I’m launching a hair salon with my best friend – should we keep income separate? Dave Fishwick replies

My best friend and I are talking about starting a hair salon together. We have both been working in the industry for over ten years, but always for different people.

We want to start our own salon and have found a space that we can rent cheaply. We already have many potential customers and are confident that it will work.

Since we are both self-employed in the salons we work in, we thought it would be best to rent the space and work with our own clients. In a few years we could get some more stylists to use the space.

Obviously we split the rent and bills 50/50, but since we will have a different client list and therefore income, I’m not sure what to do.

I trust her, but I don’t want our good relationship to sour over money, if that happens.

Is it best to keep income separate or should we form a limited company and split everything?

Dave Fishwick, This Is Money’s business doctor, responds: I’m not a big fan of partnerships, because you and your partner will always have a slightly different opinion on things like opening hours, staffing, advertising and many more costs.

Inevitably, one of you will end up doing more work than the other.

That said, I know of a hair salon in Whalley, Lancashire where two best friends have worked together with great success to build a great business.

The girls have known each other since they were eleven, hence their name Eleven Hair.

The two girls, Jinny and Vicky, have retained their own regular clients from previous salons and split the rent, rates and electricity costs, which all works very well for them.

My wife Nicky cut the ribbon on the new venture last summer and they are doing well.

Since you’re already self-employed, this idea seems like a safe bet.

You are confident that the work will continue, and I see no reason why you should not continue to be successful in a new premises, perhaps even more so as you can put your personal touches into the styling and marketing of the salon.

If you both plan to continue with your own clients and only share the premises, it seems logical to do as you initially suggest and split the overhead costs evenly, but otherwise keep your finances separate.

This would be the simplest and fairest solution to begin with and gives you flexibility and control over the hours you work and the income you earn.

As you say, you both have regular clients and your service is unique to each stylist, so as things stand, it’s probably safer for your friendship and the general goodwill in the salon to keep your finances separate for the time being.

It’s also likely that your circumstances are not the same as your friend’s.

In addition to the demands on your time outside of work, your income requirements will likely differ as well.

You can develop the business by renting out salon space or time slots to other stylists, which you currently pay for.

Alternatively, you can rent out some space to an esthetician, and use the revenue to cover more of the salon’s overhead costs.

This still allows you to keep your finances separate and allows any income above overhead to be distributed evenly.

Whether you want to combine your two businesses into one depends on how you see the salon developing as a whole.

It would probably make sense to combine your businesses if you both decide to reduce your hours and hire stylists directly.

If you hire staff and market the salon on its own, rather than promoting your own personal brands, it becomes too complicated to keep your finances separate.

There would also be potential competition between stylists, which could lead to possible disagreements, so merging into one company becomes the logical option at that point.

If you’ve been friends for so many years without fighting, you’ll probably figure out any differences.

Resentment is only likely to creep in if one of you thinks you are wearing the other down by doing more work but not being rewarded for it.

The best way to avoid this is to be honest and open with each other, and discuss things regularly rather than staying silent and letting things boil.

What can also irritate you is introducing new ideas without consulting the other person.

So the first thing I would do is have lunch with your friend, discuss all the different ideas with her, and most importantly, write them all down on paper (I call these the ground rules).

And you’ll both need a copy to refer to at any time in the future.

Working independently is key to a successful partnership, and sharing rent, rates and bills makes a lot of sense.

I’m sure it will work out fine, and I wish you the best of luck.