The Nail Salon Business Plan - The Firefly at Madison

As a public service, we’ve put together the Nail Salon Business Plan. This is because there are readers who want to live out the American Dream by renting a place on the town square in some little town to start a nail salon. This applies equally to hair salons, beauty supply places, and burger joints. There are lessons in this for everybody, including B&B Operators.

We at the Firefly, pretty bed and breakfast near Madison GA don’t pretend we are immune to the laws of economics. We are right in the middle of it, in fact, as we live out the Bed and Breakfast Life.

I have a nice Excel spreadsheet that does all of these calculations for you. You might want to learn how to use it yourself. Contact us and we will send it to you.

The Proposition

So this is the Nail Salon Business Plan. You are so good at doing nails, that you feel you can own your own shop. Keep in mind that you need at least five years of experience and a license to do this in Georgia. because we don’t want people getting sick. These same rules apply, in a general way, to anybody that wants to open any kind of retail business even if you don’t need a license.

So the proposition is, you rent a place, get some furnishings somewhere, and you take care of peoples’ nails. You are a respected person in the community, you have a customer base that loves you, and you make a lot of money. Then, you expand and make a little nail empire, because you can. Then you branch out into beauty supplies.

This is such a popular proposition that in some of these Little Southern Towns, we have noticed multiple of these.

Small Town Retail Business Plan: Location

So the first part of this is the question of where to put it. Here is a table, with data from datausa.io plus the Georgia Bureau of Investigation.

County	Town	Population	Income $/year
Morgan	Madison	18,000	62,350
Greene	Greensboro	16,000	49,755
Oconee	Watkinsville	37,000	88,308
Jasper	Monticello	21,000	51,245
Walton	Monroe	90,000	58,370
Newton	Covington	106,000	53,309
Rockdale	Conyers	89,000	57,049
Putnam	Eatonton	13,000	43,824
Taliaferro	Crawfordville	2,000	31,387
SSTB	SSTB	26,000	36,529
Barrow	Winder	76,000	57,548
Dekalb	Atlanta	765,000	64,461

County	Town	Commute (Min)	Avg Age	Poverty %	Crime
Morgan	Madison	23	44	10.5	7.86
Greene	Greensboro	25	49	22.3	12.04
Oconee	Watkinsville	21	40	5.9	12.46
Jasper	Monticello	24	46	16.0	16.99
Walton	Monroe	31	39	12.9	19.53
Newton	Covington	31	36	17.9	24.89
Rockdale	Conyers	29	37	15.2	24.75
Putnam	Eatonton	31	42	17.8	19.16
Taliaferro	Crawfordville	32	46	28.0	1.24
LSTB	LSTB	22	41	22.3	32.02
Barrow	Winder	32	35	12.1	19.00
Dekalb	Atlanta	30	36	16.6	43.49

Location: Things to think about

First of all, do you want to put your business in a place where there are a lot of rich people, or a lot of poor people? It does not take a business school genius to figure that one out. The Nail Salon Business Plan says to pick the right location.

Madison, in the grand scheme of things, is pretty good. Average income is nearly the same as Atlanta, but the crime rate is one of the lowest in the state. The poverty level is low also, so there are people with disposable income that won’t shoot you. Plus the commute is short, so people have an extra few minutes per day to get their nails done.

Watkinsville, which is commuting distance from Athens is downright prosperous because it is near the University of Georgia. Winder, which we also liked is also good. Average income is relatively high, and crime rate is still tolerable. In both of these places, there are big famous companies running big factories on the edge of town that provide jobs.

This former drug company is now the tattoo parlor

The Little Southern Town Blues

The place “LSTB” is the “Little Southern Town Blues” town that we have blogged about. A quarter of the population is below the poverty level, and it has a crime index of 32 per thousand of population. This is nearly as crazy as Atlanta. Oddly, maybe not oddly, the competition for beauty places is stiff. There were at least four around the town square when we were there.

The more rural places around, namely Greensboro, Eatonton, and Monticello have higher poverty, older populations, and higher crime. If your business idea is to sell oxygen to old people, this might be for you. The suburban places, Covington and Conyers, have nice big populations, but are a bit crazy, and the people spend more time in their cars.

The place out in the country, Taliaferro County, has the second lowest population of any county east of the Mississippi. 28% of the people that do live there are below the poverty level. Better pass on that place. Evidently there is not anything in town to steal. At least crime is low.

The point of this: You can improve your odds slightly by picking the Little Southern Town just right.

