who earn commission-based pay, and then we have our highly experienced members of the team, who are more than likely on a freelance contract. In my previous business I knew the culture inside out, but now it’s like running three different businesses at once.”

CASE STUDY

“I used to run my own business. Now I’m an employee again.” Jon Ellis, Smith England, Salisbury

“I had my own hairdressing business for 10 years. We were well–known in the town for being a good place to work but eventually I sold the business (while retaining the freehold to the property) and moved to Cornwall with my partner.

“Then Covid hit and we had sick parents and so we decided to move back. And the manager of the salon at the time was looking for a bigger premises, so there was this real possibility of running my own business again. I love hairdressing and it wouldn’t have taken a lot of money to get the business up and running again. But when I asked myself if I wanted to do this again, the answer was no.

“That was partly because of the cost of running the business – minimum wage for starters, which is killing this industry, plus I would have had to register for VAT. I don’t mind paying VAT, but why do I have to pay the same rate as a business that’s turning over £4 million?

“And the other thing was the culture change in the industry now. I just feel there’s no loyalty. You can rent out your chairs and offer the best deal you can, but someone can open up round the corner, offer a little bit more, and everyone ups and leaves you.

“Years ago, I worked for Phil Smith when he had his Toni&Guy empire, and now he has his Smith England salon in Salisbury. Icalled him up and told him I wanted to work in a salon again, I wanted to be employed. He said, ‘When do you want to start?’  

“Being back in a salon has been really refreshing, and there are so many benefits to being employed. The security of a regular wage, holiday pay and sick pay takes away so much stress. Now, if Mrs Jones cancels, I don’t have to fret. If something happens to me, Mrs Jones can be moved to another stylist in the salon temporarily, and then when I come back to work, she’ll be returned to me.

“Running my business had made me ill – it was one of the reasons we moved to Cornwall in the first place. Now my health has improved, and I am really enjoying my work. I count myself very lucky.”

Passion + Profit = The Secret Sauce, Says Business Guru Alan Austin-Smith. Here’s Where You’ll Find The Magic Ingredients

by CATHERINE | THE COST OF DOING BUSINESS

I’ve been helping salon professionals around the world be more successful for nearly 40 years and I’m just as engaged and committed to growth today as I have ever been. During that time, I’ve pretty much seen it all: recessions, high inflation, high unemployment, massive business operational changes, salons closing, salons opening, pricing issues, staffing issues, discounting… And so on.

However, I’ve also seen and worked closely with businesses of all shapes and sizes that consistently overcome those challenges and come out of difficult times on top. 

And…They all share the same common characteristic – a perfect balance between the passion for what they do and a profitable business. I call it the Passionate Profit Formula and there are four key steps:

Step 1: Refocus on your passion. 
Step 2: Set your profit goals. 
Step 3: Work backwards.
Step 4: What gets measured gets done. 

Let’s look at these in turn. First, refocus on your passion. You don’t have to sacrifice passion for profit – you can have both. In fact, you need both. Profit starts with the heart – your passion is the foundation you build your business on. However, it’s not enough on its own. 

A passionate business that isn’t profitable will start to drain the energy of the leader; you lose your mojo. When that happens, it impacts on everything within your business. And by the way, it doesn’t work the other way, either – a business focused solely on profit without passion will quickly leave the team and customers disengaged. You need both. 

So, step one of the Passionate Profit Formula is to refocus on your passion. It’s no wonder that after the pain and stress of the past few years a lot of business owners have lost sight of their passion, their dreams, their vision – the reason they started their business in the first place. 

Get back to basics, rebuild the foundations and refocus on ‘your’ passion. Passion starts at home. If you’ve lost yours, then it’s no surprise that your team may be losing theirs. 

Second, Set your profit goals. Move on from ‘hope’ business management and switch to ‘focused’management. Focused management is based on a clear understanding that you are more likely to achieve something when you are focused on it, it’s why goals, targets, etc, work. 

However, that’s one of the main reasons why so many businesses aren’t profitable. If you’re more likely to achieve what you are focused on, what happens if you are focused on break–even – on survival? 

