Is your business keeping you awake at night?

A perfect storm of negative drivers is disrupting hairdressing businesses nationwide. The lingering impacts of the pandemic and Brexit, high energy prices and rising product and employment costs are among the challenges making life and business difficult. So how are you – the owners of these businesses – coping? Creative HEAD surveys the business landscape and discovers exasperation, but also a determination to ride out the storm with courage and innovation

Hairdressing businesses – many still carrying debts arising from the pandemic – are currently grappling with high energy bills, increased employment costs and cautious consumer spending. Pouring fuel onto the fire are rising borrowing costs, which squeeze margins and place more businesses in financial distress. With the era of cheap money over, business challenges are becoming more difficult to resolve.

The Bank of England has raised UK interest rates 14 times since December 2021 in a bid to control inflation. At the time of going to press, rates stand at 5.25 per cent, up from zero a few years back. Consequently, the cost of raising or refinancing loans has shot up and businesses that loaded up on debt are facing a “financial reality check”, says Julie Palmer, a managing partner at turnaround specialists Begbies Traynor. Consumer-facing sectors such as hairdressing, hospitality, retail and leisure have been hit hard, she says. Alarmingly, the number of insolvencies in 2023 was the highest it’s been since 1993 and 52 per cent more than in 2021, according to the Office for National Statistics.

“Politicians and policymakers should remember that small firms have been the driving force behind our recovery from past recessions, and this time around it’ll be no different, if they are given the right conditions to start up, scale up, and prosper”

The impact is being most widely felt as a ‘chill’ on investment and growth, as borrowing becomes more difficult, says the Federation of Small Businesses (FSB). The trade group says would-be borrowers increasingly report being asked for personal guarantees against loans, even for relatively small amounts, which prevents many from going ahead. It also found three in 10 small firms that recently applied for loans were rejected. “Many small businesses are waiting until interest rates start to fall once again before investing in anything that isn’t core to their business,” says policy chair Tina McKenzie.

For many business owners, however, investment and future growth have long been a pipe dream; it’s the here and now that’s keeping them awake at night: “Will I be able to meet payroll? How many clients might cancel this week? Will our income be big enough to cover expenses? Is it slightly down right now? Is that a trend? How does it compare with last quarter?” These daily struggles can take over your life and have you questioning the very reasons you went into business in the first place. No wonder we’ve seen a rise in so-called director fatigue, where owner-managers shut or sell their businesses and rejoin the labour market for an easier life.

Creative HEAD surveyed 100 hairdressing business owners on everything from recruitment and pricing to the areas where they felt wider support and reform were most needed, in order to survive long into the future. The results, along with case studies, and industry comment, are shared over the coming pages.

Creative HEAD Survey

We asked 100 business owners…

What is most problematic to you when it comes to the cost of running your business?

Which of these costs should government prioritise to help your business?

Which of these tax reforms would most help your business?

Want to have your say on what’s happening in our industry? Sign up for Creative HEAD’s On The Floor 2024 debate, taking place from 15 July. Email amanda@alfol.co.uk now.

Hands up if you’ve got ‘price increase wobbles’

The cost of living has gone up, customers’ habits have changed and yet many hairdressers still think raising their prices will drive loyal clients away. It won’t, says Boss Your Salon’s Maddi Cook. Not when you raise your prices for legitimate reasons

In an industry that thrives on trends and innovation, there’s one area that we need to leave in the Noughties, along with the pouffes and pobs: low-balling our pricing.

And I know, I know, you’d likely rather reconcile your accounts and clean your trolley wheels than tell your clients that their cuts and colours are going up (especially lovely Doris, who’s been coming to you since time began). But hear me out… As someone who’s taught pricing strategy and money mindset to more than 20,000 of you lovely lot, I’ve heard it all when it comes to the ‘price increase wobbles’.

Pull up a proverbial chair as I share five reasons why it’s time to get your head out of the sand when it comes to raising your prices.

1. If you did what almost everyone else did, you did it wrong

I’ve surveyed everyone I’ve taught pricing to, and an eye-watering 80 per cent of them said they got to their prices by copying others or by plucking them out of thin air. And it’s no surprise, because pricing doesn’t feature anywhere in our hairdressing education, yet it’s one of the first things we have to come up with as we set up our small but mighty businesses.

I remember doing ‘competitor research’ when I was first setting up. This highly scientific exercise consisted of sending my family members into local salons to grab paper price lists before writing them all down on a bit of paper and plonking myself somewhere in the region of near-the-bottom-but-not theactual-cheapest, in a bid to seem attractively competitive.

