We Asked 100 Hairdressing Business Owners: What Keeps You Awake At Night? And our survey said…

We asked 100 business owners…

by CATHERINE | THE COST OF DOING BUSINESS

We know business is tough. But which part is the toughest? Creative HEAD asked 100 hairdressing business owners to share what’s been most troublesome for them over the past 12 months and whether those challenges have affected their future plans. And the results are in…

What is most problematic to you when it comes to the cost of running your business?

9%​       High energy costs

30%     ​Rising employment costs

44%​     Business taxes (eg, VAT, Corporation Tax)

1%​       Property costs

16%     ​Rising production costs

Which of these costs should government prioritise to help your business?

18%​      Energy costs

61%​      Business taxes

21%​      Employment taxes

Which of these tax reforms would most help your business?

76%​      Reduction in VAT

5%​        Reduction if Corporation Tax

19%​      Simplifying the tax system

Did you raise your prices in the last 12 months?

89%        ​Yes

11%​        No

If yes, do you plan to raise them again in the coming months?

56%​        Yes

44%        ​No

If no, do you plan to raise to raise your prices in the coming months?

54%        ​Yes

46%        ​No

The National Minimum Wage has risen this year by 14.8% to £8.60 for those aged 18 to 20, while the National Living Wage rose by 9.8% to £11.44 and now includes those aged 21 or over. Does this mean you will:

Hire fewer apprentices

69%        ​Yes

31%​        No

Stop hiring older apprentices

63%​        Yes

37%​        No

Do you think your profit will increase this year?

32%​        Yes

68%​        No

If yes, will it go up by more than 10%?

42%​        Yes

58%​        No

 If no, do you think you will break even?

58%​        Yes

6%​           No

36%         ​I think I will make a loss this year

 Do you feel optimistic about your business in 2024?

65%​        Yes

35%​        No

“The Goals I Set Now For Electric Are Very Different To The Ones I Set At The Beginning. You Have To Stay Fresh”

Mark Woolley’s Electric empire spans salons, professional products, a private members’ club and events – and there’s even more to come.

by CATHERINE | THE COST OF DOING BUSINESS

What made you decide you wanted to set up your own business?

Even when I was a young kid, my aim was to do a creative job where I could own and run my own business around it. When I met the guys from Saks, I realised I could do this within hairdressing. Luckily, I fell in love with doing hair straight away and by 1996 I was the owner of my first Saks franchise salon. Over the years, I continued to feel more attached to the creative side of hairdressing, as opposed to the business model, and I increasingly felt like I wanted to build my own brand. In 2005 I took the plunge, left Saks and opened my own independent salon.

The name – Electric. How did this come about?

The word Electric describes the energy around everything we do. Originally it was describing the atmosphere in our salons, where a client would meet somebody very accomplished, but this person would be warm, welcoming and friendly. We would also play great music, serve great drinks and we’ve always had a very positive team, and that makes the atmosphere. It was important to me that my business wasn’t named after me. I wanted it to be democratic.

What was your goal back then? What did you set out to do differently?

The goal was to establish a cool, independent brand. In fact, I had already opened a studio and called it Electric Studio while I was still at Saks, so the immediate goal was to build that up and to be honest, a product line was always in my mind from the outset. In terms of building Electric, I have always looked outside of the industry for inspiration – music, art, fashion, chefs. They all mix business with creativity and how they develop their personal brand is incredible. The concept of building a community was inspired by Nick Jones’s members’ club Soho House; how to create a hub around a product line, that definitely came from Michael Gordon’s House of Bumble – it always blew my mind how he had these incredible hairdressers, like Howard McLaren, Garren and Jimmy Paul working there, using his products. And Anthony Mascolo has always injected excitement into the industry, whether through his photography with Toni&Guy or the incredible shows he delivered with TIGI. I set myself goals when I launched Electric, and I religiously set new goals every year to keep improving and also to have something for me and my team to aim for. The goals I set for myself now are very different to the ones I set at the beginning. You’ve got to stay fresh.

Was there a specific moment when you felt you’d achieved success in business?

I don’t think I’ve got there yet. There have been a few things we’ve celebrated along the way: the first salon, the launch of Electric products, the opening of Electric Studio, launching the brand in the US, opening Electric Space, buying Falmer Court… But it still feels like there’s so much more to do and compared with the people I’ve admired along the way – Anthony Mascolo, Michael Gordon and Nick Jones – we are not even out of the starting blocks.