The answer is you break–even – you survive! 

I speak to many business owners who are crystal clear of what they must put in the till, in order to pay the bills and salaries. That’s break–even! When I ask the same people how much profit they are targeting, I rarely get a clear answer. A business that’s only focused on how much they need to breakeven, with no idea how much profit they need, will always struggle to grow.  

Question one: how much profit you need? Profit enables reinvestment in the business. Better salaries all round, improved working conditions, smarter marketing strategies and the ability to weather the storm of rising costs and taxes.

Question two: how much profit do you want? As business owners, we pour our hearts and souls into our businesses. We deserve to reap the rewards of our hard work, whether that’s through financial success, personal fulfilment, or a combination of both. This should be over and above the owner’s salary. Assuming you are ‘working’ in the business, then your wage is exactly that – a wage – it’s not really profit.  

The answer to question two is how much money you feel is a fair reward for running your business, on top of your salary. Add those two amounts (need and want) together and you have a profit goal. (By the way, if you are using Floomly or have The Fantastic Hairdresser Calculators, it’s easy to work out what you must take to make the profit you want and need. If not, then you might need some help from your accountant or bookkeeper.)

However, don’t just add it to your break–even – we have high variable costs in salaries and stock purchases, and even with tight control of those, they’re still going to come in around 60 per cent(remember to include your salary in that percentage). That’s 60 per cent of your sales that will never go towards your profit target. Your profit target should pay the bills and give you the profit you need and want. 

And now the fun starts with step three: Work backwards. 

Working backwards from your annual target for profit, you can make some key decisions. Pricing, for example. People ask me how much they should increase their prices or even if they should increase their prices. My answer is always the same: I have no idea!  

Because the first decision on pricing must be based on your target for profit, so unless I know that I have no idea. Too often pricing decisions are based on market data: competitors’ prices, average incomes, etc, alongside the courage and belief (or lack of) in your business. You should consider market data, but only after the finances.

You can work out how many weekly customers you need and what average bill you should be targeting. That might influence the services you promote, the space you have available, your staffing levels and even your opening hours. You are making a plan – a plan for profit. 

I usually suggest a two-year plan: set your profit goal for year two and make the changes needed in year one, and then just keep it going, year after year! 

Finally, I always say that the most dangerous time in business is when you are doing well – because you take your ‘eye off the ball.’ Measure your sales, your team performance, your key metrics, your expenditure, and so on against benchmarks based on profit. Just knowing what you did isn’t enough – you must know what you are achieving against your targets for profit. Setting targets isn’t enough – measuring how you are doing consistently is the key to a laser–like focus on profitability. 

Perfect 10 – Why The Time is Right For Sally Montague To Expand Her Salon Group

For 40 years Sally Montague has been busy creating strong communities in her salons built around creativity and care. And while the business is strongly influenced by its heritage, with daughters Emmanuelle and Angel now on board, it’s building for future growth, too.

by CATHERINE | THE COST OF DOING BUSINESS

It was thrilling – though perhaps, for those who know her, unsurprising – that at a party to mark her 40th anniversary in business, Sally Montague announced her plan to open three more salons. Looking on were two of her daughters, Emmanuelle and Angel, both of whom have key roles within the business, and Angel’s two-month-old daughter. “Meet our next future salon manager,” quipped Emmanuelle.

Many a true word is spoken in jest. The Sally Montague Hair Group is a force to be reckoned with, with seven super-busy salons based in and around Derby providing the beating heart for local communities, creating jobs (all staff are fully employed) and stimulating economic growth. (Sally is so committed to independent businesses that she has never purchased anything online and only shops locally.) While other salon groups are standing still or contracting, Sally and her daughters are busy planning for growth, with salon number eight about to be announced.

