Concern for sister’s startup

[thomashop]

I don’t know if this is the right place but I wanted to ask a group for their thoughts. There’s a large gap between my sister (20) and I (32). To preface everything she’s fresh into her beauty/hairdressing career at only about a year under her belt working for another woman in her salon. My sister is definitely talented and wanted nothing but to join the hairdressing community as soon as possible and decided to not go to college for an associates degree in business (what my wife and I suggested). We said if she ever wanted to open her own salon later on it would be a good background to have. Now my wife and I don’t have any business experience, one in the LEO field and other in the medical field and we have 2 kiddos.

Now the concern comes in here. My parents are encouraging my sister to open up her own salon with not even a year under her belt. They feel she could make more money renting out 2 other chairs and making all the operating decisions herself. However, my sister has limited savings, no life experience, a limited clientele and I can’t see employees joining her to learn from her with only a year under her belt.

I believe my parents are taking a business loan out (unknown amount) to renovate a space for her salon. My sister could only contribute to purchasing 3 chairs and that’s it. She doesn’t seem to be financially mature enough to operate her own business as she has said I don’t want to learn the accountant responsibilities as my mom will handle that. Which unfortunately in this case she is the baby child and our mom certainly will do that. I know from researching most new businesses fail in the first 2-3 months and it takes a while to turn profit. I obviously don’t want my sister to fail and I would love to see her flourish and run her own shop successfully. But I worry my parents (dad who just retired 3 years ago) and mom (still working) are encouraging my sister at the wrong time and may be footing the bill of a loan that they shouldn’t have to be doing in their age.

I guess im looking for advice on how to approach this nicely and respectfully with my sister and parents about my concerns. Or any advice I can give my sister about starting her own small business or expectations for the first few years would be greatly appreciated.

Update/Edit:
Thank you to all the ones that gave actual insight and advice. I never said I don’t support or that she’s no talented either I think she’s very talented but just not mature enough when handling her own finances. I’m not invested in the business but seeing 3 adults trying to start a business blindly with my sister having no business plan in sight or knowledge of trying to run a business is frustrating. But I will sit down with her 1 on 1 and get her take on it. It seems to me like mom is trying to live through her (by opening a salon). Biggest concern is they don’t want to hire an accountant and handle everything themselves. In the end it’s not my call, it’s theirs and their mistake if it bites them in the butt. All I can do if provide support when asked. But thank you again.

 

[believerz]

@thomashop do not co-sign anything and keep your distance from in incoming shitshow. Let people learn the hardway and perhaps nest time they do a better job.

 

[malkah18]

@thomashop I wouldn't get involved tbh it's not your business or your problem. Let them take out loans for her and lose a bunch of money.

 

[jcano]

@malkah18 That’s his future inheritance they’re wasting

 

[seattleartcolony]

@jcano That’s ridiculous. The parents aren’t dead and it’s their money to use while they’re alive.

 

[steamchristian]

@jcano When the sarcasm is possible to be misinterpreted , put in a “ /S “

 

[jcano]

@steamchristian Lmao I fucked up

 

[bmanuel77]

@thomashop Well my first question would be what does your sister want? You’re talking about what your parents want and what they think but I didn’t see anything about your sister’s thoughts on the situation. So maybe start there. Have a one on one sister conversation with her and ask her if no one was pressuring her what would she do. Maybe she’s only going along with it because she’s trusting that your parents know what’s best and maybe she needs help telling them to back off. Or maybe she’s all for it and the best you can do is let her know you’re available if she wants your advice.

 

[showtime2507]

@thomashop I know successful entrepreneurs who has zero business background and they are making bank. Not in the beauty industry

 

[malkah18]

@showtime2507 Yeah I never had any business experience before I started my business. Granted mine didn't require me to go into debt for it

 

[boss121]

@thomashop I'm with you 100% on this one, and it sucks that you gotta be both the adult in the room and also play salesman and try to sell them logic and common sense.

Fortunately, math doesn't lie, numbers don't lie, and you can use a break even analysis tool to show them the raw reality. That 2 extra chairs is not enough to prop up a business, especially considering those extra chairs would only be utilized maybe 15% of the time.

She needs a business model (that she puts together herself) with market analysis for the local area, competitor analysis, SWOT analysis and Porter's 5 Forces analysis, plus competitive edge or points of differentiation. And the most important things: financial projections & break even analysis, and a business operating system (BOS) to include SOPs, policies, marketing strategy, 5 year business plan, customer service / fulfillment policy, a detailed model of all software to be used, process mapping, value stream mapping, marketing strategy, HR and employee retention policy and compliance, Tax and finance policy and controls, permits and compliance policy and folder, liability insurance and property insurance, plus business savings & payout policy, and emergency fund.

