Running a Nail Salon

The planning and start-up phase of your nail salon took a great deal of time, money, and effort. As you progress into the day-to-day routine of running of your salon, it’s important not to lose your momentum. Whether you’ve been in business for a few months or a few years, this guide is designed to help you keep your business successfully moving forward.

Working On and In Your Business

As the owner of a salon there’s a good chance you spend much of your time working in your business, managing employees, and overseeing the everyday operations. With all of those responsibilities, it can be difficult to find the time to work on your business as its owner. Finding that balance is extremely important. The items below should help you prioritize what’s necessary to continue working on the success of your business in the years ahead.

If you need help branding your nail salon, try using our Free Nail Salon Logo Maker. Our free tool will help you brand your nail salon with a unique logo to make your small business stand out.

Budgeting

One of the most critical parts of running a successful business is managing its finances. Maintaining an operating budget and properly managing your salon’s assets and debt are all essential to sustaining the life of your salon.

Standard Operating Budget

Your standard operating budget is a simple but essential tool used to calculate how your business is performing and will perform moving forward. Preparing an annual operating budget will allow you to set revenue goals, estimate expected profits, and determine what funds are needed for labor and materials. This budget is also useful for securing future funding either from lenders or investors who will want to know as much as possible about your salon’s financial health.

At the most basic level your operating budget will need to include the following information:

Sales: Your sales - also known as gross revenue - is simply the amount of money you brought in by providing services and selling products.
Fixed Costs: These are the costs that remain the same over time no no matter how your business performs. Fixed costs include things such as insurance premiums, rent or mortgage payments, interest payments on loans, utilities, cleaning services, marketing, wages, and property taxes.
Variable Costs: These costs typically adjust according to sales. The most common variable cost in your salon will be your inventory of materials used to perform services. If your employees are paid a commission, your payroll tax burden will also vary depending on sales performance.
Profit: With the numbers above, you can calculate your salon’s net profits by subtracting your total costs from your total sales.

Use this operating budget to inform your business decisions moving forward. Are you investing time and money into services that aren’t profitable? Where can you cut or shift funds to operate more efficiently? The answers to these questions will help you run a smooth and successful business.

Credit Cards

Although credit cards should not become a spending crutch for your business, when used responsibly, they can be a useful budgeting tool. Learn more details about business credit cards for small businesses in our guide.

First, a credit card can be a great way to handle regular monthly payments that come in at inconvenient times. You may have several bills due at once and choose to use a credit card to cover one or more before paying the balance off later in the month as more cash flows into the business.

Second, business credit cards offer a revolving line of credit. Unlike a loan that is applied for, issued, and used once, you can use your available credit over and over again as you pay off your balance. This is a much easier and faster way to access credit than applying for multiple business loans.

Finally, using your business credit card responsibly will allow you to earn rewards. If you must accrue debt, using a credit card that offers rewards that directly benefit your business is a good way to go.

Rainy Day Fund

Although credit cards can serve as an important resource, the smartest businesses also keep a rainy day savings account to cover unexpected expenses or help with business growth without going into debt.

In good times, using reserve funds to cover the expenses of growing your business will provide you with a much faster return on your investment because your profits won’t be competing with loan, credit card, or interest payments. In bad times, having a rainy day fund to fall back on can soften the financial hit you take by leaving you in the black even after covering unexpected expenses.

Rainy day funds are a great way to deal with things like the unexpected loss of an employee or sudden need for an additional hire, damage or unexpected business closure due to natural disasters or other unforeseen events (before any applicable insurance coverage is processed), or expenses needed to expand your business when the opportunity arises.

Having this fund can also have long-term benefits. In the best case scenario, you’ll never need to tap into your savings. If that’s the case, your rainy day fund can become part of your retirement fund or keep you afloat if you need or choose to close your salon completely.

A great way to build a rainy day fund is to simply set up a direct deposit into your savings account once or twice a month if and when profits allow. Even modest contributions will add up overtime, so don’t be discouraged if you are only able to contribute a small amount.

Taxes

Keeping track of your salon’s tax liabilities can be one of the most complicated parts of running a business. Planning ahead for what you’ll owe can make this process run more smoothly and prevent surprises at tax time.

What Taxes Will My Business Need to Pay?

The taxes your salon is required to pay will depend on what type of business you formed, how many employees you have, and where you are located.

