Find the "Perfect" Location--Get help from a Realtor

You need to find the "perfect" Location

There are a number of questions you must have answers to before you finalize your location.

Start by working with a reputable COMMERCIAL real estate agent. Be certain that the agent does not just sell houses.

Most of the questions in this blog were answered by:

Bob Sypolt

Northwood Realty 201Associates

1179 Rostraver Road

Belle Vernon PA 15012

www.northwood.com

For purposes of this blog, we are assuming that the salon owner is going to lease space as opposed to buying a building.

Where can you secure basic information about the community that you plan to open in:

Population

Demographics

Income Levels

Schools

Visit the websites of the towns or city

Visit the website of the local Chamber of Commerce or other business associations

Visit the website of the mall or strip mall that interests you

As much as technology enables us to get information online, I would still suggest that you get out of your car and walk. Walk up and down the streets of the town. Walk the strip mall(s) and the actual mall that interests you. Stop in the stores and introduce yourself. Visit the local city building, police station and mall manager's office.

Review the parking situation.

Is enough parking available for your customers?

Is the parking area properly paved?

Is the parking area properly lit at night? Is it safe? Do the local police protrol?

What is the cost of parking to you or your customers?

If there is a charge to your customers, is it in line with what your competitor's clients have to pay?

Your Lease:

Determine your monthly rent:

Is there an up charge for:

Property taxes?

Property insurance?

Maintenance?

Common fees?

If so, can these charges be changed without notice or negotiation?

Length of lease:

1 year--too short unless the salon owner will have to do nothing to improve building.

3 years--very good especially if it is renewable. Short but allows the average business time to succeed.

5 years--even better than 3

10 years--very long--probably only to considered with a very experienced salon owner. This probably will not happen.

What does the lease include? Most of these items are negotiable.

Flooring? Most salons do not want or cannot have carpeting in their work areas.

Wall coverings? Painting or Wall Paper

New Electric? Must consider the electric requirements of each work station. This is very important if salon has tanning beds.

Plumbing? Location of any existing plumbing should be considered when laying out the salon. If possible, shampoo areas and other sinks should be located so as not to move plumbing.

Water and sewage? Quite often these utilities are included in the rent. Salons do use more water than an average business.

It is important that the above items be settled in writing in the lease prior to signing. Take nothing for granted!

Restrooms?

If it is a free standing building, it must include a restroom.

If it is part of a multi use building, are public restrooms available for your clients?

Determine if the landlord will allow for leasehold improvements?

Again, in writing in the lease.

If in a mall or strip mall, what mall rules normally apply?

Opening time

Closing time

Holiday hours

Use of space outside storefront

Music and/or noise

# of people

Signage

Take the time and spend the money to have your lawyer review the lease.

It will be cheap and quick when a problem occurs and you are prepared.

There are 2 additional experts you need on your team.

There are 2 additional experts you need on your team!

A Lawyer & a Real Restate Broker

How to choose a lawyer?

The following factors and questions should be considered when choosing a lawyer.

• Do they know and/or get along with your accountant? In my opinion your account is your most important team member. Therefore, the other team members must be compatible with him or her.
• What type of law do they practice? You will want a lawyer that specializes in business, tax and real estate law. (In small towns, it is more likely to find lawyers who are generalists)
• Are their fees afordable? Yes, lawyer fees are negotiable. Do not sign any long term payment arrangements.
• Do they return calls and get back to you quickly? Ask around the business community. Ask what their policy is.
• What is your "gut" reaction?

To start you will need a lawyer to do the following:

Set up corporation and/or partnership papers.

File for a fictious name license

Review your lease.

*Special note--There are a lot of these you can do yourself.

Lawyers can only charge for their time and expertise. You do not have their expertise. However, you can do the simple tasks that require time.

• You can file for your cosmetology/nail/barber license.
• Open your own bank accounts.
• File for local permits.
• Collect data for the things the lawyer will do.
• Do special mailings--certified. etc.

Be certain to request and keep copies of everything that your lawyer does for you.

Trade Journals--Keep in Touch with the Industry

It is important to keep in touch with the industry.

This is so if you have owned a salon for years or are just opening one.

Following the Trade Journals is one way to do it.

Modern Salon and American Salon are two of the biggest and oldest in the industry.

I stopped my discussion of the experts needed to open a salon because there are two very interesting and helpful articles in these magazines:

• American Salon's November 2nd edition article by Rodney Cutler on Social Networking: Not Just for Gen-Y. Sure it started as a way to connect with friends, but now it's one of the most powerful and easily accessible marketing tools out there....................(This is a must read article!)
• Vance Publishing, the parent company of Modern Salon invites you to attend a FREE presentation of "The Art of the Possible"--Digital Marketing Strategies and Tactics to Grow Your Business in the Salon Industry at the 2010 Western Buying Conference on January 14th at Bally's Hotel in Las Vegas. You must register. If you are unable to join the presentation contact modernsalon@vancepublishing.com for an individual appointment.

