How to Start a Hair Extension Selling Business?
How to Start a Hair Extension Selling Business?
1. Understand the Industry
This industry is one that specializes in sales of hair extensions, hair pieces as well as wigs for not only aesthetic but medical purposes. In this industry, the hair extensions often are sold in two kinds of materials which are – synthetic materials and human hair materials. These two categories often come with a wide range of key product differentiators which includes color, style, price and durability.
Interesting Statistics About the Hair Extension Business
Between 2009 and 2014, the demand and preferences by consumers who either have to keep up with cultural or fashion trends has ensured that the innovation and manufacturing for hair extensions have increased moderately, which has also led to a consistent mix of new products for stores selling hair extensions.
About three quarters of the hair extensions sold in the United States of America are made out of synthetic materials, with the rest of the hair extensions made out of human hair. The latter sells at a higher price which is the reason why it also has a higher revenue share in the industry.
Revenue for this industry stands at $310 million, with annual growth for 2010 to 2015 projected at 2.7%. According to statistics, there are 884 hair extension stores in the United States of America, with none of the companies having a dominant market share in the industry.
Revenue for hair extensions have grown especially as the spending on hair extensions by consumers are on a rebound, probably due to the new innovations. The next five years has been projected to be better for the industry especially as average disposable income is expected to rise. Also, the average sales per customer are also expected to rise leading to bigger revenue for the industry.
According to a research firm, Mintel, the 2012 revenue for hair extensions was $684 million, with that figure expected to rise to $761 million in 2017. However, according to Mintel the revenue for the industry was due to the fact that other areas had not been explored by the manufacturers. Mintel pegged the industry’s revenue at half a trillion dollars if all things were done rightly by the manufacturers.
African American women make up 70 percent of the hair extensions industry, however out of the many stores targeting this group of consumers, only 1% of the stores or businesses are owned by black people. As at 2014, wigs and hair extensions retail stores had $299 million in sales, with $876 million estimated to be made in 2019, according to IBISWorld.
This industry is one that remained unscathed during the economic downturn, especially as the recession affected other industries. Even though the sales of relaxers which represent 21% of the black hair care market with expenditures estimate at $152 million, has been down by 15% since 2011 due to the promotion of natural hair trend, sales of human extensions have grown regardless of the trend as nearly 6 out of 10 consumers.According to Mintel wear an extension, which allows them to switch their look, and also enables them to give their real hair a break from manipulation, thereby mitigating breakage.
Even though the industry is seen as predominantly for black consumers, there are concepts popping up to address other markets as well as well as demands for fused-on or clip-on hair extensions. More young women regardless of color are now using hair extensions especially as celebrities have joined the trend.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition of those who use hair extensions are;
- Primarily black women
- elderly women who have lost their hair
- Patients who have had to lose their hair due to an illness as well as other young women of other colors.
- Music celebrities
- Movie actors and actresses and high classed personalities have not been left out of those using hair extensions especially as they are able to change their looks whenever they want.
3. Decide What Niche to Concentrate On
If you intend to start this business, you first will need to know what hair extensions are in vogue, especially as this is usually determined by the current hairstyles as well as the new available hair extensions in the market. In carrying out research on where you would get many genuine hair extensions from, you would need to make it through.
Asides visiting vendors to determine what customers buy, you would also need to read current hairstyle magazines, be on the lookout for individuals and what hairstyles you are seeing more people wear; finally, you might also need to visit hair extension retail websites as this would also help you determine what hair extensions to get for your store.
There really aren’t many niches that exist in the hair extension selling business as entrepreneurs in this industry do not manufacture but just sell hair extensions to clients which might be stylists or private individuals. However, in retiling there are certain services and areas of specialization that you as an entrepreneur can go into and they include;
- Sale of human hair wig
- Sale of human hair pieces
- Sale of synthetic hair wigs
- Sale of synthetic hair pieces, and sale of toupees
If you are just starting out on a small scale, it might not be easy for you to retail all the brands and types of hair extensions. Larger hair extension businesses can however afford to sell as many kinds and brands of hair extensions as possible.
