With many overheads to consider when setting up a salon, it is imperative that you are fully informed and frugal in order to be as profitable as possible. Don’t let oversights on your premises lead to the downfall of your salon business.
After wages, salon premises will be your biggest overhead….
Once you have considered a location and the factors of accessibility, including whether or not the building can actually be used as a salon, you need to think about how to keep your monthly rolling costs down. Most salons are based within properties on a leasehold tenancy whereby you don’t own the building, but pay rent to a landlord to be there. Your rent instalments could be in monthly or quarterly payments and fixed tenancies can run for as long as 2 years to 20.
Seek legal advice early
We highly recommend seeking legal advice early when drawing up and agreeing to terms with a landlord. This ensures that you will be protected from any loopholes and costly pitfalls that could enable you to be hundreds or even thousands of pounds out of pocket before you have even started trading!
Think about how long you want your lease to run for…
Your lease ‘term’ will determine how long your tenancy lasts for. You need to be vigilant in deciding this, as too short and you could end up having to relocate, costing you time, money and clients. Too long, and you might find yourself struggling to keep afloat against the pressure of a lengthy lease, especially during quieter periods of business. Striking a balance is difficult, especially as many circumstances are completely unforeseeable.
This is where knowing about ‘break clauses’ comes in handy. Offering flexibility, a break clause permits you to ‘break out’ of the tenancy at a given date. For example, if you have taken on a 15-year lease, you could break out after 5. This is particularly useful when contemplating how long to take on a lease.
Be mindful though, if the landlord wants a break clause to be a mutual agreement, they could also end the lease early, also causing you to have to terminate business within that building – again costing time, money and clients.
Rent review clauses
Rent review clauses can be initiated by the landlord, especially on longer term lets. They are often reviews of inflation and other variables such as the rental yield of similar properties. Ask for the terms of these reviews to be outlined and how often they will happen to ensure you are prepared and not caught out.
Related: Discover our ‘Salon Design Of The Month‘ series for ideas on how to decorate your salon
Noting other charges/outgoings
Most lease agreements require you to pay additional costs as enforced by the law. Depending on the kind of building, and where it is, these additional costs could include building insurance, service charges (especially if it is located in a shopping centre), and general utilities. Again, this is something you should negotiate in your terms and must factor into any costing exercises.
Be aware of VAT charges…
Some landlords are VAT registered and will add an additional cost to your rent. If you are not VAT registered yourself, you could be paying more than 20% extra on top of your flat rate costs. If your salon business is VAT registered, you can claim it back in your annual VAT return.
Don’t forget the deposit fee
Rental deposits vary but a fee that equates to 6-9 months rent is not unusual, and again should be factored in. And although you will get all of it, or at least some of it, back (depending on the condition of the property) this is dead money, especially if you are in a long-term lease of say, 10 years. Try to negotiate a lesser number of months’ deposit up front, perhaps 3 or 4, to make this initial outlay less costly.
Other negotiable factors..
Make sure you hash out who is responsible for any maintenance or repairs of the building your salon is housed within. You can also negotiate that any maintenance you carry out to be deducted from the rent as you are improving the building. Also, make sure it is clear whether or not you are actually permitted to make structural or purely decorative changes.
Lastly, once all of the legalities are dealt with, enjoy the process of setting up your hair or beauty salon business – this is an extremely exciting time for any salon owner. Good luck! Head over to our FACEBOOK and TWITTER pages for more useful #SALONMANAGEMENT hints and tips on setting up a salon.
*We always recommend speaking to a legal professional before signing any tenancy contracts on premises.