How to Start / Open A Hair Salon Business in Kenya

Salon Business Plan (Kenya)



Overview

This refers to medium sized hair salons largely found in residential estates or urban centers. It excludes very high end branded salons which cater for an extremely upper clientele.

The target markets for the salons reviewed are middle class in all its classifications (Upper middle, middle middle, lower middle). Middle class as defined by Kenya National Bureau of Statistics as those earning between Kshs. Sh23, 670 and Sh 199,999 per month.

Though there are dissenting views about the size and definition of the middle class a reliable static from the AfDB estimates 6.5 million Kenyans are among this middle class and the number is expanding.

Yet even without the statistics a casual look at neighborhoods, the media and the streets will indicate a change towards a more sophisticated lifestyle.

With some services costing as low Kshs.50 salons are affordable across the social spectrum. However socialization, career, lifestyle and exposure to trends all influence how much a woman is ready to spend on hair.

For instance a career woman exposed to more social pressure and a higher disposable income will spend more on hair than a stay at home mother.

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The Bigger Picture

Among the factors affecting the Salon business at the national level include:

Population

The higher the population the larger the market; the more people there will be purchasing Salon services.

Kenya Population 2012 – 43.8 million

Kenya Population Growth – 2.7 % per annum.

Kenya’s population is growing which means the customer base for the salon business is increasing.

Inflation + Disposable Income

Inflation affects the disposable income and thus the amount of money an individual spends on products not considered to be necessities.

Kenya’s inflation rate peaked in September 2013 from August’s’ 6.47 to 8.97 before reducing slightly to 8.25 in October. It is important to note that inflation does not affect all economic and social classes the same. In October for instance the inflation rate among the middle class was 6.32 compared to a national average of 8.25.

Though inflation has slightly increased it’s not to the level that has largely affected consumption of hair and beauty services among the middle class. This is because grooming is seen as important for upward mobility in business, work place or socially.

Outlook

We predict a middle class inflation rate of above 8.50 % would lead to significant cutting back of the amount spent on hair across the middle class.

Barring any drastic economic or political shift the inflation rate is likely to remain at the present levels and not reduce significantly until June 2014.

The lower middle class will slightly reduce the amount they spend on hair for instance by hesitating to follow trends and opting for hair styles which last longer.

Societal pressures in terms of what a woman is expected to be, the emotional need to stand out and belong by following trends and the association of grooming with upward mobility will see women in the middle and upper class not cut their salon and beauty spending significantly despite economic pressures.

Other Indicators:

The purchase of the local consumer beauty company Interconsumer Products by the French multinational L’Oreal at a price of over Kshs. 3 billion is a vote of confidence in the long term growth of the beauty industry in Kenya. Of note is the wide range of hair care products under the Nice & Lovely brand that were previously sold by Interconsumer

Based on the purchase of Interconsumer Products and the strategy informing it, then its safe to say that keeping everything constant the hair industry will continue to grow for the next 5 years.

Critical Success Factor

Service is the one factor that if you get right and the rest of factors wrong will most likely lead to the success of the business. If the location is good, facilities superb and hygiene at the highest but service is poor then the salon business will not succeed.

Service is first about the professional skills of the stylist. How he or she is able to make hair either by following a customer’s instructions, innovating or suggesting styles or maintenance depending on her knowledge of hair care and understanding of the customer.

Service also depends on the relationship both the owner and the hair dresser are able to develop with the customer. This includes the basics of customer care like politeness, flexibility, listening and a warm personality which is informative without being patronizing.

Great service helps generate positive word of mouth which plays a big role in the growth and sustainability of a salon.

Consumer Behavior

In urban areas customers’ choice of a salon is chiefly influenced by the following:

Popularity – This does not necessarily mean a salon which is the most visited in an area but one which a friend has vouched for. An exceptional hair style will attract attention of other women and eventually lead to the question: “Where do you make your hair?”

Professionalism and Quality of Service – How well does the stylist make hair? Does she understand hair and offer friendly advice accordingly? Is she able to troubleshoot hair problems and offer workable solutions? Does she make suggestions? Does she know what is trending? Is she innovative?

Customer Care – How the owner and hair dressers relate with the customer in terms of trying to offer personalized service, common courtesy, appreciation and some level of emotional and physical comfort.

Location – Is the location convenient in terms of accessibility at the needed hours, the surrounding environment (too noisy), and safety?

Price – Is the price fair in relation to the prevailing economic situation, the quality of service and the image of the salon?

Flexibility of Service – The hours of operations: What happens if a customer fails to honor an appointment can she be conveniently slotted at another time without much ado

Hygiene – What is the level of cleanliness in the salon? How do they sterilize towels, combs and other tools? What is the personal grooming of the stylists?

Other Services – Does the salon professionally offer extras such as pedicure, manicure, massage, facials and other beauty services?

Comfort – Is there a basic level of comfort available either while waiting or having the hair made?

The Situation On The Ground

At the local level the salon business is affected by:

Location

Location is in terms of convenience, social economic status of the area and existing competition.