Income Tax

Your salon’s business income tax burden is dependent upon its business structure. The most common business structure is the Limited Liability Company (LLC), covering 75% of all small businesses. By default, LLCs are considered pass-through tax entities and are not taxed at the corporate level. This means your business itself will not be faced with any income taxes. Instead, all profits pass through to you as the owner to be taxed as business income on your personal tax return. As such, these profits - whether retained or reinvested in the business or paid out to you - are subject to your personal tax rate. You will also be responsible for paying self-employment tax on these earnings.

One of the biggest benefits of an LLC is that the IRS allows business owners to elect alternate tax designations if they desire. There are some situations in which you, as the business owner, may benefit from selecting either S corporation or C corporation status for tax purposes.

S corporation status maintains your LLC’s pass-through structure, but allows you to act as an employee and separate your business profits into personal earned income and retained business earnings. All profits will still be taxed at your personal rate, but any money retained or reinvested into the business is shielded from self-employment tax.

In rare situations, you may benefit from electing C corporation status, which designates your business as a traditional corporation for tax purposes. Although all business profits will be subject to corporate tax, you will only pay personal income tax on funds distributed to you as dividends and you will not owe self-employment tax on any earnings. Even within this double-taxation framework, because the corporate tax rate is lower than several personal income tax brackets you may save money under this designation if you retain a large portion of your earnings in your business and have a high personal income.

Employment Tax

As a business with employees, you are responsible for withholding and paying federal income tax, state income tax, and the employee portion of Social Security and Medicare (FICA tax) from every employee’s paycheck and depositing these withholding to the proper agencies. Typically, these payments must be made, along with the employer portion of FICA taxes, on either a monthly or semi-weekly basis. The schedule is based on the amount being reported. Learn more about employment tax with our helpful guide.

Unemployment Tax

In addition to these withholdings, you are responsible for federal unemployment taxes (FUTA). These taxes are paid on the first $7000 in wages paid to each employee each year. This amount is paid on a quarterly basis until the threshold is met.

State employment tax requirements will vary, so it is important to review state regulations to ensure compliance with all state tax liabilities.

How to Keep a Handle on Your Business Taxes

Once you understand what taxes you need to pay, it’s important to estimate what you’ll owe and begin setting this money aside. As a small business, you are responsible for paying estimated taxes to the state and federal government on a quarterly basis. This typically means making payments in April, June, September, and January. If you fail to make these payments, not only will you be subject to a penalty when you file your annual return, you are likely to be faced with a huge tax burden that may be difficult to cover all at once.

If your business is new and you are having trouble estimating your profits and tax burden, consider setting aside a set amount - 35% of revenue is often considered the rule of thumb - to ensure you’re not left in a bind come tax time. If you’ve been in business for some time, you should have less trouble calculating your likely tax burden, even with natural fluctuations in profits across years. Set this money aside as soon as possible and be sure to make your quarterly payments on time.

Hire a CPA

Understanding, calculating, and filing taxes can be a huge burden for any business. Whether your salon just opened or you’ve been in business for decades, hiring a CPA is a great way to ensure you keep track of your tax liabilities, deadlines, and any policy changes that may affect your business. Not only will a CPA keep your business compliant, but hiring a professional can also mean maximizing your savings come tax time.

Marketing

The marketing strategies you set up in your planning and startup phase helped launch your business to its current position. As you move forward, it’s important to regularly check in on how these strategies are working and where they can be changed or improved.

Review Your Marketing Plan

Based on the marketing plan that you made before your business opened, you should have a good understanding of what is working and what is not. Take a close look at what strategies have been the most effective and consider expanding these while pairing down anything that’s proven ineffective.

One great way to discover what’s working and what’s not is to conduct customer surveys. This can be as simple as asking new clients how they heard about your salon and keeping track of their responses. If your website includes an online appointment tool, you can include this question as part of the form.

You should also be keeping track of the level of engagement on your social media accounts. Which platforms are getting the most attention, what posts garner the most likes and comments? This information can help you focus your attention on what’s working and scale back what’s not.

Marketing Ideas for Nail Salons

Beyond the marketing channels you should already be using - Google My Business, Yelp, local ads, social media - there are a number of creative ideas that can help your salon keep its current clients and draw in new ones.

