Can you tell Remy hair from human hair? Do you know the difference between a single and a double-drawn strand and have expertise with clip-ins, sew-ins, hair weave, beaded rows, and tape-ins? Are you looking for an opportunity to be your own boss? If you answered yes to most of these questions, then developing your own hair extension business is undoubtedly an inspiring option.
Hair extensions have been super popular for some time now, and knowing how to put in extensions is just one part of the puzzle. You also need to know how to run the business side of things. That’s where this guide comes in. Here, we’ll walk you through what you need to know to launch a successful hair extension business.
A hair extension salon provides services that add length, volume, highlights, or different textures to a client’s natural hair using natural or synthetic hair extensions. A hair extension business involves selling various types of hair extensions, from clip-ins to sew-ins, tapes, micro-links, and more.
As a business owner, you need to identify reliable suppliers for high-quality products, create an attractive storefront—be it physical or online—and develop effective marketing strategies. Furthermore, offering additional services such as fitting, maintenance and custom wig creation can set you apart from the competition.
Hair Extension Industry
The hair extension industry has exploded in recent years, driven by popularity among celebrities and influencers. Social media has also helped fuel interest in hair extensions as a way to transform looks. Revenue for the global hair extension services industry reached $4.06 billion and is expected to reach $7.9 billion by 2030.
The primary target market for hair extensions is people between 20 and 65 interested in hair extensions as a fashion accessory or to enhance their looks. In fact, 34% of women claim they regularly use hair extensions as part of their beauty regime.
One of the significant trends in the hair extension industry is the rising preference for natural, ethically sourced products. Consumers are increasingly conscious of the origins of their hair extensions, pushing businesses to ensure transparency in their supply chain. Additionally, the convenience of e-commerce has made it easier for businesses to reach a broader customer base, making online marketing and sales a crucial aspect of the business model. Customization is another trend gaining traction, with customers seeking personalized solutions to match their style, hair type, and color.
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Steps To Start A Hair Extension Business
With so many important factors to consider and regulations to understand, starting a hair extension company can be overwhelming. To help make the process as seamless as possible, I’ve created this checklist to give you the steps on how to start your business right.
Step 1: Research the Market
You’ve got the vision and the skills to start a hair extension business, but there’s a crucial first step you shouldn’t skip: finding out if people actually want what you’re planning to offer. Market research is the cornerstone of any successful business plan. It provides critical data about your potential customers, their preferences, buying habits, and the competition. Also, by understanding these factors, you can better tailor your products and services, resulting in a successful hair extension business.
No matter how good your idea is, without this information, you risk entering a market that’s already saturated, or worse, where there’s little to no demand for what you’re offering. Let’s go over some of the essential steps for researching your market when starting a hair extension business.
Determine your target customer: Before you launch your hair extension business, you must identify your target customer. Who are your products for? What’s their age range, interests, and income level? By understanding your demographic, you can tailor your marketing efforts and product offerings to meet their specific needs. One way to determine your ideal customer is by conducting surveys, focus groups, and online research. Social media platforms such as Instagram and Facebook can provide insightful information on your niche market.
Analyze your competitors: Another important step in researching your market is analyzing your competitors. Identify other businesses that sell similar products and services and research their strategies, pricing, and branding. Make a list of their strengths and weaknesses, as this will help you identify opportunities for your business. Use this data to determine what sets your brand apart from others in the industry.
Use industry data and trends: Gather industry data and research trends to stay up-to-date on the latest developments in your market. Sign up for newsletters, subscribe to trade publications, and attend industry events. This will give you valuable insights into what’s trending and what’s not. Understanding the broader industry landscape will help you stay ahead of trends and provide products that appeal to your target audience.
Conduct a SWOT analysis: Complete a SWOT analysis (Strengths, Weaknesses, Opportunities & Threats) by examining your business’s strengths, weaknesses, opportunities, and threats. Utilize this information to strategize how to leverage your strengths, enhance your weaknesses, and capitalize on opportunities while mitigating threats. This analysis can provide valuable insights on how to differentiate your brand and develop a unique value proposition that resonates with customers.