Though a convenient location is not the leading influence of purchase a strategic location adds to the factors that may attract a customer to a salon.

A convenient location also gives the much needed exposure a new salon needs. With so many movements between estates and increasing number of new estates and residential buildings an easily accessible salon helps attract the clueless new resident looking for a place to make her hair.

If the service is great the customer will stick. Still if the client does not stay and continues with her search a number of such walk in clients help pay the business bills.

In some areas there are economies of location in the sense that a high number of salons are located in the same area or building and the section has

developed a reputation as the salon area. This means that a salon opening in that building for instance is guaranteed of exposure and higher chances of getting customers even without doing anything exception as compared to the competition.

Differentiation

The barriers to entry in the business are minimal that means that competition exists and will continue to increase. Standing out from the competition, and making the distinction known becomes the challenge.

The most common form of differentiation in the business is service in terms of quality of making the hair, extra services like massages, manicures and pedicures, facilities and to a small extent price.

Price based differentiation if not coupled with great service will only be a temporary advantage.

Some considerations regarding location and service differentiation:

-Is there an under served section where it will be easier to develop and sustain a lead before competition comes calling. A virgin location means you are able to get all the customers who had to visit or postpone visit to the salon for lack of a convenient location.

-Since all customers are presently being served, however inadequately, how will you differentiate to win customers? What is the competition not doing that you could do and win them over?

-Can you offer similar services as the competition but invest more in publicity and creating an image that says “We are better”?

Differentiation works best if it fills a gap that customers were yearning for but not getting such as expertise in plaiting or chemical application. Alternatively is to introduce a facility/technology/ way of making and maintaining hair that customers were not aware of but which will offer clear benefits.

This for example can be to tied to how the hair is made, speed of service, cost savings, timings and other related factors.

Loyalty

In the salon business loyalty is high. Loyalty is mainly pegged to the services offered and the kind of relationship the stylist or owner builds with the customers. Service is both in terms of people skills and also professional competence like how good a stylist is in making the hair.

In a highly competitive environment this kind of loyalty makes it a challenge for a new salon to acquire the initial batch of customers. Customers must be convinced what the new salon is offering is so good that they can drop the stylist they have been loyal to.

The easiest method currently used to go round the loyalty problem is to poach stylists with a loyal following from a competitor salon. The stylist comes with ‘her ‘customers. The stylist is paid goodwill so as to agree to defect.

In a location with high loyalty and relatively satisfied customers a salon will take longer to break even unless the owner comes up with a smart way to penetrate the market.

Social Economic and Demographics of the location

Income levels, lifestyle, education, career and economic activities in a location will determine the spending on services offered by a salon. When pricing, hiring staff and purchasing equipment it’s important to consider these.

Ground Level Summary

A good location though not the major factor influencing purchase is an advantage.

There are markets where there exists a gap in terms of service and conveniently located salons

There are markets which are saturated in terms of the number of salons, population and the income of the residents. A salon setting up in such a location will take longer to break even, and when it does it might not sustain profits for a long time.

Price based competition though it exists is not common in the market. Still a price based contest offers no long term benefits if not coupled with service.

Facilities such as chairs and décor are used to differentiate but if not coupled with great service they offer only a temporary market lead. However having superior facilities as compared to the competition initially offers the attention grabbing shock which can be taken advantage of to capture the market.

There are various ways of differentiation, and the best way depends on the circumstances in the area. In urban areas with career women opening and closing hours are a major problem. In other areas there are no stylists keeping up with hair dressing trends.

Loyalty is high in the salon business. And a new salon owner has to think of ways to break the loyalty, and make customers defect.

Random Observations

Every week in the daily newspapers there are at least 2 salons being advertised for sale. The number averages 3 in the online classified websites. Compared to related businesses such as Barber Shops the number is low.

For obvious reasons the sellers don’t quote losses as a reason for selling, preferring instead to talk of relocation to a different town or country, focusing on more profitable businesses and being too busy to run the salon.

A first hand observation of such salons hints at poor management, losses and lack of enough capital to sustain until break even point.

A salon in Doonholm had existed for about 5 months, the location was near a commonly used road but the number of customers was low. This had potential for growth but the owner it seemed didn’t have enough capital to sustain it until break even point.

Another Salon in South B had relatively good facilities but the service was sloppy and thus the customers were not enough to make it break even.

Another in Ruiru was doing well but the owner the returns were not good relative to her other business.

Other than offering great savings in cost of equipment, purchasing a salon maybe an advantage if the salon is turning a profit. The challenge is how to perform the due diligence. How without spending days and simply looking at any books will you the true status of the salon?

Here is a question related to purchase of salons asked by a visitor on our website and the answer we provided:

Would you advice I purchase an already running hair salon or start mine from scratch? - Janet

A hair salon is the kind of business that to a large extent depends on goodwill. The reason customers visit a salon is because they have come to expect a certain level of service from it. For instance a female customer knows hairstylist A understands my hair, is fast, can squeeze time for me and so forth. When you purchase a salon you are also buying this goodwill or lack of it.

