What Type of Business Should I Buy? 10 Point Checklist for Choosing the Right Industry
Hey there, fellow entrepreneur! Glad you are here- entrepreneurs are my favorite kind of people in the whole wide world and we are certainly a breed of our own. As a serial business owner, I am always looking at businesses to acquire, so I thought it would be a great idea to answer the question we all have rolling around in our minds- what type of business should I buy?
My name is Susan Wos, and I have a deep passion for not only business ownership, but the beauty industry- an industry that has provided me with an endless amount of opportunities to create generational wealth.
Walk through my reiteration of the brilliant David Barnett’s 10 point checklist on how to choose the right industry to focus on, so you understand the huge opportunities for success in beauty.
Table of Contents
Buy a Business in an Industry you are Familiar with or Have Easy Access to Information
Ok, this is an easy one… most of us have been in a salon, spa or barbershop several times. Most of us visit a beauty business at least 8 times a year. Several of us know a hair stylist or esthetician and there is certainly a large amount of information about the beauty industry online.
Beauty pros and owners are friendly people, happy to talk about their businesses. If you prefer an in person conversation, find a successful beauty entrepreneur and take them out for a coffee. I promise you will walk away with more information than you anticipate to receive.
Want some insight from salon coaches who work with a wide range of clients? Hit beauty industry consultants up for a chat- you never know who may be able to help you along the way!
Learn About The Beauty Industry
Learning about the beauty industry is simple. Check out social media for beauty businesses, watch YouTube videos from salon industry experts, or just start cozying up to a few salon owners or beauty professionals.
There is plenty of information online and through people you already know about the beauty business- you just have to look!
Industries with Independent Operators are the Best Targets
The beauty industry is ruled by small business owners who operate independently. While we do have a fair amount of profitable franchise opportunities, for the most part you will find independently owned single, double or triple location salons in your city.
HOT TIP: Most salons, spas and barbershops are owner-operated. Very few salon owners have business degrees, marketing training or excellent business acumen.
It is easy to find salons where the owner is still behind the chair! This is much like a restaurant owner working as waitstaff or in the kitchen- probably not the best use of a business owner’s time.
The beauty industry is ripe for non-industry buyers to acquire salons, spas & barbershops and drastically improve their current business models. This is not to say a great beauty franchise should be overlooked. Franchises are full of non-beauty industry owners for a reason- they are profitable and easy to run from the comfort of your home.
Buy Businesses that are Resilient to E Commerce
Want to compete with Amazon? Yeah, me either! Sure, selling products online is a great business model but man, it is so competitive.
Salons, spas and barbershops DO play the e-commerce game, but it looks a bit different… We sell our products to existing, (and new) clients through social media, through beauty affiliate programs, on our websites and in person.
We have a captive audience who sits in our chairs and asks us for advice and product recommendations. Easy sell and super common in the salon industry. We do not feel competition from e-commerce, nor are our service based businesses threatened by online sales from giants!
Innovation Opportunities are Key in Business Acquisitions
Business owners have to adapt and innovate to succeed and stay ahead of the competition. The beauty industry is chock full of creatives who have innovative ideas… even though a haircut is still a haircut, new tools, systems, services, softwares and products are always cropping up.
As a matter of fact, it is very hard to stay on top of all of the new innovations within the beauty space. From helpful apps to lash robots to head spas, there is never a shortage of lucrative, innovative ideas and new business opportunities in the beauty industry.
Choose and Industry with Stable or Growing Demand
According to Euromonitor International, the beauty industry’s projected growth is 8.4%, every year, through 2028. The larger the population gets, the more demand there is. Unless you cut your hair at home or inject your own Botox, there will always be a need for beauty services and products.
Beauty services are commonplace- a staple of life that most women look forward to, and spend a lot of time and energy researching new products and enjoying services. With innovations in the Med Spa industry (the fastest growing sector of beauty), and new products & services coming to the market the demand continues to rise.
Looking Good Never Gets Old
Looking professional and feeling good about your appearance will never go away… I remember an insightful conversation I had with my female optometrist during a recession.
At the time, I was a hairstylist and she asked me if the economy had affected my income, to which I answered “no”.
She then piped up with “I would rather starve than not get my hair done.” This more extreme attitude is far more common than most people would think- beauty is now, and will forever be a top priority for a large population of first world countries.
