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If you want to open a salon, you’ve likely realized that you’ll need some funds. However, many would-be business owners don’t have the funds they need to get a salon business off the ground. The good news is there are many ways to get the ball rolling, even if you don’t have thousands on hand to fund your fledgling business. Let’s explore how to open a salon with no money.
- It’s possible to open a salon without any upfront savings.
- Grants and loans are two ways to start your salon business.
Step One: Conduct Research Into the Salon Industry
If you want to dive into the salon industry, the first step is to conduct industry research. The goal of conducting research is to confirm your business idea has a bright economic outlook.
- Beauty salon industry: According to a recent report, the global spas and beauty salon industry has an estimated value of $138.90 billion per year. It’s expected to reach a size of $191.60 billion by 2027.
- Local market: While the salon industry might be growing on the whole, you’ll need to drill into the numbers for your area. Determine whether or not the population in your area can support a salon.
Step Two: Learn About Your Local Competitors
Every business comes with competition. Before opening a salon, it pays to scope out the competition.
- Check out the competition: Look for salons in your area that offer the services you plan to provide.
- Find ways to improve the customer experience: You want customers to love coming to your salon. As you look at the competition, find ways to offer a better experience.
Step Three: Calculate How Much It Costs to Open a Salon
Although you might not have money in your checking account right now, you’ll need to come up with a funding source for your business. Before you can ask for funds, add up how much it should cost to open a salon.
- Startup costs: You’ll need to find a suitable space, obtain the equipment, advertise your services, buy the appropriate insurance, and more.
- Ongoing costs: Once you open the doors, other expenses start adding up. A few include paying your staff members, rent on the location, and basic utilities.
- Overestimate: Many business owners find that things are more expensive than they expected. To avoid having a shortfall in your budget, overestimate the costs. A little padding in the budget can go a long way.
Step Four: Evaluate Funding Options for Your Salon
You don’t necessarily need to have cash on-hand to open a salon. However, you will need to come up with a source of funding. Below are some of the top options:
- How: Consider any personal savings you have on hand. Of course, it’s a good idea to keep a personal emergency fund. But if you have savings stored in a CD, home equity, or valuable items to sell, you might be able to fund your own salon startup.
- Advantages: You don’t have to take out a loan to get started.
- Disadvantages: Draining your savings leaves your personal finances more vulnerable to money issues while starting a new business.
Borrowing From Family and Friends
- How: If you can ask friends and family, they might help you fund your salon startup.
- Advantages: The loan terms might be more flexible than a traditional lender. Plus, you feel supported by your circle.
- Disadvantages: Borrowing money can put a strain on relationships. Also, your lender might expect a share of the profits.
- How: If you have a great story and some marketing skills, crowdfunding might be a solution. Consider using a platform like Kickstarter to connect with an audience.
- Advantages: You get the funds you need while building out a group of future customers.
- Disadvantages: Many crowdfunding campaigns require you to provide a product or service to your supporters.
- How: Small business owners can apply for grants to get started. Grants.gov is a helpful place to search for grant opportunities.
- Advantages: You don’t have to repay grant funds.
- Disadvantages: Grants often involve a lengthy application process and a competitive pool of applicants.
- How: Personal loans usually don’t have use restrictions, which means you can use the funds to start a salon.
- Advantages: If you have good credit, personal loans often come with reasonable rates.
- Disadvantages: A personal loan is tied to your personal credit. If you cannot keep up with the loan payments, it will negatively impact your credit score.
- How: Credit cards in your personal name offer one way to open a salon business.
- Advantages: You’ll get access to the funds you need to get your salon doors open.
- Disadvantages: High interest rates and fees can make credit card debit spiral out of control quickly.
Small Business Administration (SBA) Loans
- How: The SBA works with lenders to help small business owners access the funds they need. You can borrow between $500 and $5.5 million to fund your business.
- Advantages: SBA loans tend to come with reasonable interest rates.
- Disadvantages: Like other loan types, you must repay the funds.
Beauty Salon Loans from Online Lenders
- How: Many online lenders offer loans to start your beauty salon. Find some of the top here.
- Advantages: Online lenders often offer short applications and fast funding times.
- Disadvantages: Depending on the lender, you may need to sign a personal guarantee. Essentially, a personal guarantee puts your personal assets on the line as collateral.
- How: An equipment loan is designed to help you purchase a specific tool for your beauty salon. For example, you might use an equipment loan to purchase chair mats, nail stations, and more.
- Advantages: Leverage financing to get the equipment you need. Since the equipment acts as collateral on the loan, you can often find reasonable rates.
- Disadvantages: If you don’t keep up with the payments, the lender might seize the equipment.
- How: Microloans range from $500 to $50,000. But the average microloan amount of $13,000.
- Advantages: You don’t have to borrow more than you need to get started. And a smaller loan amount comes with lower payments.
- Disadvantages: The relatively low cap on microloans might mean you don’t receive enough funds to start your new salon.
Business Line of Credit
- How: A business line of credit comes with funds that you can access up to a certain amount. You can tap into these funds on an as-needed basis.
- Advantages: You eliminate the risk of overborrowing because you can borrow on an as-needed basis.
