How to Open a Hair Salon

Part 1 - How to start a How to Open a Hair Salon business - Background

American film and TV actress Joan Crawford once said, “I think the most important thing a woman can have—next to talent, of course—is her hairdresser.”

Hair salons offer clients a safe retreat from the worries of daily life, a place to get pampered and walk out feeling ready to conquer the world.

Our guide is in 3 parts:

• Part 1 - How to start a Hair Salon business - Background
• Part 2 - Our planner tool to see if this idea is the right fit for you
• Part 3 - Action plan to get started

What are the costs involved in opening a hair salon?

Many salon owners have been through the formal training and certification process, spending years perfecting their trade. This offers invaluable information regarding the industry and is an initial investment in your salon.

A critical part of your business strategy is your salon’s location. Whether you purchase a building, build from the ground up, or lease your space, it’s critical that you select a location with high visibility and traffic. Get to know your target area and choose a space that isn’t saturated with salons, is easy to get to, and has ample parking.

Once you’ve chosen your location, it’s time to start filling your space. The following are essential items you’ll need to invest in before opening your doors:

• Accounting and business software

• Client management and scheduling software

• Website

• Chairs

• Furniture for waiting area and workstations

• Decorate and design the shop with your desired clientele in mind

• Ample lighting

• Basins – your workspace will likely need plumbing and electrical work to accommodate your salon’s unique needs

• Haircare products

• Towels and smocks

• Equipment for laundering

Many salon owners report an initial investment of $95,000-$200,000, depending upon size, location, and services offered.

Read our hair salon purchasing guide to learn about the materials and equipment you’ll need to start a hair salon, how much to budget, and where to make purchases.

What are the ongoing expenses for a hair salon?

It’s important that hair salons deliver quality at all times. This means investing in hair care products that you believe in. You’ll need to keep inventory fully stocked to ensure your stylists have everything they need to perform. Supplies will set you back between 2% and 8% of your total sales. (Assuming you’ve chosen the commission-based model.)

Your staff will be, by far, your greatest expense. Between desk staff, hair washers, and apprentices, staffing costs will cost about 10% of sales. Payroll taxes will run about 7.6% of sales. Depending upon your advertising strategy, budget for 2%-5% for marketing, 3% of total sales for maintenance and 2% for insurance.

Who is the target market?

While some salons specialize their services to fit one demographic, most fulfill the needs of men, women, and children. Consumers spend approximately $20 billion annually at the salon, with most women paying an average $1,800 per year. Thus, the female population is who you’ll primarily be targeting in your marketing strategy.

How does a hair salon make money?

Prices are set by the salon owner or individual stylist, depending upon the salon’s business plan. Each client is billed based on the goods and services they receive. It’s standard procedure for tip to be added by the customer, which goes directly to the hair stylist who performed the services.

How much can you charge customers?

Your clients are charged based on the products and services provided. A client who receives a cut, color, and hair treatment will be charged more than one who just comes in for a haircut. It’s important for your staff to excel at time management and to schedule clients properly, based on what they want out of their appointment. Every moment is an opportunity to bring more money into the company.

As the owner, you’ll also earn a profit from each of your stylists. This can be set up in two different ways: you can pay the stylist a commission based on services they’ve provided or they can play a flat “rental” fee for the use of their space. Commissions paid to the stylist ranges from 35% to 50%, while others are paid on a graduated commission scale.

How much profit can a hair salon make?

Your profits will be defined by a number of things, including how you structure the business and what city/state you live in. The average annual earnings for a hair salon owner in New York City is $93,000, while one in Florida is approximately $54,000.

How can you make your business more profitable?

There are a number of strategies you can employ to maximize your profits. The following are a few of the most creative and successful:

• Offer complementing services such as nail, skin, massage, and waxing. If your client can schedule their nail appointment around the time of their haircut, you’re more apt to retain them as a customer.

• Make an online scheduling service available to your clients.

• Dedicate a portion of your space for retail sales. Retail sales are estimated to be 2 to 3 times more profitable than hair care services. Get creative with your retail space by including more than hair products. Many owners include items like jewelry and art. You could offer this on a consignment basis, where the artist is paid once a sale is made and you receive a percentage of each sale.