Assess Barriers to Entry when Buying a Business
While you do need a license, (as of now), to perform most beauty services, owning a beauty business does not require any special licensing or training. Most states require salons, spas and barbershops to be licensed and inspected by state boards, but this is an easy barrier to overcome.
It is helpful to have an understanding of technique and or beauty services skills when you approach a business that does not have management infrastructure. The key to buying a beauty business when you do not have the skills or training in the industry is by hiring skilled managers or by buying businesses with independent contractors such as booth rental or salon suite businesses that do not depend on mentorship and training.
As I mentioned before, being business savvy and having good marketing chops is certainly a big plus for beauty business owners but this would be a barrier to entry for any business that serves the public or that needs customers to thrive.
Seek Industries with Great Profit Margins and Cash Flow
We all like to make great money…the beauty industry is no exception! As a business broker, I have seen extremely low cash flowing businesses all the way up to 35% profit margins in beauty businesses.
This all comes down to pricing, management and new customer acquisition abilities. You may struggle to keep a 25% profit margin on beauty services as a new owner, learning the ropes. You can also take salons that have a very low profit margin and turn them into cash cows if the seller does not know how to manage money.
While it is super important to analyze cash flow and profitability, it is equally as important to assess the opportunity at hand and what you can do to improve the business. Most great business ideas are profitable when operated efficiently and great management is in place.
Many beauty businesses are operated by people who do not understand how to be profitable. Or maybe they are too nice. It is also possible the current owner is a fantastic creative that can’t manage money.
I encourage buyers of any business to assess the opportunity to grow alongside a business valuation analysis.
Is the Industry Scalable and are there Growth Opportunities?
While individuals and beauty businesses can reach capacity, scaling by adding locations or more team members, multiplies your income potential. Franchising or creating a product line based on your beauty business is a common theme amongst top achievers in the hair and skin care world.
Adding online sales, online services like coaching & consulting or learning the latest trends to implement new services are ways salon owners grow their business. And of course, the easiest way to grow is by increasing your client base to the maximum capacity.
Beauty Business Owners Buy Existing Salons & Spas for New Locations
A key indicator of the growth potential in the beauty industry is the fact that oftentimes our beauty businesses for sale are bought by owners who are seeking another location. There is no easier way to walk into profits than by buying an existing beauty business.
Consider Regulations when Buying a Business
The beauty industry does have regulatory issues to perform services, however very little regulation on ownership- unless it is a medspa. State boards of Cosmetology, Esthetics, Massage and barbering dictate what is needed to operate legally.
Some cities require a license to operate any business and there are always a few simple boxes to check, legally, to own a beauty business. Check with your local state boards, cities and state regulatory entities to understand what is needed for compliance in your area.
Does the Industry Interest You and is this a Good Fit for Your Entrepreneurial Dreams?
Only you can answer this question! Beauty businesses are people-heavy opportunities. Not only will you deal with staff, you will also need to deal with customers. Oh, and it helps to like to make people feel good and provide opportunities for employment or independent contractors.
Some beauty business models offer a very hands off type of ownership, while others require more involvement from owners, at least at first. The goal in buying a beauty business, (or any business), should be to decrease the need for your personal involvement over time.
The good news is, salons, spas and barbershops are often fun places to be! Rarely do you walk into a beauty business and see unhappy people. Making people feel great while filling your social cup is a pleasurable experience only you can decide if beauty is for you!
Conclusion
While I do provide a slightly slanted POV on why you should consider the beauty industry if you are seeking a new business opportunity, there are concrete facts as to why this is one of the best industries to invest in.
If you want to learn more about why a beauty business acquisition is a smart choice, just click that bolded text to get an in-depth review of what your entrepreneurial potential will be in beauty. To review, we checked allll of David’s boxes for the 10 things to consider when thinking- What type of business should I buy:
✔️ Familiarity or availability of information
✔️ High number of independent operators
✔️ Resilience to e commerce
✔️ Opportunities for innovation
✔️ Stable or growing demand
✔️ Analyze barriers to entry
✔️ Profit margins and cash flow
✔️ Scalability/ growth opportunity
✔️ Regulatory considerations
✔️ Personal interest & fit
Want more insight on the beauty industry? Follow us on Instagram, LinkedIn or Facebook, better yet, contact us today for a chat!
Yours in service,
Susan Wos, Founder of Salonspa Connection