Try to grab all the free help you can for your business!

Follow up to 10/10/09 Blog "How Computerized Will Your Salon Be"

Follow-up to 10/10/09 Blog "How Computerized Will Your Salon Be".

Answers and Statements by a Small Business Computer Expert:
Kevin Marraccini
marraccini.com, llc
1316 Woodland Drive
Monroeville PA 15146
412-956-3573
kevin@marraccini.com
www.marraccini.com

Point of Sale program for services and retail:
I think Point of Sale is a must. Quick Books and Microsoft both have products geared toward the small business. They include easy to follow screens and link with credit card processing companies. They will also link with tax software.
Is there hardware available?
Computer manufactures are incorporating POS as a complete solution offering. These offerings will include a computer, monitor, cash drawer, barcode scanner and printer.

Are appointment scheduling programs available?
Most POS programs have a Appointment Program available as part of the package. They are print reminder postcards, phone and email lists. A client record card can also be included.

Can the POS program attach to an accounting program?
Most POS systems can do basic bill paying and invoicing. Most will link to more advanced account software packages such as:
P/L Statement
Balance Sheet
Inventory--Retail and /Service Products
Payroll (Outsourcing payroll is also an option. They will also prepare taxes.)

There are a number of Computer packages just for Beauty Salons. Do you recommend them or prefer basic programs such as Quick Books?
I checked out a few of them and they do seem pretty powerful. Might even do what Quick Books does. They need to work with the accounting program the salon is using. Linking to tax software is important.

What hardware do you suggest?
Dell or HP is what I typically recommend for computers. There are many cash draw and scanners vendors.

The following should also be considered:
*The owner or manager may also want a computer in their office.
*They will need a router to connect to the internet and link multiple computers.
*They may want to restrict access to certain programs such as payroll, P/L, etc.
*They may also want to "lock down" the register so employees are not surfing the internet for non work related things.
*I think internet at broadband speed is important--Cable, DSL. FIOS.
*Running antivirus or spyware detection programs is important.
*Having a backup program to protect the data is very important. I recommend Mozy.com.
*Passwords are important.

Email and Website:
Email and Website are great. Scheduling appointments by email would be a quick way for communication. Salon owner may want to have a smartphone or blackberry.

Opening a Salon? You need insurance..

If you are opening or own a salon, you will need insurance. Following is a list of questions I asked an insurance expert. Insurance is one of those things you buy hoping you will never need it.

The answers are from:
Michael F. McGroarty
McGroarty & Bradburn Insurance, Inc.
Pittsburgh PA
1-800-737-8494

Liability Insurance--What the insurance covers?
The insurance covers Bodily Injury and Property Damage to the public as well as operators' professional coverage for errors and omissions made by the salon or its operators.

Falls, etc. in the salon?
Any Bodily Injury or Property Damage and Professional Liability if purchased for negligent acts for which the salon would be responsible.

Services by owner and employees?
The entity (salon) and the employees are generally covered by the policies.

Services by Booth Renters (Independent Contractors who actually rent space in the salon)?
Again the salon (Corporation, Partnership, Sole Proprietorship) would be covered as well as employees. Independent contractors would not be covered. The independent contractor needs their own coverage and should name the entity as an additional insured.

Does the salon owner need liability insurance to supplement the booth renter?
The owner should not under any circumstances do anything without having their own coverage first. They should not rely on the renter to cover them. 99% of the time this will not work.

Property Insurance?
Property insurance if the salon owner owns the building?
Basic coverage should be building, contents, business income, hired and non-owned auto coverage, crime, business interruption, umbrella, professional.....be careful about things like tanning, etc. that the policy covers things that are outside the norm of the particular business.

Property insurance if the salon owner rents space?
Everything above except the building. However, betterments and improvements made to the building by the tenant that would not be taken out if the tenant vacated the premises can be covered by the tenant.

What is the amount based on?
Furniture and Equipment?
All limits should be replacement cost currently and an inflation % increase should be included at each renewal.
Small equipment such as irons, blowers, shear, etc.?
(Quite often such equipment belows to the individual operator)
The owner can include property of thers in their policy. The individual operator usually has no coverage under their homeowners for business property.
Supplies?
These would normally be covered as contents.
Records and compiter?
Should be insured separately as computer coverage with a separate limit.
Loss of business and Interruption of business?
Usually included in package policy for 12 consecutive months.