Step 2: Write a Business Plan
Once you’ve researched the market and found that people are interested in your hair extension business, it’s time to write a business plan. While not required, writing a business plan is important in launching a successful hair extension business. The plan lays out the route for your business journey, helping you avoid bumps and detours, in addition to being an important document requested by loans and investors when evaluating a project for funding.
When writing a hair extension business plan, here are a few sections that I would recommend focusing on:
In this section, you don’t just want to talk about how big the market is; you need to show why your business will succeed in that market. Maybe you offer something unique or have found an untapped niche. Whatever your edge may be, this section highlights it as lenders want to know that you’re not just jumping in blindly.
Here’s where you introduce the people running the show, usually, that’s you and any key staff. Lenders care about this because they know that a business usually sinks or swims based on its leaders. Show that you and your team have the skills, experience, or at least the hustle to make this work. A strong team can be a solid indicator that the business has a better chance of success.
Whether you’re setting up a physical store or an online business, the location matters. For a physical store, discuss the proposed location and why it’s ideal for your business, considering factors like foot traffic, proximity to target customers, and competition. If you’re online, explain your strategies for reaching your target audience and standing out in the crowded digital space.
Banks and other lenders will zero in on this part. They want to see that you’ve thought out how much money you’ll make and spend. Most importantly, they want to see that you’ll make more than you spend so you can pay back the loan. You’ll need to be ready to explain how you arrived at those numbers.
Before you take your business plan to a lender, have someone else take a look, like a business owner or an accountant. They can provide fresh eyes and might catch something you missed. It’s always better to find any issues before you’re sitting across from a loan officer.
Related: How to write a business plan
Step 3: Source Funding
Okay, you’ve done your homework. You know there’s a market for your hair extension business, and you’ve got a solid business plan. What’s next? You need money to bring this dream to life.
Since funding can be delayed and even denied, before you start ordering supplies or signing leases, you have to make sure the funds are there. Let’s dive into some common funding options for a hair extension business.
Personal savings: The first place many people need to look for startup money is their own bank account. Personal savings can be the quickest and simplest way to fund your business. However, if your savings aren’t enough to cover the costs, you’ll need to look elsewhere.
Bank loans: A common way to secure additional funding is through a bank loan. Banks typically require borrowers to invest 15% to 25% of their personal funds towards the total project cost. They also look at factors such as credit scores and collateral. If a bank considers your loan too risky, they might opt for an SBA (Small Business Administration) loan guarantee, which provides them with a safety net.
Friends and family: Another common funding source is turning to your social circle. If you go this route, make sure to put everything in writing, even if it feels weird. Relationships can get messy when money’s involved, and a written agreement keeps everyone on the same page.
Microloans: If you find you can’t get a traditional loan or don’t need a lot of money, microloans could be your answer. Some organizations offer small loans designed for startups and often provide training to help you succeed. This can be an excellent way to get both the money and the knowledge you need to hit the ground running.
Step 4: Acquire & Set Up Your Store
With the funding secured and your business registered, the next step is setting up your location. This is where the planning starts to feel real, where your dream begins to take physical shape.
When choosing your property, make sure it’s in line with the target market you’ve outlined in your business plan. Are you catering to a high-end clientele? Look for a place in an upscale neighborhood. Targeting young adults? Maybe a spot near a college campus is right for you. But before you sign anything, make sure your funding is secure. Also, double-check the zoning laws to make sure you can operate a hair extension business in that location.
Once you’ve nailed down your location, it’s time to fill it with the stuff you need: chairs, mirrors, display shelves, and so on. Consider sketching out your floor plan to confirm that everything fits and is easy for staff and customers to move through.
Step 5: Register the Business
The next step is to take care of any paperwork to get the business legal to operate.
Choosing the right structure for your business is the first task, as it impacts things like taxes, ownership, and personal liability. The four primary types of business structures include sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC).
- Sole proprietorship: This is the simplest form of business structure, with low startup costs and ease of management. However, it provides no separation between personal and business liabilities.
- General partnership: This structure is similar to a sole proprietorship but involves two or more people. Each partner shares in the profits, losses, and liabilities of the business.