Cue, a revolving door of salon-hopping bargain hunters, who all seemed to want their hair done at 8pm on Sunday, for less than what “her down the road” is charging, and not to worry, they would definitely pay next week when their wages came in.

2. The cost to do business is rising rapidly

First of all, there are stock costs, where between a post-Covid hangover, Brexit and the rising costs of production, wages and energy, it’s understandable that the cost of products keeps creeping up. But the same also applies in-house to your own business, especially those of you who are salon owners with employees. From tubes of tint to brews, loo rolls and keeping the place warm, almost every cost you have will have risen in the past six months alone.

3. Inflation and the cost of living mean your profits are stretched thin

We’ve already seen how the rising costs of doing business are eating further into your profits, but what that profit gets you is rapidly shrinking, too. If you’re like me and your mortgage came off its fixed rate, your biggest bill shot up overnight. The same can be said for energy costs at home, general household bills and running costs, plus the price of your day-to-day essentials, like food shopping and fuel. The Retail Price Index (RPI), which measures inflation, shows us that £50 in 2014 should be £75 in today’s money. It’s crucial that you don’t just factor in your business costs but also consider what you need to have left over in your pocket, and how far that will take you in today’s economy.

4. Your experience grows by the day

I find it can be helpful to think of yourself as a worker within your company. In my past life working for someone else, I would have a meeting at least once a year to discuss a pay rise. At the very minimum it covered inflation, but it also factored in my performance, my experience and education, my contribution to the company’s profits and customer satisfaction. Every single day you get more experienced, and you sure as heck contribute to your company’s success (in fact, for most of you there wouldn’t be a company, if it wasn’t for the graft you put in). Book a meeting in with your gaffer (ie, you) and put together a compelling pitch as to why you deserve a juicy pay rise. Don’t be the worst boss you’ve ever had!

5. You’re actually doing a bunch of jobs

I have a fun (see: gut-wrenching) exercise that I do in my group coaching programme, Breakthrough, where I get everyone to list all of the different roles they play in their business, along with the hours they spend doing each. We then work out what they’d earn for doing each job for that much time every week, to really show how much they ought to be earning. Sometimes it’s over six figures! It’s always tonnes more than what they’re currently taking home. Think about each of these five points and, if the maths isn’t maths-ing, it’s time for a price increase.

Don’t fancy getting knee-deep in spreadsheets or spending the next few years getting a business degree? Then join more than 6,000 other hair and beauty entrepreneurs and grab my industry-leading pricing calculator and course, Boss Your Profits: bossyoursalon.com/profits

Employers beware: new legislation around tips comes into force this autumn

As revealed at this year’s Salon Smart, the government is about to introduce new legislation around UK tipping laws that will have implications for some hairdressing employers. The Employment (Allocation of Tips) Act 2023, expected to come into effect on 1 October this year, will make it unlawful for employers to withhold tips from workers. The new law will introduce changes to tipping practices in the UK and, if not adhered to, could have substantial financial consequences for employers, with awards of up to £5,000 per employee to reflect losses suffered.

The new legislation will protect tips paid by cash and card, ensuring that tips are passed on to employees without any deductions from their employer. The tips should be allocated fairly (a draft statutory Code of Practice has been provided by government), and all workers are protected by the new law, including those on zero-hour contracts.

The obligations under the new act include the total amount of the customer’s bill, which will include any deductions such as bank and admin charges. This means that employers will no longer be able to apply a portion of a gratuity or tip to meet those additional charges and will need to find an alternative way to pass on those charges to clients.

If, in your business, tips are regularly paid to your employees, you should implement a written policy that explains the allocation of qualifying tips, and how they will be distributed in a fair and consistent manner. Having a written policy which is clear and accessible to all staff will ensure adherence with the new laws and will help to avoid any potential employee complaints and claims.

You must also keep a record of how tips are being allocated and distributed among your employees. Under the new law, employees will have a right to request information about an employer’s tipping record once every three months. If an employee does request a copy of your tipping records, you must comply with this request within four weeks from the date it was requested. If there are inconsistencies in your records, or if the records show that the tips have not been distributed fairly, this can be used as evidence by an employee to bring a tribunal claim.

You should ensure that tips are paid to employees no later than the end of the month following the month in which the customer paid the tips. If tips have not been paid on time, an employee can claim up to £5,000 in compensation.

