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How Many Hair Salons In New York?

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An
Expert
replied on 06/06/2018
Uber Strategy Manager | BCG Consultant, Interviewer

Hey there

Here is one approach:

# Hair Salons = (# hours required for men's haircuts per year + # hours required for women's haircuts per year) / average service capacity of 1 hair salon (which would be: opening hours x average # hair dressers x utilization rate).

Reasoning

I usually like to estimate these from the demand side - the logic being that a sizing of demand is actually an estimate of the maximum efficient supply of hair salons that can be supported in the market. Estimating it from the supply side is also a great approach, but you leave yourself open to the risk that there is undersupply in the market.

High level illustration (you can add more segments to this)

Total service hours required for haircuts p.a.:

  • Assume 8m people in NY; 4m men and 4m women
  • Service hours for men:
    • Assume men go to hair salon average once every month, 30min each time
    • Service hours p.a. = 4m x 12 x 0.5 = 24m hours
  • Service hours for women:
    • Assume women go to hair salon average once every 3 months, 1 hours each time
    • Service hours p.a. = 4m x 4 x 1 = 16m hours
  • Total time spent in hair salons is 40m hours p.a. in NY

Total service capacity per hair salon

  • Assume 8 hours operating time, average 3 hair dressers, 50% utilization rate, open 6 days per week for 50 weeks.
  • Note: the key assumption here is that a hair dresser cannot work
  • Hence service hours per hair salon p.a. = 8 x 3 x 0.5 x 6 x 50 = 3600 hours p.a.

Therefore, total number of hair salons = 40m hours / 3600 hours = 11,000 hair salons

Sense check: 11,000 salons implies 1 salon every ~700 people in NYC (350 men, 350 women). Given men cut their hair 12 times p.a. and women cut their hair 4 times p.a., that implies 5600 visits per year, or around 15-20 clients per day, which feels reasonable.

Note again that demand side estimation assumes there is a maximum efficient supply in the market, which may not be case.

Hope that is helpful!

Anonymous A replied on 06/05/2018

1. I would first clarify if its a unisex salon or not ? ( i have assumed its a men's salon here )

Approach :

1. Calculate the average daily capacity of each salon : ( based on my experience men take 30 min for a haircut , i.e 2 haircuts by one barber in an hour , Midtown salons have 2-4 barbers /salon . average: 3 ; hence 3*2= 6 haircuts/hour)

2. Assume utilization rate / day : U can divide in weekday and weekend ( men usually go for haircuts on weekend 70 % utilized on weekend , 40% on weekday)

3. opening hours : 8 hours

4. Per day utilized capacity : Number of operating hours * utilization rate * capacity / hour

5 . per month = per day * 30

6. Assume frequency is once / month ( based on experience , but ill check with interviewer )

7. Per month capacity of each * number of salons = men population in NYC .

Vlad replied on 06/05/2018
McKinsey / Accenture / Got all BIG3 offers / More than 300 real MBB cases / Harvard Business School

Hi,

  1. I would clarify first whether it's men (barber shops) / women / both
  2. Estimate the corresponding population size (probably discount very young kids)
  3. Adjust the population size by the tourists, people coming from NJ, etc.
  4. Estimate the average frequency of services per person (depending on the segment - men, women, etc)
  5. Estimate the total demand of services per day (Average frequency * population / number of days between the haircuts)
  6. Calculate the capacity of the average Hair saloon per day (e.g. 3 people * 8 hours / 1 hr per haircut)
  7. Take into account idle time (e.g. your actual Hair saloon occupancy = total capacity / 2 assuming 50% occupancy)
  8. Divide the total demand by the occupancy of 1 saloon

Best

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