You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple step guide to starting your hair salon. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
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
- 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.
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.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your hair salon is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, but if you still want to weigh all your options check our our article, What Structure Should I Choose for My Business?
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
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.
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.
State & Local Business Licensing Requirements
In most states, it is necessary to obtain a cosmetologist license. Here is an example of the application process.
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.
Hair salons may also wish to look into applying for a resale certificate, which allows retailers to purchase goods intended for resale without paying sales tax.
In addition, certain local licensing or regulatory requirements may apply. For more information:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
In order to play music in a business setting, permission must be acquired from the composer or license holder. Typically, it is possible to obtain a “blanket” license allowing a businesses to play music owned by a large catalog of artists and recording studios. Such licenses can be obtained from Performance Rights Organizations, such as ASCAP or BMI.
Certificate of Occupancy
A hair salon is generally run out of a small retail location. 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 retail 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 hair 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 your hair salon:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for you business’ location to ensure your hair salon will be in compliance and able to obtain a CO.
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.
How to promote & market a hair salon
Customers want to go somewhere that makes them look and feel sensational. The look of your salon, the friendliness and knowledge of your staff, and word-of-mouth will be what gets many new clients in the door. There are, however, a number of other things you can do to attract new clients.
Getting involved in your community offers multiple benefits: you’re getting your name out there and remembered, and you’re able to get to know customers and prospects on a more personal level, helping you better understand their needs. Consider hosting charity events or donating gift certificates to local charities for a raffle or auction. Sponsor a baseball team or local race, where your salon’s name will forever be printed on t-shirts made for the event. Many salons have also found great success through referral programs, where active customers are rewarded for referring friends and family to your studio.
Establish yourself as a leader in the industry by being active on social media sites. Many salons have found great success with Instagram, where they can post before and after pictures of a technician’s work. Additionally, be sure your beauty parlor is easily found by listing it in all community profiles such as Yelp, Google Places for Business, and the Yellow Pages.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
Once you’ve gotten a new client in the door, you’ll need to work to ensure they stay there. Going to the salon is about the experience as much as it is getting your hair done. Maintain a safe and spotless shop at all times. The overall look and feel of the place should be welcoming and properly represent your brand.
Everyone from the checkout station to your hair designers should be friendly and knowledgeable, always willing to help. This is a very dynamic industry that is continuously evolving in both products and techniques. It’s important to stay up on the latest trends and that your clients see you implementing these new techniques.
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.
Start A Hair Salon In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Hair salon owners vary in age, gender, and experience. The one thing they all have in common is that they are passionate about helping people to look and feel spectacular. They enjoy working around people all day and thrive in a fast-paced environment.
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.
TRUiC's YouTube Channel
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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.
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.