The Little Southern Town Business Plan: Overhead

Rent/Sq Ft/Year $	10.00	12.00	14.00	16.00
Rent/Year $ (for 1000 sq ft)	10,000	12,000	14,000	16,000
Employee Salary $/year	30,000	30,000	30,000	30,000
Payroll Tax$ year	1,860	1,860	1,860	1,860
Your Salary $ year	25,000	25,000	25,000	25,000
Your Payroll Tax $/year	3,100	3,100	3,100	3,100
Utilities $/year	2,400	2,400	2,400	2,400
Total Overhead Cost/Year $	72,360	74,360	76,360	78,360
Daily Gross Profit to Break Even $	289	297	305	313

The first thing you’re going to find out is that it is hard to know what your rent is going to be. You will do what I did. This was to google “commercial real estate near the county square” and come up with a description of the property, and no idea of the rent. There is a link down below.

Mystery Rent

That is because the people that own these places don’t want you to know, and also, because they are a bit negotiable. Sometimes they will give you a break on the rent temporarily to get your business established. This is up to negotiation between you and them. One thing that will help you is to develop an understanding of math.

What I’ve done in the table above is to do the calculation by square foot, and make it variable. The range is between $10 and $16 per square foot. It is widely believed in this area that the typical rent is in this range. These calculations, by the way, are for a rather small 1000 square foot storefront. They also don’t include one dime for improvements and fixtures, so keep that in mind.

Little Southern Town Employees

Next, you are going to need a helper or two. I am throwing out the figure $15 an hour, for 40 hours a week, because that is what they are making at the local factory.

Also, I am including Federal Payroll Tax of 6.5%. This is required by the government unless you want to run on a cash basis under the radar, which a lot of people do.

Next, I have some salary in there for you. You do want to make a salary, don’t you? Notice that you’re going to be making less than your employee at the start of all of this. That is pretty typical. If there is someplace to cut back, which there will be, some generous bosses will cut their own salary first.

Side note: Your surly teen does not share your dream, and will not be a good employee.

We will talk about “opportunity cost” at some point. That’s the money you could have made at Dollar General rather than lose it on your nail salon. At this point, we’ll just consider actual out of pocket cost.

I’m throwing in a flat $200 a month for utilities but that might be low, if you want something like Wifi for example. The reality might be higher. You still haven’t paid for advertising or insurance.

The difference between Sales and Profit

So the sum total of this is going to be somewhere between $72000 and $78000 per year. This is the amount of money you’re going to have to come up with to stay in business.

If this amount of money scares you, skip all the way to “the bottom” now.

The amount you charge for doing someone’s nails is the “top line” better known as your “sales”. So let’s say this is $25. It is not correct to say that you “made” $25 when the cash register rings, because it cost you something to get it. You had some supplies, and you also had to pay someone to actually do the job. So if the job took an hour, this is $15 like we said. Add a couple of dollars for enamel, and you end up with something like $17 . This is what is called “variable cost”.

Gross Margin

So the difference between sales and variable cost is what is called “gross profit” or “gross variable margin.” Actually there are a lot of different names for this. Margin, Operating Income. Profit Margin

You need to know what this is. If you don’t know what this is, skip down to “the bottom”.

An equally important number as the one above, is the “daily sales to break even.” This is the amount of money your top line needs to be to keep you in business.

Rent/Sq Ft/Year $		10.00	12.00	14.00	16.00
Ticket per Selling Customer $	25.00
Gross Variable Margin Percent	0.25
Contribution per Selling Customer $	6.25
Paying Customers to Break Even (people)		46	48	49	50

Paying Customers

Your gross variable margin varies depending on what business you are in. Using the example above, your profit margin is about 25% which means that for every $25 sale, you end up with $6.25 to contribute to your daily operating expenses. In the restaurant business it is thought that around 66%, that is 2/3 of the sales price is gross profit.

What that means is that for the cheapest case above, you need 46 paying customers every day you are open and that is just to keep the doors open. More than that if your rent is higher.

If you only feel like staying open 8 hours a day, that means it’s 6 customers per hour, every hour. When is the last time you were in a nail salon or beauty parlor and 6 people an hour came in?

Paying Customers to Break Even		46	48	49	50

Conversion Rate	0.75
Traffic Needed to BreakEven (People)		62	63	65	67

Conversion Rate

You need to know about this too. In the retail business, people walk into and out of your stores all the time. Only a few stop to buy something. For us, in the antique places, we only buy things about 10 percent of the time so the converstion rate in antiques might only be 10%.