The problem comes when there is no goodwill. You will just have bought equipment and space but worse a low value brand name. The miserable part is that you may have all the equipment, modern or otherwise, a good location but still no customers because the salon has developed a reputation as where “hair gets burnt”. To change that it will take more than adding “Under New Management” below Beyonce Beauty Salon. It will take time and an investment in marketing to turn it around. That doesn’t mean it can’t be done. It can.

On the other hand if the goodwill is positive it means that you are purchasing a positive reputation and customer base. You won’t have to acquire customers from scratch. You just have to work to maintain the existing customers, make the service levels improve, and also try to make the customers trust you as they may have trusted the previous owner. Depending on how much you are paying for the goodwill you might break even faster than you’d has started from the ground since you will have the advantage of a good reputation that is sought by new hair salons.

If you start a new hair salon from the ground then you have much more control of the brand you build, what customers think of it, the kind of service you offer and much. Depending on location, the competition and level of service in the area it may cost you more in time and resources to acquire customers as compared to purchasing a good existing salon.

The tricky part is how before forking the cash you will know the level of goodwill the salon you wish to purchase enjoys. Books of accounts and the proprietor will only tell you half the story. Some basic research and simple things like spending a day or two at the salon will be of help. Talk to the stylists too, they hold a lot of leverage and will likely be honest.

Still on that it is important to consider if the best stylists will remain with you even after a change of ownership. I have seen cases where a person sells a salon only to open another one a few meters away pulling with her all the stylists, the same people the salon’s goodwill largely depended on, thus leaving the new owner with just a shell with no reputation whatsoever despite having paid money for ‘goodwill’. Though it is possible to 'poach' stylists from other salons, who will come with their own client base, its hectic and at an unexpected cost. Also depending on the reward method some hair stylists demand a salary or commission increase so as to continue operating under a new boss.

Remember purchasing a salon is not just about equipment and location but also a reputation.

Capital Process & Equipment

Licenses

Local Government Trade License - This varies from county to county but ranges from Kshs.3000 to Kshs.10, 000. This can be acquired at the local authorities’ offices

Health Certificate – This is issued to the individual stylist to ensure they are hygienic and don’t have diseases they can transmit to customers. The cost ranges between Kshs.400 to Kshs.1000. In some counties the health certificate is not strictly enforced. This can be acquired at a government or private hospital.

Music Copyright of Kenya License – This may be necessary if the salon has a TV or is playing music. The cost averages Kshs.2000. This can be acquired at the local office or from MCSK officials who move round enforcing the law.

Equipment:

The whole array of equipments that are needed to run a salon vary with capital, competition, target market and personal taste of the owner. Generally though the core equipment include:

Hair Dryer – This is for all hair drying activities in the salon. It is the classical trademark salon equipment.

The price of a new Dryer ranges between Kshs. 12,000and Kshs.30, 000. The most commonly used Dryers, with basic features average Kshs.15, 000. Second hand Dryers from individuals and dealers are available for as low as Kshs.7000

Dryers are available in supermarkets but a wider variety and better prices can be found in hair salon equipment shops along River Road (See suppliers below)

The Dryers found in these areas are basic but good enough to run a salon business. Italian Dryers though slightly expensive are preferred to the Chinese models which are said to break down often.

Blow Dryer – This is for straightening the hair and other related functions. Prices range from Kshs.2000 to Kshs.15, 000 with most salons opting for models which cost an average of Kshs.2, 500. Dryers are available in supermarkets and other salon equipment suppliers

Chairs – These are styling chairs which customers sit on while having their hair made, and also while waiting to be served.

There are many salons which start with very basic Kenpoly chairs which go for Kshs.500 each. The alternative is to go for specialist hair styling chairs. Prices range from Kshs.2000 to Kshs.30000 depending on the quality and features such as sink, levers for adjustment, quality of leather and so forth.

Hair Styling Station – For a more professional look a Hair Styling Station maybe necessary. This is a wooden/metallic structure with a mirror, drawers and compartments to hold different tools. Some salons improvise this by having mirrors, shelves and bowls to hold equipment.

Price of A Hair Styling Station averages Kshs.20, 000 but could be as low as Kshs.7000

Sterilizer – This is used to sterilize equipment to kill gems and maintain a high level of hygiene. The price ranges from Kshs.5, 000 to Kshs.15, 000 depending on make and model.

Hair Strainers – These are used for straitening hair. Prices average Kshs. 3,500

Shampoo Bowls/Sinks – These can be on their own or with a sink fixed to a chair.