Local Business Partnerships

This can be a great way to both connect with other business owners in your area and draw in new clients. One great option is to join with similar businesses in the area to create discounted package deals. Just like movie theaters and restaurants may offer discounts for dinner and movie combinations, you can join with massage parlors, hair salons, or other spas in the area to create attractive packages. In doing so, you can share clients across business to everyone’s benefit. Learn how to find a business resource near you that can help with this and anything else to help you grow your business.

You may also partner with local businesses to create referral programs. These programs can reach beyond your industry and include any business in your area. For example, if you are next door to a restaurant, coffee shop, packaging store, or other retail, ask these businesses to refer customers to your salon and offer clients a discount when they mention who sent them. You can reciprocate by recommending these businesses to your clients.

Loyalty Programs

An easy way to keep clients coming back for more is to offer a loyalty program. This is typically as simple as handing out punch cards that offer a free service or discount after clients have purchased a certain number of services. You can offer a variety of options with these cards to cover a range of clients and services. Loyalty programs give clients an extra return on their investment in your company and a reminder to stay with your salon for all of their needs.

You can also offer discounts to loyal clients who refer people to your salon. For example, if a client refers someone who then books and completes a service, they may receive 25% off their next service.

Hiring and Training

At this stage, you should have a solid hiring and training process in place, but it is important to check in on how they are working. Are these processes resulting in the skill and experience you’re looking for in your staff? Are you finding candidates you’re happy with or is it a struggle to get the right people through the door? Look over the processes from start to finish to see what’s working and what’s not.

Perfect Your Hiring Process

Hiring the wrong people can be very costly, both in time and money. For that reason it’s critical to spend some time working on perfecting your hiring process. To begin, consider the following:

Hiring needs: Take a close look at your hiring needs. What do you need and how can you fill these roles most effectively?
Budget: Every new hire will mean wages, unemployment insurance, payroll taxes, and any benefits you offer. Be sure your hiring process reflects the broader long-term financial needs of your business.
Recruitment strategy: Look at your recruitment strategies to determine what’s been working best. Where are you finding the most candidates and which recruitment methods result in the most hires? You may get a flood of candidates by simply posting a help wanted sign in your window, but if none of them meet your needs this recruitment strategy is not effective.
Screening process: Consider how you are screening your applicants to decide who to bring for interviews and who you ultimately hire. Find ways to streamline this process to make your hiring decisions easier.

Training Based on Processes

Good hiring practices can only take you so far. No matter how great a new hire may be, a thoughtful training program is still needed to ensure each new employee is on the same page with the rest of your staff, understands how to properly perform the job, and knows exactly what is expected of them in terms of performance.

Look closely at your training program to identify what works best and what can be improved. At a minimum, your training process should include:

General information: When new hires come on board it’s important to provide them with information about general salon policies and practices such as how appointments are made, how to greet clients, cleaning and other responsibilities around the salon, sick and vacation leave policies, and how payroll, tips, and benefits are handled.
Technical training: How you deal with technical training will depend a lot on each specific hire. Many salons bring on newly licensed techs right out of cosmetology school. If this is the case, having a comprehensive training program that combines sitting with experienced employees, practicing services on salon staff, friends, and family, and slowly building up their skill set with supervision will ensure smooth onboarding. Although more experienced techs may be brought up to speed more quickly, it’s still vital that you ensure their work is up to the specific standards of your salon.

Employee Assessment

Conducting thorough employee assessments is a very important part of keeping your salon running smoothly. Proper evaluations offer a number of benefits to you, your employees, and the business as a whole. These assessments help to reinforce the standards you set forth during hiring and training, offer meaningful feedback for both positive and negative performance, and create powerful incentives for employees to stay on track.

To conduct fair and effective evaluations it’s important to set clear standards and keep thorough records of how each of your employees is performing within these criteria. This can include things like how often an employee calls out without notice, how they handle challenges within the salon, how much work they put in to keeping their space clean and helping to maintain the common salon areas, and their professionalism in speaking and dealing with you and other employees.

When giving evaluations it’s important to be specific about what your employees are doing well, where they can improve, and exactly how you’d like to see those improvements happen. It’s also critical that you are honest with your employees. Although it can be difficult to criticize people, in the end both you and your employees will be better off if you’re open and honest in your evaluation.

Finally, give your employees the opportunity to speak and provide their own feedback during their evaluations. Not only will this make them feel heard, it will allow you to evaluate your own performance standards to see what’s working and what’s not.

