Financing a beauty salon and spa business: What are your options?

Opening a salon is a dream that many hairdressers and beauticians have as they progress through college learning how to cut, style, wax and pamper. Making this dream come true however can be as daunting as it is exciting.

Being your own boss and enjoying total creative freedom may be your driving force for opening a hairdressing or beauty salon but where do you start?

The first challenge is often raising adequate funds to make your dream a reality in the first place. However, there are many options available to you which you may not have thought of yet.

When you're up and running, there will undoubtedly be many other hurdles that you'll need to overcome as a business owner. But with the right attitude, hard work and proper planning you'll have a great chance of being a cut above the other salons in your area.

So, let’s answer some of the questions that you may have about starting and maintaining a successful hair and beauty salon business.

a collection of scissors and combs

How do I finance my beauty salon and spa business?

Opening a salon is not cheap. You want your customers to enjoy the pampering experience which means that fitting your salon out with quality equipment, furniture and décor can all add up.

The cost ultimately depends on a number of factors including location, size of the business and the number of staff you take on. Whatever decisions you make about your salon, you’re likely to need to borrow money to get your business up and running.

Piggy banks

Some 414,000 businesses were started during 2017 in the UK alone, according to the Office for National Statistics. This is an increase of 31,000 on the previous year and a massive 61.7% rise from a decade before.

This means that you’re competing against many other business start-ups who are also seeking to fund their new venture. So, how do you better your chances of getting the money you need?

An excellent place to start is by creating a business plan. Not only will this vital document help you to understand who your target clients are, what products and services you want to offer, and how your salon will be run; it can also help to secure funding.

When approaching a lender, a well-written business plan can demonstrate that you’re aware of your costs and projected profits and what challenges and opportunities you’ll face as a start-up.

Once your business plan is in place, it’s time to get the funding you need. Here are five ways to secure finance to get your new business started:

Bank loan
The traditional way of getting the money you need to start your business is to go to the bank. Bank loans can be a great way to raise finance, but not everyone can get one.

Banks want reassurance that you can repay the money you borrow. To prove this, you’ll need a strong credit history or hold substantial assets such as property. If you have neither of these things, the bank may not be the best place to start, but there are still other options available to you.

Start-Up Loans
This UK government-backed scheme has the aim to boost the economy by offering loans to budding entrepreneurs to get their businesses up and running.

The average loan is £7,200, but you can apply for up to £25,000 with up to five years to pay it back at an annual interest rate of 6%.

What’s more, you’ll get free business support from Start-Up Loans too. Not only will Start-Up Loans help you to develop your business plan and figure out your financial projections, but you'll also receive 12 months of free mentoring when your loan application is accepted.

Angel investment
The UK Business Angels Association (UKBAA) represents over 18,000 investors, one of which could be interested in supporting your business.

An angel is generally a wealthy and successful entrepreneur who chooses to invest some of their personal disposable finance in return for a share of your business. Your angel will share their business advice and experience with you throughout your journey to becoming the boss.

Each angel will have different criteria to be met by the start-up businesses they choose to invest in, but all expect to see a return on their investment within three to eight years. Therefore it’s in their best interests to help to make your salon as successful as possible.

Your loved ones
The people that want your business venture to be a success more than anyone else are your family and friends. They can also be a valuable source of finance too.

Remember that even though you’re lending money from a loved one, you should treat them as you would any other business lender. To formalise the agreement seek legal advice to have a contract drawn up. This will ensure that any issues that may arise at a later date can be resolved quickly and easily.

Now you have your funding, you’re well on your way to opening your hairdressing or beauty salon. But the hard work has only just started.

Are there any requirements for opening a salon in the UK?

If you’re considering opening a hairdressing salon in England or Wales, you must check whether you need to register your business with your local authority. The council may charge you a fee to inspect your premises to make sure they comply with health and safety rules.

Once you’ve passed the inspection, you’ll receive a certificate of registration which needs to be displayed where clients can see it.

Beauty products

Even if you don’t need to register officially, you’ll still need to obey local byelaws which include:

  • Keeping your premises clean, well-lit and adequately ventilated
  • Taking measures to stop infection or contamination
  • Making sure that any staff are appropriately trained and can use the equipment effectively
  • Getting public liability insurance

If you’re looking to start a beauty salon (or will be offering beauty services alongside hairdressing), then a licence may be required to perform certain treatments. These include:

  • Aromatherapy
  • Massage
  • Reflexology
  • Sunbeds

Before you’re granted a licence, your premises will be checked to ensure that they’re suitable and you’ll need to provide proof of your relevant qualifications.

