Chapter Eight – Salon Setup and Management

Chapter Eight – Salon Setup and Management

Choosing the Business Site

  • From Home
  • Mobile Van
  • Mobile – in people’s homes

 

Home Visits/ Mobile        

 

  • Few overheads
  • Good for nervous dogs who do not like to separated from their owners
  • Dictate your own hours, prices
  • Your Security
  • Time- getting from one location to another
  • Expensive advertising

Employee

 

  • No overheads
  • Employers deal with clients
  • No need to advertise
  • Easier to take sick time
  • You have company
  •  Guaranteed income
  •  Holiday pay
  • Wages can be low
  • Time pressures
  • Set hours

 

Shop or Unit

 

  • Dictate your own hours, prices
  • In the long run can be very profitable
  • Groom more dogs
  • Other business can run alongside at same location
  • High overheads
  • Long lease
  • Set hours
  • Hard to take holiday time
  • High set up costs
  • Risk of bankruptcy
  • Change of use permission needed

 

From Home

  • -Low overheads
  • -Dictate your own hours
  • -Utilities are already installed
  • -Hard to separate home and work life
  • -Can be lonely
  • -Can be very messy
  • -Planning permission may be needed

 

Business Type

 

How do you want to establish a business?

 

Businesses can take a variety of forms, ranging from sole traders to public companies trading their shares on the stock market, or from a group of friends operating as a partnership to a formally established cooperative with rules and guidelines.

 

When choosing the format of your business you may wish to consider:

 

  • the types of customers you want;
  • whether you want people to invest in the business;
  • the risks involved in providing your products or services;
  • how many people are involved in the business.

 

Sole traders

 

Most people who start in business do so as sole traders, working on their own, often from home. They alone receive the income and they alone are therefore liable for any losses or debts. Having no colleagues can be liberating, but may equally be isolating with no one to provide motivation or inspiration.

 

Partnerships

 

You could set up in business with one or more colleague(s), relative(s), or friend(s). This form of business relationship is usually known as a partnership. All may be equal partner(s) or some may have a larger share of the business than others. Your income and liability are proportionate to your share in the business.

 

Limited companies

 

As a limited company, the business is registered with Companies House. There are more regulations associated with running a business this way, but these are generally offset by tax advantages. Those directing the company have shares proportional to their involvement.

Franchises

 

Franchises provide a way for individuals to start their own businesses with the backing of an established brand and business process. Well-known examples include Body Shop, Clarks Shoes, McDonalds

 

Insurance

 

Setting up a grooming salon will require the following insurances:

 

  • Public Liability
  • Employers Liability
  • Animal Liability
  • Liability to Animals
  • Personal Accident Cover
  • Business Vehicle Insurance
  • Contents Insurance
  • Animals in Transit Insurance
  • Equipment Cover
  • Buildings Insurance

 

 

 

Financial Management

 

Financial Records – All paperwork must be kept for 7 years.

 

Typical financial records include the following:

 

  • supplier invoices (charged to you)
  • customer invoices (charged by you)
  • petty cash receipts
  •  written proof of any funding or loans
  • bank statements, cheque books and paying-in booksMake sure you get some form of documentation for every financial transaction to do with the business and file them carefully, sorting records by calendar month and financial year.As well as the actual documentation, you will also need to record them in a series of ‘books’, (hence the term ‘bookkeeping’), kept either manually or on computer. These normally comprise:

 

  • a sales ledger (itemising all income earned by the business)
  • a purchase ledger (itemising all costs to the business)
  • a nominal ledger (which itemises both under headings e.g. grants, materials, postage etc., which are ideally the same headings as those used in your company budget)
  • a cash ledger (recording all receipts and payments through the bank account)Summary information from all of the above will then assist you in producing your management accounts.Management Accounts Throughout the year, a suitably trained member of staff or a freelance bookkeeper can prepare the management accounts.Management accounts are made up of two parts:

 

1. The profit and loss account (P&L account) shows the actual income and expenditure over a given period e.g. monthly, quarterly or annually, and the resulting profit or loss.

 

2. The Balance Sheet, rather than illustrate how much business the company has brought in and how much it has spent doing that, the balance sheet is a snapshot of how much money the company has at a particular point in time: how much it owns e.g. cash in the bank, property, equipment; and how much it is still due to be paid. It also shows how much money is owed to other people e.g. suppliers, lenders and the HM Revenue & Customs. It takes into account any money that has been invested in the company and any profit (or loss) achieved in the year so far.

 

Financial Records and the Law

 

As soon as you start trading, you must keep accurate records of all income and expenditure and any other financial activity relating to the business. At the end of the year, don’t throw them away as you are required to keep financial records for at least seven years! The government, through agencies such as the HM Revenue & Customs (which deals with VAT), want to make sure they are collecting the necessary tax incurred by your business and they are entitled to inspect your financial records at any time, so it is essential that you take the time to maintain your records properly.

