It’s no secret that the economy has been tough on small businesses, and family-owned hair salons are no exception.

The beauty business world is notoriously competitive and the economic downturn hit the industry particularly hard when cash-strapped consumers cut out non-essential spending.

“Every day is a challenge since the recession hit,” said Yolette David, owner of Myoda Salon in Central Islip, New York at the International Beauty Show in New York this week . “I lost around 20% of my clients, and as a result, many of my stylists went into a different field to make more money.”

Since the recession, David said employee retention has become a major problem; her stylists want a paycheck more than they want to embrace her artistic vision for the salon.  In an effort to attract new clients, David launched a marketing strategy that includes postcard and flyer distribution and discounts for customer referrals.

“Everyone says that salons should do more marketing as part of their business strategy, but everything is money spent, and sometimes you spend the money and you don’t get what you expect,” said David.

One of the best ways to get more customers through the doors is to launch marketing campaigns via social media, according to Jon Gonzales, president of Hairdresser Career Development Systems, a course designed to teach business strategies to salon owners.

“It takes two seconds to create a business fan page on Facebook, and offer a link to your Facebook page on your Web site,” said Gonzales.  “Have someone help you put together a short video on YouTube that offers a tour of your salon, a sample of your work, or beauty tips. If they can see your salon and your smiling face, pretty soon you’ll be booked up.”

But publicizing your business via the Web shouldn’t go too far. Gonzales says that online incentives like Groupon aren’t the right fit for every business, and discounts should only be offered to long-standing customers.

“People put too much emphasis on Groupon and not enough on quality. Don’t get me wrong, there’s nothing bad about offering a deal, but you have to be careful you don’t cheapen your salon. If you give your services away, you’re defeating the purpose,” said Gonzales.

Sharon Flesche, owner of Headlines Hair Salon in Northvale, New Jersey said that while she hasn’t tried Groupon yet, her use of social networking has created a real boost to business.

“The bad economy has just started to hit me in the last six months.  Many of my clients are still losing jobs, and the ones trying to save money are holding off an extra two weeks for their cut,” Flesche said. “But social networking has been great for business because I’ve been able to publicize our fundraisers like Pink Hair For Hope. Even if people won’t spend the money on an ordinary day, they’ll come in if it’s for a good cause.”

At The Hair Shop in Parlin, New Jersey, owner Mary Ann Minella uses the salon’s Web site to attract new customers.  

“I like using our site because I can control it, and I always know what’s posted there,” said Minella. “By offering deals and specials on my site, the Google results always come straight to us, which is nice.”

Minella said that the Web has heated up the rivalry among salon owners, and that “competition is fierce in and out of the salon.”  Yet even though she’s enjoying the added boost from the site, Minella said retaining employees is still a problem.

“Typically, hairdressers have horrible business skills because they are artists, not MBAs,” said Gonzales. “You will always have turnover, but there are ways to keep it to a minimum.”

Gonzales suggests putting new employees on a strict training program that includes an initial probation period of six months. After the trial period they should then be bumped up to a full-time employee, with additional levels of “stylist” and “master stylist” set as goal points along the way.

“Rather than initially bringing them on with full benefits, give them something to work toward over time, like more money or a more prestigious title,” Gonzales said. “At the end of the day, you have to take full responsibility for the success of your employees. No one is going to stop you from handing out flyers in front of the supermarket or sending out coupons to customers you haven’t seen in a while.”

When all else fails, Gonzales says Grass roots campaigns are where it’s at. Stand on the street corner and pass out flyers, make cold calls and send out mailers inviting people in.

“You have to exceed customer expectations,” Gonzales said. “Be friendly. It works in any economy.”