Starting a Beauty Salon Business

The beauty salon industry is ripe with opportunity. It is largely immune to the trend toward ecommerce since it provides hyper-localized, personalized services. If you provide great service, you will quickly develop an excellent reputation that will lead to repeat bookings.

Additionally, there’s a trend toward buying “experiences” rather than “products,” and the beauty salon fits very neatly into this new way of thinking and purchasing. All that said, starting up a beauty salon business can be tricky. There may be local competition, and you'll need to invest in finding skilled workers and developing an excellent brand.

Beauty Salon Business Formation Guide

In this guide, we’ll explore everything you need to do to set up your beauty salon business and maximize your chances for success. We’ll cover:

Understanding the world of a beauty salon

Paying taxes for your beauty salon business

Deciding if you’re ready to start a beauty salon business

Hiring employees, managing finances and administering your beauty salon business

Deciding if you’re ready to start a beauty salon business

Locating other resources for your beauty salon business

Determining the best legal structure for your new organization

Following various rules and regulations

And much more

By the time you’ve read through our complete beauty salon business guide, you will have all the information you need to set up and manage a thriving beauty salon business. Let’s get into it.

Understanding the World of the Beauty Salon Business

Key Beauty Salon Business and Background Data and Statistics

Here are some of current statistics that will help you understand the beauty salon industry:

$57B

Consumers spent in the hair and nail salon industry in 2016

700K

People employed in the industry across the U.S.

2.8%

Revenue increase by year, while job growth is expected to increase by 0.6 percent a year

Statistics about Beauty Salon businesses
79% of people employed in the beauty salon industry are hairstylists, hairdressers or cosmetologist
Only 10% of workers in beauty salons are men

The biggest expenses for beauty salons are employee compensation, real estate and rental, manufacturing and professional and business services.

There are nearly 270,000 beauty salons, hairdressers and barber shops in the U.S.

Wages paid to workers are typically low, with many earning around $22,000-$25,000 a year.

The industry is very fragmented, with the largest 50 salon chains only contributing 15 percent to overall revenue

This all points to the beauty salon industry being ripe with new opportunities for focused entrepreneurs, so now might be the perfect time to dive into starting your beauty salon business. Incfile is here to help you form your beauty salon business and understand the ins and outs of owning a beauty salon company.

What Your Beauty Salon Customers Are Looking For

If you want to run a successful beauty salon, you need to build your entire suite of services around customer needs. When it comes to offering beauty and hairdressing services, that means providing a great range of services at an extraordinarily high quality combined with reasonable pricing.

Your beauty salon will rely on word-of-mouth marketing, so you want to help customers become an advocate for your business. You can do this by offering personalized service and ensuring your staff provides extensive beauty treatments that leave your customers feeling pampered and wonderful.

When it comes to providing beauty treatments, you will want to ensure you’re providing the right niche of services. You have plenty of options:

Hairstyling and hairdressing

Hair removal and hot wax treatments

Manicures and pedicures

Massage

Tanning

Facials and skin care

What Are the Main Skills, Expertise and Experience Needed to be a Successful Beauty Salon Entrepreneur?

When it comes to skill sets, you need wide-ranging expertise to be a successful beauty salon owner. These skills should include:

Hiring

Finding, interviewing and hiring great beauty salon employees who can provide awesome beauty treatments and hairstyling services

People Management

Dealing with staff schedules, coverage, internal issues and other people management areas

Marketing

Promoting your beauty salon business against a competitive field; local marketing expertise is essential

Treatment Design and Pricing

Working with employees to create luxurious treatments with good profit margins

Salon Creation

Setting up the salon in the first place, which includes finding equipment, furniture, fixtures and fittings

Operational Management

Ensuring customers are served well and beauty treatments are provided to the standards you expect

Business Administration

Sorting out profits, payroll, financial management, accounting and all the other areas that go into running any successful business

What Are the Main Challenges for a Beauty Salon Entrepreneur?

Your main challenges will be finding the best beauty treatment therapists, local marketing and creating good profit margins for your business. You will also need to focus on creating extraordinary customer experiences so your customers become advocates for your salon.

Plan Your Beauty Salon Business

Before you start your business, there are a few key areas you need to focus on. You will need to establish whether there’s a demand for your beauty salon services, look at potential benefits and pitfalls, understand how your business finances might look and ensure everything is in order.

In short, you need a business plan — here’s how to think about your business idea.