- Disadvantages: With a large line of credit, it’s tempting to spend more than you should. If you have a budget in place, it’s easier to avoid the temptation.
Merchant Cash Advance
- How: A merchant cash advance (MCA) isn’t a regular loan because the company is purchasing a percentage of your future sales.
- Advantages: You can pay back the loan as your customers pay for their services.
- Disadvantages: The repayment period can cut into your cash flow. If you are running on tight margins, an MCA makes it difficult to get ahead.
If you are opening a salon, you have a skill that others need. Bartering capitalizes on this skill without any money changing hands.
- How: Whether you cut hair, do nails, or provide another service, chances are plenty of people would love to get treatments for free. You might offer to trade skills. For example, you might offer someone with marketing skills a year of free haircuts in exchange for a marketing campaign.
- Advantages: Bartering helps you stretch out your budget without paying for things you need.
- Disadvantages: Not everyone is open to a bartering arrangement. But it never hurts to ask.
Bootstrapping involves putting in some seed money of your own and using cash flow to grow the business over time.
- How: You can leverage your cash flow to grow your business slowly.
- Advantages: You don’t have to deal with a monthly loan payment.
- Disadvantages: Bootstrapping is a challenge for many. Be prepared to grow slowly.
Step Five: Create a Business Plan for Your Salon
A business plan is a key element of a successful company.
- What is it? A business plan acts as a roadmap to success.
- What it contains: You can use this document to plan out the steps you must take to grow your business.
- Why you need it: Without a business plan, it’s easy to get off track. Although you can adjust along the way, your business plan should guide you toward the salon of your dreams.
“Build something 100 people love, not something 1 million people like.” - Brian Chesky, co-founder of Airbnb
Step Six: Register Your Salon Business and Obtain Licenses
Like all business owners, salon owners should be prepared for a bit of paperwork.
- Form a business entity: In some cases, you’ll decide to form a business entity like an LLC. But in some situations, you can choose to be a sole proprietor.
- Get an EIN: An Employer Identification Number (EIN) is issued by the IRS. You’ll need it if you want to hire anyone and file business taxes.
- Get necessary permits and licenses: In some states and cities, you’ll need specific permits and licenses to operate a salon. Reach out to your local Chamber of Commerce if you aren’t sure what documents you need.
Step Seven: Secure the Money Needed to Open Your Salon
- Weigh your options: The method you use to fund your business is a big decision. Take the time you need to weigh out all of your choices.
- Move forward: Once you’ve determined the best funding method for your situation, it’s time to secure it. If applying for a loan, this might involve gathering financial information, drafting a business plan, or improving your credit.
Step Eight: Market Your Salon Using Low-Cost Methods
You’ll need to get customers coming in the door with the help of marketing. Luckily, there are some affordable options:
- Social media: A social media following can help you find the right customers for your business.
- Offer discounts for new customers: As you get started, consider offering discounts. Once a customer loves your work, they’ll likely return.
“Good marketing makes the business look smart; great marketing makes the customer feel smart.” - Joe Chernov, CMO, Pendo
Step Nine: Open for Business
After months of hard work, it’s time to open your salon. Consider hosting a grand opening event at your business location to entice new customers to check out your salon.
How to Find Investors for Your No-Money Salon Startup?
If you don’t want to use traditional loans or savings, an investor might be willing to provide the funds you need. The key is finding the right investor. Give these strategies a try:
- Identify Potential Investors
- Create a Strong Business Plan
- Leverage Online Platforms
- Seek Out Business Incubators and Accelerators
Additional Tips for Opening a Salon with No Money
Opening a salon with no money isn’t a walk in the park. But the good news is that it’s entirely possible. Use the tips below to streamline your success.
Utilize Free Business Resources
- Chamber of Commerce: Your local Chamber of Commerce might offer a helping hand for new businesses in the area.
- SBA: Small Business Administration offices across the country offer programs for budding entrepreneurs.
Seek Guidance from a Mentor
- Find the right mentor: In most cases, the right mentor has successfully achieved your goals. Look for mentors to offer advice on your salon.
- Be coachable: If you are asking advice from someone who has built a successful business, make sure to take their advice seriously.
Leverage Your Personal Network
- Who do you know? Use word of mouth to let people know you are open for business. For most, your personal network will come in handy.
Make Use of Social Media
- Build a social media presence: A social media presence can help you reach potential customers.
- Put your best foot forward: Make your social media accounts a pleasant thing for potential customers to consume.
Find an Affordable Space
- Low overhead: As you get off the ground, low overhead is critical. If possible, keep your space as affordable as possible. Otherwise, you could be stuck in an expensive lease.
Start Out Small
- Small is mighty: When you start small, you have the opportunity to make adjustments on the fly.
- Lower costs: A smaller space is easier to maintain.
Focus on Essential Services
- Make your customer feel special: Do what you do with a passion that shines through.
- Use customer feedback: When a customer has a comment, use that information to make the experience better for the next customer.
A salon business could be your path to a successful career. It’s a challenge to open a salon without savings. But it is possible to find investors and lenders to get the funding you need. Be flexible as you make progress toward your goal of salon ownership.