Business Overview

Beauty salons have become increasingly popular as disposable income has risen. Salons are as much a social institution as they are a way to improve the appearance of customers. The beauty industry generated $62.46 billion in 2016 alone, and it’s numbers have consistently gone up for the past 13 years.

Who is this business right for?

This business is right for those who care about making others feel better about themselves by way of improving their appearance. Owners do not need to be licensed in cosmetology if they do not planning to administer any services, but it is strongly recommended to have cosmetology training so you are knowledgeable about the services your business offers. Ideally, the owner will be a very sociable person, as you will need to build relationships with clients in order to create returning customers.

What happens during a typical day at a beauty salon?

To a certain extent, owners can decide how much they want to be involved in the business. An owner may hire managers to ensure the salon is running smoothly, while they concentrate more on investing in the new ventures and trends. However, here are some of the usual duties of beauty salon owners:

  • Finding a space with a good deal of foot traffic
  • Advertising the salon (web, print, television, etc.)
  • Ensuring inventory is stocked
  • Analyzing current and future customer demand
  • Performing styling duties
  • Managing employee schedules
  • Ensuring cleaning procedures are followed

What is the target market?

Beauty salons will profit most from repeat clientele. You’re looking for men and women who are willing to pay more for quality work, and those who need set services every month.

How does a beauty salon make money?

Beauty salons make money by exchanging beautifying services for money. It is important to find\ the right profit margins for your services. Some salons use a base rate for coloring or haircuts. A good rule of thumb is to look at the pricing structure of other salons in the area, and aim for a middle-of-the-road approach. Customers do have their budget limits, but they may become instantly suspicious about the quality of work if the rates are too low.

What is the growth potential for a beauty salon?

Depending on the space you get, the potential can be unlimited. Along with common menu items like waxing, manicures, and pedicures, consider either offering or leaving the door open for spa features like steam baths, or skin treatments like Botox.

A beauty salon’s growth is rooted in being able to keep up with the market. Your ideal customer may want standard and familiar (e.g., a manicure) or something a little more risqué (e.g., vampire facelifts.)

Once your business has a steady flow of business, it is possible to open a second or even third location to maximize the reach of your business.

Getting Started

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

Typically, the most successful beauty salons have owners who understand the ins and outs of how a beauty salon functions. Therefore, experience working in a salon can be very beneficial. Many employees will not only need a license to operate in the US (education requirements vary from state to state), but they need to seek out additional education to keep their license as time goes by. Owners should know and understand how each service should be administered to keep quality levels high. There will also be a certain amount of intuition needed, alongside standard business sense, to keep clients impressed both in person and behind the scenes.

What are the costs involved in opening a beauty salon?

Experts recommend you have at least $60,000 before opening a beauty salon, but this number is highly dependent on the property costs in your area and the number of chairs you plan to have (1,000 square feet will fit about 6 chairs.) Equipment will typically cost around half the initial capital, or around $30,000. The costs of licensing to operate vary widely (anywhere from $100 to $2,000.)

Advertising costs should also be factored in, with television time costing up to $15,000. If you choose to use a pay-per-click model for digital ads, your costs may be substantial due to the ubiquity of beauty salons.

What are the steps to start a beauty salon?

Once you're ready to start your beauty salon, follow these steps to ensure that your business is legally compliant and avoid wasting time and money as your business grows:

STEP 1: Plan your Business

A clear plan is essential for success as an entrepreneur. A few important topics to consider are:

  • What are the initial costs?
  • Who is your target market?
  • How long it will take you to break even?
  • What will you name your business?

Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.

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STEP 2. Form a legal entity

Establishing a legal business entity such as an LLC prevents you from being personally liable if your security guard company is sued.

STEP 3. Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

STEP 4. Open a business bank account

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

STEP 5. Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

STEP 6. Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

STEP 7. Get Business Insurance

Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.

STEP 8. Define your brand.

Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.

STEP 9. Establish your Web Presence

A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.

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Select your state below for an in-depth guide on completing each of these steps in your home state.

Where can I find a business mentor?

One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.

Having a support network in place to turn to during tough times is a major factor of success for new business owners.

What are some insider tips for jump starting a beauty salon?

You’ll likely need to give discounts at the beginning to entice customers to stray from their usual place to come to yours. The double-edged statistic to remember is that a beauty salon can experience up to 25% turnover in any given year. That’s a decent amount of customers to come and go, but it’s helpful for salons trying to gain a foothold in the market.