Manicure and Pedicure Sets / Mini Spas – Kshs.500 to Kshs.1500

Other Miscellaneous Items

Prices of the below items range from Kshs.100 to Kshs.1500 depending on quality and supplier:

-Towels

-Shower Caps

-Combs and Brushes

-Scissors & Tweezers

-Gloves & Aprons

-There are other miscellaneous equipment that

-Cosmetics/ Applicants

-Hair Chemicals

-Shampoos

-Conditioners

-Cutex

-Facial creams

Equipment Suppliers

There are a number of salon equipment suppliers including supermarkets. However some of the most popular by virtue of variety and prices are found in the upper section of River Road. This means the square north of Accra road (towards Globe Cinema). These include:

Salon Requisites and Equipment River Road, behind Perida Center

Salon Warehouse

Shamneel Court, Parklands Rd, Westlands

Tel: +254204447981

Dubai Beauty Center Museum Hill road

Online you could check: www.salonwarehouse.co.ke

There are also independent importers who sell salon sets consisting of a number of items required to start a salon. One of the independents sells a set @ Kshs.200, 000 and this consists of:

Dryers (2 sets)

Shampoo sinks (2 sets)

Blow dryers (2 sets stand alone dryer stands)

Sterilizers (2 sets)

Hair clippers -shavers (2 sets)

Tong machine (1 pc)

Hair straitener (complete set thermo iron stove)

Aprons (4 pairs)

Salon organizer (detachable shelves and stands)

Towels (10 pairs)

(We can provide contacts of this particular supplier on request)

Capital

The capital required to start a salon varies depending on quality of facilities one wishes to have.

In some town centers there are salons which have started with as little as Kshs.50, 000. Such have a single Hair Dryer, Blow dryer, four or so plastic chairs towels, sink, and a handful of cosmetics.

A modern salon with all the above facilities would cost between Kshs.500, 000 and Kshs.2 million.

Most standard, fairly modern salons in neighborhoods have around Kshs.300, 000 invested.

Competition & Survival

(Base: September 2013)

Average no of Salons per Estates

14

No. that have existed for over 2 years

63 %

No. that has opened in the last 1 year

27%

No. that has closed in the last 1 year

3 in 10 salons

 

 

The figures above do not include home based freelance stylists who are becoming common in most neighborhoods. Partly this is a result of an overflow of qualified hair dressers

The older the estates the more salons there are. The number of salons corresponds with the size of the estate .In newer estates and residential buildings salons are some of the first business to open.

In 2012 the hair care industry in Kenya recorded a growth rate in value of 10

%.In a way this is an indication that citizens are spending more on hair which in turn means the demand for professional hair care services is on the rise. Salons are the major avenue through which people seek hair care services.

As noted there are minimal barriers to entry in the salon business both in terms of skills and capital.

The number of hair training colleges has more than doubled in the last 5 years. Besides there is a lot of informal training of hair stylists through apprentice programs in hair salons. This means competition in the business will continue to increase.

There are more salons opening than closing. This hints at opportunities existing in the market. The ability to seize these opportunities, make a profit and grow depends on among other things:

-How well a new salon differentiates either to serve a niche or fill a gap in the market

-How soon a salon creates a lead in service

-Location

-How soon the lead is lost

-Marketing and the use of guerilla and aggressive marketing,

-Internal efficiencies such as controlling costs.

The market is fragmented such that it is rare to get one salon controlling more than 18 % of the market unless in centers with less than 10 salons. It is however not unusual to have salons with less than 1 % of the market, this as measured against the population of the area and percentage of those who would be in need of hair stylist services.

The lack of a dominant player means that any new entrant in the market who has the right mix of factors has more than a fair chance of capturing customers. The market is pretty open for grabs.

There is room for branding. At the larger say regional level this at a high cost. This is because considering the loyalty in the market and the kind of relationships that stylists create with customers branding would involve a consistent marketing and advertising message that promises a better experience than consumers are presently enjoying. Without any evidence or guarantees of quality such a message may or may not work.

A short cut to this would be through a radical innovation which solves a common or niche hair problem. This could be through the introduction of facilities and methods, proprietary or otherwise not available in the market.

At a more local level crude branding is possible through consistency of service or having methods and facilities not available in the neighborhood. Normally such branding starts by trying to build a name as being the best in particular services.

Thus a salon may aim at make sure it excels in blow dry, plaiting, chemicals or

whatever services. Though such a salon offers other services the fact that it’s known to be extremely good in particular services help capture a segment of the market, and use that as basis for growth.

Though such branding may not work beyond the neighborhood it aids in building sufficient attention to generate word of mouth and not to look as an-also- run.

In the salon business a reputation based on service may take months to build due to the high loyalty among customers.

Worthy of note is the trend among individual stylists to build personal brands which at times are l than the salons themselves. Such personal brands helps the stylist negotiate better terms with a salon owner, easily start an own salon, or give him room to freelance.

Even at the very local levels there exists personal brands are stronger than those of salons. For new salons it’s important to aim at building a sort of salon brand which will enable the business to survive beyond particular stylists.

Branding at the local is possible through consistency of service.

In Huruma estate Nairobi there were 197 visible salons. Though this is not exactly the focus market of this survey it’s interesting to note that there are a large number of customers coming from ‘middle class’ estates to have their made there. Some of these were women who are still loyal to their former stylists despite moving up socially. Others come in pursuit of stylists famed for particular service, while a few are seeking quality at relatively lower prices.

Competition is largely based on quality of service, variety of service, price, convenience and location.

Market Entry Strategies

How a salon enters the market determines its success in both the short and long term. The following are the most common market entry tactics:

1.Set up in any available space and paint ‘Salon’ on the wall and wait for customers to walk in.

