Crafting a Business Expansion Plan for Your Beauty Biz

If you’re already running a successful beauty salon or spa, expanding your business might seem straightforward. After all, you’re already running one operation; why not another? In reality, each new location has its own unique quirks and obstacles, to say nothing of financial challenges or management woes. If you want to grow sustainably, your salon needs a business expansion plan.

Every plan looks slightly different depending on your industry vertical and location, but they all account for similar traits. This article will highlight everything you must consider to give your new operation the best possible chance of success.

Every beauty business expansion plan begins with comprehensive reporting. After all, you cannot grow until you understand the strengths and weaknesses of your current location. With the right reporting techniques, you can measure client demand, operational efficiency, and — most importantly — whether growth is feasible or even necessary. (For example, if you can maximize efficiency by increasing the average client spend, do that before tackling a risky expansion!)

Your expansion plan must account for available funding, annual revenue, regular clients, and whether your beauty team can keep things running in your absence. Effective reporting techniques can reveal insights on each of these points:

Sales

Salon reports tell you how much revenue you’re earning, but the best salon reports give a top-down view of overall finances and sales for each category. Analyzing these trends can tell you which services are popular, when seasonal lulls may occur, or which product sales drive the highest returns. Make sure to account for the following when creating your expansion plan:

• Wholesale product costs

• Gross profit

• Net profit

• Promotional lift of marketing campaigns or discounts

• Average dollar spend per visit. 

Customer data

Outside of sales data, reports also present new insights into your clients’ habits and service preferences. In terms of growth, it’s imperative to know your retention rate — the percentage of returning clients. Any salon looking to expand should have at least two-thirds of its business be repeat appointments before opening a new location.

Team reports

Finally, reports can reveal trends relating to your most valuable assets — your on-site staff. Calculating the average revenue per chair presents a big picture view of productivity and efficiency, although some contextual data is required. For example, some stylists may have few appointments with upsells, but they frequently book children who won’t need them. Alternatively, other stylists will have few bookings but retain 95% of their clients.

Custom reporting tools can also showcase hidden training gaps among the team or highlight opportunities for successful stylists to share their techniques. In addition, they can summarize metrics like stylist retention — an important detail for managers and owners who must know whether their business can grow sustainably.

For more details on growth planning, take a look at “Salon Reports: How to Extract Meaningful Insights From Your Salon Management System.”

As you might imagine, one of the biggest obstacles to a business expansion is lacking the necessary capital. Starting a new salon costs approximately $62,000, and that’s if you rent your location — building a new site outright is far more expensive. Even if you have saved up enough funds, there’s still the matter of maintaining your existing locations.

Thankfully, there are many capital and financing options available to salon owners:

Personal savings

Personal savings and existing revenue can be an excellent financing source if you’re turning enough of a profit to do so. Even just having a portion of reallocated funding reduces the risk for lenders and investors, making it easier to obtain loans from outside sources.

Traditional loans and credit lines

Most businesses use traditional bank loans for financing, but they are not without risks. Banks tend to have highly-regimented repayment guidelines and significant consequences for missed payments. As an alternative, business credit lines are more flexible and helpful if you need to draw on capital as required instead of obtaining a lump sum.

Small business loans

If your salon falls within the legal definition of a small business, you may be eligible for specialized financing options. In these cases, the Small Business Association will work on your behalf to secure low-interest loans from partner banks.

Borrowing from friends or family

Some beauty salons are family businesses, opening the door to private loans with flexible interest from friends or family. Unfortunately, these options can place immense strain on personal relationships. If you remain professional, follow a written contract, and set clear repayment expectations, it can prove successful.

Private equity

If you’re willing to negotiate for a portion of your ownership, private equity can be an excellent financing solution. Capital firms are always looking for high-return initiatives, and successful businesses looking to expand can be relatively low-risk to their bottom lines. Alternatively, you might find a solo investor who can partner with you for business shares.

For suggestions on raising capital, check out “Salon Financing: How to Raise Capital for Your Beauty Business.”

Before opening a new salon location, you must decide whether to operate it directly as a chain or license your brand to a franchise. This distinction will be negligible at the client level but vastly significant in terms of store management, revenue generation, and other factors. There is no right or wrong choice, but chains and franchises have their own benefits and drawbacks to consider while drafting your business expansion plan.

Franchise

Franchises are independently-owned stores that operate under a licensed brand name. A new franchise begins when the original business owner grants the right to recreate brand elements through a franchise agreement. These agreements establish basic operating procedures, marketing practices, prices, and retail product line-ups in a salon environment, but otherwise, franchise owners have full ownership of the new location.

Franchise expansions are low-risk opportunities for beauty businesses. Brand owners do not have to manage stores directly — leaving all startup costs to the franchisee — but they also do not earn additional revenue beyond royalties. If the new location is an overwhelming success, the franchisee benefits.

Chain

Chains are groups of storefronts that share identical names, branding, products, operating policies — and ownership. A chain grows when a parent company expands into new locations or acquires and converts another business. Each branch operates under its own management and staff, while owners handle the big picture from a central location or office.

Chains require significant investments of capital and other resources, but brand owners reap the benefits when they succeed. Each new location generates revenue for the parent company, which owners can then reinvest on improvements or new branches.

For more details on salon franchises and chains, read our detailed guide, “Franchises vs. Chains: Which is Right for Your Salon Business?”

Business expansions begin by exploring growth opportunities, but owners also need to consider the challenge of juggling multiple locations. The last thing you want is to spread resources too thinly across each chain, let alone run yourself ragged trying to do so.

Small business owners often tackle responsibilities by themselves and don’t feel comfortable handing control over to another party. At the same time, juggling multiple businesses is virtually impossible without leaders who will keep things running smoothly. Whether you hire a new manager or promote someone from your existing team, seek out someone dependable who you can trust to get the job done.

Another helpful consideration is building shared infrastructure between each branch. By sharing the same salon management platform across each location, you can centralize all operations through a single system, such as staff schedules, client bookings, and payment collection. Streamlining these processes also makes it far easier to train new staff across locations and helps you maintain a consistently high quality of service.

To learn more about running a full-fledged salon enterprise, head over to “How to Manage Multiple Businesses: 4 Critical Steps for Multi-Location Salons.”

Expanding a beauty business is perhaps the biggest challenge for any salon owner, but it’s also the most satisfying to achieve next to opening your first location. By following a business expansion plan that accounts for current salon performance, available capital, and multi-location management strategies, your business won’t just grow — it will thrive.