Introduction
ESHK Hairdresser Limited was founded in 2005 by Fernando Lopez and his partner, Meg Liu. The two had worked and lived in East London for several years, which led them to choose the business location. The founders took advantage of the rapid economic growth in East London and opened the first beauty salon on Goswell Road.
The couple has an eye for art; they also enjoyed the growth and creativity in East London as it developed, which they wanted to share with the world. The East London community’s growing interest in art and technology motivated the founders to start a beauty business. The beauty salon is expanding into other cities in the UK, bringing the founders’ dreams closer.
Content analysis has primarily been used to collect data on ESHK and its founders. Studying related documents, including journals and other content formats, provides insight into the business environment. To understand the operations of small and medium enterprises in the UK beauty industry, the report evaluates the motivations and personal traits of entrepreneurs. This report analyzes the start-up process, competitive advantage, level of competition, business growth, challenges, strategy, sustainability, and the government’s role in the industry.
Findings
Entrepreneurs
The beginning and growth of ESHK revolve entirely around the two entrepreneurs. Fernando and Meg possess traits that position them for success in the business environment. According to Anwar et al. (20), entrepreneurial entrepreneurs possess characteristics such as confidence, creativity, and perseverance that help them develop ideas and establish new ventures.
Meg and Fernando, for instance, demonstrate the ability to take risks by investing all their savings in a beauty salon when the industry is not promising. Anwar et al. (2021) note that, in addition to personality attributes, human capital attributes such as education and experience are necessary for entrepreneurship. In the case of ESHK, the founders were professionals in different creative fields with strong community knowledge, which laid a solid foundation for entrepreneurship.
Creativity and Innovation are core traits that describe the ESHK founders. Entrepreneurs have an impressive imagination that repackages simple, readily available items into magnificent products and services (Anwar et al., 2021). The ESHK founders were primarily motivated by the art in beauty salons.
While a few firms already existed in East London, Fernando and Meg identified an artistic gap in the services, from styling to the face of the shops. ESHK is also renowned for blending technology with the beauty industry to enhance customer efficiency and experience (Endole, 2023). The firm’s culture reflects the innovative spirit of Fernando and Meg.
Start-Up Process
The ESHK Hairdresser Limited started as a small, stylish shop in East London. The two founders built the establishment from savings from their work. Fernando and Meg established the beauty salon when there were only signs of creative growth in the neighborhood (Endole, 2023).
As natural creatives, the founders saw an opportunity to introduce art and technology in the fast-growing beauty industry. The primary motivation was to teach technology and art in the hairdressing rooms, to brighten the spaces, and to make them stand out from the existing, boring areas. The founders primarily wanted to establish something beautiful in the neighborhood to match the changing trends in style and beauty. The plan was to introduce an artistic touch to East London and share the creativity with other cities (Endole, 2023). The founders of the small, stylish establishment had a vision to become a beauty salon with outlets across the country.
Concept and Competitive Advantage
ESHK Hairdresser Salon offers a wide range of hair styling and cutting services. The firm has now spread to other cities in the UK and attends to everyone’s unique hair needs. The professionals handle blow-dries, color combinations, simple shortcuts, subtle highlights, and smooth balayages, among other services (Endole, 2023). The salon is open to both men and women, with (blonde or dark, short or long hair). The team goes a step further to handle color corrections and fix ombre if one is dissatisfied with a previous hair salon.
One of the distinguishing features of this business is the friendly customer service. The attendants are highly knowledgeable in all aspects of hair styling and offer free consultation on the suitability of color and cut for a specific person, occasion, or season (Endole, 2023). The ESHK spaces are beautiful; the customized art on the walls and service presentation sets them apart. Also, the firm has standardized operations in all four cities; a customer on a trip is assured of the same experience in a different town. The unique systems of ESHK Limited make it a force in the competitive beauty industry.
Market Demand and Competitive Environment
The UK beauty industry has demonstrated consistent growth over the past few years. According to Olarewaju and Tamvada (2023), 25% more small and medium enterprises were registered in 2022 compared to previous years. An increasing number of service providers in the beauty industry often results in more competition, hence, innovation.