Finally, it is important to note that there will be no transition period. This means that, in order to avoid the consequences of non-compliance, you will need to make any required changes to your business operations before the new legislation comes into effect.

Creative HEAD Survey

We asked 100 business owners…

Did you raise your prices in the past 12 months?

If yes, do you plan to raise them again in the coming months?

If no, do you plan to raise to raise your prices in the coming months?

CASE STUDY

“I don’t apologise for put ting up my prices”

“Straight after Covid, everybody wanted to be employed because they wanted the security of a regular wage. But because it was so busy, it was understandable why some would think, ‘Why aren’t I having all of this to myself?’ and want to go self-employed. But even as a freelancer you have to be entrepreneurial and put the hours in. And some freelancers are absolutely thriving, while others perhaps need a bit more help.

“Everyone’s talking about a recruitment crisis but I also think salons haven’t evolved in line with industry needs, and they’re not offering anything compelling enough for people to want to go and work there. I rent chairs at my flagship Allertons salon because I’d quadrupled the size and the rent, so I needed help to cover the fixed costs of the business. And I thought, ‘How can I make this an unbeatable place to work?’

“We’ve got a stunning location, beautiful furniture, the best products, and so on. But I also knew I had to cater for both the quiet freelancers and the busy freelancers without crossing a line where I might as well employ them. So that’s when I came up with these different packages.

“We offer a basic package, which is best suited for busy freelancers, where you pay your rent and that’s it. But there are extras that you can bolt on, such as access to our reception team to take and manage bookings, access to the Allertons POS, where we not only charge just 0.9 per cent per transaction but we also provide everyone’s data in a spreadsheet that’s great for their accounts, and we’ll even find new clients for them. And everyone has access to our training and to our products, which we sell on at our heavily discounted rates, which means they don’t have to invest upfront in stock and that helps with cash flow.

“Back to my point about some salons stagnating. I know some that are charging the same for a haircut as they did five, six, seven years ago. People are petrified to put up their colour prices. But to me, that’s an alien concept, because I’m not a hairdresser. I run the business from a spreadsheet, while they’re running it from a chair, which is a different ball game completely. We put our prices up by 12 per cent recently, because I’d worked out what I needed to charge to make my 10 per cent margins. And I’m not apologising for it, just as I don’t apologise for charging a no-show fee. That client should apologise to you, not the other way around!”

To VAT or not to VAT

According to the Federation for Small Business (FSB), the current tax system, with its plethora of taxes, reliefs and thresholds, is too complex, expensive in time and money to comply with, a substantial barrier to growth and it’s inherently unfair for SMEs. Small businesses do not have the dedicated tax teams and specialist knowledge available to large corporates and consequently they miss out on many reliefs 

Value Added Tax (VAT) is particularly troublesome for hairdressing businesses. Despite the recent increase in the VAT threshold to £90,000 – one of the highest in Europe – the National Hair & Beauty Federation estimates that 93 per cent of sector businesses operate below it, with many taking measures to reduce their economic activity to ensure that they do not cross it.

The NHBF commissioned an independent report from Pragmatix Advisory, ‘Avoiding the Cliff Edge’, which argued that VAT payments should be smoothed (ie, there should be tiered rates), to minimise the immediate VAT liability businesses receive upon passing the threshold. The report also drew inspiration from successful cases in European countries where lower VAT rates have shown positive impacts. For instance, the Netherlands lowered VAT to 6 per cent in the 2000s for labour-intensive services such as hairdressing, resulting in the creation of 4,000 sector jobs.

Meanwhile, the introduction of Making Tax Digital (MTD) was supposed to alleviate many issues arising from the complexity of the tax system, easing tax compliance, increasing efficiency and aiding cash flow planning for businesses. Yet, just over two years since its initial introduction, small businesses are complaining that MTD has done little but increase the costs of compliance.

Small businesses also have limited awareness of the available tax reliefs they may be eligible for, which means they pay their fair share of taxes, but don’t get their fair share of reliefs. According to the FSB, small businesses are on average only aware of five reliefs – a very small number considering the wide variety available. Fixing the gap in knowledge around reliefs would go a long way towards restoring more faith that the tax system is fair towards small businesses; they pay their liabilities and thus should receive their fair share of reliefs.

An FSB spokesperson said: “We urge the government to create a system within the Making Tax Digital software to create nudges around potential reliefs that businesses could apply for.”

