Starting a Beauty Salon

You’ve been toying with the idea of opening your own salon for a while, and you’re now prepared to make that dream a reality. You’re in the right place if you’re thinking about starting a new company and opening a beauty salon in particular: The beauty industry is worth over $56 billion annually.

Although salon life might seem glamorous to clients, a salon is like any other small business. It takes long hours, hard work, savvy, research, timing, and sometimes even luck. You will spend a lot of time on your feet and be responsible for every aspect of the business not just the fun parts with clients. The best way to reduce the variables that can lead to failure is to understand better the economics of opening a salon, from the startup costs to the standards for pricing.

Starting your own beauty business will take up a big part of your life. For this to work, you need to make sure you can do it in balance with your lifestyle.

For example, is a flexible work arrangement important for you? Do you want to be able to take holidays and travel?  Do you need to work around children? Or do you want to dedicate 100% to your new salon business to really grow your new salon and brand?  Do you want to have employees or be a sole operator? 

There are options for how to get started in your salon.  You can start your own, join an established salon franchise, or buy an existing one. 

Starting from scratch by renting a new space and turning it into a salon comes with benefits. You have more options of location on the market to choose from and you will be able to build the salon up exactly the way you want without worrying about the image and reputation of the previous owner.

The drawback of building out a new salon from scratch is that you will need to invest substantial money up front to turn it into a salon with the building fit-out and new equipment.

You won’t already be known so you will need to be prepared to go for some time without making a profit and spend money on marketing to establish a client base.

The cost of opening a salon from scratch starts at around $50,000, assuming you will rent the location.

Capital and Risks?

More money obviously provides more alternative options for the salon you want to open up. If you have the finances to open a bigger salon, with multiple chairs or beauty rooms, you can benefit from economies of scale. However, this will increase your financial risk in case the business does not turn out as planned.

It is important you find a model for your salon that fits the finances you have at hand and the risk you are ready to take. If you push yourself too far here you will have a stressful time ahead of you with sleepless nights worrying about your finances.

Start-Up Costs?

The cost of starting a salon starts at around $65,000 for a good but basic setup in a commercial location. Nail, lash, brow, and skincare salon start-up costs are typically lower than body sculpting and laser treatment due to the equipment cost. The cost can be significantly higher, even over $500,000, if you are looking at an expensive location and a luxury fit-out. There are also ways you can start your salon business on a much smaller budget, maybe even under $5,000, if you are happy to work from home or operate a mobile business. Let’s go through the salon expenses you need to plan for in your salon start-up budget.

Common Monthly Expenses

On top of the upfront investments, you should also consider your ongoing costs. You should make sure you have some spare budget available to cover at least 2-3 months of expenses without any income as it may take a few months to fully get your salon up to speed and generate income.

  • Rent or mortgage payments ($1,000-$5,000)
  • Wages ($4,000): Even if you do not employ anyone at the start, you should not forget to plan a wage for yourself.  
  • Utilities ($150-500): Cost for electricity, water, etc.
  • Facility maintenance ($100-400): There will always be some work needed on the facility to maintain it in the state you want, so make sure you plan room for this in your budget.  
  • Continued investment in yourself and your team is important for the long-term success of your business, so you should set aside money for this as well.
  • Depending on the services you offer, you may be required to pay one or more annual fees.
  • Buffer Budget ($400): As a business owner, you’ll always have some unexpected expenses.

You can reduce the stress that comes with setting out on a new business venture significantly by making sure you have a solid view of the costs you will incur as you start out. I would highly recommend that you plan your finances so that you can cover your start-up costs as well as the first six months even if you fail to meet your planned income target. This will give you more confidence and fewer sleepless nights. You should include your budget in your salon business plan.

Getting your salon budget right is essential.  The right planning will help you avoid sleepless nights and unnecessary stress. So don’t rush and make sure you have your plan perfected before parting with your money.

I will give you a rough estimate for each item on the salon expense list. You’ll also get a recommendation for the best way to keep costs within your budget while getting what you need. But of course, the exact cost for your salon will vary depending on many factors, and these numbers are just a guide.

Go through each item in the salon expenses list below and try to find out what the exact cost will be for your salon. This will improve your business plan significantly, and you’ll not have to keep stressing about finances as you start your business.

How to Hire your Beauty Team

Hiring the right staff for your beauty salon is essential; the quality of their work can be make-or-break for your new business, particularly as you’re establishing your credentials.

Before you start the interview process, create a list of the qualities you’re looking for in an ideal candidate. Compiling some interview questions that address these needs also helps you stay focused when you meet a candidate face-to-face. Here are some things to consider:

  • Skill set: The candidate’s skill set and capacity to learn are both important to think about when interviewing. Think about how many years of experience you want your stylist to have. Do you want each stylist to have proficiency in coloring? Or do you want a multi-skilled team member who can do both cuts and waxing?
  • Attitude: A candidate’s attitude and work ethic determine their dependability, and ability to work with others, and it will also help you get a sense of how they interact with customers.
  • Personality: A candidate’s personality should match the company culture you want to infuse into the salon. Whether you are aiming to be an upscale boutique or a family-focused shop, you want your company culture to be a natural fit for all your team members. Think about how you want to define your company culture and the traits that each employee should have.