What’s the biggest risk you’ve taken in your business?

[Laughs] My latest project!

Have you always enjoyed your business, or have there been times when it’s caused you sleepless nights?

I’ve been genuinely frightened a few times, but I always managed to sleep. I think there needs to be a bit of fear because that’s what compels you to make the decisions you need to make. As I’ve got older, I realise I’m at my best when I’m on my toes.

In business, what do you believe is your greatest strength?

People. I like working with people and seeing them develop. I believe everyone who works for Electric truly feels part of something and we are working on it together.

Anything you wish you’d done differently?

I’ve made plenty of f**k ups, but I don’t regret anything. It might sound like a cliché, but the important thing is to learn from your mistakes.

What’s next for Electric?

I want to build on everything we have started building. I want to grow Electric in North America. I want to open Electric Space in New York. I believe Electric products can become a global brand. I want to push this as far as we can.

How do you relax away from the business?

A real mix of things, from spending time with my family to painting. I really love art and I’ve produced it for as long as I can remember. I like staying fit, so you’ll often see me going for a run in the morning and hitting the boxing gym. I love music, I love classic cars and I feel lucky that I also love most of what I do for my job, like cutting hair and creating imagery. There’s nothing more satisfying than feeling I’m building the brand.

And finally, is it too early to think about succession plans for Electric? Who might be next in line to take up the helm?

The great thing about Electric being a brand is that other people can be successful within it. In lots of ways it’s a family business, with members of my own family involved, but some of my team that have worked with me for years are part of that family too, and I think we can continue to grow Electric long into the future. I often get asked, What is my exit plan? The honest answer is, I don’t have one.

ELECTRIC SPACE

A central London members’ club for creative and arts professionals, where hairdressing fuses with fashion and music. Alongside 30 workstations and VIP spaces, members have access to monthly education seminars, business networking events, a creative studio for shooting content and a private cinema and screening room, as well as a fully licensed bar, retail store and on-site concierge. Electric Space is also increasingly used as an event space by brands such as ASOS, Adidas, Sony Music, Google and Estée Lauder.

“This is our vision for the future of hairdressing – a space for collaboration, leisure and work. Here, freelance hairdressers can create collections, shoot images and film, teach courses and hold seminars, all while networking with other members who work in PR, advertising and photography.”

ELECTRIC SALONS

Brighton, Reading, London (within Electric Space)

Electric has had salons since 2005, and today you’ll find 70+ staff working across them, all fully employed.

“We believe in training our own people in our own salons to build their careers. All my staff are fully employed, though we offer more flexibility in working hours than we used to. That model works. We believe in it and are fully committed to it.”

ELECTRIC PRODUCTS

Launched in 2010 with ethical, sustainable, all-British formulations created by Mark and his team of chemists, Electric products are stocked in hundreds of salons and used by some of the world’s most influential stylists. Look out for a major upgrade in autumn this year, with a brand-new product line-up, complete with innovative packaging design created by independent artists.

“We’ve made it our mission to produce products that perform to the needs of elite professionals using ingredients and raw materials sourced by ourselves in the UK – and, indeed, grown by us at Falmer Court. We have over 700 stockists in the US, 120 in the UK, and you’ll see both of those numbers grow in the months to come.”

FALMER COURT

Electric’s HQ, complete with development lab for the product line, but also a unique venue for events ranging from music gigs and classic car rallies to weddings. Falmer Court also plays host to Electric’s Global Congress, a three-day extravaganza of education and entertainment for the #ElectricFamily, culminating in an early-morning dip in the English Channel at Brighton beach!

“My home. It’s where we develop the products and grow some of the ingredients and where we hold events in the Great Thatched Barn. Events are part of the Electric DNA now. We’ve always evolved, but keep the same goal of exciting our people and our community.”

The Minimum Wage Is 25 Years Old. Has It Become Bad For Business?

The UK’s minimum wage is now one of the highest in the world relative to typical wages, placing an incredible strain on hairdressing businesses. Many predict there will come a point where it will start to destroy jobs.

by CATHERINE | THE COST OF DOING BUSINESS

On 1 April this year, workers on the National Minimum Wage (NMW) and the National Living Wage (NWL) had their pay boosted. Apprentices, too, got an inflation-busting pay rise of 21.2 per cent. The change was the largest-ever increase in the minimum wage in cash terms, and the first time it had increased by more than £1. Furthermore, the NLW – now at £11.44 per hour, making it one of the highest in the world – now applies to anyone aged 21 and over (it was 23 and over in 2023). The changes have been made following recommendations made by the Low Pay Commission (LPC), an independent body that advises the government about the NLW and NMW.