- Corporation: A corporation is a separate legal entity from its owners, providing them with personal liability protection. However, it involves more paperwork and higher setup costs.
- Limited Liability Company (LLC): An LLC combines aspects of sole proprietorships/partnerships and corporations. It provides personal liability protection of the corporation but is easier to administer.
Related: Comparison of business structures
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
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Northwest - Best privacy protection. $39 plus state fees & free registered agent for 1 year!
Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.
During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.
Obtain business licenses and permits: Hair extension licensing requirements differ depending on your location and the services you will offer, which can make getting started confusing. Some states, like California, don’t require licensing to sell hair extensions, while others require a cosmetology license to install hair extensions.
In addition to hair extension-specific licensing, some general business registrations will be needed. and vary depending on the state. These typically include a business license, sales tax permit, retail certificate of occupancy, and Employer Identification Number.
Step 6: Source Suppliers
Opening a hair extension business requires having quality products for customers to purchase. Finding reliable vendors for which you can purchase inventory in bulk will take some time, and they will usually require proof that your business is in the process of opening before they provide wholesale pricing information.
Initially, the cost to stock inventory in a new store is quite an investment, so dig into what your customers will want so your shelves have what they want to buy.
If you aren’t sure about what suppliers to go with, trade shows are a great way to start your research. You get to see products firsthand and start immediate conversations with potential suppliers. These events are worth the investment of your time and money. Also, don’t underestimate the power of a good recommendation. Talk with other hair extension businesses (not competitors, of course) or join online forums or social media groups focusing on the hair industry.
Step 7: Hire Staff
Some hair extension businesses are solely owner-operated, and others will hire employees. There are several federal and state rules that employers need to follow. Here is a brief overview.
Obtaining an EIN: An Employer Identification Number (EIN) is a unique number assigned by the IRS to businesses for tax purposes. You’ll need this number before hiring your first employee.
Employment eligibility: Under federal law, every employee must be eligible to work in the United States. You’ll need to verify this eligibility using Form I-9.
State reporting: Each state has different reporting requirements for new hires. Generally, you’ll need to provide information about each new employee to your state’s directory within a certain period after hiring.
Worker’s compensation: Most states require businesses to carry workers’ compensation insurance, which provides benefits to employees who become injured or ill while on the job.
Labor laws: You’ll also need to comply with federal and state labor laws, including minimum wage, overtime pay, and workplace safety regulations.
Step 8: Create a Marketing Strategy
With the business close to opening, it’s time to nail down the marketing strategy so customers will learn about your new business.
Whether selling online or locally, a successful online presence is important. Social media platforms like Instagram and Pinterest are great for this type of business, allowing you to showcase your products and customer transformations visually. Collaborate with influencers who align with your brand to reach a broader audience. Another popular tactic is content marketing through blogs or YouTube tutorials that provide value by answering customer questions about hair extensions, such as care tips or style ideas.
Collaborating with influencers is another powerful tactic. Influencers can showcase your hair extensions to their followers, which can significantly boost your brand’s visibility and credibility.
Creating YouTube tutorials showing how to use your hair extensions can be a great way to engage your audience and highlight your products’ quality and ease of use.
Additionally, if selling at retail, look into creating in-store promotions such as discounts or complimentary samples to bring customers in the door and try the products.
Step 9: Prepare to Open!
Starting a hair extension business involves multiple steps, and even after securing funding, finding suppliers, and setting up your location, there’s still work to be done. Every business will have different needs, but here are some key areas you may want to focus on:
Business insurance: Getting the right insurance is a must. Options include liability insurance and property insurance. This protects you against losses from events like theft, fire, or lawsuits.
Opening a business bank account: A separate business bank account is essential for keeping your personal and business finances separate, which can simplify bookkeeping and tax preparation.
Management software: You might consider using industry-specific software like Rosy, DaySmart, or Booker for credit card processing, bookings, and inventory tracking. Another option is Square for Retail, which also offers point-of-sale features.
Setting pricing: Deciding on your pricing strategy is key. You have to consider both the cost of goods and your overheads while making sure the price is something your target market is willing to pay. Don’t forget to factor in labor and material costs accurately when pricing services. Underpricing will lose money.
