1. Milady’s Standard Cosmetology
The Salon Business
Milady’s Standard Cosmetology

2. “You don’t drown by falling in water; you only drown if you stay there”
Zig Ziglar

3. Objectives
Describe the two ways in which you may go into business for yourself
List the factors to consider when opening
a salon
Name and describe the types of ownership under which a salon may operate
Explain the importance of keeping accurate business records

4. Discuss the importance of the reception area to a salon’s success
Demonstrate good salon telephone techniques
List the most effective forms of salon advertising
Objectives
LEARNING MOTIVATION (WHY?)
Most individuals entering the field of cosmetology dream of owning their own salon one day. More than a few actually turn that dream into reality. Owning or even managing a salon is not the right choice for all graduates. The first thing you must realize is that being a top quality technician or stylist does NOT qualify you to effectively manage a business, including a beauty salon. There are many factors to consider before taking the step into ownership or management. Knowledge of business principles, bookkeeping, business laws, insurance, salesmanship, and psychology is crucial for the successful salon owner.
Serving people is one thing; managing people is quite another. In addition, to all the business knowledge you must develop, you will need to develop your leadership, control, and sensitivity. You must learn to plan, supervise, control, evaluate, and, above all, be a team player. In today’s lesson, we will cover many of these basics in preparation for your potential salon management or ownership position.

5. Going into Business- Booth Rental
Responsible for
Own clientele
Supplies and inventory
Record keeping
Accounting
Tax liability
Malpractice
insurance
Health insurance
Purchasing and budgeting
Advertising
GOING INTO BUSINESS
ACTIVITY: Ask students to think back to the goals they set when they first enrolled in cosmetology school. Did they include owning their own salon someday? Divide students into groups and have them brainstorm about the pros and cons of salon ownership. Ask for a volunteer scribe and have him/her record on the board or flip chart in two columns the advantages and disadvantages the students list for owning a salon. (Remember to reward your volunteer!) Upon completion of the list, point out that today’s lesson will cover all this information and more. Then move into the lesson.
NOTE: Explain to students that if they want to go into business for themselves, they will basically have two options: opening their own salon or renting a booth in an existing facility.
BOOTH RENTAL: Also known as chair rental; now practiced in over 50% of all salons. Pennsylvania prohibits booth renting and New Jersey does not recognize it as an acceptable method of doing business. You should be booked at least 70% of the time to consider booth rental.
Rent a station
Responsible for:
Own clientele
Supplies and inventory
Record keeping
Accounting
Tax liability
• Malpractice insurance
• Health insurance
• Purchasing and budgeting
• Advertising

6. Booth Rental Advantages Disadvantages Small initial investment
Minimal expenses
Disadvantages
No paid days off
No sick leave
No paid vacations
ADVANTAGES
Small initial investment.
Minimal expenses. Be sure that you have a large enough clientele to cover the costs of rent and supplies. Verify whether the state regulatory agency requires a license for booth renting.
DISADVANTAGES
No paid days off.
No sick leave.
No paid vacations.

7. Opening Your Own Salon Location
OPENING YOUR OWN SALON: Be prepared to research the idea of opening your own salon extensively before making any final decisions. We can’t possibly cover all the aspects of salon ownership in one chapter when entire books have been written on the subject., unemployment compensation, cosmetics and luxury tax, OSHA.
Location. A very important factor. Should be located near active businesses such as restaurants, department stores, specialized clothing stores or supermarkets — areas where a person can make one stop for several purposes. Should reflect your target market. High traffic cuts down on advertising costs.
Study the area. Know area’s demographics: size, average income, buying habits of the population.
Be visible. Clearly visible and eye catching; signs easy to read.
Parking facilities. Must be convenient and well lighted. Consider near public transportation. Inform clients ahead of time if nearby parking requires payment.
Competition. Avoid too much direct competition.