Needless to say, the rises present a Catch-22 for hairdressing employers who want to pay staff a wage they can afford to live on, without jeopardising the health of their business. Business leaders are legally required to pay at least the NMW to their staff, and for many hair bosses, the new NLW represents yet another restriction on growth. Many are also experiencing an increase in wage expectation from other members of their team and on top of that are having to inflate salaries to maintain a competitive edge when recruiting talent.

Hairdressing businesses, which tend to be small enterprises with lower profit margins and tighter budgets, are often more susceptible to the impacts of a higher national wage.

On average, the rise means a full-time worker contracted to work 36 hours per week will now be paid £22,000 per year (pre-tax). However, an increase to the National Minimum Wage means more expense to the employer than just wages. It’s also an increase to associated costs, including National Insurance Contributions (NIC) and holiday pay.

From 6 January this year, the main rate of National Insurance was cut from 12 per cent to 10 per cent, affecting 27 million people. Under the change, the rate of tax paid by employers and employees was reduced by one percentage point. However, these savings were swiftly cancelled out by confirmation that the current NIC thresholds for both employers and employees will be frozen through to April 2028, meaning that more workers will be paying National Insurance as their wages rise.

Rises in the Minimum Wage present a Catch-22 for hairdressing employers who want to pay staff a wage they can afford to live on, without jeopardising the health of their business.

A further challenge is that the competitive hiring market means many employers will struggle to compete for applicants if they only offer NMW. Other businesses often choose to pay the so-called ‘Real Living Wage’ to staff members. At £12 per hour (£13.15 in London), this puts additional pressure on hairdressing employers when it comes to recruitment.

Hairdressing businesses, which tend to be small enterprises with lower profit margins and tighter budgets, are often more susceptible to the impacts of a higher national wage. The NHBF, which has long been warning about the impact of NMW rises on hairdressing businesses, has been advising the LPC on future policy.  It said “The government should take a cautious approach to any future rises beyond 2024. We support moving away from a targets-based approach to a wider assessment of the economic and labour market conditions for future NMW/NLW rate setting.”

CASE STUDY

“We were the only sector organisation to call for restraint on wages.”  Caroline Larissey, chief executive, National Hair & Beauty Federation (NHBF)

“Hair is a unique sector. It is female-dominated and one of the biggest employers of young people in the UK. However, unlike retail or hospitality, we don’t have those big names – like McDonalds, Marks & Spencer, Wetherspoons or Next – who can lean on government to make change, so that makes lobbying more difficult. That’s why the NHBF does this on behalf of our members and the wider sector.

“We campaign to make our industry’s voice heard on issues that are vital for business, including finance, business support, quality, standards skills, education and – for beauty – aesthetics regulation. Our lobbying is evidenced-based, which is why our State of the Industry quarterly survey is so important. Government and ministers see it as a valuable tool for regular insights. Major reports on Skills (Careers at the Cutting Edge) and Avoiding the Cliff Edge on a VAT smoothing mechanism are important in maintaining our authority and credibility with government. They allow us to put forward a range of recommendations for discussion based on robust evidence and facts.

“Bringing about policy change can take time, but influencing is about looking at the government’s agenda and finding a win/win, where both sides can benefit. We’re coming up to a general election and it’s interesting that the government still has appetite for change – for example, raising the VAT threshold at the Spring Budget, which will benefit some sector businesses and is useful as an interim measure. They also announced an additional £60m for help with apprenticeship training costs and more flexibility in the levy which may be useful for some, but we are pushing for much more on this.

“We’re about to launch our manifesto for the next government and are working with the Low Pay Commission (LPC) on evidence around wages. We were the only sector organisation last year to call for restraint on wage rises. We’ll be giving oral and written evidence over the summer. NHBF members have already met with LPC commissioners.”

CASE STUDY

“I’ll be employing fewer apprentices because of the National Minimum Wage rise.”Richard Phillipart, owner, The Boutique Atelier, Ellesmere Port

“I have always had apprentices in my business and usually take on four each year, but the rises in the hourly rates combined with the changes to the National Living Wage mean I’ll take on fewer apprentices next year and I won’t be employing older apprentices anymore. The business just can’t afford it.