When you’re ready to make a hire, make sure you confirm the candidates’ experience with their professional references, confirm their eligibility to work, obtain the correct workers’ compensation insurance, and set up records for withholding PAYG taxes. To ensure you’ve covered your specific needs, seek advice from your bookkeeper or accountant.

Once you’ve hired and onboarded your employees, you might feel like your job is done. Not so fast. The beauty salon industry is competitive, and it’s not unfamiliar to see stylists jumping between salons.

To minimize employee turnover at your beauty salon, you have to provide them with reasons to stay. Here are four ways to manage your employees more effectively:

  • Build strong relationships with your direct reports and encourage team bonding activities outside of working hours.
  • Outline a career path for employees and give your hair stylists an opportunity to advance or progress.
  • Promote from within before you hire someone outside your salon; this encourages stylists to stay as they can see internal opportunities.
  • Offer competitive compensation compared to salons in the area.

1. Loans and Financing

It’s not easy to cover all the costs of opening a salon using only your savings. You’ll most likely need to raise some capital at the beginning that you can pay off during your first year from your salon profits. The interest rate you can expect will vary depending on how the loan provider sees your risk profile.

To get an accurate idea of the loan cost for your business, you can go to a loan comparison site on the internet. They allow you to compare different loans for small businesses so that you can find the most cost-effective solution for you.

(Approx. 1.25%-10% Interest Rates)

2. Insurance

Full salon insurance costs about $2,900 per year (approx. $240/month) for a beauty salon, hair salon, barbershop, or spa with two employees. However, the exact amount of salon insurance can vary greatly. It can range from $50/month to $1,000/month depending on the number of employees, business turnover, which state you’re based in, and the type of services provided. There are also ways you can combine insurance to bring the cost down.

($50-$1000 per Month)

3. Software and Point of Sale System

To effectively run your salon, you need good salon management software. These are systems with features that range from appointment booking and point of sale support to inventory and payroll management. There are hundreds of solutions on the market – some are free, and others are really pricey. Since this is such a critical component of the salon business.

(From Free to $300/month)

4. Website

I’m sure you’ll agree with me that you cannot really start a salon today without an online presence. Your salon’s website helps you get visible when people search for salons in your area and is at the heart of all your other marketing activities.

But having a regular local agency create your website for you can be really expensive. Luckily there are other ways.

You can use Fiverr or Upwork to hire a professional to build your website, generally with a price range from $200-$3,000, or you can create one yourself using a website builder like Site 123 or WordPress.

(from free to $10,000)

5. Licenses

There are a number of licenses you may need in order to run a hair salon or other beauty business. The total license cost for a salon could be up to $12,000.  This will depend on your city, start, country, and the services you are wanting to offer.  Some services being offered from a home salon may require no license, while other more invasive services from a commercial premises may reach the high end of the cost chart.

($500 – $12,000)

6. Branding & Design

Starting a salon also means starting a premium business. Not everyone can afford to go to a salon. You need to recognize that what you’re offering is a premium (and sometimes luxury) service. Your brand and image should reflect this.

So to increase your chances of success with your business, you’ll likely want to invest some money (or time) in the look and feel of your brand. I’m talking about things like logo design, brand colors, and other visual assets that you’ll use in all touch points with your salon.

If you don’t have any budget to spend on outsourcing the design of your salon brand, you can also do it yourself. The best tool for beginners to use for this is Canva. I’m a big Canva fan and use it for pretty much all the graphics you find on this website. It can help you create a logo and salon branding even if you don’t have any previous design skills.

You can also design print material, salon menus, and business cards and order them professionally printed right to your doorstep. It’s awesome.

They have a free plan, but when you sign up, I suggest you start with a 30-day free trial of Canva Pro. This way, you also get access to professional photography and design assets that you otherwise would need to pay for. After 30 days, you can downgrade to a free plan if you no longer need the things you get with a paid account.

(From Free to $2,000)

7. Marketing Expenses to Build Your Clientele

If you’re opening a new salon, you need to make it a priority to attract new clients. In the beginning, very few people will know that you even exist unless you invest in your marketing.

How much you should budget for marketing is really up to you. There are many ways that you can market your salon and the most cost-effective ways are typically using digital marketing strategies.

($500-$5,000)

8. Legal & Consulting Fees When Forming a Business

You should set aside some budget for legal support and business formation fees.

($50-$5,000)

9. Salon Equipment

Equipment needed to run your salon can be one of your largest expenses, in the beginning, depending on the services you want to offer.  Generally, if you are offering services that are labor-based, like lashes, nails, waxing, facials, and brows, the cost may be significantly less.  If you are looking at laser treatments, body contouring, and other machine-based services, the cost can be upwards of $50,000 per machine.  When purchasing machines like this, it is important the equipment you purchase is FDA/TGA approved to ensure you can get insurance for your business and are operating with compliant equipment.