This strategy is based on the premise that there is more demand than supply for salon services, and customers will walk in. It treats lightly the nature of loyalty in the business and assumes there is a pool of customers dissatisfied by their present stylists who will shift to the new outfit.

Deepening on the level of competition in the area the strategy may or may not work. If the competition is low then there is a high chance of netting dissatisfied customers. On the other hand if the competition is high the dissatisfied customers will have moved to another of the salons within the area. Many are reluctant trying out a new salon unless a friend says something positive about it.

Dissatisfied customers largely make their choice of which salon to shift to on the strength of friend recommendations. No one is likely to recommend a salon service of which they have not experienced.

Again if the competition is low relative to the population of the area then the strategy may work.

If the service in such a salon is not good and customers walk away unhappy then the business is likely to fail in the medium term. If the service is good then the business is likely to succeed and break even in the medium term. Also because in urban areas there are always new people moving to an area eventually there will enough of the new tenants opting for the salon

Whatever the conditions the strategy is risky and stretches the break even point.

2. Set up a salon in a prime location & for customers to walk in

This strategy is based on the assumption that customers will opt for a convenient location as opposed to walking an extra distance to their usual salon. Secondly there is an assumption that a prime location will help capture walk in customers in search of a salon. A great location will also give the new salon immediate visibility.

This works in all the scenarios but not in isolation. Customers won’t walk in and become regular customers in a salon simply because it’s located in a convenient location, there must be another clear impetus to make them defect, service or relatively fair prices for instance.

A great location is an advantage, when combined with the other factors that customers care about then it helps the salon break even and grow faster, otherwise a location on its own is not enough to make the salon succeed.

3. Set up salon and put a board stressing one feature/service

“Our Blow Dry Lasts For 1 Month” “The Best Blow Dry in Town” This strategy aims a capturing the market by trying to win a segment of the consumers rather than everybody. Also it’s an effort in differentiating and making the difference known. When coupled with say a good location this strategy works in the short term. In the long term it works if the promises given are fulfilled and don’t end up being a marketing gimmick.

With this method a salon is able to attract dissatisfied customers, those seeking a change of service , new customers not yet sure where to have their hair made and also those whose loyalty to other businesses is not strong and don’t mind better service. Loyal customers may be easily tempted to shift by the promise of above average quality.

This is the least employed of methods but one of the most effective.

4.Set up a salon but have above average facilities as compared to other salons in the area.

This works by attracting immediate attention to the salon. Customers will try out the new salon fascinated by the facilities or hint at modern. If the service is good and the price just the customers stick, if not the shine quickly fades and the customers disappear as soon as they came.

This strategy may work although, depending on the location, it may require more capital investment. Also such a head start can easily be eroded even within a week of starting, after all that is needed is to purchase equivalent or better equipment.

The strategy can work in the short term, but again to build lasting impact customers will need to be given a reason other than the facilities in order for them to remain. Otherwise they will move as soon as a new salon with better equipment comes to town.

5. Set up a salon and charge a lower price as compared to competition

This assumes a rational consumer will chose a lower price as compared to a higher price for the same service. It tends to ignore the fact that in the salon business service is supreme, and though price is important it’s not totally at the expense of quality.

This strategy works only in the very short term when price conscious customers try out the new salon. Such loyalties are temporary unless cultivated to last. The salon may develop a reputation as the cheap salon for quick fixes when there is no money. That in itself maybe a marketing strategy but can easily collapse when incomes improve. If the lower price is coupled with exceptionally good service, for instance above the higher priced older salons then the approach work.

There will be challenge though if the salon decides to increase the price in future, the customers may not stick.

Price based competition must be given depth so as to last.

6.Set up a salon, then ‘poach’ popular stylist

In this case the new salon owner pays goodwill to a popular dresser so that he or she defects to her salon. The stylists are brand on their own with power to influence their faithful followers.

Though this strategy is expensive the salon has a jump start and breaks even sooner. There are some few risks though the stylist may have exaggerated his or her loyal client base. Then not all customers may follow her to the new station.

In the medium term the issues to worry about is will the stylist last, continue attracting more clients and will he jump ship again to another salon. This is especially if the brand is built around the stylist rather than the salon itself.

If this is done well the strategy is effective but for long term survival the salon has to think beyond the stylists and build its own brand to survive beyond stylists.

7. Set up salon then for a short time offer free services

This is based on the premise that consumers will be tempted to try out a complete hair do free of charge. Once they try and find the service excellent they will be convinced to shift from their present dressers, and also spread the word.

Even if the service is good there is a 50 50 chance that this will work. There are those who will opt for free service for the sake of it. Plus the wrong target market may try out the free service. This could be like school children or those who spend below average on salon services. Also it could be a risky strategy if as the owner you are not sure of the service.

On the other hand if the service is different and good, the choice of potential customers to try the service free is done selectively and there is overall incentive to come back then this works.