“I pay my team a good wage – very few of them are paid the minimum wage. But because the minimum wage is creeping ever closer to what my intermediate team members get paid, then their wages have to go up, and then they creep closer to the more senior team members and so the same thing happens. So, whenever government increases the minimum wage by these huge chunks, I’ve increased every member of staff’s wage by the same amount. I can’t have an experienced team member being paid just 70p more per hour than someone who is still shampooing. It wouldn’t be fair.

“At the same time, the government is projecting a 4 per cent increase in public sector pay. So, on the one hand it’s saying all the country can afford is 4 per cent, but us private employers have to find 21 per cent? I find it so frustrating. And if you repeatedly don’t pay the minimum wage, you can go to prison. So, under the threat of prison, I have to put my wages up by 21 per cent. But nobody’s talking about that.

“Apprenticeships do work and they’re important, but you’ve got to be able to afford them. Far fewer salons offer apprenticeships nowadays and I think this latest move will put employers off even further, which then puts even more onus on the training academies and colleges to train students to a better standard than they currently do. Because I certainly won’t be spending a year retraining them on £11.44 an hour.”

To VAT or not to VAT? It’s a pretty big question in hairdressing right now

According to the Federation for Small Businesses, the current tax system is too complex, expensive to comply with, a substantial barrier to growth and it’s inherently unfair for SMEs.

by CATHERINE | THE COST OF DOING BUSINESS

Of all the taxes we have to deal with, Value Added Tax (VAT) is particularly troublesome for hairdressing businesses. Despite the recent increase in the VAT threshold to £90,000 – one of the highest in Europe – the National Hair & Beauty Federation estimates that 93 per cent of sector businesses operate below it, with many takingmeasures to reduce their economic activity to ensure that they do not cross it.

The NHBF commissioned an independent report from Pragmatix Advisory, ‘Avoiding the Cliff Edge’, which argued that VAT payments should be smoothed (ie, there should be tiered rates), to minimise the immediate VAT liability businesses receive upon passing the threshold. The report also drew inspiration from successful cases in other European countries, such as Finland and the Netherlands, where lower VAT rates have shown positive impacts. For instance, the Netherlands lowered VAT to 6 per cent in the 2000s for labour-intensive services such as hairdressing, resulting in the creation of 4,000 sector jobs.

“The Government ought to do more to publicise available reliefs for small businesses such that their use is maximised, addressing the fairness issue within the tax system.” Federation for Small Businesses

Meanwhile, the introduction of Making Tax Digital (MTD) was supposed to alleviate many of the issues arising from the complexity of the tax system, easing tax compliance, increasing efficiency and aiding cashflow planning for businesses. Yet, just over two years since its initial introduction, small businesses are complaining that MTD has done little to smooth the tax administrative process but has significantly increased their costs of compliance.

Small businesses also have limited awareness of the available tax reliefs they may be eligible for, which means they pay their fair share of taxes, but don’t get their fair share of reliefs. According to the FSB, small businesses are on average only aware of five reliefs – a very small number considering the wide variety available. Fixing the gap in knowledge around reliefs would go a long way towards restoring more faith that the tax system is fair towards small businesses; they pay their liabilities and thus should receive their fair share of reliefs.

The Netherlands lowered VAT to 6 per cent in the 2000s for labour-intensive services such as hairdressing, resulting in the creation of 4,000 sector jobs.

“The Government ought to do more to publicise available reliefs for small businesses such that their use is maximised, addressing the fairness issue within the tax system,” said an FSB spokesman. “We urge the Government to create a system within the Making Tax Digital software that utilises the information provided by businesses to create nudges around potential reliefs they could apply for. Importantly, this should be a free feature of all Making Tax Digital software and not a paid-for add-on.”

CASE STUDY

“The government’s tax strategy makes it really hard for freelancers to grow.”  Faye Cawood, owner, The Hidden Hare, Harrogate

“I’d been a hairdresser for 10 years and worked at the same salon for seven of them when I went self-employed. I’d worked my way up the ranks and the only person above me was the salon owner, so it felt like it was time to go out on my own. And Covid had an impact on that – the realisation that I ought to have a better work/life balance.

“I started off renting a chair because it was a little less risky, but things went well and about eight months later I took on the premises that I’m in now, and I’ve been here 18 months as a salon ownerand I rent out my chairs and various spaces within the building. I had wanted to take on an apprentice, but I was operating so close to the VAT threshold that actually employing somebody would make me worse off and then you’ve then got all the HR stuff to deal with. It’s not that I’m against employing someone, but I did this for a simpler, more straightforward life so I’m going to stick with my current business model for now.

