The beauty industry is fierce at the best of times. With high competition on highstreets, rising rents and unpredictable work patterns, running a beauty salon is difficult to turn a profit from. With the spread of COVID-19 and implementation of social distancing, this is perhaps the most damaged industry.
Almost all revenue in a beauty salon revolves around close contact, and it’s an incredibly socially driven environment too. Back in Easter time, salons were reassured that they would receive government help. This, for most part, came in the form of roughly a £10,000 government grant. There have been some more recent grants, and council-specific ones, albeit much smaller than the previous.
For this reason, many salons have turned to alternative financing solutions. For example, American lender Kabbage have been busy handing out loans to British salons, who just want to tie themselves over until next year when they think they may be in a better position. By choosing a business loan, it can tide businesses over during the hurt that has come from the lockdown periods. For most salons, there has been no pausing of rent, unlike some residential situations. This hasn’t been enough for most businesses, given that salon’s have been forcibly closed for a similar length of time as been open this year. Coming out of the last lockdown wasn’t enough as there remains to be measures still in place that are hurting business.
Going into 2021 as a beauty salon
Whilst those in all three regional tiers can currently open, salons were among the last businesses to be able to open back up, behind cafes. The issue is that, whilst many customers are dying to get back into the salon, many will still be weary of the close contact and demand will inevitably fall.
Summer months are the best time of year for beauty salons, which is behind us now. They were closed for much of the summer, meaning that they missed out on their busiest months. For a while, massages and lashes were banned too, due to the close contact. With restrictions easing up now, it’s bittersweet as they’re heading into the quietest months of January and February. Beauty therapists will continue wearing PPE into 2021, along with the customer, which again doesn’t contribute to the social atmosphere that many customers long for.
Being one of the last businesses to open in the summer, beauty salons fret that they will be one of the first to close back down in the event of another change in restrictions. Of course, there is the introduction of the vaccine, which the UK was first to get on board with. Unfortunately, much of the customer-base of salons are young females, who are less likely
to be receiving a vaccination.
There is hope that eventually, enough people will be vaccinated to the point where we stamp out the remains of the virus. This, though, seems a long way off yet. Salons, like all UK SMEs, will be hoping that Easter time going into Summer will be the last of it. With summer being naturally harder for COVID-19 to spread and survive, along with hopefully millions of vaccinations, there’s a good chance we are seeing the beginning of the end. Though, this could mean another 5 months of lackluster revenue or potential closures.
Lack of financing
As mentioned earlier, there hasn’t been many waves of government help for beauty salons. Government grants are drying up across the board, and most banks won’t go near sole trader beauty salons. High Street banks tend not to lend money to anyone with a less-than-perfect credit score.
Their adversity to small business lending is glaringly obvious, but it’s worsened during Coronavirus. There’s even less certainty to the cash flow forecasting of a beauty salon, seeing as they’re likely the first business to be on the wrong end of a restrictions law change. The only hope left regarding financing lies within alternative financing. These are online lenders that specialise in small business loans with less-than-perfect credit scores. Such
lenders know that most small companies have a sketchy track record, but many are perfectly capable of repaying small loans. Therefore, they judge businesses on their individual merit of current accounts.
Instead of taking the time to host physical meetings in a branch, they operate with tonnes of automation. Their infrastructure allows them to scan your application and read your financial situation – that way, there’s less prejudice. This also means the process is quick. In a matter of minutes, a salon owner can apply for a small loan. Within 24 hours, the application will likely have a verdict, and then funding should follow within 24 hours after approval. Sometimes, you may find yourself with same-day
funding. This is far away from the month-long process of bank loans – and it’s much more attainable.
This online industry is getting more and more popular over the time of the pandemic. In fact, it’s somewhat a reflection of government failure – hence why there’s talks about a new state- backed loans scheme for SME. Still, to have the option, even with higher interest rates than bank loans, is a positive. The biggest problem salons face here is their lack of cash flow forecasting accuracy. Being able to predict February’s income is near impossible, given we have no way of knowing if there will be another lockdown. Thus, taking on significant debt is a gamble, as repayments
have to be met otherwise their woes deepen.
On a final note
For some, it’s survival at all costs. But it’s important to remember how many salons come and go on a high street; it becomes obvious that long-term survival is unlikely. Thus, accepting that this time around it didn’t work, and perhaps trying again in a post-coronavirus world is the right choice, instead of further leveraging the business. That decision is up to salon owners alone. Unfortunately, there is no rulebook.
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