Joining industry associations: Membership in associations like the Professional Beauty Association, American Hair Loss Council, or the National Hair Society can offer networking opportunities, education, and even discounts on products and services.
Preparing for the grand opening: From decorations to promotions, your grand opening is an opportunity to introduce your brand to the world. Consider specials, giveaways, or partnerships with local businesses to draw a crowd.
Common Questions When Starting a Hair Extension Business
How much does it cost to start a hair extension business?
Starting a hair extension business can set you back anywhere from $10,000 to $50,000, depending on various factors like location, scale, and inventory. This is a ballpark figure, but let’s break down the major costs to give you a clearer picture.
Location: The first deposit for leasing a retail space can vary widely based on location and size. In a busy city, expect to pay at least $2,000 to $5,000 for the initial deposit. In addition to any deposits, budget for any buildout or remodeling costs.
Inventory: Hair extensions themselves can be costly. To stock a moderate range, you could be looking at an initial outlay of around $5,000 to $15,000.
Equipment and supplies: Think chairs, mirrors, washing stations, and so on. This could cost you around $3,000 to $5,000 to start.
Business licenses and permits: Getting the right licenses can also cost money. Fees can range from $100 to $400, depending on your state and local requirements.
Insurance: For the initial set-up, liability and property insurance could cost around $1,000 to $2,000.
Marketing: Launching your business with some buzz is essential. Initial marketing costs, including a basic website and some local advertising, might be around $1,000 to $2,000.
Miscellaneous costs: These are the unpredictable or smaller costs that add up, such as utility setup fees, initial phone and internet charges, and business cards. Budget at least $500 for these.
Is it profitable to sell hair extensions?
While it’s challenging to pinpoint an exact profit, industry data suggests that hair extension businesses can typically achieve a profit margin of around 50% to 80%.
For example, consider a hair extension business that generates $100,000 in annual revenue. The average cost of hair extensions is between $200 and $500, so using an average of $350, meaning you would need fewer than 30 customers per month, which is pretty reasonable for a hair extension business in it’s first year.
If the cost of goods sold (COGS), which includes the cost of hair extensions and other direct costs associated with the products, is $40,000, the gross profit would be $60,000 ($100,000 – $40,000). This represents a gross profit margin of 60%, which falls within the industry standard.
However, this is not the net profit. From the gross profit, you must subtract all other operating expenses, such as rent, utilities, salaries, marketing, and insurance. Suppose these expenses total $30,000. In that case, the net profit would be $30,000 ($60,000 – $30,000), representing a net profit margin of 30%.
These figures are hypothetical, and actual results will vary based on numerous factors, including the specific location and size of your business, your chosen marketing strategies, and more. Therefore, conducting thorough research and considering all potential costs when planning your budget is essential.
What skills are needed to run a hair extension business?
Running a hair extension business requires a unique blend of technical skills, business acumen, and interpersonal abilities. Here are some key skills one should have to be successful in this industry:
Professional know-how: Even if you decide to distribute hair extensions solely, ensure you stay current with industry trends and innovations. Understand what the market is doing, what novelty items are being introduced, and what manufacturers can supply your products.
If you offer all hair extension services, we highly recommend you learn the trade through a mentor, apprenticeship, or accredited program.
Technical skills: Expertise in applying and maintaining hair extensions is crucial. This includes understanding different types of hair extensions, application methods, and care techniques. Many professionals recommend completing a hair extension training course to acquire these skills.
Customer service and interpersonal skills: This is a vital skill and one you need to enjoy. Especially if you offer hair extension services, you will be helping your customers achieve their desired appearance. Empathy and care are essential traits when assisting clients suffering from hair loss. The ability to advise clients professionally on style, fashion, and hair extension options is equally essential.
And don’t forget to maintain a solid relationship with your suppliers, hair stylists, and beauticians.
Excellent marketing skills. How will your target market find you – how will you grow your customer base? We recommend investing in good imagery and developing a consistent, authentic comms and marketing strategy and branding that speaks to your target market. Consider getting influencers to wear your gear and promote it to their followers.
In addition, an outstanding customer experience will ensure repeat business and help expand your brand through word of mouth.