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How to Start a Barbershop

Overview

How to Start a Barbershop

In today’s fast-paced world, a trip to the barbershop encourages us to slow down. If you have experience working as a barber, you probably already know the meaningful connections and relationships that good barbers forge with their customers. When you start a barbershop of your own, you can continue to develop these customer relationships while turning the business into the store of your – and your customer’s – dreams. Owning a barbershop can be a financially and emotionally rewarding venture as you help customers achieve their ideal looks.

Business Overview

Barbershops have been around for centuries, and they’re currently enjoying a resurgence in popularity. These shops specialize in grooming for men and boys. They offer services, including hair cuts, shaves, hair care, and more, and many sell specialty hair and shaving products, too.

Many barbershops thrive on the small-town, close-knit feel that they can establish with their customers. Traditionally, shops are small, with just a few barbers on staff. Barbers are known for striking up conversations with their customers as they work, leading to a relationship and familiarity with customers. In many ways, barbers offer their customers an experience, rather than just a cut or a shave, and that experience and focus on the customer’s individual style and preferences is what helps barbers to earn loyal customers.

Industry summary

The barbershop industry has recently experienced growth, and that growth is expected to continue. According to IBIS World, the barbershop industry experienced 1.8 percent annual growth from 2013 through 2018. During that time, the number of businesses increased to 147,406, and industry employment also grew to 160,037. In 2018, the industry brought in $4 billion in revenue.

The industry’s increased revenue is due to several factors. While demand for services hasn’t necessarily increased, a growing population has increased shops’ customer bases. As shops have expanded into more specialized services, they earned more money per customer in 2018 than in 2013, leading to increased income. An increase in per capita disposable income during that same time means that customers are more likely to purchase elective services, like shaving, than they were previously.

Related Industries

Hair Salon
Microblading

Industry Trends

The barbershop industry is constantly evolving, and barbers need to keep up with all of the latest style trends to deliver what their customers are looking for. According to the National Barbers Association, one major trend that barbers should embrace is that women are increasingly looking for shorter hair cuts. While barbers traditionally cater to men, encouraging women to step into the shop could open these stores up to a new customer base. Celebrities, moms, businesswomen, and more are looking to change their styles and go short with their hair. Barbershops should showcase their cuts to both male and female audiences.

Elegance notes that barbershops stand to benefit from the increased focus and value that men are placing on grooming. While customers can order cheap razors and products online, they’re willing to pay a premium for the personalized service and the higher-quality products they can get at their local barber. Specialty services, like hot towel shaves, are increasingly in demand, and barbershops are experiencing a resurgence as a result.

Target Market

Barbershops traditionally market to men with hair care or personal grooming needs. Many shops also offer haircuts for children. Some shops also market to women. A barber shop’s specific target market will depend on the services it offers and any of its specialties, like providing luxury, higher-end services, or creating cutting-edge, bold looks.

Checklist for Starting a Barbershop

If you’re thinking about starting a barbershop, it’s important to do your research first. Here is a checklist to help you get started.

Step 1: Write a Business Plan

After coming up with an idea, the next step in starting any business should be to write a business plan.  Not only will a bank require you to have one, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.

Related: How to write a business plan

Step 2: Form a Business Entity

A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.

When deciding on which business entity is best for a barbershop, it normally comes down to the sole proprietorship and Limited Liability Company.

A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
 
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.

That leaves the sole proprietorship and LLC.

The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is that the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.

Related: Guide to forming your LLC
 

Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.


Some popular LLC formation services include:


IncFile - $0 plus state fees & free registered agent for 1 year!

IncAuthority - $0 plus state fees & free registered agent the first year!

ZenBusiness - $49 plus state fees & free registered agent for 1 year!

Step 3: Name the Business

Finding the perfect business name for a barbershop can be challenging. Not only does the name have to resonate with your customers, but it also has to be available to use.

Related: Tips and ideas for naming a barbershop

Step 4: Select your Location

Barbershops will need spaces that can be modified to accommodate their needs for space, different stations, sinks, and more. Rental costs will vary depending on the size and location of a building. Buildings in prime retail areas that are convenient and easily accessible will carry higher rents, but they can also generate walk-in traffic and help to build public awareness of the business.

Related: Choosing a business location

Step 5: Apply for Business Licenses and Permits

A barbershop will need to obtain certain business licenses and permits. These permits and licenses can vary based on the state and town where the business is located.

The first license to focus on is obtaining the necessary certifications to be a licensed barber in the state where the shop will be located. Barber License states that all 50 states regulate and license barbers. Because a barber’s work affects public health, barbers must acquire a license before opening a shop and are subject to regular inspections. Different states have different licensure requirements, and you may need to complete a barber program, an apprenticeship, or both.  Each state’s board regulates certification training. Certification typically takes around nine months to complete, and fees range between $20 and $100.

In addition to a state barber license, there are a few general business registrations that may be needed, such as a business license, sales tax permit, Employer Identification Number, and Occupancy Permit, among others.

Related: Common business licenses, permits, and registrations by state

Step 6: Find Financing

Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a barbershop is another.  Funding to start a barbershop business can be difficult.  In order to get a loan, the borrower(s) will need to have good credit and be able to invest 15-25% of their money towards the total start-up costs.

