Why consider...the Beauty & Wellbeing sector?

You may opt to offer a mobile service, visiting clients in their homes or offices.

If you are already working in the Beauty and Wellbeing (B&W) sector – offering hairdressing, exercise training, nutritional therapy or another personal service – starting your own business may be the logical next step towards enhancing your career, increasing your independence and boosting your earning potential. One immediate advantage is that you can take your existing skills and experience and apply them to a business set-up that suits you. This sector offers a range of enterprise options, so you may decide to open a high-street hair salon or beauty clinic, operated either as a personal concern or a franchise. Or you could work independently under the umbrella of a larger organisation – as a personal trainer, beautician or acupuncturist within a larger health club, salon or clinic, for example.

The key to a successful B&W business is quality of service and client satisfaction. This is one reason why small, independent concerns can compete effectively against established brand names and chains. Both smaller and larger enterprises will share similar costs when it comes to utilities, rent, rates and even purchasing of products, meaning you should be able to hold your own when it comes to pricing. And as a small enterprise, you are as capable as a larger operator when it comes to plugging a gap in a local market (say, for a nail bar or tanning salon).

In brief

• The pros and cons
• The statistics
• Business models
• Money matters
• Sources of funding
• Common pitfalls
• The moneysense top five: managing your money
• How I did it: Beauty and Wellbeing
• Green issues
• Useful contacts

As with any start-up, the positives and negatives of going it alone will depend on personal as well as business matters. Here are a few points to consider if you’re thinking of launching in the B&W sector:

Pros

• Using existing skills, so you don’t have to factor in retraining costs and lack of earnings while learning a new profession
• Working in an area of personal job satisfaction, giving you the motivation to push your business, accept low earnings during the start-up phase and work the long hours necessary to establish your enterprise
• Continuing professional development – learning and expanding your skill-set can be a requirement of professional registration in the B&W sector. It can also present opportunities to expand your business. Ongoing training will present a cost, however.
• Flexible working hours, allowing you to fit your business around your family, other commitments and even an existing job
• Independence – you will be your own boss
• The chance to start your business gradually, while working in other employment
• Opportunity for home/mobile/freelance working, allowing you to fit your business model to your needs and working preferences
• Range of business models, each representing varying degrees of investment
• Established support network of professional bodies, providing business and professional advice, cost-effective insurance, deals on products and equipment, etc
• A lot of customer contact.

Cons

• High levels of business competition, meaning it is essential that you develop a USP and/or high level of customer satisfaction to attract and retain clients
• Potential high premises costs, especially in businesses that require passing trade to attract clients, such as a high-street hairdresser
• Need for additional business skills or training, such as marketing, bookkeeping, management, health and safety, to complement your professional qualifications. Being a good beauty practitioner does not guarantee success in business. If you do not already have these skills, you will have to learn them or contract parts of your business administration out to qualified service providers
• Costs of essential equipment and maintenance. This will include set-up costs, repairs, upgrades and potentially expanding the range of services you offer. For example, treatment beds, laser machines, tanning booths, nail bars, hair dryers, etc.
• Outlay on professional registration fees and licenses to operate
• Relatively low profit levels, based on the amount people are prepared to pay for a service compared with the time and costs associated with providing it. For example, a £30 haircut may take an hour to complete in a salon, but the fee will need to be offset against the salaries of the hairdresser and the trainee/junior who washes the client’s hair; cost of products (shampoo, conditioner); ongoing costs of running salon, etc. The Working in Fitness Survey 2009 found that 48% of respondents considered low pay, in comparison with other industries, a reason to leave the sector.

Annual turnover for the B&W sector was £5.25 billion in 2006 – and trends suggest the sector will continue to grow, according to the latest figures from Habia, the Government-appointed standards-setting body for the hair, beauty and spa industry. There are 340 million client visits across the B&W industry each year (six per person per year), with the average household spend on hairdressing services £161.

Around 70% of business owners are female.

Total employment across the sector in 2007 was 245,795 (0.87% of the total UK workforce). Of people working in the sector, 42.2% are self-employed (there are 55,000 freelancers). The majority of businesses are small enterprises, with 75% of salons having fewer than five staff and 93.5% of workplaces having up to 10 employees. The average salon turnover is £88,000, with 1,200 openings and closures annually. Average outlay on training each staff member is £1,250 for large salons, £740 for medium salons and £571 for small salons.

In the fitness industry, an average of six days and £484 are spent developing skills each year, according to the Working in Fitness Survey 2009. The survey also shows that 47% of people working in fitness are either self-employed or working as freelancers. The survey found the average salary (for both self-employed and permanent workers) to be £20,300. According to the Office for National Statistics, the average annual wage in the personal services sector is around £12,000.

