The beauty industry is rising through the influence of makeup artists such as Charlotte Tilbury and Pat McGrath. You may be inspired by several makeup artists or have a budding urge to start your own business. If so, it may be time to set up a beauty salon. However, before jumping into opening your new small business, you need to put in the hard work and consider several factors, including choosing a niche, legal entity, employees, and licenses.
Deciding on a Beauty Salon Niche
There are several beauty salon services in the industry, each offering different services and points of difference. For example, some do hairdressing, some do manicures, and some do massages. Your business may not offer every kind of service, so it is best to choose some services that you want to offer. Before deciding on a niche, you may want to research your target market and what services they would like.
Your beauty service may include the following:
- manicures and pedicures;
- eyebrow microblading and threading;
- hair removal treatments, such as bleaching and waxing;
- massages;
- tanning services;
- specialised beauty treatments, such as Botox;
- professional events makeup; or,
- specialist hair treatments, such as perms and hair extensions.
In the beauty industry, staying ahead and with the trends are essential. You will need to adapt your treatment services based on what is new on the market, which your customers may love. Likewise, creating a business plan that states your niche and plans for adapting to future trends is beneficial.
Choosing a Legal Entity
Next, you need to decide how to structure your new salon business. For example, you may want to be a sole trader, have a partnership, or incorporate it as a company. Each structure has different elements and legal obligations.
Many beauty salon owners start by becoming sole traders, running their businesses independently. It is a good idea to test your business idea with this structure as it has low fees and is easy to set up. You can take all the profits but are also personally responsible for all business liabilities and debts.
Some people choose to open a partnership where costs and risks are shared. Of course, profits will be shared too, but this is a small compromise to make, seeing as your partners can invest capital in the salon. All partners need to be on the same page when making decisions, and it is helpful to establish a partnership agreement to outline everyone’s rights and duties.
You can incorporate your new business as a company with the Companies Office. A company will suit your salon if you want to scale your business in the market quickly. This structure has some filing requirements, such as registering shareholders and directors on the Companies Register. With a company structure, customers and investors will likely view your business as more reputable and trust your salon more.
Continue reading this article below the formHiring the Right Team
Your beauty salon will only be as great as your team. You need to hire the right staff to ensure that the quality of your new salon remains high.
Once you have found the right employees, you can begin hiring them. Legally, you must pay your staff at least the minimum wage and create an employment contract they can sign. An employment contract will outline their role’s terms and conditions and entitlements. Once signed, the employment agreement becomes legally binding.
As an employer, you are responsible for deducting and paying pay as you earn (PAYE) tax on an employee’s behalf. You will need to provide Inland Revenue with payment and employee details. To determine how much to deduct from an employee’s income, you need to know their:
- tax code; and,
- salary or wage details for the pay period.
Hiring new employees for your NZ business can be complicated. Let us help you scale up and reach your next milestone faster with this free employer guide.
Licenses
Before opening your beauty business, check with your local council to see if you need to acquire any health protection licenses. You may need a license if you provide certain beauty services, such as:
- acupuncture;
- derma rolling;
- hair removal;
- nail care;
- exfoliation;
- tanning using sunbeds; or
- laser treatment.
To acquire a license, you will need to contact your local council, which will assess and register your business as either a:
- single basic service;
- multiple basic services;
- single high-risk service; or
- multiple high-risk services.
Key Takeaways
Before opening your beauty salon, choose a niche and specific services you want to offer. You should select a business structure and hire the right staff to help maintain your beauty salon’s high quality. Finally, you must check with your local council whether you need a license to offer your services to the public.
If you need help setting up your beauty salon, our experienced business lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers who can answer your questions and draft and review your documents for a low monthly fee. Call us today at 0800 005 570 or visit our membership page.
Frequently Asked Questions
Depending on your local council regulations, you may need a license for your services. Usually, licenses are required for services that will pierce the skin, risk burning the skin, or risk breaking the skin.
As an employer, you must deduct PAYE tax from your employee’s income and pay the money to IRD. Your employees cannot pay this tax by themselves. To determine how much money to deduct, you need to know your employee’s tax code and income details.
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