CASE STUDY

“The government’s tax strategy makes it really hard for freelancers to grow”

“I’d been a hairdresser for 10 years and worked at the same salon for seven of them when I went self-employed. I’d worked my way up the ranks and the only person above me was the salon owner, so it felt like it was time to go out on my own. And Covid had an impact on that – the realisation that I ought to have a better work/ life balance.

“I started off renting a chair because it was a little less risky, but things went well and about eight months later I took on the premises that I’m in now, and I’ve been here 18 months as a salon owner. I don’t employ people, I’ve got a barber renting the middle floor, a beautician renting the top floor and I’m about to rent out a chair to another stylist. I had wanted to take on an apprentice, but I was operating so close to the VAT threshold that actually employing somebody would make me worse off and then you’ve then got all the HR stuff to deal with. It’s not that I’m against employing someone, but I did this for a simpler, more straightforward life so I’m going to stick with my current business model for now.

“The VAT threshold was £85,000 just before they raised it, and I was hovering at about £83,500, so dangerously close. My accountant was telling me to take a couple more holidays because as soon as I hit that threshold, I’d be losing a good chunk of my earnings. And I’m a one-woman band, I’m working five days a week at 95 per cent capacity most of the time, so to make an extra £20,000 or £25,000 to offset the VAT is not particularly doable.

“Raising the VAT threshold to £90,000 has given me some breathing space and it means I can put my prices up, which I needed to do. But it doesn’t allow me to give myself a pay rise because with that threshold you’re always thinking, ‘Will I hit it? Will I not hit it? And is it going to be worth it?’ I believe having the threshold so low stunts growth for small businesses. I don’t really understand the government’s thinking on that. It needs to rethink its tax strategy for freelancers, because the way things are set up now makes it really hard for us to grow.”

“Why we campaigned for a cut in VAT for hairdressing” Toby Dicker, Salon Employers Association

As a salon owner employing 70-plus staff within his five-salon group, The Chapel, Toby Dicker understands full well the financial pressures of operating a hairdressing business on the British high street. Since launching 26 years ago, he calculates he’s seen Employers National Insurance go up by 37 per cent, Value Added Tax (VAT) rise by 33 per cent, and his business subsequently squeezed to almost zero margin.

According to Toby, the hair industry is taxed like no other business on the high street. He claims that around 35p in every £1 is paid in tax by salons employing their teams on PAYE, while other retailers on the high street pay as little as 12p.* With the current VAT rate of 20 per cent triggered once turnover reaches £90,000, some hairdressing businesses deliberately stay below the threshold, either by non-reporting or by stunting further growth. Avoiding the costs and inconveniences associated with VAT means those businesses have the potential to cut their prices by at least 20 per cent, compared with VAT-paying salons.

And that, says Toby, has created an existential crisis that threatens the very future of the sector: “Budget-squeezed salons are reducing the number of apprentices they take on, while non-VAT registered salons, such as ‘rent-a-chair’ models, home and mobile hairdressers, don’t take on apprentices at all,” he says. “Because only PAYE employed salons can run apprenticeship programmes, numbers have dropped to the lowest level ever, to 5,000 intakes a year. PAYE salons taking on apprentices invest up to £50,000 in salary and training costs per apprentice over two years, yet they receive little government support in return.”

In 2020 Toby co-founded the Salon Employers Association (SEA) to campaign for reform on fiscal and tax matters directly affecting VAT-registered and PAYE salons. Almost 1,500 businesses signed up, including high-profile salons such as Brooks & Brooks, Errol Douglas, Sally Montague, Daniel Galvin and Barrie Stephens. A survey conducted by the SEA received more than 600 responses, revealing that more than 50 per cent of salon owners were considering closing their business. “That’s more than 5,500 businesses and 44,000 jobs,” says Toby, “many of them occupying spaces on our struggling high streets, helping to drive millions of customers into cities, town centres and villages each week. The government and HMRC are forcing honest businesses to go bust,” he continues. “Salons add almost all value through labour, rather than product, and we estimate that our business model is hit up to six-times harder than other retail outlets because nearly all our costs are labour. We have more people working in salons versus other retailers, so any employment related costs hit us much harder."