8. Opening Your Own Salon Written agreements/business plan
Business regulations and laws
Insurance
Salon operation
Record-keeping
Salon policies
Written agreements/business plan. A business plan is a written description of your business as you see it today and 5 years into the future. Necessary to obtain financing and to provide a blueprint for future growth.
General Description.
Area Demographics. Average income in area; average costs of services; number of salons within a 5-mile radius, etc.
Salaries and benefits.
Operations plan/pricing structure.
Projected income and expenses for up to 5 years.
Business regulations and laws
Local regulations. Building renovations (local business codes).
Federal laws. Social Security, unemployment compensation, cosmetics and luxury tax, OSHA.
State laws. Sales tax, licenses, employee compensation.
Income tax laws. Both federal and state government.
Insurance. Malpractice, property liability, fire, burglary, and theft, and business interruption.
Salon Operation. OSHA guidelines. Must have Material Safety Data Sheets to comply with OSHA.
Record-keeping.
Salon policies.

9. Location, Location, Location

10. Types of Ownership Proprietorship Partnership Corporation
TYPES OF SALONS
Individual ownership. Privately owned business OR sole proprietor.
Proprietor is owner and manager.
Proprietor determines policy.
Proprietor receives profits and bears all losses.
Partnership. Privately owned by two or more parties.
More capital is available.
Combined ability and experience. Makes it easier and possibly more successful.
Profits are shared—not always equally.
Partners assume each other’s unlimited liability for debt.
Corporation. Saves money in taxes.
Raise capital by issuing stock.
Stockholders own interest. You can be a sole stockholder or have many stockholders.
Corporate formalities required. Must have officers, director, and meetings, and keep minutes.
Income tax limited to salary.
Unemployment insurance required.

11. Purchasing Existing Salon
Written purchase agreement
Inventory statement
Investigate default on payments
Identify correct owner
Use salon name and reputation (blue sky)
Disclosure of clientele information
Non-compete clause
PURCHASING AN ESTABLISHED SALON
Written purchase agreement. Advice from both an accountant and an attorney is advised.
Inventory statement.
Investigate to make sure no default in the payment of debts
Correct identity of owner.
Use of salon name and reputation, called blue sky.
Disclosure of clientele information. Purchasing and service habits should be included.
Non-compete clause.

12. Drawing Up a Lease
List exempt equipment and fixtures that are separate from lease
Agree on necessary renovations
Clarify option to sub-lease
DRAWING UP A LEASE
ACTIVITY: Ask how many students are currently renting or leasing a home or apartment. Then divide the students into groups and have them list as many elements of the rental or lease agreement that they can remember from memory. Give them 5 to 10 minutes to do so. Have them report their results to the whole class. Point out that much of what they stated will also be important to a lease of a professional facility and then move into the next part of the lesson.
• List exempt equipment and fixtures that are separate from lease.
• Agree on necessary renovations
• Clarify option to sub-lease.

13. Protection Against Fire, Theft, Lawsuits
Keep premises secure and locked
Purchase insurance
Know laws and sanitary codes
Keep accurate records
PROTECTION AGAINST FIRE, THEFT, LAWSUITS
• Keep premises secure and locked.
• Purchase insurance: liability, fire, malpractice, burglary.
• Know cosmetology law and sanitary codes in your state.
• Keep accurate records. Ignorance of the law is no excuse.
NOTE: Ask students if they have ever lost personal property due to a fire. Have them share their stories with the rest of the class. Summarize the discussion with why it’s important to maintain proper protection of your business.

14. Business Operation Sufficient investment capital Management efficiency
Good business procedures
Cooperation between management and employees
Trained and experienced salon personnel
Excellent customer service
Service pricing
BUSINESS OPERATION. Smooth salon management depends on several things.
Sufficient investment capital.
Efficiency of management.
Good business procedures.
Cooperation between management and employees.
Trained and experienced salon personnel.
Excellent customer service.
Pricing of services.

15. Allocation of Funds Average expenses Importance of record keeping
ALLOCATION OF MONEY: A good accountant and accounting system are indispensable.
Average expenses
Importance of record-keeping. Good records are necessary to meeting requirements of local, state, and federal laws regarding taxes and employees.

