For many barbers, opening an independent barbershop is the ultimate goal. This is the time when you can express your creative talent as a completely independent artist and craftsperson. You can set your own prices and potentially earn like the pros, go to international barbering events, give out your own business card, and develop a list of clients who will fly in to see you.
The life and career of “Craig the Barber” is the kind of success story that inspires up and coming barbers to go out and get theirs… What started as a hobby in high school simmered over the course of a career in banking; that is, until Craig had an epiphany that barbering was his true calling. After graduating from barbering school and cutting his way up the ladder at various barbershops and salons in the Beverly Hills area, he developed a steady list of high profile clients – pro ball players, celebrities, you name it. He was that good. This allowed him to expand his business through word of mouth and eventually, as his rep grew, he began to make media appearances. These appearances led him to being featured in national magazines and television, eventually becoming a regular contributor to Men’s Health…
Barbering as a Business
Opening your own barbershop is an exciting prospect, and as an up-and-coming professional you should be prepared to make an investment in your future. On top of all the time you will spend learning about the business end of barbering, you’re also going to be putting down a significant chunk of change on a building lease and equipment like a barber chair, an inventory of barbering products, and other things like waiting room accessories- magazine subscriptions, a TV, a coffee machine, and the list goes on. Because barbering is an esthetic trade, you’ll undoubtedly want to make the interior of your shop look impeccable.
As you embark on opening your own barbershop, consider these two words: barbershop business. You need to understand these two separate aspects in great detail and depth.
The “Barber” in a Barbershop Business
Only a barber with years of experience should consider opening a barbershop. You need to know the ins and outs of the tonsorial arts, including the best tools, supplies, and products. You need to know what works and what doesn’t for satisfying clients and attracting new customers. By the time you are thinking about opening your own place, barbering should be the easy part.
It goes without saying that you also need to be a pro barber. While the importance of finding a great high-traffic location can’t be stressed enough, when you’re considering your own shop ideally you will already have a large list of regular clients you’ve built up over time.
At this point you should also be ready to make a long-term commitment to your art and trade. Opening your own barbershop is a long-term investment that pays off over time, so you need to go into this endeavor fully committed.
The “Business” in a Barbershop Business
There is a reason why “business” is its own major in college, why there are business lawyers, why there are business accountants, and why there are business advisors: starting and running a business is complicated. This holds equally true for a barbershop business.
Start by making a business plan. Calculate all the expenses you will incur getting your shop ready for opening, as well as your monthly and yearly reoccurring expenses. Figure out how many clients you have to see each day, and how you have to set your prices to meet your expenses. By doing this you can see if you can turn at least a small profit by charging prices your clients will pay.
You’ll probably need around $5k-$10k to get started, depending on how expensive things are where you live and how many supplies you need to get. Depending on who you ask, you should either first save up this initial investment, or speed things up with a business loan. If you’re planning on taking out a loan from the bank you’d better develop a very solid business plan you can show them.
To ensure you operate legally, you must be aware of the laws in your own jurisdiction. This includes employment, business, and tax laws at the city, county, and state level. And those are on top of federal regulations.
Don’t panic, you don’t need to hold a degree in business or certification as an accountant. As you consider opening up your own shop, the best way to start delving into the business end of things is to ask another barber who has experience with this. Many cities also have designated officials who can help you navigate the process of officially establishing your own business.
To form your own barbershop business you will likely need to work with at least two agencies: your city or county’s business office and your state’s board of barbering/cosmetology.
Getting a City or County Business License
Your city or county’s business department is responsible for issuing you a business license. Getting a business license can be easier than you might think, and typically involves filling out a one or two page application. Before you apply for your business license, you will need to know what type of business you are forming. If you are forming anything more than a sole-proprietorship – and even if you are forming just that – you may want to get advice from an accountant:
- Sole Proprietor – Use this model if you’re planning to be the sole owner and operator of your barbershop; you won’t have any employees and you will be doing everything.
- LLC-Limited Liability Company – Use this model if you’re planning to act as the main boss and hire employees. On your taxes you can report your earnings as personal income, while at the same time maintaining a certain degree of protection from things like lawsuits. If you are planning on opening a franchise (buying a shop under corporate governance, like Supercuts or Fantastic Sams) you may want to use this model too.
- Corporation – Use this model if you’re planning to start a large barbershop business, opening multiple locations, hiring many employees, and attracting investors.
While we’re on the subject of licensing- there’s a good chance you’ll be required to get insurance (liability and other types like building, fire, flood, etc) along with your business license. Even if this isn’t a requirement, you should definitely get liability insurance and strongly consider insurance for your business.