The B&W sector offers a range of business models, some of which will be more practical to certain professions than others. Your final decision may be influenced not only by the skills/services you have to offer, but also by why you want to start a business in the first place and the way in which you want to operate.

For example, a hairdresser may offer a mobile service, work as a freelance from an existing salon, start an independent business, or buy a franchise. The decision is as much about business know-how and confidence, lifestyle choices and local opportunities, as it is about cutting hair. Similarly, a nutritional therapist may decide to work from home or from an established clinic – both options have their benefits and drawbacks.

It may be easier for you to obtain funding, as the business will have a proven track record.

Buying an existing business
The advantage of buying a going concern is that much of the groundwork will have been done for you. Whether it’s a tanning salon, hairdresser, beauty clinic or other business, you should have instant access to premises and/or equipment, established customers and a regular income. You may also benefit from trained staff experienced in a range of holistic and/or personal grooming or wellbeing techniques.

However, you may need substantial resources to buy the business, make any necessary improvements and provide cashflow and working capital until you start generating profits. You will need to pay for professional services from accountants, surveyors, solicitors, etc. You may need to honour existing contracts with suppliers for haircare and beauty products. And you will have to consider the impact of your new ownership on any existing employees.

'It worked for me'
Melody Rayfield, owner of The Body Loft, personal training and fitness centre, Shoreham-by-Sea
"I took over The Body Loft in October 2009. I’m a trained massage therapist and had previously set up a small gym, so I had the necessary training and experience to start a business from scratch. However, I liked the fact that the premises were already established and stocked with equipment. I wasn’t able to take out a loan to fund the start-up; instead, I arranged to pay the past owner a monthly fee for a set period, to cover the cost of the fitness machines and other fixtures. The business wasn’t profitable when I took it over, but I drew up a business plan based on the increased number of clients I felt I could bring in. Happily, I have managed to do that. After paying my fee, rent, and expenses such as utilities, I’m ahead of my forecast. I also profit from renting out rooms to other therapists."

Starting your own business
Going it alone doesn’t necessarily mean investing thousands in premises, staff and equipment. In fact, it can be a stepping-stone between being an employee and taking on a major business commitment – you might offer a mobile massage service, run a homeopathic clinic from home, or see clients from a hired room in a holistic therapy centre.

'It worked for me'
Lisa Haste, mobile hairdresser, Bury St Edmunds
"I’d worked in hair salons for 15 years, going from trainee to manager level, but when I was pregnant I decided that offering a mobile hairdressing service would fit more flexibly around family life. I’ve found it to be a relatively easy and risk-free way of starting my own business. I don’t have to pay for the cost of premises; I can claim expenses such as my car and clothes against tax; and word-of-mouth recommendation means I have plenty of clients. Working part-time benefits me, as my customers know they have to book me four to six weeks ahead, meaning I can forecast my earnings. I see around 30 clients per week, and although I charge half of what I did in the salon, my low overheads mean I’m better off as a sole trader."

Buying a franchise
Franchising is an increasing trend in the B&W sector, with weight-loss programmes and hairdressing in particular showing a rise in the number of businesses that run along these lines. A franchise offers efficiency in buying, access to the latest products and equipment, and ongoing training via organised programmes or a company’s own academy. According to Habia, while an independent hair salon can generate as much profit as a franchise, the latter can have an advantage when it comes to attracting clients and charging higher prices for the services offered. However, it can be a more expensive way to enter into the sector – the purchase price for a hair salon franchise, for example, starts at around £20,000. Diet and weight-loss franchises can cost from around £12,000 plus VAT.

'It worked for me'
"I became a LighterLife franchisee in January 2009. I wanted to run my own business and as a disillusioned dieter who had lost weight successfully with LighterLife, I had faith in the brand. Taking on a franchise has meant benefiting from advice and training, and I’ve found a tax adviser and an accountant that have helped me with the financial side of the business. I’ve invested £7,000 of my savings and borrowed £20,000, but I’m already ahead of my projected earnings. It can be stressful running my own business, but it’s an energising stress, and as a franchisee I know I always have back-up."

Start-up costs vary widely across the B&W sector. If you are establishing a consultancy from home, for example, initial costs could be kept to £2,000 to £3,000, as you focus on marketing your business, paying for any essential licenses and setting up your office or therapy room.

Another relatively inexpensive option is to pay for the rental of a chair in a hair salon, the use of a room in a beauty or therapy centre, or to enter into an agreement with a health club to offer a service such as personal training or sports massage under its name. According to Ben Pratt, Product Development Manager at leading fitness trainers Premier Training International, a personal trainer might pay a fixed fee to a health club of between £300 and £500 per month. The average personal training fee is between £30 and £40 per hour-long session. Ben Pratt suggests an optimum number of clients of 25 per week, giving a monthly income from appointments of £3,000 to £4,000 per month.