16. Purchase Records Maintain perpetual inventory
Prevent overstock/shortages
Monitor pilfering
Establish net worth of business
PURCHASE/INVENTORY RECORDS
Maintain perpetual inventory.
Prevent overstock/shortages.
Monitor pilfering.
Establish net worth of business.
CONSUMPTION SUPPLIES: Used in daily operation of business.
RETAIL SUPPLIES: Those to be sold to clients.

17. Service Records Keep record of all treatments and retail
SERVICE RECORDS: Keep record of all treatments given and merchandise sold.
ACTIVITY: Place students in pairs. Have them discuss the management of their personal affairs. Tell them to consider what their personal lives are like and what types of personal records they must maintain in order to live. Tell them to consider things such as paying rent, utilities, buying groceries, paying doctor bills, etc. Have them list the types of records they must keep to ensure the security and safe-keeping of their families. Point out that accurate record keeping is even more important in the operation of a business.

18. Planning Salon Layout Flow and volume of services Adequate space
OPERATING A SUCCESSFUL SALON
PLANNING SALON LAYOUT
Flow and volume of services. Maximum efficiency should be primary concern for type of salon. You must decide what type of salon you are going to open: low-budget or high-end.
Adequate space. Reception, retail, waiting, services, lounge, dispensary, storage, restrooms, changing rooms/closets, etc. Facility should include adequate lighting, air conditioning, heating, and ventilation.

19. Personnel-Hiring Considerations
Skill level
Personal grooming
Image as it relates to the salon
Overall attitude
Attitude
Communication skills
PERSONNEL: Size of salon determines size of staff. The success of the salon depends on the quality of the services provided.
HIRING CONSIDERATIONS: Skill level, personal grooming, image as it relates to salon, overall attitude, communication skills
ACTIVITY: Have students role play the salon owner and the job applicant. Have the salon owner ask questions which will help determine the factors discussed.

20. Payroll and Employee Benefits
Meet payroll obligations
Offer good benefits
Provide employee evaluations
Create and stay with tipping policy
Put compensation plan in writing
Create incentives
Develop effective salon policies
PAYROLL AND EMPLOYEE BENEFITS: As a salon owner, it will be important to make employees feel appreciated and allow them to share your success. Here are some things to consider.
Meet all payroll obligations timely.
Offer good benefits.
Provide employee evaluations.
Create and stay with tipping policy.
Put compensation plan in writing. Give each employee a copy.
Create incentives.
ACTIVITY: Group students into teams and have them brainstorm to develop what they believe to be an effective compensation plan.
Develop effective salon policies. Follow them fairly and consistently.

21. Managing Personnel Be honest with employees Expect the best
Be a mentor
Share information
Follow the rules
Be reliable
Teach them what you know
MANAGING PERSONNEL .
NOTE TO INSTRUCTOR: Point out places where students can learn more detailed strategies for managing personnel. The following tips are effective but not listed in the text.
• Be honest with employees.
• Expect the best.
• Be a mentor.
• Share information.
• Follow the rules.
• Be reliable.
• Teach them what you know.

22. The Front Desk Reception area Receptionist (salon quarterback)
Booking appointments
Appointment book
THE FRONT DESK: Also known as the “operations center.”
Reception area. First Impression of salon created here. Phone system is centered here.
Attractive, appealing.
Comfortable.
Display retail.
Stocked with business cards.
Prominently display prices OR provide a menu of prices to each client.
Receptionist. Is the “quarterback” of the salon. Should be pleasant, greet clients with smile and by name, create goodwill, establish favorable impressions; have thorough knowledge of retail products. The receptionist may be called upon to perform other duties during slow periods such as straightening the reception area, maintaining inventory, and making daily reports.
NOTE: Ask students why the salon’s receptionist is compared to a football team’s quarterback.
Booking appointments. Should be done with care. Services are sold in terms of time. Clients should never have to wait. All salon employees may be required to answer the phone and book appointments. The following elements are essential.
Attractive appearance.
Knowledge of services offered.
Unlimited patience. Patience is necessary for dealing with both clients and salon personnel.
Appointment book. Essential for effective scheduling and time management. May be a book or a computer system.