8.Set up a salon in a location with many salons and with a reputation as the

‘salon area’

In this case you will be taking advantage of location economies. The fact that a section of a town is known as the ‘salon’ place means that you will spend little on advertising since customers will walk in. Still the competition is intense and you need to be aggressive to win customers. Many use a combination of service, attractive price and guerilla marketing to attract the customers. Thus you see stylists in a place like Kenyatta Market waiting at bus stages for women alighting from matatu then try to lure them to their salons either by mentioning superior services or fairer prices.

This works but the owner has to be prepared for really aggressive marketing and competition.

9. Set up salon then do a lot of traditional marketing

This involves distributing fliers, sticking posters and boards mentioning the advantages the salon offers as compared to the others in the location. This could be a hit or miss but it helps give the salon visibility and somehow makes consumers trust more than say a salon which does not advertise. Good advertising and marketing works especially if it’s consistent. The response may not be immediate but it pushes the salon to the minds of the consumers.

With consistency, persistence, a clever message and method this works. If done half heartedly then it will flop.

Revenue

 

 

 

 

 

Average Daily Revenue

 

Kshs.2700

 

 

 

 

Lowest Daily Revenue Recorded

 

Kshs.200

 

 

 

 

 

 

 

 

Highest Daily Revenue Recorded

 

Kshs.66,750

 

 

 

 

 

 

 

 

Overall spending of salon and beauty products has been on an upward trend but the share of individual salons has been on the decline because of increased competition.

On the other hand salons which have existed for over 2 years record higher average revenue than 3 years ago. So as mentioned above spending has increased but now the amount is shared among many more salons unlike 5 years ago.

Revenue thus is a function of loyalty, type of client and service. Revenue is also influenced by no of customers, how often they visit a salon and how much they spend per visit.

Above average revenue figures are recorded in salons serving career (salaried) women. These visit salons on average twice per month, double the visits by those informally employed. Formally employed women are more consistent in their salon visits since they receive a salary and are able to properly budget for hair salon services. In areas where the majority of the clients were public school teachers and mid level civil servants the revenue was comparatively low.

Salons in Nairobi record a higher average income as compared to other major towns in the country. This had less to do with income and more to do with social pressures which lead to an increase in the average spending per individual as they try to stand out and keep up with trends. This pressure is present in all urban areas but more pronounced in Nairobi.

Salons serving niches or which have ‘branded’ themselves as good in particular services record higher revenues. Niche markets could be like dreadlocks, Asian and European hair, dye and so forth.

Salons in good locations and with a professional image and service recorded higher revenue compared to similar in inconvenient too hidden locations. This is by attracting a relatively higher number of clients and also one time walk in customers who are far from their regular salons but in need of a quick fix.

Salons offering extra services such as manicures, pedicures, facials, record a higher income. The extra revenue from these activities usually is about 14 % of the total revenue. In some cases this is enough to pay for the costs of running the business. It is instructive that though such services looked peripheral there increasingly in demand with many customers making them an integral part of their beauty care.

There are salons which offer manicure and pedicure free of charge to those consuming services of a certain value, usually Kshs.500 and above. Though this

didn’t have any positive effective on revenue in the short term, in the long term it helped build loyalty which then translated to higher incomes in the long run.

Though this is service centric business meaning that most of the revenue comes from service rendered rather than the sale of physical products, higher revenue is recorded among salons that sell related products like weaves, wigs, pieces and such. This only worked if the variety is large enough, quality better and prices fair than competing supermarkets and specialized beauty shops. Variety and prices are the main reasons customers preferred to purchase such items elsewhere and come with them to the salons.

A couple of salons also offer related feminine items like perfumes and lingerie. Again sales of such items are profitable if they are of unique design or of a better relative to other shops where such items are found.

Below average price have a negative impact on revenue even if the quality of service was excellent. Same case with a price many points above average. If the service is specialized, extremely good and the feel of the salon matching then its profitable to charge a reasonably higher price.

There is no clear pricing formula. The classical demand and supply forces tend to determine different prices for the same service in various parts of a town for instance. The income and social structure of a place also play a role in determining the price hence charges could be higher in some estates and urban centers as compared to others.

Quite many salons practice differential pricing. They gauge the social and economic status of the customer then set a price accordingly. The difference in price is + - Kshs.50 to Kshs. 200 of what is considered to be the standard price.

Other salons set prices according to the ‘size’ of the customer’s head, length and quality of the customer’s hair and complexity of the service.

Differential marketing has a positive impact on revenue as long as the customer is comfortable in it and does think herself overpriced when compared to other customers.

Revenue is also higher in salons practicing organizational and service efficiencies. The former are to do with managing costs, manpower reward and supplies. Service efficiencies are to do with such factors as speed and capacity. During the peak times how long do the customers have to wait before they are served, how many customers can be served in a day?

The break even point of a salon averages 7 months. The duration could be longer or shorter depending on aspects like location, service, marketing and economic conditions.

 

Manpower

 

 

 

 

 

Average no of employees

 

3

 

 

 

 

Average commissions

 

30 %

 

Average salary

 

Kshs. 8,000

 

 

 

 

 

Skills of hairstylists are gained either through formal training, apprenticeship or a combination of both.