Family is a driving force behind the business, and undoubtedly a key reason for its success. It was Sally’s architect father who rented the building to her when she opened her first salon in Friar Gate, Derby, in 1983 (note, no freebies here), and her mother worked on reception to save on costs. It was husband Garrick who loved finding the buildings for each new salon after that, helping to mastermind the growth of the group, and who encouraged his wife to aim for 10 (he sadly passed away in 2021, age 64, after a long battle with cancer). And Emmanuelle, who used to help out in the salons on Saturdays and during her university holidays and chose to enter the business 16 years ago instead of returning to college in Paris, is now the group’s brand manager; while Angel, who trained at Sassoon and got the session bug after working backstage at The Clothes Show, is the group’s art director, bringing her Fashion Week experience to creative shoots, shows and team training.

“We’ve built a community that’s really special, and we’re so proud to have families spanning three generations visit us for our services.” Sally Montague

But for the first 20-odd years, Sally pretty much ran the salons on her own (Garrick looked after the buildings but he was not involved in the business side). Friar Gate, which launched with three chairs, quickly expanded to 18 positions…  and then kept growing. But it took 10 years before salon number two came along, in Derby’s Irongate, as a lack of business confidence (not to mention three children under the age of five) was holding her back. “I felt I was a good hairdresser but as far as business was concerned, I was just winging it every day,” she says. A turning point came when L’Oréal Professionnel Paris (to whom Sally has remained loyal her entire career) sponsored her to attend a business course with Alan Austin-Smith. “It blew my mind,” she recalls. “I had all this new knowledge and I couldn’t wait to put it into action.” In 1996, with the salons bursting at the seams, Sally was awarded Derby Business Person of the Year. Newly emboldened, she opened in Belper in 2000 and between 2007 and 2021 another six followed, including her salon in the David Lloyd centre in Derby – her only salon that is leasehold.

Filling seven salons is quite a task, but Sally and her teams succeed day in, day out. So, what’s the secret? “It’s a given that the hair has to be fantastic,” says Sally. “And my standards are really, really high, so whoever I trained or brought in had to be fantastic too. But I think it’s the experience we create. We make it special, whether that’s decorating the salons for Easter or Valentine’s Day, or my Friday Ladies Club, where everyone comes in for a blow-dry. We’ve built a community that’s really special, and we’re so proud to have families spanning three generations visit us for our services.”

“A big reason why clients are so loyal is because they can see how much education we continually invest in our team,” says Emmanuelle. “Our education calendar for the year is absolutely packed, and we share everything we do via a dedicated Instagram channel that not only helps drive recruitment, but the clients love it and are inspired by it, too. And from the team’s perspective, we’ve introduced things like personal trainers and education on nutrition alongside their L’Oréal colour sessions, so they feel they are continually developing, too. When you’re growing salons you need the team to grow with you.”

This desire always to improve what they’re doing has been made easier since Sally’s daughters joined the business. “We’re constantly critiquing what we’re doing,” says Sally, “and because it’s me, Angel and Emmanuelle having those conversations, it leads to improvement, rather than someone being offended.”

As a result, the three women have taken decisions together that have proved pivotal to the business. During the 2008 recession, when the phones stopped ringing and clients started spacing out their appointments, they decided against using Groupon and other discounting schemes, even when their teams were pushing for it. “We looked at it, and we said, ‘No, we’re not doing it’. We’ve never done those promotions. We offer very high quality, but our clients do get value for money.”

Having her daughters on board means Sally can carry on doing the job she loves (“I’m on the salon floor four days a week and nobody interrupts me because Emmanuelle takes care of everything. She’s put the business on another level.”). But they’re not trying to do it on their own. “You can’t get to 10 salons with three people,” says Emmanuelle, “it’s got to be a massive team effort. We’ve got a really strong senior management team, so the salons can maintain those high standards, and we want to welcome people into the business and grow – and we’re doing that successfully.”

For Sally, the future still doesn’t involve retirement – she has a different vision in mind. “I’d like to come off the floor a bit more so I can call in on the salons and thank all the clients for coming. I mean, I drop the towels and stock off and when I do that I wave at the clients and say hello, and they love it. The staff say, ‘I can’t believe Sally’s come in with the towel bag’, but you know, that’s what I’ve always done. And I’m happy to do it and I would like to be able to do more of it.”