Bigger investments include opening a hair salon, which costs around £10,000 to £20,000, according to Habia. Converting a building into a spa or beauty clinic may cost 10 times more, once the cost of planning, building work and the purchase of essential equipment is counted. Small beauty clinics average 125 clients per week, with treatments costing from around £8 to £80, or more for wedding or day spa packages. Calculating how much income you can expect from your estimated number of clients will help you decide how much cash you want to put into your business upfront.

Whichever level of investment you choose, your business plan will need to include the ongoing costs of running your business, the amount of profit you expect to make and the sources of your income. Although most B&W businesses are paid immediately for services, you will need to work out when bills are due and ensure you have enough cash in your bank account to meet them. For example, only 7% of a hair salon’s income comes from the sale of haircare products, and offering additional beauty services, such as a nail bar, may be a more productive way to generate additional earnings. See below and Funding Your Start-up for sources of finance.

Most businesses need to provide some money for start-up costs – it can be hard to attract other funding without it.

The funding available to start-ups in the B&W sector is generally that available to all new businesses. This should provide you with start-up costs as well as working capital to help you establish your business.

Personal investment
Sources include savings, inheritance, redundancy payments and equity from remortgaging your home. However, you will need to be aware that if the business fails, you are likely to lose this personal investment.

Overdrafts and loans
Your bank may be able to provide you with additional finance. In order to obtain either an overdraft or a loan, you will need to provide your bank with a good business plan, security (such as personal assets) and, if possible, a proven track record in business.

Equity investment
An option for larger start-ups, as it depends on attracting an individual or institution to invest money in your business in return for a stake in the company. If you want to cancel the arrangement, you will need to buy back your company stake from the investor and factor in an additional sum to provide a suitable level of return on the investment.

The Government’s Solutions for Business scheme can help if you have been refused funds from a bank or other investor.

For smaller start-ups, investment from a family member or friend may be an option, although this should always be made official with a contract, to avoid fallouts later.

Grants
Your Regional Development Agency (RDA) and Business Link can provide you with information about grants and support services available to you locally. You may also be able to secure a loan from Peer Group Lenders, such as the Ethnic Minority Enterprise Network.

Government support
This includes Small Loans for Business, Finance for Business, Grant for Business Investment and the Enterprise Finance Guarantee. These initiatives are in England only; other support is available in Scotland, Wales and Northern Ireland.

Most personal service businesses are cash-based – you give someone a massage, tattoo or life coaching and they pay you for that service. It means that one of the most significant causes of business failure – lack of cashflow – is less of an issue in this sector than in others. However, it makes customer satisfaction, your skills, and attracting and retaining clients a priority. These are the most common pitfalls you may encounter:

• Overstaffing Non-professional staff such as a receptionist or cleaner may be unnecessary costs when you first start out, as they don’t earn money for the business. As long as you can manage bookings and cleaning your premises, it may be better to save this money or invest it in a trained staff member whose clients will generate his/her wages.
• Poor pricing What you charge should relate to your own experience or that of any staff – customers generally expect to pay a higher fee to a more qualified stylist or facialist. Well-known franchises may also charge higher prices because their brand name is associated with quality.
• Lack of working capital Write down every cost involved in your start-up, from premises and equipment to the refreshments you will serve clients. It can be easy to underestimate the amount of cash required.

1. Regularly appraise the cost of contracts with your suppliers. Franchises and regional hair alliances of independent salons may benefit from group discounts.

2. Consider your wage expenses. It may be worthwhile renting out a chair in your hair salon rather than employing an extra stylist.

3. Utility bills will be some of your biggest expenses. Shop around to ensure you are getting the best deals.

4. Monitor your stock. Experience and accurate record keeping will tell you how much of each product to buy, whether it’s hair dyes or homeopathic remedies. If a line isn’t selling, change it to another brand so that you aren’t left with excess stock you can’t get rid of – many beauty products have an expiry date, which makes resale difficult.

5. Allocate sufficient start-up funds to decorating and fitting-out your establishment. B&W businesses thrive when they offer a relaxing, stylish environment for customers.

I formed a limited company, which cost about £250, and took over in April 2007.

Nutrition: 'Raising my professional profile with registration'
Angela Falaschi is a nutritionist and homeopath working from a health centre in London.
"I am a member of the British Association of Nutritional Therapy, the Homeopathic Medical Association and the Guild of Naturopathic Iridologists. This means that potential clients searching for a nutritionist or homeopath have access to my name and contact details via each organisation’s website, as well as my own and that of the clinic in which I work. Knowing that my work must meet the standards of a professional body reassures potential clients, whether they contact me through the organisation or simply read details of my membership on my own marketing literature."