Spearheaded by Toby, the SEA campaigned for the government to reduce VAT to 10 per cent for the hair and beauty industry, arguing that the reduction was necessary to ensure salons’ survival on the high street. The campaign was supported by

The Hair & Barber Council, the Freelance Hairdressers Association, the Fellowship for British Hairdressing and the Men’s Hairdressing Federation (together with the SEA they now operate together as the British Hairdressing Consortium) and salon owners up and down the country writing to their MPs using template letters available from the SEA’s Instagram channel. However, in his Spring Budget, Chancellor Jeremy Hunt actually raised the VAT threshold to £90,000 and cut the National Insurance Contributions (NIC) for the self-employed from 8 per cent to 6 per cent but did not cut NIC for employers. “This Budget just made the scales tip further away from level, by increasing the VAT threshold to £90,000. PAYE and VAT-paying salon owners clearly don’t matter to this government,” said Toby.

But he’s not giving up. He has further meetings planned with HMRC and the next item on the agenda is compliance – and particularly around the subject of disguised employment, where a worker functions as an employee but is not classified as one.

“Our industry is being destroyed by flouting of HMRC payments and tax avoidance,” says Toby. “The fraud is largely hidden from the radar but those caught breaking the law are facing severe legal and financial penalties… Meanwhile, those following it are seeing their profession fall apart and are penalised for doing the right thing. We want to help spread the word to get salon owners and stylists to read up on the rules, comply and help us all turn the tide now.”

*Information available @salonemployerassociation

@salonemployersassociation

Minimum Wage – is it bad for business?

The Minimum Wage Act was introduced 25 years ago, in 1998, but the world was very different back then. Blur had just headlined Glastonbury and GDP growth was at 3.4 per cent. Increasing the rate by £1 an hour this year, taking the UK’s minimum wage to one of the highest in the world relative to typical wages, has placed an incredible strain on small businesses, with many predicting there will come a point where a high minimum wage will start to destroy jobs 

On 1 April this year, workers on the National Minimum Wage (NMW) and the National Living Wage (NLW) had their pay boosted. Apprentices, too, got an inflation-busting pay rise of 21.2 per cent. The change was the largest-ever increase in the minimum wage in cash terms, and the first time it had increased by more than £1. Furthermore, the NLW – now at £11.44 per hour, making it one of the highest in the world – applies to anyone aged 21 and over (it was 23 and over in 2023). The changes have been made following recommendations made by the Low Pay Commission (LPC), an independent body that advises the government about the NLW and NMW.

Needless to say, the rises present a Catch-22 for hairdressing employers who want to pay staff a wage they can afford to live on, without jeopardising the health of their business. Business leaders are legally required to pay at least the NMW to their staff, and for many hair bosses, the new NLW represents yet another restriction on growth. Many are also experiencing an increase in wage expectation from other members of their team and on top of that are having to inflate salaries to maintain a competitive edge when recruiting talent.

On average, the rise means a full-time worker contracted to work 36 hours per week will now be paid £22,000 per year (pre-tax). However, an increase to the National Minimum Wage means more expense to the employer than just wages. It’s also an increase to associated costs, including National Insurance Contributions (NIC) and holiday pay.

From 6 January this year, the main rate of National Insurance was cut from 12 per cent to 10 per cent, affecting 27 million people. Under the change, the rate of tax paid by employers and employees was reduced by one percentage point. However, these savings were swiftly cancelled out by confirmation that the current NIC thresholds for both employers and employees will be frozen through to April 2028, meaning that more workers will be paying National Insurance as their wages rise.

A further challenge is that the competitive hiring market means many employers will struggle to compete for applicants if they only offer NMW. Other businesses often choose to pay the so-called ‘Real Living Wage’ to staff members. At £12 per hour (£13.15 in London), this puts additional pressure on hairdressing employers when it comes to recruitment.

Hairdressing businesses, which tend to be small enterprises with lower profit margins and tighter budgets, are often more susceptible to the impacts of a higher national wage. The NHBF, which has long been warning about the impact of NMW rises on hairdressing businesses, has been advising the LPC on future policy. It said: “The government should take a cautious approach to any future rises beyond 2024. We support moving away from a targets-based approach to a wider assessment of the economic and labour market conditions for future NMW/NLW rate setting.”

“We remain committed to ensuring that minimum apprentice wages support the at traction of talented individuals into apprenticeships and remain fair for employers. The increased rate will make apprenticeships more at tractive, particularly to young people from low-income backgrounds. We continue to monitor the impact that changes to apprenticeship wages have on apprenticeship starts.

“Employers tell us that they view the apprenticeship as the best way to train and enter the sector. Last year we increased funding for the Hairdressing Professional standard by almost 60 per cent, and we now pay 100 per cent of training and assessment costs for small employers who do not pay the levy when they take on apprentices aged 16 to 21.”

