What can owners do?
All you have to do to assess the damage is to look in the mirror.
Nearly 45,000 hair and beauty businesses and salons began 2020 with full order books and regular appointments as well as a healthy walk-in and casual trade for people wanting to look their best for going to weddings, restaurants or before they went away on holiday.
Then the first lockdown was announced, closing the entire industry down overnight and threatening the jobs and livelihoods of over 288,000 staff of which the vast majority, 88%, are female.
Fast forward a year and many salon owners would not have believed it if you told them they would still be closed and would remain so for a total of 15 months in some cases.
Under the stipulations of the current lockdown requirements, depending what hair and beauty service they provide, some have been allowed to reopen but others will be waiting until May 17th or June 21st when hopefully all social distancing requirements will be lifted.
Further research from the National Hair & Beauty Federation (NHBF), the largest industry body for the sector, shows exactly how strong the headwinds facing the personal care sector remain.
Can you close a business if it has debts?
The headline finding is that just under half, 46% of respondents surveyed, said they couldn’t be sure if their business would still exist by June 21st, even if all restrictions are gone.
By their own estimations 10% of the hair and beauty industry had permanently closed by December 2020 when the third national lockdown was instituted.
Since this measure was enacted 61% of salons who responded said they are not profitable.
38% said they were just about breaking even while almost one in four (23%) of salons said they aren’t earning enough to cover the basics of rent, overheads, staff costs and stock.
The cumulative effect of having to continue to pay fixed outgoings while being unable to diversify and generate income during the lockdown outside of support measures. Debt has increased and cash reserves have reduced and been wiped out.
Bounce back loans are going to be around for a while
Those that have been able to secure financial support through the bounce back loan scheme (BBLS) will also find their repayments coming due unless they have already extended the repayments.
There is no precise data on hair and beauty salon borrowing but according to statistics supplied by the British Business Bank some 97,961 Hairdressing and beauty treatment businesses along with others classed as “Other Service Activities” by industrial classification took out a bounce back loan last year.
The total borrowing for this segment is over £2 billion (£2,097,754,389) so the average borrowing amount would be £21,141 per business – which is nearly 20% of average turnover for more than half of the industry according to NHBF figures which says more than 50% of their members annual turnover doesn’t break £99,000.
Enforced closures have also had an impact on employment in the sector too.
More than half of respondents, 59%, have cut staff hours to reduce costs. 55% have cut apprenticeships while 16% have made redundancies in the previous 12 months while another two in five could not rule out further job losses in 2021.
How an insolvency moratorium can buy your business time to recover
Richard Lambert, Chief Executive of NHBF, said: “Financial stability will be the key to returning to profit and stability.
“Hopefully most hair and beauty businesses who have been able to return to work in the past few weeks will have enjoyed record income. However, they need the chance to get their head above water.
“As things stand, they’ll have to start repaying rent arrears and the debts and loans accrued over the past year just when business rates relief and furlough come to an end.
“Tackling this tsunami of financial obligations under long term social distancing requirements will scotch any chance for the industry to be profitable.
“It will be even less likely that businesses will have the resources, capacity or financial ability to take on or keep apprentices, putting the future skills of the sector in real jeopardy.”
The NHBF have been lobbying for additional support for the sector for some time including a Save Our Salons campaign to temporarily reduce VAT for the sector and an extension to the Self-Employed Income Support Scheme (SEISS) if the economy has failed to recover sufficiently by September.
Hair and beauty salon owners are some of the most multi-skilled in any line of work, and they have to be.
Not only do they have the pressures of managing a business but they have to ensure their customers are always satisfied with their treatment as one poor experience means they probably won’t return again.
They have to attract the most talented staff and meet their expectations to avoid them joining competitors or branching out on their own and taking their client base with them.
So it would be unsurprising if many salon owners took the past year as a sign that now is the time to make a personal and professional change and look to close their business down.
Others might be in financial difficulties right now but could have enough clients to be able to trade profitably once they’re allowed to fully reopen and need to arrange some breathing space with their creditors in the short and medium term until they re-establish themselves.
No matter what their individual circumstances, they will have a variety of options to move forward with.
We offer a free initial consultation for any salon owner or self employed hairdresser, nail technician, beautician or any other specialist.
Once we understand the state of play facing their business, we can devise a workable plan to help them achieve their aims leaving them free to concentrate on doing what they do best – making the nation look fabulous again.