The Level of Competition in the Hair Extension Selling Business
If you have carried out your research thoroughly, then you should know that starting a hair extension selling business is not that difficult, especially if you have the required finance and have gotten a good location plus you have laid out marketing strategies.
The level of competition in the industry is intense for why larger extension companies can afford to buy hair extensions in bulk, therefore getting a discount for bulk purchase and leading to them being able to lower the prices of the hair extensions they sell, small scale hair extensions business cannot afford to do so. For small scale hair extension businesses, offering specialized and personalized services to your clients gives them an advantage over their competitors.
4. Know the Major Competitors in the Industry
Even though this industry is fragmented, there are still well known hair extension brands. These brands have become well known probably due to the model used to sell their hair extensions or due to the quality of products stocked for its customers. Some of the well known hair extension brands in the United States of America include;
- Lori’s Wigsite
- Indique Boutique
Even though the hair extension selling business is a huge one, it doesn’t mean there aren’t businesses that are failing, which is why it is necessary for you to carry out a thorough research before going into this business. One key component to becoming a success in this business is not only to have the necessary financing needed, but to also have an updated knowledge about the hair industry.
Customers need to sometimes be advised on what hair extensions to get and so would be confident in your choices, if they know that you are knowledgeable about hair extensions. The industry which is part of the fashion industry is one that is recession proof as people especially women want to be able to look good always as well as be able to change their looks whenever they want.
Other two important aspects about the hair extension industry is pricing and location. In setting a price for your hair extensions, you will need to be practical as your business is intended to make profit. You will need to factor in your overhead and operational cost as well as what your competitors are currently offering.
Also, location for your hair extension selling business is very important, as it must be convenient for your customers to get to. To be truly successful, you would need to combine selling both online via your website, forums and e-commerce sites with your physical store.
5. Decide Whether to Buy a Franchise or Start from Scratch
Every entrepreneur who intends to start a business has certain goals and objectives that must be achieved. This might mean that the goals be achieved by starting the business from scratch or buying a franchise. Either option has its pros and cons, which means that as an entrepreneur you should weigh your options carefully before choosing.
Starting from the scratch is a great way at learning firsthand about your hair extension business. However, starting from scratch would require that you aggressively source for clients, as well as handle paperwork that might distract you from running the business.
If you intend to buy a franchise, ensure that you carefully shop for which franchise would best benefit your hair extension business. Do not just rush into buying any franchise, so that you do not end up throwing your money away. If you buy into a good franchise, it would benefit your business, as you would not only learn the ropes of the business but also get other support necessary for your hair extension business from the franchise as well.
6. Know the Possible Threats and Challenges You Will Face
Every business is at one time or another faced with threats and challenges and the hair extension selling business is no different. The threats and challenges that are faced by entrepreneurs in this industry is the entrant of too many competitors into the industry, high price for hair extensions as well as a host of others.
Nothing can be done as regards some of the threats and challenges; however, every entrepreneur who is determined to make a success out of his or her business will not be deterred by some of the threats or challenges.
7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
One of the most important decisions for your hair selling business is in deciding what business structure would be best for you. No business can legally operate in the United States of America, without a legal structure of some sorts even if the business is being operated from home.
If you are going into the business of selling hair extensions, clients need to know that they can trust you and the first step towards gaining their trust is to show that you are running your business legally. Choosing a legal structure for your hair extension business might be a confusing task, and so if you feel overwhelmed, you can approach an attorney to help guide you on which structure would best suit your hair extension business.
There are different legal structures that exist for your hair extension business, and you would need to study the pros and cons of each to decide what would best suit the requirements of your business, especially if you do not feel that approaching an attorney is necessary.
There exists four structures for your hair extension which are, sole proprietorship, partnership, corporation and Limited Liability Company (LLC). Each structure would require a filing. If you settle for an LLC for instance, you would need an LLC certificate, a business license, an LLC operating agreement, as well as a federal tax ID number.