Related: Finding the money to start a business

Step 7: Open a Business Bank Account

Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
 
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.

Step 8: Get your Marketing Plan in Place

Marketing is important both in starting a barbershop and in continuing to bring in new clients. Marketing can take on many forms, from print advertising to social media to radio ads. Customer review sites like Yelp, Facebook, and Google are important as many new customers will check feedback before deciding on trying a business for the first time.

To help your barbershop stand out, don’t underestimate the importance of turning each customer’s visit into an experience. Small elements, like having quality reading material and complimentary water and snacks available, can instantly elevate a customer’s experience. Providing great customer service is essential, so focus on hiring barbers who are engaging, friendly, and who can easily establish connections with their customers.

Related: Low-cost ideas to market a new business

Every business is going to need a logo. Make a professional logo in no time with the free Canvaa logo maker!

Step 9: Get Business Insurance

There are several types of insurance to consider when starting a barber shop business. A few of these include:
– General liability insurance protects the business if a customer is ever injured while on the business’ property. This insurance can cover costs like legal fees that result from the accident.
– Commercial property insurance protects the shop against property loss and supplies after an event, like a fire.
– Workers compensation insurance helps cover potential expenses like medical bills or lost wages if an employee is ever hurt.

Factors like the shop’s location, the value of the building and equipment, and the number of employees on staff can all affect the cost to insure a barbershop. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. When comparing the quotes, be sure to consider important factors like coverage limits and exclusions, premiums, and deductibles.

Related: What types of insurance does a barbershop need?

Step 10: Hiring Employees

A barbershop owner can act as the sole barber, but at some point, the business will likely need to expand and hire additional barbers. According to the U.S. Bureau of Labor Statistics, barbers make a mean hourly wage of $15.97 and a mean annual wage of $33,220. The hourly wage can range from $9.27 to $25.29, while the annual wage ranges from $19,280 to $52,600. Factors like a barber’s location and years of experience will affect wages.

In addition to budgeting for employee salaries, a shop will need to budget for other expenses like workman’s compensation insurance, paid time off, and health insurance contributions.

Instead of hiring employees, some barbershops will instead rent out chairs to other barbers.  While this guarantees a monthly income for the owner and not having to hassle with payroll taxes, the owner is somewhat limited to the amount of control the business has over the work of the renter.

While it is a lot less expensive to have independent contractors, there are important considerations to not incorrectly classify employees as contractors. The IRS has a guide with more details for deciding whether someone should be classified as an Employee vs. Independent Contractor, but basically, if an individual rents a chair, provides all of their own tools, and determines their own hours, they are most likely an independent contractor. If you pay the barber through a commission and/or regulate when they work, they would likely be considered an employee. Commissions generally range from 30 to 70% of the barber’s profits.

Related: Hiring your first employee

Step 11: Set up an Accounting System

Setting up an accounting system for your barbershop is critical to the long-term success of your business.

Staying on top of taxes not only keeps the business out of trouble with the government, but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.

Related: Setting up the accounting for your business

The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:

- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.

Find bookkeepers in your local area or use a service like 800Accountant.

How much does it cost to start a barbershop?

Barbershops tend to have high startup costs. The size of the shop will affect the cost, especially when you’re outfitting multiple stations. Plan to spend $75,000 to start a smaller shop with just a few stations; larger shops can cost $150,000 and more.

Some common startup costs for a barbershop include:
– Barber school – $5,000 – $10,000
– Shop equipment and supplies such as clippers, scissors, trimmers, combs, etc. – $2,000 – $5,000
– Inventory including shampoos, shaving cream, and styling products – $1,000 – $2,000
– Furniture such as barber chairs, child seats, waiting area chairs, TV, cash register, etc. – $15,000 – $50,000
– Scheduling and management software – $3,000-$5,000
– Signage – $1,000 – $3,000
– Initial marketing and website – $500 – $3,000
– Working capital to fund the first few months of rent, utilities, internet, insurance, payroll, etc. – $5,000 – $15,000
– Shop renovations – $???

How much can a barbershop owner make?

According to The Barber School, barbershop owners make an average salary of $30,000. However, many factors can affect a barbershop owner’s income. The number of years the shop has been in business, the shop’s size, and the shop’s location can all affect its profits.

What skills are needed to run a barbershop?

While starting and running your own barbershop doesn’t require a business degree, certain skills and experiences can increase the chance of this business being a success.

Barber experience. In addition to holding a barber license, a shop owner needs to have experience working as a barber to understand this industry’s challenges and nuances.

Active listening skills. A barber needs to be able to actively listen to clients to understand what they want.

Interpersonal skills. Great interpersonal skills are a must since any barber needs to know how to listen to customers and create an environment where they feel welcome and understood. Making small talk and establishing connections with people is important since this can help build customer loyalty.

Attention to detail. A barber needs to pay attention to all of the details in a business, from the work they do for clients to the shop’s cleanliness.

Physical endurance. Barbers spend long hours on their feet, and shampooing, styling, shaving, and tending to customers is physically demanding. A shop owner will need physical strength, dexterity, and endurance.

What is the NAICS code for a barbershop?

The NAICS code for a barbershop is 812111.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code?

Resources:
American Barber Association
National Association of Barber Boards of America
National Association of Barbers
National Barbers Association
Professional Association for the Beauty Industry

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