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Wednesday, August 2, 2017

How to Setup a Profitable Beauty, Hair Salon in Nigeria

A beauty salon is a place where mostly women visit to receive beauty treatment/services for their hair, skin, nail or facial needs. There are different forms of beauty salons such as nail salons, hair salons, beauty parlours, cosmetic shops or even spas. Each of these type appeals to different target market needs. Today’s article is merely dealing with the hair aspect of the beauty salon business in Nigeria.

Market Opportunity for Beauty Salons in Nigeria
There is a huge market for haircare products and hair treatment service in Nigeria. Nigeria is Africa’s second largest market for hair products with consumers spending over $210 million (N798 billion) in 2016 on hair extension products alone (both natural and artificial). The average middle class Nigerian woman (21 to 45 years) spends between N9,000 to N30,000 monthly on her hair mostly on extensions.

This is because for most women in Nigeria, their hair is a source of confidence and scruffy looking hair even for a not so classy lady is a nightmare they wish to avoid. As a result they go through a lot of inconvenience to have a really nice hairdo – spending hours at a salon ‘fixing their hair’, saving to raise the required amount to make the next hair style in say 2 or 3 weeks times – even sometimes the buck falls on the men in their lives to foot the bill of styling their hair.

A conservative estimate of this market reveals that at least 5.1 million Nigeria women qualify as target market who can spend within the N9,000 to N30,000 monthly range which means a beauty salon that in a big town or city such as; Lagos, Abuja, Port Harcourt or Benin should be able to attract sizeable patronage if they have an effective marketing strategy in place.

Target Market Summary Hair Extension yearly gross sales in Nigeria
·         Total population: 24.45 million (2010 est.)
·         Urban Population: 13.45 million
·         Middle class Population: 5.1 million
·         Estimated spending for Nigerian middle class women on hair extensions:  N797.6 billion

Challenges of Beauty Hair Salons in Nigeria

  • Irregular Power Supply: the main challenge is having adequate power supply to power the different machines required. This doesn’t come cheap because fueling costs and maintenance cost fluctuate very unpredictably and this can affect the bottom line by as much as 30% of gross profit.
  • High cost of Rent: as if that is not enough, finding an ideal location for a premium hair dressing/treatment service is both expensive and difficult. If you want to target the middleclass and you can’t afford to find a place within their reach that you can afford, how can you possibly achieve your sales target?
  • Difficulty in finding competent hair stylists: professional hairstylists mostly prefer to be self-employed but when they are not, usually don’t come cheap. But that is if you can even find them because they are hard to come by. Which means you’ll have to make do with apprentices and inexperienced hairstylists which may delay your business growth for a while
  • Difficult customers: some customers don’t know what they want and even when they know may make ridiculous and frustrating demands. Others may be very rude and aggressive to your staff and may bad mouth you and your business. Dealing with such customers can be difficult especially if they have been patronizing you for long and have even referred others to you.
  • High amount of fake/counterfeit hair products: the market has been infiltrated with low quality, cheap imitation hair extension and hair creams/shampoos which makes delivery quality hairstyling difficult and frustrating if your customer insists on buying her own hair style products. 

How much is required to setup a Beauty/Hair Salon in Nigeria
For a small sized operation with 1 main professional stylist and 3 assistants/apprentices, a good breakdown should look like this;

  • 2 wall hair driers – N80,000 (N40,000 each)
  • 2 hand hair driers – N10,000 (N5,000 each)
  • 4 hair straighteners – N16,000 (N4,000 each)
  • Stock on hair creams/shampoos – N100,000
  • Stock on other hair accessories – N40,000
  • 1 year shop rent – N300,000
  • 3 months operating costs – N300,000
  • Signage and print advert – N90,000
  • Furniture – N300,000
  • Contingency – N300,000
  • Total – N1,536,000

Financial Summary and Projections
Assuming you can on a daily basis attract 6 customers and the salon is open for 300 days in a year with each customer paying on average N4,000 for your service then the projections should look like this;

  • First Year Sales – N7,200,000
  • Cost of sales – N2,880,000
  • Gross profit – N4,320,000
  • Total Expenses – N1,800,000
  • Profit before tax – N2,520,000
  • Taxation – N756,000
  • Profit after tax – N1,764,000
  • Payback period – 10th or 11th
  • Return on Investment – 115% within 12 months

You can recover your initial investment within your first year if you can achieve your sales target and minimize your operating costs. There is stiff competition in this business but there is also plenty of room to succeed - as this business favours innovative service and marketing approach.

Are you looking to start a hair/beauty inclined business in Nigeria and need a well-researched, well written business plan? Give me a call: 0803 206 4106 or email me: paulonwueme@gmail.com for details