8. Discuss With an Agent to Know the Best Insurance Policies for You
Regardless of whatever business you intend to operate, you would need insurance, regardless of the structure of the business. An insurance policy covers you and your business from any liability that might occur whilst the business is in operation.
You can carry out a research on what insurance policies you think would be suitable for you, or check out what insurance policies other hair extension business owners use. Also, you can approach an insurance broker who would best advise you on the best insurance policies for your hair extensions business.
Some of the basic insurance you might need to look into getting, if you intend to start your hair extension selling business in the United States of America include;
- General Insurance
- Health Insurance
- Liability Insurance
- Workers’ Compensation
- Products Insurance
9. Protect your Intellectual Property With Trademark, Copyrights, Patents
If you are thinking about starting your hair extension selling business in the United States of America, then you do not need to consider applying for an intellectual property protection. However, if you feel the logo of your company is unique enough, you might apply for an intellectual property for it. You should however know that most entrepreneurs in this industry do not consider buying an intellectual property as a priority.
10. Get the Necessary Professional Certification
If you are thinking or running a hair extension selling business in the United States of America, then you would not need to consider having a professional certification.
What is required of this business is having knowledge and up-to-date information regarding hair extensions. The industry is not a closely regulated one and you wouldn’t need to handle anything hazardous, therefore except for a business license and other legal documents needed to run a business, you do not require anything else.
11. Get the Necessary Legal Documents You Need to Operate
There are certain legal documents that you would require if you intend to run your hair extension selling business legally. Some of the basic documents that you would require to be able to run your hair extensions business in the United States of America includes;
- Business Plan
- Certificate of Incorporation
- Business License
- Operating Agreement
- Federal Tax ID Number
- Insurance Policy
- Employment Agreement
12. Write a Business Plan
The business plan also clearly defines how you intend to promote your products and what kind of Pricing Strategy you intend to use, as well as your target customers. This is why as an entrepreneur intending to start this hair extension selling business, writing a business plan will benefit you more than it would your investor, bank manager or attorney.
A comprehensively written hair extension selling business plan helps throw light on what is needed to be accomplished in order to move the business to a higher form of profitability. It will also help you in addressing the likely needs of your clients, as well as what your marketing strategy should be and your customer service as well.
Writing your business plan would help you evaluate how much cash is available and how much you might need to source for in starting your business. If you intend to generate cash from a backer or investor, you would need to state what you will be offering your lender in return. This also means that you should be able to estimate the expenses you are likely to incur before you will start generating income for your business.
One important aspect of your business plan is your financial projections as any investor will thoroughly analyze this section. This is why most entrepreneurs usually hire a business plan writer to help in drawing up something comprehensive enough to convince an investor. However, if you are running on a tight budget, you might consider going online to search for free business plan templates that will aid you in writing out your business plan.
13. Do a Detailed Cost Analysis
Starting a hair extension selling business is one of the cheapest businesses any entrepreneur can start especially as the prices for the hair extensions as well as other equipment are almost the same.
This does not however mean that all hair extension business owners have the same start-up cost. The start-up cost for your hair extension business is dependent on what scale of business you intend to run, as someone that operates from home is going to have less start-up costs than one who is going to lease a facility.
Some of what you would be required to fulfill if you intend starting your hair extension selling business in the United States of America include;
- Incorporation fee would cost $500
- Budget for liability as well as business license would cost $1,000
- Amount needed to acquire a facility with renovation costs included would cost $15,000
- Cost of equipping the office with computer, phones, mannequins and display units would cost $5,000
- Cost of launching an official website $500
- Additional expenditure such as signage, business cards as well as advertisement would cost $500
From the above report, if you intend starting your hair extension selling business on a small scale in the United States of America, you would require $22,500. However, this amount isn’t inclusive of the hair extensions themselves.
