Making a business model

With the hair and beauty industry open again after a lengthy lockdown, now is the time to fine-tune your business model in order to ensure continued success in the future, advises salon business expert Liz McKeon

A business model refers to a plan for making a profit. It identifies the products or services the business plans to sell, its target market and all running expenses.

Successful salons, spas and clinics have business models that allow them to fulfil client needs at a competitive price and a sustainable cost. As we move forward with the virus still in existence, and a degree of uncertainty about the future, every business is trying to figure out the ‘new normal’. Regardless of your size or location, there are five components to stabilising your business model:

1 Work environment – being nimble during these times has proven to be one of the key strategies for survival. For example, having to minimise the number of people in work areas, without affecting cashflow, was a critical need for salons to keep employees working, while attending to clients’ needs.

2 Daily operations – understanding your financial situation, and having both short-term and long-term strategies, can help you be prepared for unforeseen circumstances. Managing cashflow must be a critical component of your overall strategy.

3 Employee retention – staying connected to your employees while going through times of uncertainty is important. By leveraging current partnerships – with suppliers, for example – there may be additional benefits that can be provided to your employees on a continual basis.

4 Risk management – since the increase in online salon shops and automated money movement, there has been a spike in email and money fraud. Working with expert payment processor software, technology partners and the right financial institutions can help you develop a risk-management strategy.

5 Contingency plan – ask yourself how prepared you were for the unexpected in the last 18 months. This is a question that you can hopefully answer now, and it may mean it is time for your business to evolve with back-up contingency plans in place.

Reasons for failure 

When businesses fail, there are always reasons and these are the four most common ones:

1 Inadequate management – in many salons, the owner is the only senior-level person within the company. While the owner may have the skills necessary to create and sell services and products, they may lack the attributes of a strong manager. Without a dedicated management presence, a business owner has a greater potential to mismanage certain aspects of the business.

2 Financial hurdles – happiness is positive cashflow! Running a successful salon really boils down to one critical point: making money. It is your responsibility to have financial knowledge about your business.

3 Marketing mishaps – the philosophy behind marketing is to satisfy the needs of every client as best you can, while making a profit. If you make your clients happy, they will buy from you again and again.

Your ability to attract clients determines your success in business, and your goal is to position your salon in your market as the ‘only’ choice for what you sell.

4 Ineffective business planning A common mistake in business is poor planning and unrealistic expectations in terms of income and expenses. Take a realistic approach to budgeting; don’t plan for the best scenario, plan for the worst. If everything turns out better than expected, you will just end up with more money in the bank!