There are great options available, though, that provide high returns and low start-up costs. You can purchase teeth whitening equipment for $2,000 and charge $100-$300 per treatment.

($2,000-$500,000)

10. Initial Salon Supplies and Inventory

When you start out, your retail shelves will be empty and you’ll need to fill up your back-bar with products and other supplies needed to perform your services. The cost for initial supply and inventory will vary greatly depending on the type of salon you’re starting, so it’s impossible to give you a specific number here. Try to write down everything you think you’ll need, put a cost behind each item, and round up your number so that you can fit it all in your budget.

($2,000-$15,000)

11. Salon Premises

We’ve landed on the last item on this list of salon start-up expenses. And this will probably also be your largest expense. There are many different types of locations where you can choose to start your business.

Generally, you will find that the higher the rent price will be, the higher the profile of the location is, and the more people that walk past, the higher the rent price will be.  Commercial real estate is generally billed per square meter or square foot, so the larger the premises, the more you will pay.

Rent on commercial premises may also price the outgoings separately so make sure you are clear on the full cost of occupancy when doing your budget.

The security deposit will also vary depending on the location.  Some shopping centers may even require security for the entire lease duration.

($2,000-$20,000 per month Plus Security Deposit)

Questions to ask yourself when choosing your premises.

What type of salon do you want to start? The salon start-up cost will vary depending on if you plan to start a nail salon, a spa, or a hair salon, as the equipment and space needed are different.

Do you have an existing clientele?  If you know you have a list of clients who will flow through your door as soon as you have your new place open you have come a long way. This will give you more flexibility when choosing your location as you are not as dependent on getting new clients from the street into your salon.

If you do not have an existing clientele you may want to go for a setup where you can benefit from getting new clients effectively.

This could be done by renting a space in an existing salon or in a shop with high foot traffic.

If you are still set on having your own physical salon, you probably want to make sure that it is based in an area where there is natural traffic of people outside your salon. An option is of course also to start smaller, build your clientele, and only later move to your own physical location.

What’s the Average Square Footage of a Salon?

Among the 550’000 salons and spas in the U.S. the average size is 1’500 sqft.

I would say that if you have a salon of that size you have a good room to grow your business. It’s also possible to manage in a smaller location but you will need to smartly consider the furniture that you install to optimize the space.

Your Own Salon vs. Renting a Space at an Existing Location

The physical location of your salon will most likely be your biggest expense as you start your new salon so you want to make sure you think this through properly.

Having your own physical salon location gives you the complete flexibility to set it up as you want it. This is what most people planning to start a salon dream about, but it is also the most costly approach. Having your own location also means you need to build the salon’s clientele.

An alternative is renting a chair or booth in an existing salon or shop. This does not give you the same flexibility and your business potential is naturally limited to you within the renting space. However, it will significantly reduce your costs as you set out as you will probably get access to equipment and supplies as part of your rent. The location you are renting will likely also help bring you new clients, so this is typically a preferred approach if you do not have an established base of clients yet.

Cost for Taking over an Existing Salon

Taking over an existing salon will minimize major renovation interventions on the property as it is already built out to support salon operations.

You will also get the salon equipment you need to get going from day one. And, more importantly, by taking over an existing salon, you’ll also benefit from the existing clientele built up by the previous owners. However, if you buy the full salon with operations as it runs today, you will, of course, want to make sure the style of the salon and its clientele are in line with the type of salon you want to run and also the current trends. The cost of taking over an existing salon starts at $60,000.  The cost can be significantly higher if you buy a salon with a well-established brand that has proven to be profitable today.

However, you decide to start your own salon. As long as you have done your preparation and you love what you do, it will be an exciting time for you!

Why Do Beauty Salons Fail?

Many beauty salon owners do substantial research, create a robust financial plan and take all the right steps when starting their business. But staying afloat in the health and beauty industry can be tough.

Here are four reasons why some beauty salons fail in their startup phase:

  • Inadequate cash reserves. You need healthy cash flow to manage unexpected costs and fees you may incur when opening a salon.
  • Lack of industry experience. Without relevant experience in the industry, you can struggle with day-to-day operations and forecasting for future growth. Many top-performing salon owners have been in the industry for many years. You’ll get there over time, but remember to learn as much as you can from those who are in the business already, and take those lessons to heart when you’re planning.
  • Failure to keep up with trends. Salon trends change frequently, and being a stickler for the old way of doing things can have a material impact on your business. Promote continued education for your staff and encourage them to learn new skills and expand their services. This will also empower them to upsell more beauty services to clients, meaning more sales.
  • Competition. A heavily saturated industry means that competition is a top struggle for many beauty salon owners. Owning a salon is a lucrative business that attracts a lot of savvy entrepreneurs, so it’s essential to constantly assess your local competition and aim to stay competitive with prices, services, and overall