If you are looking towards starting your hair extension selling business on a medium scale in the United States of America, you would need nothing less than $45,000 which is exclusive of the hair extensions itself. If you want to start this hair extension selling business on a large scale in the United States of America, exclusive of the price for the hair extensions, you would need nothing less than $90,000
14. Raise the Needed Startup Capital
Most hair extension selling shops usually fail due to lack of finance. Finance is very important for a start-up as well as an already established business. This is because even if you have fantastic ideas on what you intend to do with your hair extension selling business but do not have the necessary finance, your ideas would just remain ideas. Raising capital might not be so easy, but as an entrepreneur, it is a task you must go through.
This is where the importance of a business plan comes in. if you have a business plan in place before sourcing for capital; it would help make your work easier for you as the document will show investors how serious you intend to take your hair selling business.
If your business plan is not comprehensively written, you might have a hard time convincing investors to invest in your business, especially if you do not have the necessary funds yourself. Some of the available options that you can use when intending to source for capital for your hair extension selling business include;
- Using your own money by selling your personal property or stocks
- Applying for a business grant
- Sourcing for soft loan from friends and family members
- Raising money from business partners and investors
- Seeking for funds online from angel investors
15. Choose a Suitable Location for your Business
Choosing a location for your hair extension selling business is very important. You would need to decide beforehand if you intend operating from home and then selling the hair extensions online via your website and e-commerce stores.
If you want to go via this route then you would not need to worry much about a location. The only thing you would need to worry about if ensuring that you provide clear pictures as well as good descriptions about your hair extensions.
If however you want to lease a physical facility to run your hair extension selling business from, then you would need to ensure that the location is in an area that is easily accessible for both your employees and customers. Getting a location for your hair extension selling business means that you would need to lease a commercial property, obtain a business license, get display units for your product as well as hire the staff to help you in running the business.
Also, the area where you are going to lease your facility matters as it would be wrong if you open a luxury hair extension business in the ghetto. You would need to carefully check that the location is where there is a high mobile and vehicular traffic as well as it having a parking lot for those with cars.
The fact that you are looking to lease a location doesn’t mean that you should spend too much finances that would add a strain on your budget.
16. Hire Employees for your Technical and Manpower Needs
There are really no equipment that is needed to launch your hair extension business except your display shelves and mannequins. This equipment can be bought for fairly used and still used for a long time. All you need to do is ensure that the fairly used equipment is in good shape.
However, purchasing the items for fairly used will allow you spend less than you initially would if you had bought the equipment brand new. Listed below are some of the equipment you would need to fully launch your hair extensions business;
- Display Shelves
- Head Mannequins
- Filing Cabinets
- POS Machines
If you are going to run this business on a small scale; then you can operate from home and sell more via online. This means that you would not require a facility to sell your hair extensions. Of however, you are planning to run the hair extension business on a medium or large scale, then you would need to lease a facility for your business.
Regarding the number of employees that would be needed to run the hair extension selling business, it varies depending on the size and scale of the business.
While one person can run this business if you are operating from home, you would probably need to hire more hands if you intend leasing a facility depending on your structure. You would need a manager, sales and marketing executive, sales persons, and receptionist. This would be about 5 to 10 employees.
The Service Delivery Process in Hair Extension Selling Business
This is a service based industry and as such there are no production processes involved for this business. The processes usually involved include checking out manufacturers and brands of hair extensions and striking a deal with them.
The last process involves selling those hair extension brands which you have chosen to customers who want to purchase for a number of reasons such as changing their looks or hiding a defect.
17. Write a Marketing Plan Packed With ideas & Strategies
Marketing is a very important tool of any business that intends to generate profit and grow to become a success. Marketing also helps create awareness about a business to both competitors and clients. If you intend marketing your hair extension business, you must ensure that you deploy all forms of marketing in your target area.
First thing to do is draft your marketing strategies that should be embedded in your business plan, as this would have ensure you carried out your research thoroughly and know what strategies would and would not be effective. Some of the marketing ideas and strategies that you can adopt for your hair extension business include;
- Ensuring that your hair extension business is listed in yellow pages
- Advertise your hair extension business in fashion, beauty and lifestyle magazines
- Attend beauty and fashion shows as well as pageantries
- Make use of your official website to promote your hair extension business
- Make use of direct marketing
- Ensure your customers help refer your business to others
- Leverage on social media platforms such as Facebook and Instagram to market your hair extension business
18. Work Out a Reasonable Pricing for your Services & Products
Setting the right price for your hair extensions is very important. You cannot however just pull out a figure offhand as your price, as your price must follow certain modalities such as ensuring that you cover your overhead and operational cost.