Sales

Selling your salon services is the lifeblood of your business. Knowing how much money your business brings in, where that money is coming, where that money is going, and how to increase your sales numbers is essential to your success.

Assess Sales and Lifetime Value (LTV)

Understanding both your sales and the lifetime value of each client you bring in will help you assess the overall performance of your salon. Your sales are the total revenue your business brings in during a specific period of time. This includes all revenue acquired through both services performed and products sold.

Your total sales numbers can then be used to calculate both your expected profits (revenue minus expenses) and the lifetime value (LTV) of your clients (sales minus cost of client acquisition/retention). Every time a retained client comes back for an additional service, their LTV increases. Because it costs much less to keep a client than to generate a new one, understanding LTV and how to maximize this number through client retention practices will increase your profits over time.

Find Low-Hanging Fruits to Increase Revenue

Because customer acquisition can be expensive, finding ways to target low-hanging fruits can help you quickly and efficiently increase revenue. In marketing, the term low-hanging fruit refers to those who are easiest to attract to your business. To identify and market to these clients, consider the following:

Who are your low-hanging fruit customers? For your nail salon they could be former clients who haven’t been back in a while or patrons of nearby businesses who you haven’t pulled into your salon yet.
What may trigger these people to book a service with your salon? For former customers, introducing welcome-back discounts, advertising expanded services, or other exciting promotions may entice them to come back for another try. When it comes to targeting passersby, tweaking your outdoor advertising or offering walk-in deals may push new clients to walk through your door.
How can you keep them coming back? Once you’ve attracted these clients into your salon, it’s vital that you have a solid plan in place for developing them into loyal customers. This is one place where your loyalty program may come in handy. Be sure their first service is performed flawlessly and leave them with an incentive to come back for more.

If you can manage to identify, attract, and convert your low-hanging fruit clients, you can quickly increase revenue and maximize profits.

Experiment with Different Options and Models

Although your salon’s primary revenue model will center around the services offered, there are plenty of ways to experiment with a variety of models that may expand your income. To do this, consider places you can add new income streams. These may include:

Retail: Even if you already have a line of retail products for sale in your salon, it’s always a good idea to review these offerings from time to time to see what’s selling and what’s not. Keep track of the latest trends in nail fashion and update your offerings to meet an ever-changing demand. Train your employees to effectively pitch these items to their clients during and after their services. If your in-salon sales are already booming, consider expanding even further by offering products for sale online.
Gift cards: If you are not yet offering gift cards for your salon, now is the time to do so. Include a display at your front desk and consider offering one free or discounted service for anyone who purchases a card at a certain denomination.
Membership: Although this may not work for every salon, consider the benefits of offering a membership program to your clients. For a flat monthly fee you can include a certain number of qualified services. This will help guarantee a steady monthly revenue stream and maintain customer loyalty.
Advertising: Find brands willing to pay experts to endorse their products. If it’s a product you already use or feel comfortable recommending, you may be able to make money doing this both in your salon and on your social media channels.

Operations

Finally, throughout the life of your business it is critical to stop from time to time to take a closer look at your operations and how things are running.

Assess and Adjust

Just like employee evaluations, taking the time to evaluate your business as a whole is critical. When things are running smoothly, it is easy to sit back and enjoy the ride. Although it is wise not to change with something that’s working, routinely assessing the overall operations of your salon can help you save money, improve services, boost sales, and handle problems before they get out of hand.

Customer Experience Processes

When assessing your salon operations, it is important to evaluate the overall customer experience. Every few months you should be doing a deep dive into your online reviews to look for any positive or negative trends that can inform your performance. Speak with both clients and employees to get feedback on what clients tend to love and what they may hate.

This evaluation should also include a look at customer service performance. How is the appointment scheduling process going? Do you routinely have long wait times to book an appointment? How many walk-ins do you tend to get in a day? Are there places you can streamline your services or expand your staff to better handle the workload? The answers to these questions will help you perfect the customer experience in your salon.

Back End Processes

Just as important as the front end experience is how things are running on the back end. This includes everything from payroll and accounting to managing inventory. Who in your salon is responsible for each of your back end responsibilities? How much of it do you take on yourself and what is delegated? Consider whether or not there are more efficient ways to spread around these jobs or other ways you can streamline processes to make them run more efficiently.

Always being on the lookout for ways that you can improve your overall salon operations will put you ahead of the competition.