“The VAT threshold was £85,000 just before they raised it, and I was hovering at about £83,500, so dangerously close. My accountant was telling me to take a couple more holidays because as soon as I hit that threshold, I’d be losing a good chunk of my earnings. And I’m a one-woman band, I’m working five days a week at 95 per cent capacity most of the time, so to make an extra £20,000 or £25,000 to offset the VAT is not doable.

“Raising the VAT threshold to £90,000 has given me some breathing space and it means I can put my prices up, which I needed to do. But it doesn’t allow me to give myself a pay rise because with that threshold you’re always thinking, Will I hit it? Will I not hit it? And is it going to be worth it? I believe having the threshold so low stunts growth for small businesses. I don’t really understand the government’s thinking on that. It needs to rethink its tax strategy for freelancers, because the way things are set up now makes it hard for us to grow.”

The Law On Employee Tips Is Changing: Here’s What You Need To Know

This autumn sees new rules for managing staff tips – which means the way you currently handle tips in your business could become unlawful.

by CATHERINE | THE COST OF DOING BUSINESS

As revealed at this year’s Salon Smart, the government is about to introduce new legislation around UK tipping laws that will have implications for some hairdressing employers. The Employment (Allocation of Tips) Act 2023, expected to come into effect on 1 October this year, will make it unlawful for employers to withhold tips from workers. The new law will introduce changes to tipping practices in the UK and, if not adhered to, could have substantial financial consequences for employers, with awards of up to £5,000 per employee to reflect losses suffered.

The new legislation will protect tips paid by cash and card, ensuring that tips are passed on to employees without any deductions from their employer. The tips should be allocated fairly (a draft statutory Code of Practice (available here) has been provided by government), and all workers are protected by the new law, including those on zero-hour contracts.

If tips have not been paid on time, an employee can claim up to £5,000 in compensation.

The obligations under the new act include the total amount of the customer’s bill, which will include any deductions such as bank and admin charges. This means that employers will no longer be able to apply a portion of a gratuity or tip to meet those additional charges and will need to find an alternative way to pass on those charges to clients.

If, in your business, tips are regularly paid to your employees, you should implement a written policy that explains the allocation of qualifying tips, and how they will be distributed in a fair and consistent manner. Having a written policy which is clear and accessible to all staff will ensure adherence with the new laws and will help to avoid any potential employee complaints and claims.

You must also keep a record of how tips are being allocated and distributed among your employees. Under the new law, employees will have a right to request information about an employer’s tipping record once every three months. If an employee does request a copy of your tipping records, you must comply with this request within four weeks from the date it was requested. If there are inconsistencies in your records, or if the records show that the tips have not been distributed fairly, this can be used as evidence by an employee to bring a tribunal claim.

You should ensure that tips are paid to employees no later than the end of the month following the month in which the customer paid the tips. If tips have not been paid on time, an employee can claim up to £5,000 in compensation.

Finally, it is important to note that there will be no transition period. This means that, in order to avoid the consequences of non-compliance, you will need to make any required changes to your business operations before the new legislation comes into effect.

Hand Up If You Want To Be Heard

How do you feel about working in hair? Creative HEAD invites YOU to share your thoughts for the next On The Floor report.

by AMANDA | THE COST OF DOING BUSINESS

Creative HEAD is on the hunt for salon employers, employees and freelancers to take part in the 2024 On The Floor report, our regular deep dive into the landscape of modern hairdressing and barbering. We want to know what’s happening now and what’s coming next for UK hairdressing’s employers, employees and self-employed.

Launched in 2021, Creative HEAD’s major industry survey, On The Floor, discovered salon employers frustrated by increasing numbers of rent-a-chair competitors; employees feeling disenfranchised by the glamorisation of freelancing and the prioritising of social following over talent and skill; and growing numbers of self-employed stylists building their own brands and independence, with all that entails.

Follow-up reports have investigated recruitment challenges and the headaches trying to find and keep hairdressing and barbering apprentices. And now we want to do it again, to keep the conversation going and to better understand how to tackle the challenges and make progress…

In July we will be conducting focus sessions with our three key groups – salon employers, salon employees and self-employed stylists. And we want to hear what YOU have to say! These sessions will be conducted on Zoom and will allow all participants to have a voice and share their thoughts and experiences.