The conversion rate in the nail business? I am probably being generous to say that it’s 75%. What that means is that for every 100 people that make an appointment to get their nails done, only 75 show up.

This sort of thing drives doctors and dentists nuts by the way. It is more common in lower income areas.

So in order to get your 46 customers to break even, you’re going to need to get 62 people in the door.

That’s just under 8 per hour, every hour of every day. PS. It works the same way with your website.

funny store in Winder, the Drunken Gypsy

Your Capacity

Here is one more chart.

Nail Salon Model
Chairs	4
Time per Client (Hours)	1
Hours/Day	8
Capacity Customers/Day	32

Here’s your actual production capacity. If it takes an hour for someone to get their nails done, and you have 4 chairs, and are open 8 hours a day, the most people you can get into the place is 32 customers.

So what you know for sure is that you’re going to need at least 6 chairs to break even, and those 6 have to be full all the time, and that is just to break even.

Here’s the calculation:

Nail Salon Model
Chairs	6
Time per Client (Hours)	1
Hours/Day	8
Capacity Customers/Day	48

That means you’re going to have to get a bigger place than your 1000 square feet, and hire more employees. Therefore is no way, mathematically, that you can survive in your 1000 square foot building.

Upsells

It is possible that you could do upsells. You can sell your customers some nice hair cream. Maybe you can sell them some gift certificates. You can sell them a “deluxe” job of some kind. Think creatively because that is a possible way out,

You might even decide to write a book and sell them that.

“The Bottom”

For those who skipped down to “the bottom” let me give you the quick version.

The probability of you succeeding in retail in one of these little towns is very near zero.

These places are usually started by people that didn’t pay attention in math class, which is why, in a little town, there is so much turnover in tenants.

Alternate Strategies

There is one option, and that is to rent out space in your shop to spread the risk. Here is how it works.

You have six chairs in your shop, and six friends. You charge each of them some dollars to use your chair. What this does is spread the risk. You have convinced them to essentially pay a fraction of the rent and attract their own customers to their chair. Let’s leave aside for a moment the issue of customer poaching.

So you charge $300 a month, that’s $1800 a month to cover your rent and overhead, and that might be enough to keep the game going. You might provide some common advertising, to attract customers to everybody.

This replaces one problem with another. Instead of attracting customers, you are attracting stylists. As they quit, and go away, you have to replace them, and that might not be so easy. It takes a lot of work for them to pay back your $300 a month. In fact, it’ll take a couple of hundred customers.

The antique places down here are like that. They rent out a portion of a building to an antique dealer, who sells items on consignment.

The Real Alternate Strategy

Buy the building, and rent it out to people that want to live out the American Dream. The Little Southern Town Business Plan works better if you have deep pockets. This is the way it has been since the very beginning.

Exceptions

There are exceptions to every rule. If you are a tattoo artist, for example, and can charge many thousands of dollars for your beautiful body art, maybe that is one way. Maybe you are selling something with a very high profit margin, that might also work. Some mind-bending substance comes to mind.

If you are gifted at math, and can control your variable costs, and are efficient, you might be able to develop a system. Our guy Chris in Winder is doing this and working three hours a day selling burgers.

But, you need to know these things precisely and not rely on “faith.”

Attracting Traffic

This is also a thing. It is likely that you will be much more successful if you are able to attract traffic to your business. If you increase the number of people that stroll in off the street, you can tolerate a lower conversion rate.

How are you going to attract traffic? You’re going to try. You’ll have events, become prominent in the community, decorate your place so that it becomes a destination. If you are lucky, and have people like Zeb Grant and the lady on the corner in Greensboro, who will decorate. It will give you a downtown buzz. People will like to go there.

If you don’t try, and your place is un-inviting, you’ll have some issues. Here is an example of not trying:

The Real Bottom Line

We said awhile back that in a town that is 200 years old, everything used to be something else. Countless businesses have been in these places since the settlement of the town. A lot of times, it is written in tile, like the above doorways. So, what we are saying is nothing new.

So in the event you think you are an exception to this, the math and history say otherwise.

Also, keep in mind the deep pockets that own these places. Also, keep in mind the big businesses that have their factory on the edge of town. If it were not for them, the prosperous towns might be less so. Also, don’t forget the licensing and permitting. There is a government body that wants to extract revenue from you. This alone is a significant barrier to success.

Those things, namely the “company towns” and the deep pocket owners have also been around forever. If things happen that they go belly up, it has a lot of effect on the nail places and barbecues in town. In the last couple of centuries, this has been another fact of life.

So, keep that in mind, while you are coming up with your Little Southern Town Business Plan.