How to Create the Perfect Barbershop Business Plan [Free Template Inside!]
You have the skills. You got the passion. You’ve acquired the know-how. Starting a barbershop is a good option too, because in 2021 alone, there was a 1.3% rise seen in the grooming industry. Just look at this stat- an estimated $4.9 billion is generated, every year in the hair and salon industry. So what’s missing? Well, the thing you’re missing is a barbershop business plan.
Having a clear action plan and understanding of your business and what will impact it is extremely important.
Even if you are a veteran in the industry, knowing how your business is performing and keeping a hardcopy of your goals and forecasts is always a good idea. Especially if you want to secure funding.
Yes, we understand. Crafting a business plan that caters specifically to your barbershop can be tough. And while we cannot help with personalization, we can definitely help with providing some tips and techniques which will help you to write the perfect business plan for your barbershop.
Here’s a comprehensive guide on how to create a business plan for your barbershop business, completely from scratch. Here’s a list of what we will be discussing, you can jump to any section directly by clicking on the links. We even have a handy template for you at the end!
- What is a business plan and why do you need it?
- When do you need a business plan?
- How to create a barbershop business plan from scratch?
- Bonus: Business plan vs Budget
- 4 common mistakes to avoid when creating your business plan for a barber shop
- Parting thoughts
What is a business plan and why do you need it?
One thing that should be clear is that there is no set definition of a business plan. Generally, a business plan is a document that defines your goals and what your plan of action is to achieve them.
Your milestones and plans need to be documented so there is a hard copy of all the details and goals. This makes it easier to keep track of things. It is a good tool to organize your thoughts, and assist you in creating timeline graphs with solid projections to reach your targets.
Now that we know what a business plan is and why we need it, let’s cover a few scenarios that outline when you need a business plan.
4 situations where you might need a barbershop business plan
I. When you are just starting:
When you are starting out, a business plan can serve as a solid plan of action and can significantly clarify your next steps.
Having the experience of creating business plans and inputting correct numbers and stats is always valuable and will help you when you need to make a barber business plan to secure financing.
II. When you are bringing in partners:
Asking someone to be a partner in your business venture is a huge commitment and it needs a thorough evaluation. What better way to convey your vision than to use a business plan and show every relevant detail?
III. When you are embarking on joint ventures:
An agreement between two companies where they share their work and profit, for similar or even the same goals is a joint venture. A business plan here would be a handy tool to relay the vision of your business and all the required information, like projected profit and loss, tactics and every other relevant detail.
IV. When you need to secure funding:
A well-written business plan for a barber shop will summarize your business’ history and background, which you can then use to successfully communicate to banks and investors and secure financing.
Lenders will want to know the actual potential of your business, and so every detail in your business plan is important to showcase that very potential.
How to create a barbershop business plan from scratch?
There are multiple approaches to making a business plan. There are online functionalities, like SCORE or hiring someone from Fiverr or Upwork where they might charge anywhere from $20 to $500 depending on the contents and your needs for the business plan.
You can even consult a professional business plan consultant who will charge between $5000 to $20,000. Some might even charge up to $50,000.
But the most cost-effective way of creating a business plan is to create your own, from scratch. This way you can follow the guideline that we have provided and personalize it to fit your business needs and branding. After all, no one will know your business, better than you do.
Keeping that in mind, the following are the components of a business plan:
I. Executive summary
An executive summary is an overview of a document. The length and scope differ depending on the document. In general, an executive summary is anywhere from one to two pages long.
Usually the executive summary is written last, since it is much easier to write it when all the ideas of barbershop business plans are in place.
II. Business description
This is where you combine the key details of your business, what you do, your USP. It briefly includes: crafting a problem statement, identifying the target market, explaining the concept and strategy.
It is always a good idea to follow the 5 W’s. The Who, What, Where, When and, Why.
- Who: Who are you? Who is your target customer? Describe who you are, your name, business name, and target market.
- What: What is your service, describe what you do. Investors will want to know what you do. Use specifics and be clear.
- Where: Where is your business located? Mention shop setup parameters, and the exact location of either where your business is, or where your business will be located.
- When: What are your projections? Mention the timeline, note your short-term and long-term milestones. Aiming to expand your business and set up barbershop chains in the next 5 years? Note that down!
- Why: Why would your customers want to come to your barbershop? What is your USP, why are you any different from your competitors in your area? Also, note your mission statement to mention why you’re in your business.