Formal training is of varying quality depending on the training school. There is no particular standard guiding training among the tens of hair and beauty schools. The major advantage of formal training is that it equips the stylist with the theory that comes in handy when understanding some hair problems. This may lack among apprentices with no formal training.

On the other hand most apprentices are passionate, have a natural talent for playing with hair, and are more eager to learn. The lack of formal theoretical knowledge may stretch their learning curve and deny them the knowhow needed to handle complex hair situations which require some theory to help understand. Also when the apprentice is of little formal education there may be challenges in communicating to certain clients.

Most salons tend to balance between the above two by having staff with a variety of skills and backgrounds. New salons are hesitant to employ fresh stylists, fresh out of college or apprenticeship, instead preferring to start with an experienced hand and one or several of the green stylists. Customers want to feel confident the stylist knows what she or he is doing, and not experimenting with their heads. This is especially important for new salons.

To cut costs some new salonists employ fresh out of college stylists. These demand less pay and a number are comfortable with the idea of ‘growing with the businesses. Depending on the practical experience of the stylist this may work positively, however if a situation arises and the stylist seems unsure it reflects bad on the salon.

As mentioned word of mouth is critical for the growth of a salon. Like a work of art, the quality of stylist is there to see carried by a customer in her head. For a new salon it’s important to have a stylist who will help generate positive currency.

Reward

Reward methods tend to be of several forms: Salary only, salary and commission and commission only.

Stylists in a new salon often demand a salary and commissions, although there are cases where stylists start purely on commission. For a new salon a salary helps keep the stylists working for you since initially there may be not enough business to sustain them on commissions. If the commissions are too low, and the business taking time to get enough customer numbers the stylists may prefer to defect to other more established salons if an opportunity rises.

A high turn over of staff is not desirable in the early stages of the business. This is more so if a stylist is good and some customers have started to love her. Nevertheless some stylists are confident of making the business grow and are comfortable working on commissions. A number of new salonists are hesitant to employ fresh stylists on commissions only. This is because they are ambitious, a little impatient and are unlikely to stick for long if the business does no pick up fast enough.

Salons which have gone beyond a break even point tend to either go for salary or commissions. Commission is preferred since they reduce fixed costs and motivate the stylists to excel and work towards acquiring and maintain as many customers as possible.

Commissions vary but average 20% – 30 % depending on what is considered okay in a particular market, negotiation skills of the individual, ‘brand’ strength of stylist and the service being offered. A stylist with a bigger customer base and a strong influence on the customers may negotiate a larger commission.

The service being offered means those commissions may vary depending on whether the stylist is using only her skills but also other particular resources. For instance plaiting which is more skill based will attract different commissions as compared to application of chemicals which will use more of the owners’ resources.

For those poaching star stylists from other salons it’s important to perform some due to diligence to establish how much clout such stars have vis a vis the salon they are presently working from. How much of the patronage is because of her as an individual and how much is because of factors tied to the salon itself, like its location and facilities. This will help estimate how many of her customers she will be able to carry with her to your salon. Also it will help you match the facilities or other conditions of the rival salon you are poaching from.

It’s also important to agree on how long the stylist will remain at your salon before moving on. This will help you get a return on the goodwill you may have paid her to defect. There are several cases of start stylists who have defected shortly after moving to a new salon.

Another preferred method of poaching start stylists is to offer higher commissions without a salary or goodwill. This guards against paying higher amounts for goodwill, and suffering a greater loss if the stylist quits. It’s also advisable not to grow a salon around one stylist, rather to have salon stand on its own or the popularity to be tied to several stylists.

Whatever the manpower management and reward method it should aim to motivate stylists, keep the best of them, manage costs and attract customers and more talent.

Many salons recruit through word of mouth but also there are those will place ads in the newspaper classifieds or online forums. There is a pool big enough of skilled and experienced to recruit from.

Management Strategies

Management is a challenge especially for those investing in the salon business and have daytime 8-5 careers, .meaning they have no time to personally manage the salons.

-How do you ensure staff are maintaining or raising the standards you want to set for your salon? How do you ensure the staff do not take over the salon and a brand is built around the salon’s services and reputation? How do you ensure proper use of tools, resources such as chemicals, shampoos etc

-How do you monitor revenue? Whether on commission or salary how do you know the amount of money that is being made everyday?

Different strategies particularly regarding revenue management are presently being used in the market:

Trust the employees

In this case one trusts what the staff say is the amount they make at the end of the day. As expected sometimes they will say the truth while at others they will tell lies. This is an open ended practice subject to abuse, and depends on personal principles and character of the employees.

Set a target for the employees

The owner says every weekday you should at least make Kshs.300 and weekends Kshs.500, anything over and above that is yours. The figure will depend on the location and status of the salon and what the owner and employees think is a fair amount.

What happens when the salon does not generate enough to meet the set target? Some owners carry it forward as a debt the stylist has to pay when she makes more money, while others will soften and let it pass.