This will ensure that you do not sell at a loss and eventually fold up. Also, carry out a research on what prices your competitors are selling for same product and if possible, search for reliable suppliers that sell hair extensions cheaper.
19. Develop Iron-clad Competitive Strategies to Help You Win
Even though there will always be customers for your hair extension business especially as being fashionable is always in vogue, you might find yourself having just a small share of the consumer market as compared to your competitor who has more. There is no industry without competition and so how you will manage this competition depends entirely on the strategy that you have drawn up.
One strategy you could use to win your hair extension selling competitors is ensuring that you stock as many brands, types and colors of hair extensions as possible, as this will attract more customers to your store. Also, you might need to provide incentives on certain popular brands; this will make customers to prefer buying from you than your competitors.
20. Brainstorm Possible Ways to Retain Clients & Customers
If you want your business to grow competitively and make profit, then you would need to ensure that you create strategies that aim at retaining your customers. Customers are what grow a business and so if they leave your business for that of your competitors because of something that you are doing wrong, and then your business is likely to fail.
According to studies, it is better on your budget if you spend on retaining customers than attracting new ones. This is because it takes less persuasion to convince your loyal customers than it takes to get new ones. Some of the ways that you can retain your customers is ensuring that you offer them excellent customer service. Another way at retaining customers is to meet or surpass their expectations anytime they engage your services.
21. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
Any business that intends to boost their brand awareness and also create a corporate identity would require strategies to do so. If you boost your hair extension business properly, you are likely to not only allow people to be aware of your business but to also bring in revenue for your business.
If you however feel overwhelmed in handling this aspect of your business, you might hire someone who is an expert to help you out. Some of the platforms that you would require if you intend to boost the brand awareness and also create a corporate identity for your hair extension brand include;
- Employing the direct marketing method
- Promoting your hair extension business on social media platforms such as Facebook and Instagram
- Going on forums and blogs to participate in hair extensions discussion, invariably creating awareness about your business.
- Listing your hair extension business in online directories
- Encouraging your loyal customers to help refer other customers to your business, and giving your customers incentives for doing so
- Advertising your hair extension business in local newspapers, television and fashion and lifestyle magazines
- Attending pageantries and fashion shows to create awareness for your hair extension business
- Sponsoring local shows and school pageants to create awareness about your business
22. Create a Suppliers/Distribution Network
As one who intends to go into the hair extension selling business, you would need to source for where you would get your hair extensions, especially if you plan on getting different brands. One sure thing that is likely to boost your hair extension selling business is being in a good relationship with your suppliers. A good relationship is beneficial to your business in many ways.
Your supplier can give you discounts on certain hair extensions or advice you which is likely to sell more, or give you strategies that you might use to sell off your hair extensions. Either way, having a good relationship with your supplier is likely to boost the bottom line of your company.
23. Tips for Running a Hair Extension Selling Business Successfully
Every business owner envisions success for his business, and running a hair extension selling business is no different. Running your extension hair business successfully requires not only financial and human resources but laid down strategies as well. One of the ways by which you can run your hair extension business successfully is to offer additional but related services to clients, such as tips and general advice regarding their hair.
Another way is to ensure that you listen to the customers well so that you can know exactly what they want. Once customers know that you listen carefully to their requirements and carry out their demands as they want, they are likely to refer other customers to you thereby helping to boost your business.
Finally, customers like it when you keep in touch. Ensure that you pass on whatever trending knowledge you feel might be of relevance to your clients. Also, ensure that your physical location is where clients can easily access, or if you are going to be selling from your website, ensure that you have an easy and user friendly interface for your clients.