Brown and Lee (2019) demonstrate how the number of small and medium enterprises in the beauty industry has increased five times more than in the manufacturing sector during the same period. According to Olarewaju and Tamvada (2023), the industry’s exponential growth, despite challenges such as COVID-19, demonstrates the resilience and creativity of beauty salon founders in the UK. Some of the market’s top competitors include Mariza Grazia Salon Ltd, Law Salons, Hairform Studio, and Q Hairdressing. The effect of an increasing number of players in the beauty industry is spread across the country.
Despite the significant growth of the UK beauty industry, certain factors affect the market, which can be analyzed using Porter’s Five Forces. New entrants pose a significant threat to the beauty salon industry due to relatively low start-up costs (Brown-Newman, 2021). While market standards are high, an entrepreneur can establish a functional salon with basic equipment and minimal capital.
Also, suppliers in the beauty industry have low bargaining power. With the high number of market players and the diversity of products, consumers have greater power to influence market prices than suppliers (Brown-Newman, 2021). There is also a high risk that consumers will shift to cheaper or higher-quality products.
The high number of competitors increases the threat of substitute products (Brown-NewMan, 2021). In addition, the high number of competitors reduces the market’s overall profitability, creating a barrier to entry. Also, well-established, large-scale beauty firms enjoy economies of scale, creating a barrier to entry for small firms (Brown-Newman, 2021). The highly competitive environment creates a barrier to exit because firms struggle to achieve initial production costs before leaving the industry.
Business Growth and Development
Since its first establishment on Goswell Road, ESHK Hairdresser Limited has consistently expanded. According to Endole (2023), the company had one active director, as stated in a January 2023 submission. The company had four offices in four cities, each with fewer than 10 employees, during the same period.
ESHK turnover of less than two million euros, hence under the small and medium enterprise classification (Endole, 2023). As of the financial year ending April 2022, the company had total assets of 203.36k Euros and a debt ratio of 38.47% (Endole, 2023). The firm’s Instagram account has the most significant social media following, with at least 15,000 followers. The numbers demonstrate consistent growth and high potential for the London beauty salon.
Challenges of Running the Business
The UK industry is characterized by various factors that influence the growth and development of the firms. After COVID-19, beauty salons have continued to struggle to adapt to new paperwork and higher costs following the UK’s departure from the European Union (Brown-Newman, 2021). Also, implementing the new Cosmetics Regulation has led to consistent cash flow issues for ESHK and firms at the same level. The new regulations have opened avenues for company staff and customers to use unlicensed products and other shortcuts to avoid stringent regulations (Olarewaju and Tamvada, 2023). While COVID-19 was a universal challenge, the service industry, like beauty salons, was significantly affected.
Growth and Development Strategy
ESHK, as a micro-enterprise, has both numerous opportunities and challenges in the UK business environment. One primary tactic the firm employs is maintaining the existing clients and winning their loyalty. New entrants into the market mean numerous substitutes for consumers; however, with established relationships with customers, the firm is assured of a consistent market (Brown-NewMan, 2021).
ESHK is offering incentives to attract more clients and referral commissions to further expand the market. Regarding product development, the beauty firm is increasingly enriching its services, focusing on quality to differentiate itself from the generic market (Endole, 2023). ESHK Hairdresser Limited has started diversifying into the cosmetic industry to ensure the business’s sustainability.
Government Support Measures
The government has set up multiple mechanisms to support small and medium-sized businesses in the UK. Apart from access to finance, the government offers free financial advice and guidance to entrepreneurs and growing companies (Brown and Lee, 2019). Furthermore, the government makes economic market interventions to increase UK entrepreneurs’ access to finance (Brown and Lee, 2019). While the ESHK Hairdresser Limited was set up without government support, the government supports investments and economic growth in several ways.
The UK government is offering the Enterprise Finance Guarantee (EFG) as a loan to small businesses. The loan targets small entrepreneurs without a proven track record or security to guarantee a commercial loan (Brown and Lee, 2019). In this case, the government offers the lender a 75% guarantee on each loan, contingent on the lender’s portfolio (Brown and Lee, 2019). Enterprise Capital Funds (ECF) is an equity financing program that targets innovative firms struggling to realize their growth potential due to financing constraints (Brown and Lee, 2019). Typically, investors feel secure about investing in growing companies and start-ups, which is why ECF bridges the equity gap.