23. Use of Telephone Make or change appointments Seek new business
Determine why client was lost
Remind clients of needed services
Answer questions
Handle complaints
Receive messages
Orders equipment and supplies
USE OF THE TELEPHONE: A great deal of salon business is handled over the phone. Good telephone habits increase business and improve relationships. Gracious, appropriate responses help build the salon’s reputation.
Make or change appointments.
NOTE: While not in book, the following are several uses for the telephone.
Seek new business.
Determine why a client was lost.
Remind clients of needed services.
Answer questions.
Handle complaints.
Receive messages.
Order equipment and supplies.

24. Good Telephone Usage Use pleasant telephone voice
Show interest and concern
Be polite, respectful, courteous
Be tactful
GOOD TELEPHONE USAGE
Have a pleasant telephone voice. Speak clearly, use correct grammar. Put a “smile” in your voice.
Show interest and concern.
Be polite, respectful, and courteous.
Be tactful. Don’t say anything to irritate caller.

25. Incoming Calls Give cheerful, clear greeting Answer promptly
Provide requested information
Do not carry on a side conversation while on the phone
INCOMING PHONE CALLS — GUIDELINES
Give cheerful, clear greeting. Say “Good morning/afternoon. [Salon Name.] May I help you?” OR “Thank you for calling [Name] Salon. This is Jane. How may I help you?”
Answer promptly. Answer by second ring and take calls in order received.
Provide information requested. If answer is unknown, offer to call back promptly.
Do not carry on a side conversation while on phone.

26. Booking by Phone Know services, products, costs
Know salon personnel’s skills
Be fair when making assignments
If requested styling is unavailable
Suggest another time
Suggest another stylist
Offer to call if there is a cancellation
BOOKING BY PHONE: Take down client’s first and last name, phone number, and service booked.
Know services, products, costs.
Know salon personnel’s skills.
Be fair when making assignments. Try not to schedule six services with one stylist and two with another except by request.
If requested stylist is not available:
Suggest another time.
Suggest another stylist if client cannot come at a different time.
Offer to call if there is a cancellation.

27. Handling Complaints by Phone
Maintain self-control
Be tactful and courteous
Employ active listening skills
Maintain a sympathetic tone
Don’t interrupt
Resolve quickly and effectively
HANDLING COMPLAINTS BY PHONE: Always respond with self-control, tact, and courtesy. Employ active listening techniques. Maintain a sympathetic tone and be reassuring. Don’t interrupt. Try to resolve quickly and effectively.
NOTE: Ask students to share any good or bad experiences they have had with someone in business over the phone. The discussion should bring some levity and humor to the class.

28. Advertising Promote salon favorably Attract and hold attention
Referrals are best form of advertising
Develop ads (or outsource)
Annual budget–3% of gross income
Plan ahead for holidays
ADVERTISING
Promote salon favorably. This could be newspaper, radio, stationery, press releases, charity events, billboards, etc.
Attract and hold attention. Purpose is to create a desire for your services or products.
Referrals are best form. Make all clients happy so they will tell others.
Develop ads or outsource.
Annual budget is 3% of gross income. Plan to spend more during slow periods.
Plan ahead for holidays, etc.

29. Methods of Advertising
Newspapers
Direct mail
Classified/yellow pages
Giveaway promotional items
Window display
Radio
METHODS OF ADVERTISING
Newspapers.
Direct mail. Closer contact with potential client.
Classified/yellow pages. Check availability of co-op advertising with major product lines.
Giveaway promotional items such as combs, emery boards, key chains, refrigerator magnets, etc., that serve as regular reminders of the salon.
Window display. Attracts passers by.
Radio. More expensive, but effective.

