Vancouver Hair Salons: Business and Tax Tips – Part 1

I am noticing the proliferation of hair salons in the Downtown Vancouver area and I can’t help but think that they are in for a challenging time. Retail commercial rent is sky high, escalating real estate price and cost of living in general has reduced the city’s discretionary income pool, and as a consequence Vancouverites are relocating to the more affordable surrounding suburbs. To add to these challenges, the industry has little barriers to entry – it doesn’t take a long time or a lot of financial resources to become a hairstylist. Because of all of these factors, every few weeks, there are even more stylists competing for business in an shrinking market.

Vancouver Hair Salons Business Models

In Vancouver, the hair salon industry generally has two business models: 

Model 1: The salon employs the stylists and they are paid a combination of an hourly rate plus commission on services rendered and hair products sold.

Model 2: The other model is the “chair renter” model. Under this model, all the stylists are self employed, paying the salon owner a monthly rental fee to lease a space to cut the clients’ hair. The rent generally includes the use of facilities such as a sink to wash clients’ hair, towels, and the electrical utilities. Other small equipment required to perform hair cutting and hair dressing services, such as blow dryers, hot irons, colors, scissors, etc., are generally the renter’s responsibility, unless the owner and the hairdresser agree to otherwise.

Under the first model, the salon owner has more control over their business but also more management responsibilities. The owner has to attract talented stylists and also is responsible for attracting clientele for the stylists.

Under the second model, the salon owner has less control, less management responsibility and less risk because business risk is shifted to the chair renters. However, with the proliferation of hair salons, the laws of supply and demand are tipped in the favour of supply and therefore chair rental rates are decreasing quickly.

So how does a Vancouver hair salon prosper in such a challenging environment?

The salon business is one where the consumer is loyal to the hairdresser or esthetician, not the establishment. Therefore, first and foremost, the salon owner needs to provide a workspace and an entrepreneurial environment that will foster success for the stylists and help retain existing clientele. Two factors of a successful shop include: talented & motivated stylists, and marketing tactics on the part of the owner to attract potential new clientele to the salon. Aside from word-of-mouth, the platform for promoting salons and stylists today seems to lean more on social media. Well established and mature salons need to understand how social media and online information affects the purchase decision making process for consumers, and leveraging these tools correctly can really help an establishment thrive in a very highly competitive and saturated market.

My next blog will discuss how successful salons are thriving in this competitive market called Vancouver. So stay tuned…if you have any questions, please feel free to contact us at Mew & Company Vancouver Accountants.

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