The beauty industry typically holds its own during a recession thanks to the “lipstick effect,” where people indulge in little luxuries even when they’re strapped for cash. But a wise salon owner hopes for the best and plans for the worst. Think of a plan to recession-proof your business as just another kind of insurance. You’ll hopefully never need to use it, but you’ll be very glad you have it should a crisis occur.
Trending • COVID-19
The Beauty Industry During Recession: 5 Survival Tips
Take a deep breath. You can survive in the beauty industry during a recession if you plan for it. You got this.
1. Make a plan for surviving tough economic times
This may sound obvious, but the first step to surviving in the beauty industry during a recession, or indeed any crisis, is to plan for it. Making important decisions during times of emotional turmoil rarely works out for the better. Take the time now, when things are ok, to consider how you’ll handle things if and when they go bad.
If you haven’t been paying strict attention to your salon’s finances, trusting your accountant to do it or leaving it until the end of the quarter, now is the time for an audit. Familiarize yourself with your total assets as well as any debt you may have. Calculate how much operating capital you have at this moment, and how long it can sustain your business in the event you lose customers due to an economic downturn. Design a plan with concrete steps to take as you hit specific clearly defined milestones, such as a percentage drop in monthly profit.
2. Cut down on expenses
You’ve worked really hard to build up your business, and you haven’t been throwing your money around foolishly. Nevertheless, there are places you can scale back to extend your financial runway during tough economic times. One easy area to trim is marketing. Reduce the amount you’re spending on ads, or cut it completely and focus on the relationships you’ve built already. Another quick fix is inventory you keep on hand to sell to clients. Let items sell out, rather than restocking when they get a little low. This is not the time to keep your assets tied up in bottles sitting idle on a shelf.
Reach out to your service providers for phone, Internet and janitorial services. Call your current vendors’ competitors and tell them you’re willing to switch providers in exchange for a discounted rate. The reps you speak with will usually have a variety of bargains they can offer; it’s up to you if you switch or simply use their offer as a bargaining chip to use with your current vendors. Where possible, consider the ROI of automating your administrative services.
Negotiate your rent with your landlord. If they’re not amenable to lowering your monthly rent amount (hey, it’s worth a shot, right?), ask if you can receive a discount for paying early. If you have enough capital on-hand to have that payment in a week before it’s due, you could save five or ten percent off of your rent. Over the course of a year or more, those savings adds up.
3. Consider a line of business credit
Start talking to lenders now about getting a line of credit or small business loan for your business. Guidelines for lending tighten up during a recession, so the worst thing you can do is leave this step until the last minute.
Both will give you access to cash when you need it most, but they have pros and cons. Credit will have a higher interest rate, but no monthly payment unless you’ve used the credit. It’s a great safety net. A loan will have a much lower interest rate, but you have to start repaying it right away, which makes it a less ideal contingency. Talk with your accountant about which option makes the most sense for your business, but remember this is for your business. Many salon owners make the unfortunate mistake of using their personal credit to keep the business afloat in rough times, only to lose everything.
4. Downsize the right way
Despite all of your best efforts, there may come a time when you have no choice but to downsize your business. That doesn’t immediately mean laying off staff, however. Downsizing can go in stages as you ride out the economic downturn. Remember, this is about survival. You’ll have plenty of time to grow your business when the recession is over.
As a first step, consider reducing hours. By reducing everyone’s hours a little bit, you can save as much as you would by letting someone go. The least painful way to do it shorten your operating hours at either the beginning or end of the day. The majority of salon appointments are booked in the middle of the day, so it’s likely your clients won’t even notice your new hours. Alternatively, pick the least busy day of your week and close the salon on that day.
If you’ve cut salon hours and things are still grim, it may be time to trim your own salary. It’s your salon, and you need to lead your team through this tough time. It doesn’t send a great message for them to be taking home less pay while you’re still enjoying the same paycheck. If your salon is going to come out of the recession strong and successful, you need a staff that knows you’re on their side. Do right by them, and they’ll do their best for you.
5. Be open with your staff
Now is not the time to be a stoic leader who only shows a sunny face to their team. Be transparent about the financial situation so that your staff understands their role is keeping the business afloat. You don’t have to throw open the books for their review, but giving them the picture in general terms can do a lot to keep them productive and positive. They may even have ideas of their own about how to adapt the salon experience so your clients don’t notice any cutbacks you’ve had to make. Your salon’s survival depends on everyone giving their all, so be clear about the stakes. Rally your troops! Times will be tight for a while, but you’ll come out the other side - together.
Keeping your salon going during an economic crisis will be challenging, but not impossible. Start with a clear plan, define realistic goals, and expect to be in survival mode for two or more years. (If it’s less than that, great! But better to assume it won’t be.) By taking smart, decisive steps now, you’ll dramatically improve your situation later.
For more tips on how to outfit your salon, including the latest COVID-19 guidance, download our NEW Salon Equipment Guide!