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I have recently read a BBC article discussing the impact of COVID for salons after lockdown as the lockdown measures are relaxed. There has been a lot of uncertainty for the UK hair and beauty industry and business owners are keen to know what returning to work is going to look like.
One thing that is known for sure in the industry is that may businesses are operating on extremely tight margins and high rent, staff or running costs. The question that many may be asking is if strict measures are imposed, will it be worth opening for a small number of clients each day?
Lets face it, this pandemic is totally new and there is not a business owner out there that created a business model or pricing structure to absorb the cost of any new working practices that may have to come into place as we leave lockdown. Staff salaries, stock costs and pricing were all designed for a pre COVID business. Whilst the hair and beauty industry is one of the industries that has always been trained on PPE and safe practice we have never seen it to this scale before.
The old model for pricing and staff salary calculations needs to be completely reviewed but first the guidance is needed to allow business owners to see if this is achievable in the current climate. Unfortunately, hair and beauty businesses are not currently at the stage where they can review their pricing models because there is uncertainty over what the future looks like.
We can though look to other countries to get an idea on what the future holds. In Germany we are told in the BBC report that Salons can open with the following new rules:
Germany’s new rules as quoted in BBC News:
Cuts are by appointment only to avoid customers waiting in the salon
Customers and hairdressers must keep a 1.5m distance except when the haircut is taking place
Customers and hairdressers must wear face masks
“Direct communication” is not permitted – discussion about hair style, colour etc must be done via a mirror and kept to a minimum
No blow-drying, if possible
Fresh air must be circulated, which the rules specify should be 100m3/h per hairdresser
Scissors and other tools must be thoroughly disinfected between uses, as well as hairdressing chairs
Hairdressing cloaks must be washed after each use and, if possible, a disposable cloak should be worn over the top
Customers must wash their hands when entering the salon
It has been reported that no waiting areas should be used which could have a direct hit on walk ins, and face masks are required for both customer and therapist which gives rise to an additional cost to provide and even supply the masks to customers.
We can see from what is happening in Germany that it is not business as usual and now is a great time to consider thinking about how you are going to manage appointment only bookings and if there is going to be an additional cost in the addition of an online booking system or by the drop in walk in appointments. This cost needs to be factored into the business model as soon as possible and carefully reviewed in a cashflow forecast. In addition to looking at online booking tools it is also going to be important to record client data via consultation forms that will help with the new track and trace system. If you are looking at online booking systems check out Book In Beautiful as they have digital consultation forms as well as some other great features in the reporting section that will help manage your sales figures.
Enforcing social distancing may also come at an extra cost as this will reduce the footfall in the salon area and could have an impact on the total amount of customers treated each day. This could be an opportunity to completely review the business opening hours and staff rotas with some salon owners considering opening longer hours to service the same number of clients.
Another update was that the usual catch up with clients must be communicated via the mirror with face-to-face talking being a no go. For hairdressers this is something that can be easily adapted but how will this work for face to face treatments such as nails and lashes? Will this impact the overall service for the clients that come in for the human to human part of the service.
Extra cleaning time needs to be factored into the treatment pricing structure as well as careful consideration given to the additional cost to implement the new cleaning measures that could be introduced and likely will be if we use Germany and other countries as an example.
If we also look at Spain there are rules in place that mean salons are working to 30% capacity although the same report reported that UK London salon group Blue Tit is expecting to be at 50% capacity when we return. Is this a viable option for UK beauty businesses with the high running costs and tight margins?
Gift Vouchers
At the start of lockdown there was a big push in the sale of gift vouchers in the beauty industry and without careful management of the cash received from the vouchers or in instances where the voucher money was needed to cover immediate financial issues at the start of lockdown then hair and beauty businesses may be working for free as these vouchers are redeemed. This needs to be carefully considered and managed because if sales are reduced to 50% due to reduced footfall the vouchers could pose an issue if there is no control over when voucher slots can be booked during the new working week.
Customer behaviour
Whilst there is no doubt that hair and beauty professionals are going to be in high demand with all the home hair cuts it may be worth considering that some customers may be anxious about returning back for their treatments particularly if they are high risk and although I see debates about other businesses being able to open whilst the hair and beauty industry remains closed we can not deny that hair and beauty brings customers and staff into much closer contact and for longer durations of time than your average Tesco or retail store.
It is understandable that the hair and beauty industry are keen to get back and open the doors as soon as they are able but this should not be rushed and must be reviewed to ensure it is a sensible thing to do based on all the expected changes in cost and reduced footfall. Even the most successful and profitable salons are at a great risk of making financial losses when returning to business with the anticipated rules without careful planning.
If you have a client base that has a majority of high risk individuals such as elderly customers then this could have a great impact on sales and this along with the cost of PPE, operating costs, deferred taxes and loan repayments will also have an impact. Have you reviewed all the figures to see if it is a good option to simply open the doors as soon as you can or will careful planning need to be put in place to ensure that rushing into opening doesn’t negatively impact the business overall.
If you are a business that provides treatments to a greater proportion of elderly clients have you ran a scenario to check to see what the impact would be if this particular group of clients are advised to continue isolating? Or have you thought about the business impact on managing appointments if they are able to leave isolation and spend all their saved cash with you, have you got the systems in place to cope with that and the staff or rota to accommodate to the new social distancing guidelines.
What next?
It is possible to open and reduce the overall financial impact on the business, but you need to have a clear understanding on what the business needs to ‘break even’. You really need to understand your business financials before you open the doors and only then can you safely work out what date you should open as opposed to what date that you can open.
Before the pandemic it would have been fairly simple to know your numbers, just as we do with our clients when we run monthly profit and loss reports and other management accounts, however that is not enough. There is so much uncertainty at the moment on the anticipated guidelines, customer behaviour and company running costs. Even in my capacity as a professional accountant and advisor I am finding it challenging to run predictions for an ideal scenario. Instead I am needing to work on various scenarios and expectations in cashflow to advise as best I can with the ability to quickly amend and review the scenarios as guidance and the current circumstance changes.
So much is uncertain at this time and if you were starting a business pre-covid and you had the above uncertainties would you still rush to open or would you go back to the drawing board, review the business model and carefully plan your cash flow?
I really do appreciate that this is a really difficult time and when opening up your beauty business you did not go into business to be a management accountant or data analyst but help is available and you may decide to seek professional help of a qualified professional such as myself, to review every possibility with you to ensure that you make the best decision for you and your business.
You do not need to go through this alone, if you need some help then please do get in touch today.
Friendly disclaimer: The information contained in this article is for guidance and information purposes only. It should not be relied upon as full and complete accounting, tax or legal advice. For specific advice relevant to your own situation please speak to Ria-Jaine MAAT or another professional direct.
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If you are looking for podcasts then do check out my interview with the amazing Carl Reader on his The Carl Reader Show’ – Ria-Jaine Raw & Uncut.
and another podcast with Katie Godfrey, owner of KG salon, KG franchise and Lash training academy on ‘The Life Of KG’ – Guest Ria-Jaine