The National Loan Guarantee Scheme (NLGS) is another government financing scheme. The finance plan is designed to offer cheaper finance to businesses with a turnover of less than fifty million euros (Brown and Lee, 2019). The loan is characterized by an interest rate of 1% that can be substituted with equivalent asset finance facilities. NLGS allows banks to raise up to 20 billion euros and lend to smaller businesses, with the loans guaranteed by the government (Brown and Lee, 2019).
Business Finance Partnership (BFP) is an investment plan involving the government and private investors that lends to small and medium-sized businesses. This product aims to increase financial channels for small enterprises; BFP can be accessed through non-bank lending institutions (Brown and Lee, 2019). Other UK government lending products include the Seed Enterprise Investment Scheme (SEIS), which ESHK can currently access to support the firm’s growth (Brown and Lee, 2019). The government has accredited multiple lenders, including UK High Street Banks, to boost entrepreneurs and micro businesses like ESHK Hairdresser Limited.
Social and Sustainability Goals
ESHK Hairdresser Limited has significantly contributed to the community in multiple ways. Endole (2023) notes that 3% of the micro business’s total employees have a disability. While the workforce is small, it represents social diversity in the local communities. Additionally, ESHK’s management has a strict policy on waste disposal that has resonated with other industry players, thereby making a significant contribution to the community (Endole, 2023).
ESHK also has the opportunity to join the British Beauty Council’s Sustainable Beauty Coalition, which focuses on rapid, effective changes to address the existing climate crisis (Brown and Lee, 2019). According to Brown and Lee (2019), some popular beauty products are not environmentally friendly. Therefore, ESHK joining other major players in the industry in the universal campaign on saving the planet will be a significant gesture to the community. Different ways for ESHK Limited to realize social and sustainable goals include sensitizing the public to the risks, side effects, and clinical recommendations of beauty products.
Conclusion
Small and medium-sized enterprises in the beauty industry face challenges from the onset. Some entrepreneurs like Fernando and Meg spend all their life savings to start. Motivation and resilience are admirable and necessary for entrepreneurs in this industry, but the nature of market demand and the competitive environment can test the viability of original business concepts. ESHK Hairdresser Limited, for instance, has been in operation for at least 15 years, yet its asset values do not reflect the time and other resources invested in the business. Even with unique concepts that gave ESHK a competitive advantage, challenges like COVID-19 and Brexit came and flattened the playing field for all players in the industry.
In contrast, challenges are healthy because they spur innovation and growth strategies across different firms. Also, the UK government has developed multiple financial tools to help start-ups and growing small enterprises realize their potential and ultimately boost the national economy. In addition, ESHK Hairdresser Limited has opportunities to invest in social activities that positively impact the community and ultimately sustain the business.
Recommendation
ESHK Hairdresser Limited is well-positioned in the UK market to grow and join the market leaders. However, some aspects of the business should be tightened to withstand increasing competition better. They are, first, investing in talented employees because they are the face of the firm. The management should consider hiring motivated people like the founders who align with the salon’s image. Hiring individuals with shared values and paying them well will make them strong brand ambassadors.
Additionally, the firm should invest in a digital marketing team to develop and execute a marketing plan and to research the market environment and competition. Analyzing competitors and major firms in the beauty industry can clarify trends and help ESHK develop a long-term winning strategy. Also, the increasingly dynamic business environment requires a dedicated digital team to keep up with trends and adapt accordingly.
Reference List
Anwar, I., et al. (2021) ‘Traits and entrepreneurial intention: testing the mediating role of entrepreneurial attitude and self-efficacy‘, Journal for International Business and Entrepreneurship Development, 13(1), pp.40-60.
Brown, R. and Lee, N. (2019) ‘Strapped for cash? Funding for UK high growth SMEs since the global financial crisis‘, Journal of Business Research, 99, pp.37-45.
Brown-NewMan, L.A. (2021) Small business critical success factor: understanding financial and non-financial factors within a beauty Salon. Doctoral Dissertation. Columbia Southern University.
Endole. (2023) ESHK Hairdressers Limited key data.
Olarewaju, T. and Tamvada, P. (2023) ‘How ethnic minority SME owners in the UK can create value amid informal institutional voids‘, Journal of Creating Value, 9(1).