III. Industry overview
This is basically an overview of your business’ industry. What is the size of your industry, what sectors does it include?
- Give an overview of the industry. Keep it brief and concise.
- Find the trend and patterns and the factors that affect the industry as a whole. (eg: COVID19 drastically reduced footfall in all barbershops).
- Describe your company’s position in the industry. Mention opportunities that your business can take advantage of to have a solid footing within the same.
IV. Market and competitor research
Market research is having an understanding of your buyer persona, your niche market, and what affects your persona’s decisions. The way you can go about doing market research is:
- Conduct face-to-face discussions.
- Create your buyer persona.
- List out your primary competitors.
- Check the pricing of your competitors.
Competitor analysis helps you identify your own value proposition and what makes your service different from other barbershops in the area. It tells you why your competitors are succeeding and also why they are failing.
- Start by making a note of their sales and marketing channels and tactics.
- Look at their pricing strategy.
- Analyze which strategy works best for them.
- Perform SWOT analysis.
V. Sales and marketing channels
It is crucial for your customers to know that your services exist, which is why you need a marketing plan. While it might seem obvious, a lot of businesses, especially, high-touch services like salons, spas and barbershops, underestimate the importance of marketing.
Marketing is not just pamphlets or advertising on the local billboard. It’s a promotional activity that requires public relations. Things have gone online, especially since Covid19 became a thing, and while services might be back offline, you have to adapt your marketing channels to online marketing.
- Will your advertising be online, through Google my business, or local online directories like Grand Local, or Beauty Seeker?
- A good way to advertise is via a website or booking portal?
- You can leverage reviews left for you to attract more business?
- You might even want to start video marketing, a simple shot of you or your barbers cutting hair, maybe some sort of a tutorial, or also do product reviews.
Here is a more in-depth guide on marketing your barbershop, for you to never fail in marketing again.
Just hearing the word “budget” might make you feel anxious, but don’t worry. We’re here to help. This section will help you evaluate where our finances currently stand and what you need to do to hit your goals.
Basically, the process is for you to list your monthly fixed and variable costs, and then make decisions regarding the usage of your funds.
Making sure your market research is done well, is your first step. This is because a budget is decided by your business’ return, and you need to know your buyer persona well.
Bench quotes that “Budgeting + Book-keeping = a match made in heaven”. When your business is new, your budget is entirely fiction. The longer your business has been operating, the more solid groundwork you will have to make that fictional budget a functional budget.
To do that, you have to make sure that you are recording all your financial data through thorough bookkeeping. Here is a handy template that you can use to record all of your existing finances.
VII. Financial projection
This section provides a snapshot of your company’s future financial position. If you’re an established business, you should include historical data too. Banks and lenders like to see at least three years of your barber shop financial plan in the barbershop business model.
Regardless if how long your business has been in existence, this section should include:
You can have short-term sales forecasts and long-term sales forecasts depending how long your business has been around.
If you are a new business, and you do not have enough historical results, it might make forecasting challenging. But having a good understanding of your marketing will make this job significantly simpler.
Note how many appointments you had in a month and the prices of each type of haircut and service that you provided.
It will outline how much revenue is coming in – which basically is going to be how much you charge for your services and how much is going out, monthly, and project the expected inflow and outflow based on that.
This is the inflow and outflow of revenue, how much you charge for your services, and how much is going out (in renting your shop and buying resources), monthly.
You can estimate approximately what your cash-flow statement will look like using your sales forecast and budget forecast – basically your barber shop business model.
It is every business’s dream to achieve the break-even point. Break-even is when you are neither losing money nor gaining profits. This means, your profits and expenses are exactly balanced and you have broken even!
If you have done your sales and cash flow prediction accurately, then it should be feasible to find the break-even point.
The information that you will need at hand is your costs and expenses. All the variable and fixed costs, employee salaries. Make a spreadsheet. This spreadsheet, ideally, should be turned into a graph to plot break even.
Calculating break-even can seem tough for a service business like yours. To say it simply, break-even is:
Fixed Cost per unit / (Sales per unit – Variable Cost per unit)
Here, units can be products you’re selling, like shampoo, hair talc, gel etc or types of services.
Balance sheet projection:
What is a balance sheet? A balance sheet determines where you stand financially in your barbershop business by keeping track of all records and elements of your business. A balance sheet should ideally have:
- Assets: An asset is anything tangible owned by your business. It can usually be liquidated and be turned into cash. Your assets can be separated into current and noncurrent assets.
