A beauty salon has long been a place where clients can visit and leave feeling their best. If you are passionate about helping clients and making them feel special, then a beauty salon may be your calling. However, opening a beauty salon is a big move, regardless of whether you have previously worked in the industry. Therefore, you should know the steps involved in opening and growing a beauty salon. This article explains what you need to do to make the dream of owning your own beauty salon come true.
How Should I Structure My Business?
Before you open your beauty salon, you need to decide how you will structure your business. If you are operating alone, you can either start as a sole trader or a company. On the other hand, if you have a business partner, you can set up either as a partnership or a company.
There are other factors to consider when it comes to determining the most appropriate business structure for your beauty salon. For example, if you set up as a sole trader or partnership, your up-front costs to start the business will be minimal. However, you will also have unlimited personal liability. This means you may have to use your personal assets and finances to pay the debts your business owes. Therefore, if a client decides to take legal action against your business, your personal assets and finances may be at risk if you do not have appropriate business insurance.
You may decide to set up a company rather than work as a sole trader or in a partnership. Although there are initial registration costs involved in setting up a company, your personal liability is limited. This is because the company is a separate legal entity, and shareholders are not personally liable for debts the business owes.
How Do I Set Up My Structure?
Once you have decided on your business structure, you need to register your business for an Australian Business Number (ABN) and Tax File Number (TFN). If you are structuring your business as a company, you need to register the company first and then apply for an ABN and TFN for the company.
Whether you are a sole trader, in a partnership or setting up a company, you need to register your business name with the Australian Securities and Investments Commission (ASIC). This is the case if you have a business name other than your personal name for your business to trade under. You can register any business name so long as another entity has not already registered it.
You should also consider other aspects of your business when setting up your structure, including:
- registration of trade marks;
- application of restraint of trade clauses;
- whether you want a lease;
- how you will deal with equipment;
- how you will hire and manage staff; and
- whether you need permits or licences to run your business.
Trade Marks
You should consider applying for a trade mark for your registered business name and logo. Importantly, there is a difference between registering our business name with ASIC and registering a trade mark over your business name. The former is an essential formality for every business operating in Australia. The latter gives you unique intellectual property rights.
You can register a trade mark over several aspects of your brand, not simply your business name. For instance, you can apply for a trade mark over the following
- logo;
- image;
- phrase;
- jingle;
- colour; and
- scent, among others.
A registered trade mark gives you exclusive rights to own, use and sell your mark. Likewise, you can enforce your trade mark if you find another business is using your mark without permission.
Before opening your beauty salon, register your business name and logo to prevent others from using it to promote their business. Protecting your business’ branding is important because it enables you to stand out against competitors.
This guide explains the essentials of trade marks and the steps required to register a trade mark.
Restraint of Trade Clause
Are you currently working as a beauty technician for someone else? If so, you need to check your employment agreement to see if it contains a restraint of trade clause.
A restraint of trade clause might prevent you from starting your own beauty salon soon after you leave your employment at someone else’s salon. It is likely to set a time frame and geographical area within which you cannot open your beauty salon, as it will provide direct competition to the salon you have recently left. You should ensure that you comply with any restraint of trade clause in your employment agreement.
Lease
Before you open your beauty salon, you need to find a suitable premises to operate from. You may want to enter into a lease for a specific period instead of buying the premises. When looking for leased premises, you need to find a location that works for you, your business and clients. For example, do you or your clients need convenient access to parking? If so, you need to find a location that provides car parking spaces.
Once you have found suitable premises and you receive a lease agreement, you should review it. It is important that you understand your rights and obligations under the lease to ensure you operate the salon legally. When reviewing the lease agreement, you should look out for the:
- term of the lease, that is, how long the lease is for and whether you have the option to renew once the initial term expires;
- permitted use of the premises. If the lease sets out that the permitted use is residential, likely, you will not be able to run your business on the premises;
- rent you are expected to pay to the landlord and how often; and
- obligations under the lease, for example, you may need to keep the premises clean and in fit condition.
Equipment
You will require equipment, including chairs, mirrors and tables, to operate your beauty salon. You may choose to either purchase or lease this equipment. Regardless, you need to ensure that the equipment complies with health and safety standards.
If you decide to lease equipment, you should review the equipment lease agreement. This agreement sets out the terms of the lease, such as how much the equipment costs and how often you must make payments. You should look out for any onerous obligations within the equipment lease so that you can negotiate these to your advantage.
Dealings With Customers
Before you perform services on clients, you should have them sign a client agreement, which sets out the nature of your relationship with the client. It should include:
- a waiver of liability;
- your cancellation policy; and
- whether you need to obtain consent before taking a client’s photos for your website or social media platforms.
You should also confirm with your clients whether they have pre-existing medical conditions.
Permits and Licences
You may need to obtain permits and licences before opening your beauty salon. However, the requirements will be different from state to state.
For example, if you are operating in New South Wales (NSW) and you are undertaking hair removal, cosmetic enhancement, semi-permanent makeup or anything that penetrates the skin, you need to notify the council. You can do this by completing a notification of skin penetration form to become registered to complete these services. For more information about your state or territory, you can visit the Australian Business Licence and Information Service (ABLIS) website.
In NSW, you also need to comply with hygiene standards under the Public Health Regulations. These standards include:
- having clean and tidy premises;
- using equipment that is clean, sterilised and in good working order; and
- ensuring your staff have good personal hygiene.
You can find out more about these safety and hygiene standards on the NSW Government website.
Staff
You may want to hire other beauty technicians to provide services to your clients. When you are employing staff members, you need to comply with your obligations as an employer. This means compensating your staff and providing them with entitlements under the relevant award. To ensure that you do this, you should prepare employment agreements for each employee. These agreements should set out your employees’:
- hours of work;
- leave entitlements; and
- non-competition and restraint of trade clauses.
You also need to ensure that your staff are adequately trained and have the required licences.
Insurance
You should speak to an insurance broker to ensure you have the appropriate level of business insurance. This will cover you and your staff for any injuries sustained on the premises or damage to your salon and equipment. You should check whether your lease agreement specifies a type or level of insurance policy.
Key Takeaways
Opening a beauty salon can be a big step. You need to consider:
- how you will structure your business;
- whether you want to enter into a lease agreement;
- where you should base your business; and
- whether you are complying with the relevant permits and licences.
From there, it is a matter of:
- finding the right staff;
- preparing employment agreements; and
- ensuring your business complies with its legal obligations, licences and agreements.
If you have any questions, our experienced business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
The best business structure will depend on the goals of your beauty salon. If you are starting a business for the first time and operating on a small scale, starting as a sole trader could work for you. It is cheap and easy to set up a sole trade business compared to other business structures, like a private company. However, if you have large plans to establish a recognised brand, you might wish to incorporate a private company.
Unless you are running your business from your home, you will need to enter a commercial lease. A commercial lease is an agreement between a landlord and tenant over a premises which you run your business from. In exchange for rent, you will have a dedicated space to run your business, allowing you to establish a physical presence for clients.
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