I usually go for an expensive haircut every 6 weeks (£58) in London (shoreditch), but I am WFH in another city at the moment with the same brand of hairdresser so I went there today, lower COL city so price was £42, and was asking the lady how many clients she gets a day. Was curious because its always busy and seems like a simple business model.
- 12 clients per day
- 4 hairdressers (in shoreditch there are 6)
- 1 receptionist
- Closed sundays
- Est. 70% capacity Monday - Wednesday, 100% Friday - Sat
- COGS 10% (Elec, water, insurance, product,Pulled out of my ass)
- Rent: ~£5k a month (Look at comps in London hipster areas)
Based on these assumptions the owner makes between £100k and £200k from an outlet with 4 hairdressers and 1 receptionist depending on variable costs.
Tell me why this is'nt a great 'passive' investment idea for circa ~£100k capital to set up and run for initial 6 months.
I'd be tempted to approach the manager of the outlet I usually go to and ask if he wants a % to start up a new shop. he has a following of customers and v well known.
I seriously doubt anyone routinely gets 12 expensive haircut clients a day. I also get expensive haircuts ($80 or so, including tip). An expensive haircut can easily take an hour, with most people coming in weekends and 4 to 7 pm on weekdays.
I assumed all were 45mins @ £42 and @ 70% capacity mon-wed, closed Sundays
how many customers do you estimate at your place
The place I go to does expensive and "regular" haircuts. They do a few haircuts between 10 am and 4 pm, but most of their business happens after work and on weekends. The expensive cuts include shampoo, head massage, hot towel, and hot neck shave. 45 mins to an hour+. Sounds like you're in London so maybe across the pond there are more men who are into really nice haircuts, but in North America, it's few and far between. Developing consistent high-end clientele would be pretty difficult.
Few questions on your assumptions. Let's walk thru real quick:
12 clients per day per barber * 4 barbers * 20 days per month (guess we're excl Sun and The) * 42 pounds per cut = 40k pounds generated per month
Assuming 80% blended capacity means 32k per month. What are the staff costs? You're saying rent of 5k and other COGS of 10% of revs (3k or so), which means 24k before paying your barbers. Assuming minimum wage of 9 pounds per hr per dresser, that's 9 pounds * 8hrs * 20 days * 4 dressers = 6k per month
So we're assuming 18k in profit per month (pre receptionist), or 220k per year. Receptionist probably eats another 30-40k, so let's say you have 180-190k in profits per year. Some of may numbers could be slightly off but we seem to have ended up with roughly the same figures.
You might need to be around to supervise this. Quality control of barbers will not be easy to assess and maintain (not to say you couldn't do it, but it's a taller tree to climb than you'd think). Next is quality of the place (are the barbers cleaning the hair properly, does the place look neat and welcoming, etc). Unless you want to hire someone for this or fork over more cash but even then, will they do a good job? Know some guys who own a restaurant, they're personally there 6 days a week for at some part of the time given otherwise the staff just don't do as good a job. Scaling is tough naturally, although that's a different story
2. What expertise do you have here? How do you ascertain and maintain quality to ensure guests keep coming in? How much does quality matter vs. being hip or trendy? How do you know people will continue to be willing to pay your ASP? Will this guy screw you (vs. being the one maintaining the shop)? I am very uneducated on this sector so perhaps these are basic, easy questions to answer but things to consider before proceeding.
If you do a 50% rev share, you're basically getting 90k per year, will turn into a 9x over 10yrs. Not bad at all, but you really want to know the nuts and bolts of it before jumping in. I'm skeptical that unless you want to personally sink a lot of time into this that (continually) it might not turn out very well
I've been thinking about this too myself in the states. We have a bunch of haircut chains, which I personally like because the hair dressers don't try to build a relationship with you.
My thoughts on becoming an entrant into the business was scouting the top talent at the local chains and paying them more. In your case, assume you're making the $180k-190k thats a lot of money, even if you were actively invested in the business. But, you're going to need to be fairly involved to the point where it'd interfere with your main income streamif you want to keep your full time job. To truly make it passive you can bite the bullet and make it rain for the best by paying above the minimum wage. At the end of the day, if you can make $150k or even $100k of truly passive income where you check in maybe twice a month you're still winning. I think it'll work, but maybe thats the naive business man and socialist in me.
Im going to be working at my normal job 2-3 days at home, which could conceivably be at a purpose built office space inside a hairdressers.
Assumptions were -
45 min cut - £42
60 min cut - £50
Revenue
I assumed all cuts would be 45 mins for simplicity
4 chairs / 12 clients a day max (540 mins/9 hrs p/d), open 10am-6pm
Revenue -
Mon - Wed 70% chair occupancy - £1,411 p/d
Wed - Sat 100% chair occupancy - £2,016 p/d
Weekly - £8.870
Monthly - £38,403
Yearly - £460,905
I didnt bother considering upselling products but that could conceivably be another +10-15% rev
Costs:
Receptionist in during opening hours 54 hours weekly total (2 x part time) - £10 p/h - £28k p/a
Barbers 216 hours total weekly - £13 p/h (want quality, and to poach from established shops and take some of their following) £145k p/a
Rent £65k yearly (overestimated - there is a retail comp next to the shop I go to up for rent at 55k)
COGS £46k
Total costs p/a £285k
What is this #unsexy business nonsense. This business is all about being sexy.
Also, george clooney cuts his own hair.
In UsA expensive salons with similar markups charge more based on “amount of hours experience stylist has. So like intermediate/advanced/master stylist. An advanced usually is around $75 for a cut. But at least here around 50% of that goes to the stylist no stylist is making “minimum wage.” So the margins are not amazing on just 1 salon but a well-known owner with 3 who has a fleet of 27-45 years old working for them does well.
My wife bumps into stylist she likes from time to time who always want consider going on their own...but lack the hustle/marketing/organization to manage the staff and grow it.
Then there is a whole turf war about stealing clients...so poaching a manager for a top salon to go out there own no guarantee you going to get the stylists or book of business with them.
buddy...all these independent hair salons are money laundering fronts. no one is regularly getting £40-50 hair cuts. maybe only in the city or in a hippie place like Shoreditch.
the owners a nerd with a background in account mgmt/operations at a tech startup
Hairdressers often move around and take their clients with them. It is hard to build a book. Often hairdressers work independently and share space/receptionist. They are sort of subcontractors leasing a chair. I think you're probably overestimating the booking density.
would need 55% capacity each day to break even on these numbers
that means 6.6 customers per day per chair with 45min sessions
(in which case could get by with 3 hairdressers, and less cost)
thats 606 customers p/m
7274 customers p/a
say customers are getting 7-8 haircuts per year
would mean 1039 unique customers to sustain the business
and on 55% capacity less one barber I'd estimate profits of £25-35k, which is still a crazy return on £100k outlay
Are you still doing the pizza vending machines?
still weighing it up vs opening a pizza franchise (like dominos, PJs etc). leaning toward a delivery franchise because one brand is actively looking for franchisees in my hometown, where there are currently low numbers of that brand vs other brands. monitoring a guy in the region who opened 4 of the same franchise over the past two years in the general location.
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