If you’re not sure whether you need to register your salon or gain a license for the services you’re offering, get in touch with your local authority who will be able to help.

How do I choose the right location for my business?

Where you choose to open your hairdressing or beauty salon will have a considerable impact on the success of your business. It doesn't matter how qualified or skilled you are as a stylist or beautician, if your salon is unappealing then it will be difficult to build up your all-important client base.

A globe

With all the expense of starting a new business, it can be tempting to choose premises with lower rent to save money. However, this short sited view could spell the end of your business before it’s even started.

A salon with limited space in a difficult to get to location is not worth the savings you’ll make from cheaper rent.

Look for a property that has easy access for your clients. A salon on a busy high street can benefit from good footfall figures. Also, consider car parking and transport links. These are factors that will not only attract clients but quality employees too.

Of course, being a qualified hairdresser or beautician doesn’t mean that you have to be tied to a fixed location. Being a mobile hairdresser or beautician means that you have more flexibility and lower overheads with no rent or employees to pay.

You must choose the option that's right for you. Having a bricks and mortar salon allows you to grow your business by taking on staff to serve more clients. On the flip side, being mobile puts you in control of your work/life balance giving you the chance to build your business alongside other commitments.

Whichever path you choose, you’ll need to make sure that you’re protected with the right insurance based on the risks that you and your business face.

What insurance do I need?

Running your own business can be pretty stressful, but as a hairdresser or beautician, it’s your job to put any concerns aside and pamper your clients. To give you peace of mind that the business you’ve worked so hard to build is covered if anything goes wrong, you need to have the right insurance in place. This way both you and your clients can relax.

An Open sign

The type of business insurance that you’ll need will differ depending on whether you run a salon from a fixed location or whether you offer your services on a mobile basis.

If you own a hairdressing or beauty salon

Cover is needed to protect you, your clients and your business should the worst should happen. Cover will vary depending on your individual needs but may include the following covers:

Buildings insurance
If something were to happen to your salon, your ability to serve your clients would be impacted resulting in loss of income. To get your business back up and running as soon as possible, buildings insurance will cover the cost of repairing property damage such as broken windows or the result of a flood in the premises.

Contents insurance
With all the specialist equipment and products needed to run your salon, it would be devastating if any of these items were damaged, lost or stolen. Contents insurance covers the cost of replacing the essential tools of your trade so that you can keep your business up and running.

Public liability insurance
As a salon owner, you’re responsible for the safety of every client or visitor while they’re on your premises. In a busy salon, there are many hazards that clients are exposed to, including tripping over a hairdryer cable, slipping on wet flooring or being injured while receiving a treatment.

If a client sues you for damages, public liability insurance can cover any costly compensation payouts. The expense of legal fees will also be included which you would otherwise need to fund out of your own pocket to defend your case; whether you’re in the wrong or not.

Employers’ liability insurance
Remember, if you employ staff in your hairdressing or beauty salon, then you’re legally required to have employers’ liability. This covers you in case any members of staff claim to become ill or injured as a result of working for you.

There are some exceptions to when employers’ liability is needed but generally all employees, including any casual or temporary workers, need to be covered. Failure to do so could result in hefty fines.

If you’d like to speak to a specialist insurance advisor to make sure that you get the right cover in place, then call 0345 241 3410 or fill out a callback form and someone will get back to you. Lines are open Monday to Friday, 9 am to 5 pm.

We work with Arthur J. Gallagher Insurance Brokers Limited, one of the UK’s largest insurance brokers, to offer this service.

To make sure that you’re only paying for the cover you need you’ll receive a range of quotes from a panel of insurers so that you can choose the one that suits you most.

If you own a mobile hairdressing or beauty business

You don’t need to worry about insuring any business premises, but it's still essential that you have insurance in place to protect your you and your clients.

If you’re looking for flexible public liability insurance to protect your business, then you can get a quick and easy online quote right now.

We work with Arthur J. Gallagher Insurance Brokers Limited, who will search a panel of insurers to get you a quote.

You’ll be able to tailor your cover to suit your needs by insuring your hairdressing or beauty equipment and adding employers’ liability if needed. You’ll also get to choose from a range of quotes from a panel of insurers.

Getting insurance is crucial, but it doesn't have to be complicated. Within minutes you can get on with running your business knowing that if the unimaginable happened; you’re covered.