Workman's Compensation?
Is it correct that every state requires workman's comp but that it varies from state to state?
Yes, all states require coverage but the benefits differ from state to state.
Does the owner have to pay workman's comp for independent contractors?
No. But they need certificates of insurance from the independent contractor so that they do not get charged.
How can the salon owner legally reduce the cost of workman's comp?
Have no losses or have no employees.

Optional Insurances: Medical Insurance, Disability Insurance, Group Life Insurance
Is it feasible for a salon owner to offer these insurances even if the employee pays all or a large portion?
Yes!
What are the advantages of offering these insurances?
To attract better employees particularly single moms.
To allow owner to have his personal insurance as part of a group.
What are the disadvanages of offering this insurance?
Employees sometimes do not want to participate especially if they are covered by a spouse.
The age of the groiup drives the premiums.
Can independent contractors participate?
Not usually. Most plans require UC2 or W2 forms to prove the individuals are employees.

A "Must Read" article in Salon Today Magazine

There is a "Must Read" article in the October 6th edition of Salon Today Magazine (A division of Modern Salon). It is entitled "How to raise your prices". It covers when and how to raise prices and how to communicate the price increase to your clients. This is particularly important for salon owners who have been in business for a number of years.

I will return Wednesday with more information on how to open a successful salon

Choose the Form of Business Ownership that Will Work Best For You

Choose the form of business ownership that will work best for you. This decision will be made with the advice of both your accountant and lawyer. In the conduct of your business quite often you will be working with both your accountant and lawyer. Therefore, you should be certain that these two individuals can work well together.

Three Major Forms of Private Ownership:

Sole Proprietorship-- (One Owner)
Liability: Unlimited personal liability for businesds debt
Advantages: Owner retains all profits
Easy to form and dissolve
Owner has flexibility
Disadvantages: Unlimited financial liability
Financing limitations
Management deficiencies
Lack of continuity

Partnership--(Two or more owners)
Liability: Personal assets of any operating partner at risk from creditors.
Advantages: Easy to form
Can benefit from complementary management skills
Expanded financial capacity
Disadvantages: Unlimited financial liability
Interpersonal conflicts*
Lack of continuity
Difficvult to dissolve

Corporation--(Unlimited number of owners)
Liability: Limited
Advantages: Limited financial liability
Specialized management skills
Expanded financial capacity
Economics of large-scale operations
Disadvantages: Difficult and costly to form and dissolve
Tax disadvantages
Legal restrictions

This chart is from the textbook--"Contempory Business" by Boone & Kurtz, Chapter 5

*Special note on partnerships--
Quite often in salon business, the business partners are close friends and/or relatives. While there are advantages in that you all get along well, there can be disadvanages. It is imperative that a partnership agreement be made up defining each individual's roles and responsibilities. You will want to review this regularly.

Employee vs Booth Rental

As a salon owner you must decide to hire employees, contract with independent contractors (booth renters) or do a combination of both. The following are things to be considered.

• Does your state cosmetology and/or barber rules allow for independent contractors. There are some states primarily in the east that do not. Even in states that do not permit booth rental, there are Legal ways of doing it.
• What is the norm in your community
• Control is the "question"
• How are retail sales handled

Advantages of IC (Independent Contractors):

• Salon Owner eliminates paperwork
• It is attractive to potential stylists and techs who feel they are in control.
• Salon owner does not have to pay workman's compensation insurance on IC but in most cases they have to provide proof that the IC contractor does carry their own insurance. This varies from state to state.
• Salon owner does not have to pay the employers portion of Social Security taxes. However, they must have proof available for the Federal government that the IC is filing an income tax return. They must provide them with a 1099 indicating their earnings.
• Stylist provides their own product. Salon owner does not have to inventory separates product lines for individual stylist.

Disadvantages of IC (Independent Contractors)

• Salon owner loses control.
• They cannot tell the stylist/tech when to work or what to do. Charges can only be determined by contract.
• Storage area must be provided for each stylist/tech.
• If you plan to provide any type of group insurance, the IC may not participate and may keep the business from being eligible for group insurance.
• Salon owner must determine that taxes are being filed by the IC. This sometimes causes hard feelings as the IC feels this is not the salon owner's business.
• There is very little loyalty to the salon from Independent Contractors.
• It is difficult to encourage IC to attend educational events. Salon owner cannot force them to attend.
• A dress code becomes difficult to enforce.

Most salons will still have some employees such as receptionists, maintenance people, etc. even if the majority of the stylists/techs are IC.