The Department for Education

Creative HEAD Survey

We asked 100 business owners…

The National Minimum Wage has risen this year by 14.8 per cent to £8.60 for those aged 18 to 20, while the National Living Wage rose by 9.8 per cent to £11.44 and now includes those aged 21 or over. Does this mean you will:

Richard Phillipart

“I’ll be employing fewer apprentices because of the National Minimum Wage rise”

Richard Phillipart, owner, The Boutique Atelier, Ellesmere Port

“I have always had apprentices in my business and usually take on four each year, but the rises in the hourly rates combined with the reduction in age when the top level of the National Living Wage applies have meant two things: I’ll take on fewer apprentices moving forward and I won’t be employing older apprentices anymore. The business just can’t afford it.

“As an ethical employer, there’s a knock-on effect of these rate rises. I pay my team a good wage – very few of them are paid the minimum wage. But because the minimum wage is creeping ever closer to what my intermediate team members get paid, then their wages have to go up, and then they creep closer to the more senior team members and so the same thing happens. So, every April when government increases the minimum wage by these huge chunks like it’s been doing the past few years, I’ve been increasing every member of staff’s wage by the same amount. I can’t have someone with five or six years’ experience being paid just 70p more per hour than someone who is still shampooing. It just wouldn’t be fair.

“At the same time, the government is projecting a 4 per cent increase in public sector pay. So, on the one hand it’s saying all the country can afford is 4 per cent, but us private employers have to find 21 per cent. I find it so frustrating. And if you repeatedly don’t pay the minimum wage, you can go to prison. So, under the threat of prison, I have to put my wages up by 21 per cent. But nobody’s talking about that.

“In the past two years the apprentice wage has gone up 33 per cent. That’s so much money, it’s wild. If we keep going at this rate of a £1 increase every year, the minimum wage will soon be £13 or £14 an hour. Will clients understand when we have to raise our prices to cover these kind of costs? I honestly think lots of salons will close down.

“Ironically, this year we had 15 applications for apprenticeships, which is the biggest number we've had since they changed the school leaving age to 18. We’ve interviewed nine of them and we will take on three, rather than the four we usually do. But all of them are aged 16 or 17, whereas usually we’d look at 18, 19, 20 because they had more work experience and were more committed. But we just can’t anymore because of what they cost now. Apprenticeships do work and they’re really important, but you’ve got to be able to afford them."

“We were the only sector organisation to call for restraint on wages”

“Hair is a unique sector. It is female-dominated and one of the biggest employers of young people in the UK. However, unlike retail or hospitality, we don’t have those big names – like McDonalds, Marks & Spencer, Wetherspoons or Next – who can lean on government to make change, so that makes lobbying more difficult. That’s why the NHBF does this on behalf of our members and the wider sector.

“We campaign to make our industry’s voice heard on issues that are vital for business, including finance, business support, quality, standards skills, education and – for beauty – aesthetics regulation. Our lobbying is evidenced-based, which is why our State of the Industry quarterly survey is so important. Government and ministers see it as a valuable tool for regular insights. Major reports on Skills (Careers at the Cutting Edge) and Avoiding the Cliff Edge on a VAT smoothing mechanism are important in maintaining our authority and credibility with government. They allow us to put forward a range of recommendations for discussion based on robust evidence and facts. Bringing about policy change can take time, but influencing is about looking at the government’s agenda and finding a win/win, where both sides can benefit. We’re coming up to a general election and it’s interesting that the government still has appetite for change – for example, raising the VAT threshold at the Spring Budget, which will benefit some sector businesses and is useful as an interim measure. They also announced an additional £60m for help with apprenticeship training costs and more flexibility in the levy which may be useful for some, but we are pushing for much more on this.

“We’ve just launched our manifesto for the next government and are working with the Low Pay Commission (LPC) on evidence around wages. We were the only sector organisation last year to call for restraint on wage rises. We’ll be giving oral and written evidence over the summer. NHBF members have already met with LPC commissioners.”

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Beyond the bottom line: the cost – human and financial – of burnout

Salon burnout happens to others, not to you, right? Wrong. Burnout can happen to anyone who identifies so strongly with work that they lack balance between work and personal life 

Burnout is best described as a human reaction to stress and activities that continue for an extended period without a break. As people focus much of their energy and attention solely on their business, burnout can happen and will likely be detrimental to their mental and physical health.