• Ask some of your suppliers if they have free gift packages. This gives clients a chance to try a product before investing in it.

• Before each client walks out your door, be sure they’re asked about re-booking for their next appointment. If they have to call back later to schedule, you run the risk of losing a valuable client.

• Create videos and make them available online for a small fee. Build a catalogue of techniques you and your staff have learned over the years. This establishes you as a leader in the industry and is a great way to earn a little extra profit.

Day-to-Day and Growth

What happens during a typical day at a hair salon?

While it’s not required to run a successful beauty parlor, many salon owners spend at least a portion of their day working with clients’ hair. As owner of a hair salon, there are a number of other activities to keep you busy throughout the day, including:

• Analyzing clients’ hair and facial features to recommend the best style and cut

• Learning and perfecting new hair techniques

• Answering the telephone and scheduling appointments

• Updating and maintaining client records

• Accepting customer payments

• Demonstrating and selling hair care products, based on their individual needs

• Sanitizing tools and maintaining a clean salon

• Laundering towels and smocks

At least weekly, you’ll also need to restock inventory and pay any unpaid invoices. Once you’ve built a team, you can delegate the administrative duties to your staff and focus on managing your team and maintaining your marketing strategy.

What are some skills and experiences that will help you build a successful hair salon?

The hairdressing industry has grown to a billion dollar industry due to the entrepreneurial, innovative, and business-savvy spirit of today’s salon owners. Successful owners have a strong work ethic and are willing to put in the hard work to turn their dream into reality. While it’s not required that you be a stylist to open a successful salon, the experience of working with clients and other stylists in the community offers invaluable insight.

Interpersonal skills are critical in this industry. Your staff will come from all different backgrounds. Since the work they do directly affects your brand, it’s your job to manage them and ensure they’re representing you correctly. To do so, you must be confident enough in your business knowledge to make decisions and stick with them, even when challenged. Balance this resolve with an open-minded and flexible attitude and you have a recipe for success.

What is the growth potential for a hair salon?

Twenty years ago, beauty parlor owners worked hard to make a good living, making a majority of their income by being the primary stylist at the shop. Now, with advanced business tools at our disposal, entrepreneurs have a unique opportunity to grow their business into more than “just” an honest living. Many are building salons they’re able to sell for multi-millions, offering real value and financial freedom to those committed to growing their business. Owners of Sola Salons, Stratton Smith and Matt Briger, turned their franchising dream into a reality. Making Forbes’ best franchises list in 2015, they now have more than 240 locations open across the country.

Should you consider joining a franchise?

Joining a hair salon franchise can be a good option for entrepreneurs who prefer to use a proven model rather than start from scratch. While joining one can mean slightly higher initial costs and less control, a quality franchise offers great benefits such as initial and ongoing support, marketing assistance, and brand recognition.

Opening a hair salon franchise typically requires $175,000-$1,000,000. Larger hair salon franchises typically cost more, while more niche favorites often have lower startup costs.

Interested in joining a hair salon franchise? Check out our favorites.

How and when to build a team

Unlike many small businesses, you cannot run a hair salon solo. Since your staff represents your brand, it’s critical that you take the recruitment process seriously. Each individual should be friendly, charismatic, and well put together.

Hiring stylists with several years of experience offers a distinct advantage – they come with their own set of established clients. Salon owners warn, however, that those with too much experience will require a higher salary and often have their own way of doing things that might not fit into your overall strategy. Be sure to try out prospects before hiring to ensure a good fit.

Many salon owners have found great success hiring staff that is still in school or recently certified. An apprenticeship program benefits both parties – the employee receives hands-on experience, while you have a valued assistant who can help you navigate through your busy days. If you’re a good fit for each other, it can parlay into a full-time career opportunity for the apprentice.

Read our hair salon hiring guide to learn about the different roles a hair salon typically fills, how much to budget for employee salaries, and how to build your team exactly how you want it.

Part 2 - Is a How to Open a Hair Salon business the right fit for you?

Part 3 - Action plan to launch your How to Open a Hair Salon business in 90 days