 

Self-employed, or Partnership – Required to complete a tax return each year

 

Limited companies – must produce management accounts each year and these are submitted on an annual basis to Companies House. Once submitted, these become public documents available to anyone on request.

 

Business Taxation – What are the main taxes?

 

Corporation Tax – A tax on limited companies’ taxable income or profits.

 

Value Added Tax –VAT is a tax on the final consumption of certain goods and services in the home market but is collected at every stage of production and distribution. The rate is 20% from 4th January 2011 (previously it was 17.5%). Companies should register for VAT if the value of your taxable supplies in the past 12 months or less has exceeded the current VAT registration threshold of £81,000.

 

National Insurance – National Insurance is a deduction from earnings, set up originally to fund various State benefits such as the NHS, the State pension and other welfare-related schemes. In reality, it is just another tax.

 

PAYE – Pay As You Earn is a scheme operated by HM Revenue & Customs to take income tax from employees as they earn it.

 

If you run your business as a sole trader, then you are self employed and not affected by PAYE. You will self assess your income and complete a tax return.

 

However if you run a limited company and draw a salary, then you are an employee (even if you are a director). You need to understand PAYE and what your obligations as an employer are. It’s a deeply complicated subject with many rules, and you would be well advised to get professional advice on your particular situation.

 

Employment Law

 

Recruitment –If the need for staff arises, when recruiting consider the following:

 

  • Do not allow prejudice (conscious or unconscious) to affect your decisions.
  • A contract of employment exists as soon as a candidate accepts your offer of a job, whether it is in writing or not.
  • You must provide a written statement of terms and conditions within the first two months of employment.
    • This must cover specified areas including pay, working hours, holiday entitlement, job title (or job description) and place of work.

 

  • You must comply with statutory requirements on working hours and leave.
  •  National minimum wage. This stands at £6.50 an hour for staff aged 21 and over. There is a lower minimum wage of £5.13 for those aged 18 to 20, and employees aged 16 and 17 must be paid at least £3.79 an hour.
  • Employer’s National Insurance (NI) contributions are payable on employees’ pay and taxable benefits.
  • You must deduct your employees’ tax and NI contributions from their wages, and pay them to HM Revenue & Customs under PAYE (Pay As You Earn).

 

Employee Rights:

 

  • Employers must not take any action which might undermine the relationship of ‘trust and confidence‘ with their employees.
  • Employers must provide a secure, safe and healthy working environment.
  • Employees have the right to belong (or not to belong) to a trade union.
  • Employees are entitled to a reasonable degree of privacy.
  • Employees are entitled to protection against discrimination
  • Employees are entitled to blow the whistle on their employer’s wrongdoings.
  • Each employee must get a pay statement.
  • All employees with more than one month’s service are entitled to a notice period.
  • Most employees are entitled to keep their jobs even if the business changes hands.

 

  • Employees are also entitled to have discipline and grievance issues dealt with using ‘fair and reasonable’ procedures. See the Acas Code of Practice at

 

 

Staff Induction:

 

Induction should involve

 

Usually induction involves the new employee meeting and listening to different people talk about aspects of the business.

 

Other methods include written information, audio visual aids and group discussion.

 

The following items should be covered in an effective induction programme:

 

Introduction to the business and team  structure

 

Layout of the salon

 

  • Terms and conditions of employment (explaining the contract of employment)
  • Relevant policies, such as training, animal policies, health and safety, fire safety
  • Business rules and procedures
  • Arrangements for employee involvement and communication

 

  • Roles and responsibilities
  • Expectations

 

 

 

Continual Professional Development CPD

 

The benefits of CPD to the employee are as follows

 

  • Build confidence and credibility.
  • Earn more by showcasing achievements. A handy tool for appraisals.
  • Achieve career goals by focussing on your training and development.
  • Cope positively with change by constantly updating skill set.
  • Be more productive and efficient by reflecting on your learning and highlighting gaps in knowledge and experience.

 

 

 

The Benefits of CPD to the Business are:

 

  • Helps maximise staff potential by linking learning to actions and theory to practice.
  • Helps to set SMART (specific, measurable, achievable, realistic and time-bound) objectives, for training activity to be more closely linked to business needs.
  • Promotes staff development. This leads to better staff morale and a motivated workforce and helps give a positive image/brand to organisations.
  • Adds value; reflecting it will help staff to consciously apply learning to their role and the organisation’s development.
  • Linking to appraisals. This is a good tool to help employees focus their achievements throughout the year.


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