The pro is that the owner is assured of a certain amount; also it makes the stylists put more effort in their work both in quantity and quality. The cons include staff getting demoralized if they consistently don’t meet their targets. They may also feel under so much pressure which will affect their performance or make them

quit. Also if the ‘debt’ becomes too large they will prefer to quit rather than pay some day.

The target amount may also be far much less than what the salon generates. In such a case the owner loses money, and maybe demoralized too if she realizes individual stylists are making much more than he or she collects at the end of the month yet he has to pay for water, electricity and rent.

This is a practice to be exercised with caution.

Employ a friend or close relative as your eyes on the business

The friend or relative is usually someone the owner trusts. He or she may be skilled or unskilled in the salon business but that doesn’t matter since her main role is to keep an eye on revenue and other happenings in the salon then report to the owner.

This way the revenue leakages through employees are reduced. The downside is that if the ‘eyes’ do not develop a good friendly rapport with the stylists she may end up unnecessarily bad mouthing some of the staff, reduce productivity and cause a high turnover. The ‘eyes’ trust could also wear out, and she gets involved in any schemes to steal revenue.

This is a good practice if used properly. The stylists need to know that the ‘eyes’ is the link between them and the owner. This reduces the excessive suspicion when the role of the ‘eyes’ who hangs around the salon is not specified. Crude versions of this involve employing cleaners who are nothing more than spies.

Employ a professional manager

The owner formally employs a manager with professional or other capabilities of managing the salon. The manager could be on a formal salary or have his salary tied to the performance of the business. Some owners hire managers after setting up, while others recruit the manager from the onset and she or he is involved in sourcing of location, equipment, employees and in marketing.

In some cases the owner may offer the manager a share of the business.

This works very well if the manager is good and trustworthy. It removes much of the headache of running the business though some consider the extra cost of hiring a manager unnecessary at the start. On the flip side if the manager is not good in relating to employees and customers the business will suffer.

Issue Receipts for Services

In this case the owner has clear notices that customers should insist on receipts. This may work because at the end of the day the staff will issue some receipts and some customers will demand receipts. Yet there will be customers who won’t insist on the receipts and the staff wont offer to give them.

Again this depends on having some more faith in the honesty of the staff. It may be slightly better than a free for all system, but still not wholly effective.

Monitoring Camera

There are owners who install secret cameras to monitor the staff. At the end of the day or overnight they review what was recorded and compare against what the staff reported. If there is a discrepancy they may confront the staff with the footage as evidence, but sometimes they act without reference so as not to let it known they are secretly spying on the employees.

The disadvantage is the time the exercise of reviewing say 10 hours of footage in a day may consume. Also when the staff realizes they are being recorded they may become demotivated or act for the camera when they have underhand deals.

Though this method may effective in that all is recorded its not be the best way to manage and motivate employees

Have an Anchor Stylist with the others working under her

The anchor stylist could be the older, most experienced of the stylists in the salon. She acts as a sort of manager. Sometimes the anchor stylist is asked to recruit the junior stylists and she manages the commissions they get and the clients they handle. For her trouble the anchor stylist is put on a salary or higher commissions for commission based rewards.

Success of this depends on the honesty of the anchor stylist.

Impromptu Visits

In this case the owner makes impromptu to the salon. This is supposed to keep the staff on their toes. This will make the staff look behind their back but the fact that the owner is not present throughout means there will be opportunities to swindle money if they want to do so.

Lease out the work stations

In this case the owner set ups a salon, equipping it as need be but rather than running it like a salon she leases out the workstations to stylists who want to freelance, have a reference base or without enough capital to start a salon. The stylist pays the owner a daily, weekly or monthly fee.

The owner does not concern herself with what the stylists make as long as the she is paying her lease fee. If a stylist decides to quit the program she simply gets another one. Customer service, quality of work is all left to the stylist. The owner’s main role is to maintain the salon to certain basic standards that will attract stylists. Of course stylists will be attracted to such salons if the facilities are sufficient to satisfy their customers.

This is a relatively risk free system, but at the end of the day the owner has to accept they are in the leasing not the salon business. Though they will have little say in controlling the image of the salon it will be to their advantage if they set some service standards. Often the customers are not aware of the lease agreement. Therefore if a customer has a bad experience in the leased salon she may influence other potential customers and with time the workstations stop being attractive to stylists.

Possible Strategies

-Focusing on products which continue to attract the lower middle class even as they cut their costs. Such could be through innovation in styles which are cost effective but give a fresh look

-Focusing on fairly priced but chic products for the rest of the middle class. Since they are under economic pressure due to the inflation any savings which don’t compromise on quality are appreciated. Such savings could be through innovation or internal efficiencies which cut costs so as to maintain prices at the present levels while still elegant. As you will see below service rather than price is the major influence on purchase.

-Branding as a top range salon and focus on the upper middle class who are willing to spend more to look unique and fashionable. However this has to be done in consideration of the location, your networks and resources available for start up, highly trained manpower, marketing and equipment.

A Few Salon Stories

Here is a selection of a few articles touching on the salon business. Clicking on the links will open an external website:

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