Meeting State Board Requirements
Meeting the requirements of your state’s barbering/cosmetology board can be challenging. These requirements are different for each state. You can find the specific requirements for your jurisdiction by checking with your local board. The board often works with your state’s department of public health to conduct inspections to ensure you are in compliance with state regulations. Examples of the most typical requirements include:
- Completed independent barber shop owner application
- Proof of ownership or leasing of a business address
- Proof of a city or county business license
- Proof that you are a licensed barber
- Facility requirements like:
- Hot and cold running water
- Public bathrooms
- Drinking water
- Each barber chair may have a square footage requirement (such as 35 ft2 per chair)
- Containers for trash and soiled items
- Cabinets that close for storage of barbering tools and clean towels
Depending on your state’s requirements and the condition of your newly-leased barbershop, meeting these requirements can involve renovations, designs by an architect, a plumbing inspection, inspection by an electrician, a use-and-occupancy license inspection, and a final health department inspection, not to mention a separate inspection by a fire marshal. The point of saying all this is not to discourage you, but to encourage you to find out your local requirements and price these out so you know what kind of investment you’re getting into. Make sure to take these things into consideration as you develop your initial business plan.
And you can’t forget about the other important monthly expenses you’ll need to pay for on top of rent: electricity, cable TV, air conditioning, heating, and utilities. You should also set aside some money to cover possible fines and other expenses that might come up unexpectedly.
Considerations when Hiring Employees: Renting Chairs, Commission, Salary …
Remember as a general rule, if you can’t pay the rent yourself for your own barbershop then you shouldn’t be opening one. The time to consider employees is after you’ve got your shop established.
If you want to expand into hiring employees then you can consider making them salary, commission, or booth/chair renters. Each state has its own regulations about these types of employment arrangements – check with your local board of barbering to find out exactly what you need to do when you hire employees. Each type of employment arrangement also has its own tax obligations, so make sure you are aware of these too.
Salary/Wage/Commission – If you’re hiring employees on a salary, wage, or commission basis you can hope to build a non-competitive team environment. Your employees work together to give walk-ins the shaves of their lives, and don’t get into arguments over whose client is whose. Expect to be very involved in the daily operations of your shop, including advertising, marketing, and promotions.
Renting Barber Chairs/Booths – If you take this approach you will have a more hands-off approach to running your overall barbershop, leaving you with more time to focus on your own clients while you are guaranteed a fixed amount of income from your tenants. Ideally you can also enjoy a sense of camaraderie from your colleagues/renters who are cutting heads in the chair next to you. Remember that New Jersey and Pennsylvania do not allow booth/chair renting.
Combination Chair Rental and Commission – You might find you like this approach, which gives your employees/tenants the maximum amount of working options. With happy employees or chair renters, you are more likely to retain talent over the long-term and the clients who come into your barbershop will also appreciate a workplace that exudes satisfaction. However doing taxes for several types of business arrangements might give you a headache.
Barber Business Bookkeeping
At least once a year (some types of businesses must file taxes quarterly) you will need to do your taxes. For anything more than a sole-proprietorship you should consider hiring an accountant, especially for the first few years. Many sole-proprietors also hire accountants. To properly file taxes you must keep records of all your sales as well as receipts/invoices for things like your building rent, product orders, and other business expenses.
If multiple barbers are involved with your shop you must pay particular attention to how the IRS classifies them – as independent contractors or as employees. This can be different from how your state considers your employment arrangement. For example, if you have barbers who work on a commission and have their own clients and tools, the IRS may consider these people to be your employees.
Classifying booth renters and barbers who work on commission as employees or independent contractors is a big issue for barbershops. There are many barbershops who improperly classify these professionals as independent contractors when they should in fact be classified as employees. These establishments risk heavy fines from the IRS if they are audited. To help keep your business straight the IRS has even published a guide for barbershops. The section, “Employee VS. Independent Contractor,” details how to determine if a person should be classified as an employee or independent contractor:
- If the barber rents a chair from you, pays you a fixed weekly/monthly fee, provides all of their own tools, and determines their own hours, they can be classified as an independent contractor.
- If the barber earns money through a commission and you control their hours then they should be classified as an employee.
- If the barber is paid on a commission, has their own clients, provides their own tools and supplies, sets their own hours and prices, and even has their own key for your shop, you should still classify them as employees because they are working on a commission.
- If the barber pays a minimum rent payment that can increase with their gross sales, sets their own hours, collects their own money from clients, and you as the owner supply the barbering tools, then you can classify this person as an independent contractor.
Other Independent Barbershop Models
Partnership – All this being said, maybe you as an experienced barber have a friend or partner who is experienced in business. This can also be a successful combination, where you manage the barber aspects of the shop, while your partner managers the business end of things.
Cooperative Model – You may want to give you employees a greater stake in the risk, ownership, and profits of your barbershop. This way your employees have a stronger sense of responsibility for their work. This can be done in a number of ways, starting with incentive bonuses. You can arrange a system where your employees get a bonus when your barbershop’s profits exceed expectations in a given year. If you want to spread the business responsibility even further, you can consider making your top employees partners in your barbershop, giving them a designated percentage of ownership in the business.