As a group, salon owners tend to hold out longer than most people in the fight against burnout. They have a natural optimism and passion for their business, and a need always to put on a pleasant front, which often masks their discouragement and despair. Unfortunately, most at-risk salon owners keep going, trudging along without dealing with the underlying issues that are affecting their ability to cope or work effectively.

Says Hayley Jepson, The Resilient Hairdresser: “Burnout for salon owners is an epidemic and it’s having a massive impact. Many employees sorted out their own burnout by going freelance, but salon owners can’t do that – they worry too much about being responsible for other people’s incomes. And at the moment, they’re not only dealing with appalling trading conditions, they also feel like they’re being blamed for all the problems in the industry – no wonder they’re struggling.

“There’s a saying in therapy: ‘Anger is sad and scared’s bodyguard’. I think salon owners are scared, and anger feels better than scared. People start looking for others to blame. Some salon owners are blaming freelancers for everything; others are blaming the brands putting their products in Boots. People are spending a lot of energy blaming the outside instead of taking that energy and focusing on what they can control.

“As a leader, what you bring is what you get. It’s so hard to be the one bouncing around at the top inspiring people all the time, and when that goes, it goes from the whole salon. You might disengage from the team, be less present, and that’s when people start solving their own problems and looking around to see how they can get their needs met for their careers – and leave for a better offer, or to open a shed in their garden.

“When you’re burnt out, completely overwhelmed, you exist in survival mode and lose the skill of imagination, creativity and play – that causes a massive problem. You become so focused on payroll, breaking even, that you lose sight of the bigger picture.

You’re so consumed with your own problems that you don’t see the bigger problems arising. And then you get paralysed when it comes to making decisions. You’ve listened to every business podcast, you’ve done every course, you’re reading every self-help book. When you have too many ‘mentors’, you usually end up doing nothing because you have no idea where to start. Eventually, you ask yourself, ‘Do I even want to do this anymore?’, and then you’ve got one foot out the door and everything becomes very half-hearted. You’re not really in it – your own business.”

To tackle burnout, you must first decide: are you in or are you out? “Because if you’ve got one foot out the door of the business, it just won’t work,” says Hayley. “You’ve got to make sure that you create the brain space and the physical time to work on your business. You might just need a break – a week off, a change of scenery, and a bit of peace and quiet so that you can start thinking clearly.

“Ask yourself, ‘What can I take off my plate – at home and in the salon?’ Trying to do everything yourself could be one of the reasons you’re drowning, but ordering coffee, ordering stock, booking staff holidays – that doesn’t have to be you. You need to delegate so that you can put as much energy as possible into thinking about the business and leading your team properly.

“Find business inspiration, and not necessarily from within the hair industry. Networking events and groups in your local area give you the opportunity to talk to other business owners – ones who are looking to improve, not just the moaners. It’s important to find people to talk to who understand you. Have one-to-ones with all your team and ask for their ideas. Don’t do a big staff meeting, no one talks in them. Sit down with everyone individually and explain, ‘I’m really interested in what you’ve got to say’. But be careful, because what’s really demotivating for a team is to be asked for ideas constantly, and then they’re never implemented.

“Finally, it’s important that business owners make time for life outside of work, or it will become a drudge and overwhelming. Set boundaries about your life. Allocate a set time for working on the business. The vision of the business must be you; you can’t employ your manager or expect your team to do the vision. Stay in your zone of genius.”

Creative HEAD Survey

We asked 100 business owners…

Do you think your profit will increase this year?

Bridget Hannon

“It’s a good thing for the industry, it’s shaking everything up”

Bridget Hannon, owner, Blush & Blow, London

“As a business we have always moved forward. We operated as a blow-dry bar for about three-and-a-half years, but over time we expanded into other services such as extensions and treatments, due to client demand. Our initial plan to introduce colour got derailed by Covid but we eventually launched after the first lockdown. Dealing with both those things were steep learning curves. It was definitely a baptism of fire.

“Now we’re dealing with different challenges: our electricity bill has doubled, our landlord increased the rent, Brexit has made it really difficult to find staff and now clients are stretching out their appointments for longer. There’s a lot of doom and gloom in the industry at the moment, but I have to say, if you get your business model right, if you get your pricing right, if you get how your staff want to work and be incentivised right, there’s a lot to be said about our industry being recession-proof.

“We are actually still growing in spite of these rising costs. Our demographic helps, I’m not naive to that. We are in a very expensive part of London and so a lot of our clients might be cutting back on things like holidays, but they’re spending instead on hair and beauty. We work really hard to make sure that we are constantly getting new clients in. Marketing is such a big part of dealing with the current situation: there are always people who want their colour done, it’s about finding them.