Current assets are what you can expect to convert into cash within a certain period of time (eg: a year).
Noncurrent assets are long-term investments that you do not expect to convert into cash in the near future.
- Liabilities: This would be anything that your business owes to a debtor. It may include utilities, rent, taxes, etc. Just like your assets, your liabilities should also be separated into current and non-current liabilities.
- Equity: This is the difference between your assets and liabilities, what remains when the business sells all its assets and pays off all its debts.
VIII. Management team
There are two reasons this section is required:
- One is for the lenders. In service businesses like yours, lenders feel the quality and experience of the management team is important.
- Another reason is for you, as a business owner, to know your team’s skills and decide what resources might be needed. Include details of what your team is offering in terms of intended results.
This section is usually the last thing to appear in barbering business plans. Although not absolutely necessary, a well-structured appendix can really persuade the reader that your plan is well thought out.
Generally, an appendix will include:
- Charts, graphs, or tables that supplement information from other sections.
- Any agreements, contracts, and supporting documents.
- Marketing materials.
- Resumes for each of your staff members.
- Barbershop tools.
- Credit history.
- Building permit and equipment lease documentation
Bonus: Business plan vs Budget
A common mistake people make is that a detailed budget is the same as a business plan. While it is true that a well-defined budget is very important, a good business plan is more than just the inflow and outflow of expenses.
the role of a business plan is basically to explain what one hopes to accomplish with their barbershop and how they will accomplish it. It is also an important documentation for financial institutions or investors to see whether their shop is worth investing in.
Role of a budget is to be those primarily internal documents that one will use to track income and expenses and determine where all the spending is taking place. Needing tools or giving someone a raise, all comes under budget.
4 common mistakes to avoid when creating your barbershop business plan
There is nothing wrong with making mistakes. After all, it is human nature. That being said, we can always work harder to minimize those mistakes. Here are 4 mistakes you should avoid making to make your business plan foolproof:
I. Using a static plan
Always keep in mind that things change overnight in businesses. All assumptions you made, might become moot when one aspect of your business changes.
Your business plan is where you keep a note of everything that is happening, and how those things might change your projections. Your planning is an ongoing process, which should change when the situation of your industry, your market, your competitors, and your own business changes.
Keep your business plan fresh. Keep reviewing and revising it.
II. Unrealistic projections
Every detail and statistic should be based on realistic data. Hockey stick forecasts are unrealistic. You cannot be too optimistic with no real historical data where you have seen unusual profitability in your business.
Projections have to be built from ground-up data. Lenders will understand if your forecasts are not right by looking at industry averages. If your business plan projects a margin much higher than established businesses in the industry, then that demonstrates a lack of understanding.
III. Ignoring idea validation
Making sure your plan is proofread multiple times is imperative. Include your team in the process. Don’t be scared of a 2nd opinion.
In fact, if you think you’re not business savvy enough to navigate through your business plan and figure out the mistakes, then you can get help from a business advisor.
IV. Vague goals
Having vague goals like “being successful” is meaningless. Wanting to be successful is not a problem, but that is an unclear goal. Success is subjective.
The objective of the business plan is to get solid results, and just like unrealistic projections, setting vague goals will not help you get your desired results. You need goals that can be tracked.
Unclear milestones will not only be meaningless to you, but also to the investors, no matter how excellently you present it in your business plan.
Always remember, there is no right way to create a business plan. While there are components and elements that are necessary, it is not a hard and fast rule.
Having a barbershop business plan is not about being a 100-page long essay, but about setting realistic milestones that you can track, and make changes while constantly reviewing your progress.
To make it simpler for you, we made a template curated for you!
All of this might seem overwhelming. After all, how do you track all employee’s schedules and track their progress accurately? Well, for this very reason, Appointy has a barbershop software that helps you track real-time reports of your business, take care of your appointment scheduling needs, and manage your admin work!
Happy planning 🙂
We at Appointy, help business owners grow and run their businesses with our online scheduling software. This blog was a part of our ‘Manage your Business’ category, where we provide expert tips, and resources, or simply talk about the challenges that small and medium businesses face every day.
If you have any thoughts on this blog or would like to chat about your business struggles and achievements, let us know in the comments below.
We love a good talk!