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Let’s dive into an industry that’s always in style - literally! The hair salon sector in the U.S. is more than just a place to get your split ends trimmed; it’s a booming business that’s about as recession-proof as they come. Whether it’s a fresh cut, a bold colour, or just a bit of pampering, people love to look their best, and that means this industry isn’t just cutting hair - it’s cutting into a profitable market.

With the rise of self-care and wellness, the demand for high-quality hair services has never been higher. So, let’s brush through the details and see why the hair salon industry might just be the perfect fit for your next investment. 💇‍♀️💅

INDUSTRY BREAKDOWN

The U.S. Hair Salon Industry: A Cut Above the Rest? 💈 

The hair salon industry in the U.S. is a behemoth, with a market size of a whopping $67.5 billion in 2024! Whether it's your neighbourhood barber or that chic downtown salon offering nail and waxing services, this industry covers it all. Beauty salons dominate, raking in a stunning 95% of industry revenue, while barbershops hold their own with a loyal clientele. With over 1.3 million people employed across the country, this sector is as much about style as it is about substance. ✂️

Industry Trends

What’s trending in the salon world? 🌟 Sustainability and technology are at the forefront. More salons are going green—using eco-friendly products and reducing waste to meet the demands of environmentally conscious clients. On the tech side, online booking, social media marketing, and AI tools are making waves, helping salons stay ahead of the curve and in tune with what clients want.

And let’s not forget inclusivity! The natural hair movement is stronger than ever, and salons are responding by offering services tailored to all hair types and textures. Plus, with retro hairstyles making a comeback (hello, curtain bangs and shag cuts!), there’s always something new (or old) waiting to be discovered in the salon chair. 🧖‍♀️

The Finances

Alright, let’s talk dollars and cents. 💵 The average U.S. hair salon pulls in about $317,000 annually, with profit margins sitting pretty at around 28%. Start-up costs can be steep, with leasehold improvements alone eating up 43% of the initial budget. Making the acquisition of an already successful shop a great investment! 👀

Labour costs are your biggest expense, gobbling up 20-45% of revenue, but they’re also what keeps clients coming back. A well-compensated, skilled stylist can be the difference between a one-time visit and a loyal customer. And with competition as fierce as a pair of freshly sharpened shears, standing out in this market requires offering exceptional service and a unique client experience.

Buy or Bust?

If you're considering snipping your way into the hair salon industry, now could be the perfect time to make the cut. With a market size of $67.5 billion and profit margins that can reach up to 28%, the industry offers substantial returns for those who can manage the startup costs and navigate the competition. The growing demand for diverse and inclusive services, coupled with the industry's resilience, makes it a solid investment. 💇💰However, keep an eye on emerging trends like sustainability and technology, as staying ahead of the curve will be key to maintaining profitability. 

Check out these Hair Salon Businesses for sale:

1. Premier Brooklyn Hair Salon with Multiple Location - $850,000

2. Market-Dominating Niche Salon & Spa in Victoria, BC - $200,000

3. Premier Mens Salon in Scottsdale, AZ - $315,000

Interested in a particular industry? Reply to this email with the industry you are curious about and keep your eyes peeled in upcoming issues. 👀 

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Have an opportunity in hand? Test your offer assumptions and get your FREE lending assessment score to determine your likelihood of getting financing on your deal.

DEAL REVIEW

Established Salon in High-Traffic Area

This week’s deal is a fully-equipped salon located in San Antonio, Texas. 

Deal Facts 🔥

Green Flags 🟢

• High-Traffic Location: The salon's location in a bustling area of San Antonio ensures a steady flow of walk-in customers, which is crucial for maintaining and potentially increasing revenue.

• Established Clientele: With a decade of operation and a base of repeat customers, the salon has built a solid reputation and customer loyalty, reducing the risk for new owners.

• Diverse Service Offering: Offering a wide range of beauty services, including haircuts, colouring, microdermabrasions, and bridal services, provides multiple revenue streams and appeals to a broad customer base.

• Fully-Equipped and Operational: With eight stations and ample parking, the salon is well-equipped to handle a high volume of clients, making it a turnkey operation for new ownership.

• Owner Retention for Transition: The current owners’ willingness to stay on as stylists ensures continuity in service, helping to retain existing clients and maintain business stability during the transition.

Red Flags 🔴

• Limited Growth in Revenue: Despite being operational for a decade, the salon's weighted revenue and SDE figures suggest that growth may have plateaued, requiring new strategies to drive significant increases.

• Dependence on Owners: The current owners' involvement as stylists may indicate that the business relies heavily on their personal client relationships, posing a risk if they eventually decide to leave.

• Small Inventory Value: The low inventory value of $3,000 could suggest that the business is not heavily invested in retail product sales, which could be a missed revenue opportunity.

• Potential Market Saturation: The beauty industry in San Antonio is competitive, and without strong differentiation or expansion efforts, the salon could struggle to grow its market share.

• Time Constraints of Current Owners: The reason for selling due to time constraints might imply that the business requires more attention or management than the current owners can provide, which could be challenging for new owners if similar time constraints exist.

Possible deal structure: To mitigate the risk of client attrition, this deal should include a sub-contractor agreement with the owner, who remains an active hairstylist. A retention clause is recommended, where the owner forfeits $10,000 if they leave within the first year, and $5,000 if they leave within the second year. This arrangement ensures the owner’s continued involvement, which is critical in maintaining client relationships and business stability post-sale. While it’s not an ideal scenario for the seller, it provides a necessary safeguard for the buyer during the transition.

Watch Our Video Breakdown

For a more in-depth analysis, check out this video deep dive of the deal by our Founder, Morgan Tate:

You all ate up the last edition and were on board with food trucks! 🚚 And, if we didn’t say it enough in that edition, now is the perfect time to buy one. With summer winding down, sellers are ready to turn over their business after a successful season to a new owner! So keep an eye out for food trucks with major discounted price tags.

Want to learn more about this deal? Reply to this email with a “send me more details” and we will connect you with the broker!

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TWEET HIGHLIGHT

Seeing these success stories about founders starting their business from nothing and growing an empire are inspiring - but how realistic is that? Wouldn’t it be easier to buy a business that is already successful and scale it further, rather than starting from the bottom?

Forbes released an article about if it smarter to buy or build a business to answer all your questions. Check it out!

GOOD READS

Recommended Resources 📚

Below is a list of articles, books, and other resource we recommend for buyers or operators of small businesses!

1. Getting started on your business buying journey? Don’t worry, we got you! Here is everything you need to know when purchasing your first business.

2. Does your search history look like, “____ business for sale” with dozens of other similar variants? This tweet has the top businesses for sale sites to help you narrow your search. Make sure to check out the comments as there are some hidden gems in there as well! 💎

3. If you are not already subscribed to the Acquisitions Anonymous Podcast, you are missing out. They are the #1 podcast for acquiring and operating small businesses! Not sponsored - we just shamelessly love these guys. 🫶🏼

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