“It’s a horrible thing to say but a lot of businesses will go to the wall this year. The situation we’re in really does separate those who stay on their toes from those who don’t, and if you get complacent, you’re going to be overtaken by somebody who is going to work harder, be better, be more relevant. What we have to do for our clients now has to be so much more impressive than what was required five years ago. I think it’s a good thing for the industry. It’s shaking everything up. It’s making people work really hard. And if you’re still standing at the end of it, there’s a lot to gain.”

Passion + profit = the secret sauce, says business educator Alan Austin-Smith. Here’s where to find the magic ingredients

I’ve been helping salon professionals around the world be more successful for nearly 40 years. During that time, I’ve pretty much seen it all: recessions, high inflation, high unemployment, massive business operational changes, salons closing, salons opening, pricing issues, staffing issues, discounting…

However, I’ve also seen and worked closely with businesses of all shapes and sizes that consistently overcome those challenges and come out of difficult times on top.

And… They all share the same common characteristic – a perfect balance between the passion for what they do and a profitable business. I call it the Passionate Profit Formula and there are four key steps:

Step 1: Refocus on your passion.

Step 2: Set your profit goals.

Step 3: Work backwards.

Step 4: What gets measured gets done.

Let’s look at these in turn. First, refocus on your passion. You don’t have to sacrifice passion for profit – you can have both. In fact, you need both. Profit starts with the heart – your passion is the foundation you build your business on. However, it’s not enough on its own. A passionate business that isn’t profitable will start to drain the energy of the leader; you lose your mojo. When that happens, it impacts on everything within your business. And by the way, it doesn’t work the other way, either – a business focused solely on profit without passion will quickly leave the team and customers disengaged. You need both.

So, step one of the Passionate Profit Formula is to refocus on your passion. It’s no wonder that after the pain and stress of the past few years a lot of business owners have lost sight of their passion, their dreams, their vision – the reason they started their business in the first place.

Get back to basics, rebuild the foundations and refocus on ‘your’ passion. Passion starts at home. If you’ve lost yours, then it’s no surprise that your team may be losing theirs.

Second, Set your profit goals. Move on from ‘hope’ business management and switch to ‘focused’ management. Focused management is based on a clear understanding that you are more likely to achieve something when you are focused on it, it’s why goals and targets work. However, that’s one of the main reasons why so many businesses aren’t profitable. If you’re more likely to achieve what you are focused on, what happens if you are focused on break-even – on survival? The answer is you break-even – you survive! A business that’s only focused on how much they need to break even, with no idea how much profit they need, will always struggle to grow.

Question one: how much profit you need? Profit enables reinvestment in the business. Better salaries all round, improved working conditions, smarter marketing strategies and the ability to weather the storm of costs and taxes.

Question two: how much profit do you want? As business owners, we pour our hearts and souls into our businesses. We deserve to reap the rewards of our hard work. This should be over and above the owner’s salary. The answer to question two is how much money you feel is a fair reward for running your business, on top of your salary. Add those two amounts (need and want) together and you have a profit goal. (By the way, if you are using Floomly or have The Fantastic Hairdresser Calculators, it’s easy to work out what you must take to make the profit you want and need.)

And now the fun starts in step three: Work backwards. Working backwards from your annual target for profit, you can make some key decisions. Pricing, for example. People ask me how much they should increase their prices or even if they should increase their prices. My answer is always the same: I have no idea! Because the first decision on pricing must be based on your target for profit, so unless I know that I have no idea. Too often pricing decisions are based on market data: you should consider market data, but only after the finances. You can work out how many weekly customers you need and what average bill you should be targeting. That might influence the services you promote, the space you have available, your staffing levels and even opening hours. You are making a plan – a plan for profit.

I usually suggest a two-year plan: set your profit goal for year two and make the changes needed in year one, and then just keep it going, year after year!

Finally, I always say that the most dangerous time in business is when you are doing well – because you take your eye of the ball. Measure your sales, your team performance, your key metrics, your expenditure, and so on against benchmarks based on profit. Setting targets isn’t enough – measuring how you are doing consistently is the key to a laser-like focus on profitability.

Alan Austin-Smith is renowned for his support and education brand, Fantastic Hairdresser. He’s currently on tour with Passionate Profit, a series of one-day seminars in the UK and Ireland sponsored by Floomly. Tickets cost £125 plus VAT. Visit www.thefantastichairdresser.comand floomly.com