Beautician: 'How I manage wage costs'
Suzette King is the owner of Face Facts beauty clinic in Shoreham-by-Sea, Sussex.
"When I opened Face Facts 23 years ago, I was operating on my own. When I couldn’t cope with both front-of-house duties and my treatments, I employed a trainee who could learn on the job, while helping out with bookings. This was a cost-effective way of taking on a staff member, and once she was fully qualified and generating her own client bookings, I was able to repeat the process with a new trainee. We now have three fully trained therapists at Face Facts, and a part-time receptionist who also looks after our orders and accounts. I pay a wage rather than offering commission on bookings. However, when I wanted to increase salaries last year but the economic situation didn’t allow it, I brought a new range of products into the clinic. Staff receive 10% commission on any sales, allowing them to increase their earnings with no additional expense to the business."

I’ve cut costs by reducing staff numbers, so that my margins remain the same.

Personal trainer: 'Working for an umbrella organisation'
Melissa Nicholls runs personal training company Freedom Fitness.
"I joined Fitness First as a self-employed personal trainer because I’d been working for myself for six months and felt isolated and was struggling to pick up clients. Working from the health club had vast benefits. I paid Fitness First a fee of £650 per month, which gave me access to its gym and equipment, membership lists and promotional events, as well as the friendship and support of other personal trainers. I charged clients £35 per hour and worked out that I needed to work 20 hours per week to earn the salary I required, which I easily achieved. The downside was the amount of time I spent at the club. Most personal training clients want to workout first thing in the morning, at lunchtime, or in the evening, so my actual hourly rate worked out quite low. I now run my own business, specialising in outdoor personal training, but my time at the health club gave me valuable experience and confidence when I was just starting out. And these are advantages that I’ve now taken into my new business."

Hairdresser: 'Keeping ahead of the competition'
Mark Coray is the owner of Coray & Co hair salon in Cardiff and Vice President of the National Hairdressing Federation.
"I’ve been self-employed since 1993 and part of my success is due to keeping my skills level high – I’m currently British Hairdressing Champion and International Hairdressing Champion. I’m also a colour specialist. It means I can market myself and my salon effectively, and clients can trust me to do a good job. Because of that, I can charge what I’m worth, rather than being led by my competitors’ prices. While it’s good to know what other salons demand for their services, you need to know what your overheads are, otherwise you simply won’t earn enough to keep your business afloat – as a member and now Vice President of the National Hairdressing Federation, I’ve learnt that hairdressers are notorious for undercharging their clients. The recent economic downturn has had a big impact on the hairdressing sector – salon turnover is down around 25% nationwide. For me, that’s meant cashflow has become more of a problem around the VAT quarter, when PAYE is due, and on payday. When I started out, I needed to have the clients before I could employ more staff; today, it’s just the same."

The B&W sector is seeing a rise in demand for ‘green’ and organic products and sustainable businesses. According to the latest figures from the Soil Association, the leading organic certification body in the UK, sales of certified organic health and beauty products have reached £27 million – a rise of 69% on 2007 figures. "The significant growth in sales of organic beauty products is indicative of a growing demand for green beauty brands," says Clio Turton of the Soil Association. "Especially as the narrowing of price differences between organic and non-organic products means you can price your services competitively against the rest of your sector." Legally, you do not have to be certified in order to make organic claims for your business or any products you use, but if you are seeking to make organic or sustainability your USP, certification will give your business credibility. Consumers are becoming increasingly aware that unless a product is certified by the Soil Association or another EU certification body, that product may not be truly organic.

MoneySense for Business is about helping you understand and manage your business finances. If you're thinking of starting out on your own, or already have a small business, MoneySense for Business provides helpful guides and information on managing the financial side of your business, plus useful links and tips to give you the guidance you need.

Links: Beauty & Wellbeing
British Association of Beauty Therapy and Cosmetology (BABTAC)
British Nutrition Foundation
Federation of Holistic Therapists (FHT)
Freelance Hair & Beauty Federation
Guild of Beauty Therapists
Hairdressing Council
Hairdressing & Beauty Suppliers Association (HBSA)
National Hairdressers’ Federation
Register of Exercise Professionals
The Sunbed Association
Premier Training International
LighterLife
The Soil Association
Melanie Nicholls
Mark Coray

Links: Business
Business Link 
Department for Business, Innovation & Skills
Office for National Statistics
SkillsActive

Sources
Business Link Business Categories Guide for Beautician Services, Hairdressing, Slimming Centre, Tanning Salons and Tattoo Parlours
Annual Survey of Hours and Earnings, Office for National Statistics
Working in Fitness Survey 2009, The Register of Exercise Professionals/SkillsActive
Business Link: Buy an Existing Business
Start-ups: Hairdressers
Start-ups: Beauty Salon/Spa
Start-ups: Hairdressers
Ben Pratt, Premier Training International, 01225 717252 ben.pratt@premierglobal.co.uk
Melody Rayfield, The Body Loft, 01273 461199, info@thebodyloft.co.uk