Reference no: EM131275501

How Part-Time Work Became a $40 Million Business Called Drybar

After her children were born, Alli Webb wanted to work part time. She decided to apply her training and her experience as a hairstylist to offer services in client’s homes. Her additional background in publicity would help her build business by worth by mouth. Webb also identified an opportunity: She would focus on providing only “blowouts,” washing and blow-drying the client’s hair. This method delivers a great look at a lower cost- and at a lower price for the client than having hair dyed, cut, or permed. People loved the idea, and soon Webb had more jobs than she could handle on her own, although she now admits that the earning barely covered her costs.

Still, Webb persevered; the toughest management challenge was finding enough money to keep up with the growth in demanded. Her first step in expansion was to form a corporation, Drybar Holdings, and open a shop in Brentwood, an upscale part of Los Angeles. Webb and her husband tapped into their own savings and approached Webb’s brother, Michael Landau, about investing $250,000. They determined that for the idea to succeed, the salon would need to attract at least 20 to 30 customers per day. In fact, within the first few hours opening, the salon was booked solid for six weeks. Landau was on board, and additional family and friends later invested a total of $1 million in the business. The company’s continued success then attracted $2,5 million from angel investors and later $21 million from a private-equity firm. With that funding, Drybar has grown to 32 salons, $40 million in annual revenues, and 2,000 employees, including stylists- a departure from most salons, where stylists are independent contractors. On average, each salon provides 60 to 100 blowouts every day, with many repeat customers who have discovered what an affordable luxury a 40- minute, $40 blowout can be. The high number of blowouts helps make each shop more profitable than a traditional hair salon would be.

Now that Drybar is a big company, Webb’s role has changed. Whereas she first built her business and her skill as a stylist, now she uses that knowledge to establish and monitor standards for her employees. She also established detail requirements for the design of each salon and the ways stylists should interact with their customers. One features of a Drybar blowout, for example involves clients sitting so that the face away from the mirrors. When the blow-drying is done, the stylist whirls the client’s chair around so that the client has the thrill of seeing the finished hairdo in all its glory. Webb also led the creation of a line Drybar hair care products, using feedback from her stylist guide the products’ development Managing the business has affected DRybar’s other founders as well. Webb, her husband (who used his advertising experience to become the company’s creative director), and her brother (who applied his business experience from Yahoo! And leadership of a marketing firm to the role of Drybar CEO) could not run a multimillion-dollar business in their own. Drybar therefore hired John Heffner, in whose experience in consumer goods includes a position as president of OPI Products, a maker of nail care products, to be Drybar’s new CEO.

However, Drybar’s success has led to a new kind of risk: Others see the intense demand for the blowout procedure, so competitions, including chains such as Blo and DreamDry, are entering the market. Webb’s strategy is to continue focusing on high-quality service to maintain the advantage of being the first to enter the business.

1. What kind of opportunity did Alli Webb identity? How did entrepreneurial alertness, information asymmetry, and social networks shape her success?

2. What kind of entrepreneurial risks has Webb faced? How will greater competition affect level of risk?

3. What role has financing played in Drybar’s success? What other sources of financing could Webb and her management team consider?