It is not recommended that groups be split. If your stylists are Booth Renters, then they all should be. However, you may want to have all your stylist be booth renters and the skin care technicians be employees.

How Computerized Willl You Be?

How Computerized Will You Be?

By now you have met with your accountant and determined how much paperwork you plan to do yourself and when you will turn the records over to your accountant. Most like this will have to be done at least quarterly as most tax returns must be filed quarterly.

Your basic service and retail sales and receipts should be on your computer. This is similar to basic accounting for all service and retail businesses.

Client Information (including appointment book) is most important. You can set us your appointment books on the computer as well as your client record cards. Contact by phone and/or email prior to appointment to avoid no-shows. Decide how often chemical clients should come in and follow-up. For example: if you expect a color client every 6 weeks and it has been over 5 weeks since their last appointment, call them to schedule an appointment. If client will not schedule an appointment, try to find out why. If there is a salon problem, fix it. Keep track of retail purchases and print out an order form for each client to review as they leave the salon. Do Birthday cards, anniversary cards, etc.

Print out schedule for each operator each day. This will eventually tie into payroll.

Inventory Control can save you money.

Payroll will be handled in the next blog.

Software costs range from $250.00 to $1200.00+.

Software support cost varies. You may decide to spend a little more on software support in the beginning then cut back as you are more comfortable using the software. Limit access to the computer particularly access to payroll info and client records.

Find an accountant and decide what functions you want him/her to perform.

Hire An Accountant

You will need an accountant to help you determine if you are earning money, to help you control expenses, to file and pay your taxes, to manage your payroll if you have employees. You must decide how much of the bookkeeping work you plan to do yourself and how much you plan to pay someone to do. At what point will you turn the dailey records over to your accountant? How often will you meet? This is your decision. there is no right or wrong. You will also have to decide how computerized you want your business. There are a number of good programs geared specifically for beauty and nail salons. You do not have to have any programing skills to use these programs.

Below are questions to answer. Think about them and we will discuss on Friday:

• Will the people who work for you be independent contractors or em,ployees? (There are a few states that do not permit booth rental or independent contractors.) It is also [ossible to have a combination of both.
• Do you plan to emphasize retail?
• Do you plan to run a sole propriertship, a partnership or corporation?
• Do you as the owner plan to actually take clients or do you just plan to manage?
• Do you plan to hire an in-house business manager, receptionist or combination of both?

Seasonal Tip--Plan to offer free to "good customers" a free styling of their "HalloweenWig" for the big party. 10 to 15 minutes of your time could create good will and good publicity.

In the Begining You Must Have a License

Get a License

Salon Licensing is controlled by each individual state and varies state by state.

To obtain licensing information online go to: www.__.gov

(In the blank space, enter your

state's 2 letter abbreviation .)

For example: www.nc.gov for North Carolina; www.tx.gov for Texas

Look under Cosmetology Professional Licensing and/or Cosmetology Salon Owners' License. Most of the time nail salons licensing information is under cosmetology. Barbers are usually separate.

You may also contact your local state government representative. These representatives usually maintain staffed local offices within their districts. It is part of the job responsibility (and a very positive function) to assist constituents who want to open new businesses.

Your local municipality may also require a mercantile license or zoning permit.

Suggestion: If you mail anything to your state, send it "certified mail--return receipt requested". It is worth a couple a dollars if you must have proof you sent it.

Special Advice from the author:

Even if you are planning a small one-station, please follow the law and get a LICENSE. The time and money spent is small when compared to the time and money + the worry and embarrassment if you get caught with an illegal operation.

Plan Your Salon--Surround Yourself with Trusted Advissors

You Can't Do Everything

Trust Yourself with Trusted Advisers when Starting Your Salon

The following people should be available to call on when needed:

• Accountant & Tax Adviser
• Banker
• Insurance Agent
• Lawyer
• Real Estate Agent
• Community Representative
• Distributor Sales Consultant(2)

Get Started--Planning Your New Salon

Plan your new beauty, barber or nail salon. Rejuvenate your existing salon.

#1--Decide which services your plan to offer:

Hair Cut for Men or Women

Color

Perm

Straighten

Other

Nails Traditional Manicure Men Women

Acrylic Nails

Special Techniques

Pedicures--Whirlpool

Pedicures--Traditional

Skin Care Services

Massage

Other Shoe Shine

Babysitter Available

etc.

The following factors will help you determine which services you will offer:

1. Potential Clients in your area
2. Available staff and/or employees to work in your salon
3. State licensing requirements
4. Space in the building
5. What interests you; what you want to offe

It is Wednesday, September 30th. I will be back Friday, October 2nd.