Industry • Best Practice
Your Unconventional Beauty Business Needs a Conventional Fundraising Strategy
Apr.14,2021By Boulevard Staff
Here’s what you need to know before looking for a financial partner.
Securing funding is never easy, but it becomes even more challenging when your business is outside the norm. Drybar is a huge success now, but when founder Alli Webb brought the idea of a blowout-only salon to venture capitalists, they “laughed in her face.” Unconventional businesses are harder to get off the ground, but their uniqueness can set them apart in a crowded marketplace.
The safest route to funding is your own bank account, but saving enough to start a business isn’t an option everyone can pursue. Here’s what you need to know before looking for a lender to help you get your unconventional beauty business off the ground.
Persuade investors that your market is viable
Others may not immediately understand the opportunity your niche provides, so be ready to answer what problem your business solves, and have numbers to back up your arguments. You may have to establish that the size of the need you’re filling is enough for investors to get a decent return on their investment. If you’re opening an exclusive salon for people with red hair, for example, know what percentage of the population are redheads and the unique hair care concerns you’re prepared to address for them that other salons can’t. Investors and lenders want proof — or at least a very good reason to believe — that your business will be successful. They will need your help understanding the service you plan to provide. Remember, they’re not doing this out of the goodness of their hearts; they want to turn a profit.
Craft a comprehensive business plan
Understanding the service you provide is only half the equation; investors also want to know exactly what you plan to do with the money. Before you approach any lender, create a plan that lays out how you will use the money, justifying every expenditure. Your plan should account for everything from marketing to chair rental to the lease for your location and your own salary. The more granular your plan, the more potential investors will trust that their money will be well spent.
Embrace proven fundraising strategies — and be a little selfish
When you’re able to explain your niche market and your plan to build your business, it’s time to secure your funding. The U.S. Small Business Administration should be your first stop. They have a deep understanding of the many kinds of financial support that a small business needs and offer loans to fit. SBA “microloans” inject $50,000 or less into your business to give it a jumpstart, while 7(a) loans can fund your entire enterprise. The small business loans your bank offers are likely through the SBA. The SBA also offers free resources and counseling to help you form a business plan and avoid common financial pitfalls. For more fundraising tips and tactics, check out our guide to salon financing.
If a traditional loan isn’t in the cards, seek out investors who already have an interest or connection to your audience. Investors tend to stick with what they know works, and they often use the experience of backing one business to gauge the risk of supporting another. Take the time to research a venture capitalist’s portfolio to see if you discern any commonalities, like customer demographics or the entrepreneurs’ backgrounds. Crunchbase is a great place to start your search for investors who’re interested in businesses like yours.
Wherever your search for funding leads you, be patient and selfish. Predatory lenders know you’re eager to get going and will use that to their advantage when crafting an offer. Remember: You’re doing this to bring your vision to life. You’re not obligated to agree to anything that doesn’t feel right.
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