And that's just to get started. If she can't or won't put together a business plan with all of this, she's not ready to be a business owner. I'm a consultant, this is what I do on the daily. I have an MBA in Finance, CPA, currently CEO and former VP of Operations. So I kinda have a clue about business.

As a business consultant, I can assure you that using only 2 chairs to prop up the business and starting so young with no experience is a very bad idea. If she won't put together the business plan she won't understand her business, and her odds of failure are guaranteed, 99% failure rate within the first year.

Break even analysis tool:

https://www.nase.org/business-help/calculators/business/breakeven-analysis-calculator

 

[husker]

@thomashop Meh - I started my first business at 19 and was $500k by year 5. Sounds like the people who should be supportive, as in your parents, are.

Don’t know what the problem is. Contract hairdressers won’t be joining to ‘learn’ from her - she can get excellent dressers with already cliental and pay rent right there.

Use her salon for all your cuts is my advice. Tell your friends.

 

[jamesmason10]

@thomashop You just need to leave it alone. Either the business will be a success or some valuable lessons will be learned.

 

[sisterbecky216]

@thomashop It sounds to me like your mom is opening a salon, not your sister.

 

[callielovesjesus]

@thomashop She should consider working for a successful company first to learn the rest of the hats.

Also, send your parents the E Myth Revisited by Micheal Gerber: https://www.amazon.com/Myth-Revisited-Small-Businesses-About/dp/0887307280

Suggest to her and your parents to listen to some of the better podcasts about that industry:

https://thethrivingstylist.com/podcast

https://podcasts.apple.com/us/podcast/social-beauty-makers/id1660834300

https://hairbrainedconversations.libsyn.com/

 

[emmasmithlondon]

@thomashop I know many successful forty and fifty something salon owners who jumped in and opened their own salons very early into their careers. For some reason, it seems to work out okay.

I've been doing hair for only 8 yrs. I started later when I was already a mom with a mortgage. Because of my responsibilities, I'm more risk adverse. It took me 7 yrs to rent my own booth because I was nervous about the income. Now I'm working on getting my savings right to open my own salon. What scares me the most is I know a lot of more mature hairdressers who have opened their salons when they are absolutely ready only to have them struggle and ultimately close. It seems like the more financially savvy and experienced the hairdresser when they open their salon, the greater the likelihood that it won't last.

 

[richenns]

@thomashop A great lower-risk option (if she really, really, really wants to be out on her own) is to get a space at something like Salon Lofts so she can get used to generating her own client base without having to worry about employees, onerous and really expensive real estate leases and renovation costs. Then she can grow her business slowly. But honestly, someone who is that early in her career would be much better off working for someone else, learning her craft, and finding a mentor. When I’m looking for a stylist, I’m 100% not going to see a solo operator who has only been working for a year. If I was a stylist looking for a job, I’m 100% not going to go work for a 20-year-old when one year of experience. There is no shame in being new in your career and learning from other people. Your parents are seriously fucking this up.

 

[miguel1]

@thomashop Unfortunately its not your place despite your concerns . You have kids no ones going to tell you what you can and can not do for your kids. you also dont know how your sister will do either regardless she will either thrive or lessons will be learned but even if thats the case its not your place to keep them from learning those lessons either.

 

[mgrehab]

@thomashop Simply- mind your own business and stay out of the whole situation. This isn’t your problem.

 

[robertm2000]

@thomashop As a small business owner, FWIW, I agree with your sentiments, OP. However, I'm not sure why you're so invested in this. People start and fail business ventures all the time - at 20, at 40, at 70.

Suggest to your sister and parents that if they're serious about this, they invest in a good accountant.

Collecting and remitting sales tax, handling payroll and associated required withholdings and remittances, business taxes at the city, county, and federal levels, etc. are a burden of their own. Not to mention ensuring her books are set up and maintained properly so she can properly file her personal and business taxes each year and understand write-offs, depreciation, etc.

A good accountant can also help guide her toward the best business structure (LLC, S Corp, etc.).

Again, I fully agree with you that it sounds like absolutely nobody in your story is prepared for what it takes to be a business owner, but they can be guided through the process by a good accountant... which is going to eat into the magical profits they're after.