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Financing a beauty salon involves maintaining a positive cash flow against high overhead costs and an income that can be slow or inconsistent- especially in the first few years of business. To improve their cash flow, most beauty salon owners seek outside funding, but soon realize that traditional forms of financing, such as bank loans, are difficult to obtain. The answer to this dilemma for many salon owners has been to seek alternative methods of financing.

What are the Overhead Costs to run Beauty Salon?

Running a beauty salon involves several major overhead costs:

• Real estate. Success with a beauty salon depends to a large extent on location. Real estate expenses will be one of your highest overhead costs.

• Payroll. The success of your beauty salon is also heavily dependent on the talent, ability, and attitude of your employees. As front-line representatives, they are your greatest asset. But the investment you will make in them will also be one of your greatest expenses.

• Inventory. This consists of all the beauty supplies and products that you must purchase for your beauty salon. Keeping your inventory well-stocked is essential to smooth operation.

• Equipment. From blow dryers and curling irons to tanning beds and hot tubs, a beauty salon must be well-equipped.

A Beauty Salon is Considered “High Risk” Financing

Banks are reluctant to approve financing for beauty salons because they are considered a “high risk” investment. Not only is much of a beauty salon’s capital tied up in overhead, but the income it generates is generally inconsistent. Like any retail or service business, a successful beauty salon needs time to develop a loyal customer base. Thus, for the first few years revenue can be very unstable.

Moreover, in the beginning when sales are slow or inconsistent, it could easily lead to late or missed payments for loans or any other form of debt. The result is a bad credit rating that can negatively effect the chances of receiving traditional financing in the future.

What are Your Options?

For a new or expanding beauty salon to operate effectively, it needs additional sources of financing. When securing traditional financing is difficult, there are several alternative methods of funding that are suitable to a beauty salon.

Vendor financing. If you are looking for financing for equipment or supplies, then you may be able to get it from your vendor. Vendors can sometimes play a major role in financing a new or growing business. Just keep in mind that you need to shop around for credible companies, and you can expect to pay a higher interest rate on any financing that you receive.

Lease your equipment. Instead of purchasing all of your salon equipment and furniture, try leasing it. Through equipment leasing, beauty salon owners can free up their working capital which can then be used to operate and grow their businesses.

Get an unsecured business cash advance. A business cash advance is a small business finance method that is based solely on future credit card transactions. The company offering the cash advance will purchase these credit card transactions at a discount and provide your beauty salon with a quick injection of cash. The approval process is generally quick, and the money can be received within a week of approval. Since financing is based on future sales, credit and sales history are usually not considerations. Payments are also based on sales volume.

Getting the financing you need to run and grow your beauty salon is possible; you just need to know where to look.

If you are looking for ways to expand your salon business, then you may want to consider adding spa services. From a full service day spa to simple “dry” treatments, offering spa services in your salon is an excellent opportunity to capitalize on this rapidly growing segment in the personal care industry.

The benefits of adding spa services

The biggest benefit of adding spa services to your salon is that it is an easy opportunity for growth. There is so much flexibility and variety in the spa services industry that it can accommodate virtually any budget or physical space.

In addition, you will not only open up your business to new markets, but you will also present a lot of convenience to your existing clientèle. If you offer a collection of hair, beauty, and spa services, then you provide a one-stop solution for all your customer’s beauty needs. This way, a client can schedule a number of services in one visit, rather than going to several different establishments.

Some Common Spa Services

The following is a list of popular spa services commonly offered at salons and day spas in four categories: nail services, make-up, hair removal, and skin and body care.

Nail services include:

• Manicures (both traditional and French manicures)
• Pedicures
• Nail wrapping
• Acrylic nail application
• Sculpted nail application
• Nail tipping
• Paraffin treatments
• Skin exfoliation

Makeup services include:

• Cosmetics application
• Color analysis
• Eyelash tinting
• Eyebrow tinting
• Ear piercing
• Hair-removal services include:
• Electrolysis
• Waxing
• Eyebrow arching

Skin and Body Care:

• Facials and body exfoliation (which may involve the use of salt glows, body polish, enzyme peels, and body masks like mud or paraffin)
• Massage (full body massage, facial, and hand or foot massage)
• Wraps and packs used to combat cellulite and reduce water retention
• Hydrotherapy treatments  which include: whirlpool baths, Scotch hose (by which streams of water are directed on the client to improve circulation), and hot tub treatments.
• Body tanning, including self-tanners and tanning beds

Considerations Before Deciding which Services to Offer

•  How much capital can you invest? One of the most important considerations with any kind of expansion is determining how much capital you can invest.
• Do you have access to outside sources of funding, such as a business loan? Do you, or can you, lease some of your equipment? You should also consider alternative forms of financing, such as business cash advances via invoice factoring.
• Do you have the option to expand your space? Before deciding which spa treatments to offer, you also have to be realistic with the amount of physical space you have available. Many “dry” services, for example, such as nail care, message, and make up application, require very little additional space and equipment. The “wet” services, on the other hand, will need a wet room. A “wet room” is a tiled room with special shower facilities for the hydrotherapies mentioned above, as well as any body treatments that must be rinsed off after application, such as  body masks and exfoliation.
• What do your clients want? Get in touch with the needs of your customers. Speak to them, or have them fill out a survey. Find out what services are already offered at other salons or day spas in the area. You should also consider your customers’ economic background and the amount of free time they have.

Ultimately, with a little research, adding spa services to your existing salon provides an excellent opportunity to enhance your business and enter new markets.