Concentrate on defining the customer you want, and then start finding out where those people are. Partner with other businesses to start getting more referrals, and hire someone who can make your website really stand out — both when a customer searches for salons in their area and after they click on your website.

Growing Your Business

How to promote & market a beauty salon

Find out what a customer wants and then start filling in the gaps. For example, there may not be many salons open late on weeknights or you may have better quality color treatments that last longer than other salons. You may want to set up a referral or loyalty program to encourage customers to promote your business. These discounts will ensure that the customers promote your business and return for your services themselves.

Your customers are likely to be on social media, which is the perfect place to market. Take pictures of all your successes and constantly update your feed — even if interest is low at first. If you have a specific trend that’s happening in the area (e.g., sunset color), then this should be heavily visible on Instagram and Facebook company pages.

Recommended: Get started with local advertising for your business with a $300 credit from Yelp.

How to keep customers coming back

Focus on making each customer interaction a success. This will help customers to associate success with your services, and it will also lead to them telling others they know about your business. Think about the customer experience from every angle: finding the salon, getting to the salon, parking, exiting, etc. Be proactive on sites like Yelp, and never leave a complaint unanswered. Be generous if you want to get people’s attention. Ten percent off may seem like a lot to you, but it’s not likely to impress someone who already has a relationship with another salon.

How and when to build a team

Your stylists and technicians will make or break the business, so they need to be both friendly and exceptionally competent. It is better that they’re capable rather than overly social, but you really do need both to keep people coming back. Teams need to be built at the very beginning, and additional hiring should only occur if new services are being offered, the space has been expanded, or the demand calls for it.

Legal Considerations

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate a beauty salon. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.

Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.

Maintain Personal Asset Protection

Don’t think that just forming an LLC, or any other type of business, will save your personal assets in case of a lawsuit or other matter by itself.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your LLC is sued. In business law, this is referred to as piercing your corporate veil.

Two of the simplest steps that will protect your business, and yourself, are to:

Open a business bank account

  • This separates your personal assets from your company's assets, which is necessary for personal asset protection.

  • It also makes accounting and tax filing easier.

Get a business credit card

  • This helps you separate personal and business expenses by putting your business' expenses all in one place.
  • It also builds your company's credit history, which can be useful to raise money and investment later on.
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To learn more about maintaining your LLC's corporate veil, read our guide and protect your personal assets.

Certificate of Occupancy

A beauty salon is generally run out of a storefront. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO).  A CO confirms that all building codes, zoning laws and government regulations have been met.

  • If you plan to lease a location:
    • It is generally the landlord’s responsibility to obtain a CO.
    • Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a beauty salon.
    • After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
  • If you plan to purchase or build a location:
    • You will be responsible for obtaining a valid CO from a local government authority.
    • Review all building codes and zoning requirements for your business’ location to ensure your beauty salon will be in compliance and able to obtain a CO.

Earning Potential

How much can you charge customers?

The exact amount to charge customers will be dependent on where you are, who your clientele is, and the experience of the stylists. Celebrities may pay up to $800 for a hair service and $200 for their nails. Typically though, you’ll want to set your stylists up on a tier setting, with junior stylists charging around $30 for a cut, intermediates charging around $40, and masters charging $50 to $60. Manicures and pedicures can be anywhere from $15 for a basic treatment to $30 for a spa manicure.

What are the ongoing expenses for a beauty salon?

Owners can expect to pay for the following expenses:

  • Salaries
  • Supplies
  • Advertising
  • Equipment replacement (wear and tear on chairs, dryers, etc.)
  • Building costs (e.g., utilities, permits, upgrades)

How much profit can a beauty salon make?

On average, profits can be up to 15% of the total amount your salon brings in. You can also make additional money selling retail products, such as specialty shampoos and conditioners. Should you want to make additional money, you’ll need to adjust your service prices, but increasing prices may scare off customers.

How can you make your business more profitable?

Look for the ways you can make your customers look better based on their needs. For example, if you have a lot of middle-aged women coming in, offer more services to lift and refresh aging skin. Look into bringing in cosmetic specialists from time to time for special events (e.g., offer Brazilian hair straightening for a month.) There are a variety of new trends that hit the market, like vampire facelifts and sunset coloring that can drive interest and set your salon apart. You can also franchise if your business grows large enough, but 99% of beauty salons have a single location.

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