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Dec 222014 Gossip
 

Business

HJi’s official Build a Business guru, Antony Whitaker looks at the importance of forward planning in order to avoid common business pitfalls in the first year of starting a new business. If you are a typical aspiring salon owner starting a new business, you will go through the full range of emotions, from excitement and elation to frustration and disappointment. Initially, you will be focused on the salon’s design and build-out, but you’ll also be thinking constantly about ways of attracting and keeping clients and finding staff. But one way or another, the biggest source of stress and potential pitfalls will revolve around financial issues. A little forward planning will go a long way towards helping you avoid them.So take note of these 10 points that threaten to destroy your dream before it’s even started.

1. Having unrealistic cash flow projections. Underestimating how long it takes to break even is a common mistake. You may underestimate some figures and overestimate others; either way the only certainty is that your forecasts will be wrong. If you are not strong on numbers, then enlist the help of a good accountant or bookkeeper to ensure you have realistic but conservative cash flow projections.

2. Being under-capitalised. The new salon owner will often underestimate the costs involved in setting up a new business and risk running out of money before the salon opens, or opening a business that is under-capitalised, lacking the necessary working capital and being left vulnerable to any unanticipated change in circumstances.

3. Skimping on due diligence. Entering into a legal contract such as a property lease should not be taken lightly. There may be some areas in setting up a new business where you can risk cutting corners, but hiring a lawyer to perform the necessary due diligence is not one of them.

4. Forgetting the business plan. A good business plan serves many functions beyond the purely financial and its importance is often underestimated. A solid business plan will guide your decision-making and keep you on track and everyone else focused on your business’s objectives.

5. Ignoring financial systems. Poor financial controls that ignore the need for proper budgeting, tax planning, record-keeping, and knowing the business’s break-even point will spell disaster from the outset.

6. Resisting change. New salon owners will typically copy many of the operating processes from their previous salon. Unfortunately, they will often be following a broken business model. As a new owner, recognise that what worked before may not be the only way or, indeed, the best way. Always be looking to improve the way the business is run and learn to embrace change.

7. Failing to focus on the business. The day you open your first salon is the day your job description changes completely. Being a new salon owner requires much more than merely working ‘in the business’ doing clients, but demands that you work ‘on the business’, devoting time to develop the business management systems needed for success.

8. Forgetting market research. Does your high street, mall or town, really need the products and services you have to offer? Doing the research before you open so that you understand who your target market is and what their needs and expectations are will give you a more focused and cost-effective marketing strategy.

9. Lacking discipline and control over stock. Monitoring stock usage and implementing efficient stock control systems to ensure costs are controlled and margins maintained is essential.

10. Allowing a destructive salon culture. Every business has a culture; it’s just a matter of whether it’s a culture the owner has consciously defined or a default culture that reflects what is easiest for the individuals working there, which probably won’t be what is best for the business. Designing the culture you want in the business is more important than designing the decor but rarely gets the attention it needs, especially at the beginning.

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