30. Methods of Advertising
Television
Community outreach
Client referrals
Contacting former clients
Telemarketing
Videotaped promotions
newsletters
Television. High impact but expensive.
Community outreach. Public appearances at women’s and men’s clubs, church functions, political gatherings, charitable affairs, etc.
Client referrals. Provide incentives to clients for sending referrals, such as discounts on future services.
Contacting former clients. Invite them back.
Telemarketing. Done during stylist “down time.”
Videotaped promotions. Show on VCR in reception area.
newsletters. This medium can offer discounts to clients; always include an “unsubscribe” link.

31. Selling in the Salon
Much of salon’s success revolves around the sale of additional salon services and retail products, which increase salon’s revenue
SELLING IN THE SALON: Selling is becoming an increasingly important responsibility of the cosmetologist.
SUCCESS IN SALES: Much of the salon’s success revolves around the sale of additional salon services and retail products. Adding services or retail products to each ticket means additional revenue.

32. Summary and Review
What are two ways in which you may go into business for yourself?
List 5 factors to consider when opening a salon
SUMMARY AND REVIEW
One of the many attractive features about a career in cosmetology is that becoming an industry entrepreneur is more attainable than in many other fields. However, it is essential to remember that there is much more to owning and managing a successful salon than just having excellent technical skills. Starting your own business is an enormous responsibility and should not be taken lightly. There are numerous records to be kept and laws that must be followed. In addition, there are many considerations in establishing a business that range from selecting an efficient salon layout, to inventory control, to payroll record maintenance, to filing accurate tax returns to maintaining a loyal, happy clientele. A great deal of further research and planning will be required than simply mastering the contents of this chapter, which provide a useful overview of the process.
Let’s review.
What are the two ways in which you may go into business for yourself?
ANSWER: Booth renting or opening your own salon.
List five factors to consider when opening a beauty salon.
ANSWER: Location, written agreements, business regulations, laws, insurance, salon operations, record keeping, salon policies.

33. Summary and Review
Name 3 types of ownership under which a business may operate
What purpose do accurate records serve?
Name three types of ownership under which a business may operate.
ANSWER: Individual ownership or sole proprietorship, partnership, and corporation.
What purpose do accurate records serve?
ANSWER: They are necessary to meet the requirements of local, state, and federal laws regarding taxes and employees. They allow you to determine income, expenses, profit, or loss; assess the value of the salon for prospective buyers; arrange for bank financing; or provide necessary data on income tax, Social Security, unemployment and disability insurance, accidents, and for percentage payments of gross income required in some leases.

34. Summary and Review
What 2 types of supplies make up a beauty salon’s inventory?
Why is the reception area of a salon important?
Why is the receptionist called the salon’s “quarterback”?
Explain the elements of good telephone technique
What two types of supplies make up a beauty salon’s inventory?
ANSWER: Consumption supplies, which are used in daily business operations, and retail supplies, which are sold to clients.
Why is the reception area of a salon important?
ANSWER: It is the center of the salon’s operations. First impressions are created here. It houses your phone center, your retail display, your receptionist, your business cards, your price list, and more. It is the salon’s nerve center.
Why is the receptionist called the “quarterback” of the salon?
ANSWER: In football, the quarterback is basically the leader of the team. He must know all the plays and he must know the skills and talents of all his team members. In the salon, the receptionist must keep the success of the whole team in the forefront of her mind. She must know the talents and skills and speed of each stylist. She must know how to properly match each “player” or stylist with each client.
Explain the elements of good telephone technique.
ANSWER:
Have a pleasant telephone voice, speak clearly, and use correct grammar. Put a “smile” in your voice.
Show interest and concern when talking with a client or a supplier.
Be polite, respectful, and courteous to all, even though some people may test the limits of your patience.
Be tactful. Do not say anything to irritate the person on the other end of the line.

35. Summary and Review List six different kinds of advertising
What is the best form of advertising and why?
List six different kinds of advertising.
ANSWER: Newspapers, direct mail, classified/yellow pages, giveaway promotional items, window display, radio, television, community outreach, client referrals, contacting clients, telemarketing, videos, website, newsletters.
What is the best form of advertising and why?
ANSWER: A satisfied client because he or she will refer your salon to friends and family at no cost to you.

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