Do Market Research and Validate Your Beauty Salon Products and Services

Before you launch your beauty salon business, you need to understand if there’s a demand for what you’re selling. That means carrying out market research and “validating” your products and services. Here’s how to go about it:

Identify Your Business’s Unique Selling Points (USPs)

These are the areas that will set you apart from competitors and encourage customers to come to you. You might have better pricing, a higher-quality service, a loyalty plan or some other special feature.

Determine Who Your Competitors Are

Having competitors is a good thing as it shows there’s a market. Make a note of all local competitors, their pricing and the beauty treatment services they provide.

Get Involved with Business Communities and Discussion Groups

Ask questions about beauty salon businesses. You can find links to some excellent discussion groups later in the guide.

Talk to Clients

Speak with potential customers to understand what they want from your beauty salon products and services. See if there is a specific demand for niche treatments.

Find Any Market Research Reports for Beauty Salon Businesses

Search locally, nationally or internationally. Explore statewide and national trends to identify growing treatment areas.

Understand Your Beauty Salon Business Model and Financial Projections

All businesses need a business model, which is how you will generate sales, provide services and make money. Think about your business model now, because it’s better to have that in place so you can start acquiring customers and generating revenue from day one.

You will also need to look at financial projections for your beauty salon business. What are your expected sales and revenues? What is your profitability? How much money will you keep in the business to grow it? How much will you pay yourself and others? If you can, try to plan your revenue for the next month, three months, year and two years.

You might start by just offering one or two high-demand beauty treatments and then expanding later as you build your reputation and clientele.

Write a Business Plan for Your Beauty Salon Business

Finally, you should put your business plan together. Business plans do vary slightly, but they should cover the following areas:

1

An executive summary with the most important points from your business plan

2

Your goals and what you hope to achieve with your beauty salon business

3

A description of your business, background information and context

4

A market analysis and likely demand

5

An overview of how your business is structured

6

Your business model

7

How you will market and sell your offerings

8

Financial projections, revenue and profitability

9

Appendices

We’ve got the perfect guide to writing your business plan.

Choose the Right Business Structure and Register Your T-Shirt Business

Choose the Right Business Structure and Register Your Beauty Salon Business

Now that you have all the background information for your beauty salon business, it’s time to make it into a reality. Starts by choosing the right structure or “legal entity” for your business. In the U.S., there are five main business structures. They are:

Sole Proprietorship

This is the "default" business structure and is what your business will be if you decide not to create a more formal structure. We don't recommend this type of business as it doesn't give you the legal protections you need.

Limited Liability Company or LLC

The most common type of business entity. An LLC is fast, simple and inexpensive to setup and maintain. It protects your personal finances and assets and is a great way to start your beauty salon business.

Series LLC

This is a special type of LLC entity that's only available in certain states. It allows you to create "mini" LLCs, each with their own limited liability and separate assets, under the umbrella of a master LLC.

S Corporation

This is a more complex type of business and isn't generally recommended for smaller organization.

C Corporation

These are the largest and most complex types of businesses and are far more than the average entrepreneur or business owner will need.

For more information on the advantages and disadvantages of different types of businesses, please see our in-depth guide on business entities. 

In most cases our recommendation would be to create an LLC. We have a complete guide to everything you need to do and we can set one up for your beauty salon business. LLC formation does vary from state to state, but we’ve got you covered, wherever you are.

Set Up Your Beauty Salon Business

Once you've legally created your beauty salon business, you’ll need to get some other things in place.

The Complete "Start Your Business" Checklist

A Clear and Comprehensive Guide to Starting Your Business the Right Way

The Complete

Hire Employees

If you are hiring people to work at your beauty salon, you will need to know what to do. See our 6 tips on hiring employees.

1
Get an Employer Identification Number (EIN)

Contact the IRS and let them know you will need an EIN for your beauty salon business. This is a number you will use to file and pay your taxes. We put together this guide to getting your EIN.

2
Make Sure Your Employees Can Work in the U.S.

Your employees must be legally able to work here. Carry out background checks and ensure they have all necessary legal documentation.

3
Report Employees as “New Hires”

In most cases you will need to report the hiring of employees to your state.

4
Withhold Income and Payroll Taxes

You will need to calculate and keep back income tax so you can pay the appropriate bodies. You will also need to pay the employer portion of the payroll tax.

5
Get Workers’ Compensation Insurance in Place

As listed above, you will need to make sure you have proper workers’ compensation insurance to cover injuries, illness, medical costs and the like.

6
Pay Employees on a Regular Basis

You will need to run payroll and compensate your employees on a regular frequency. Your state may mandate how often employees need to be paid.

7
Learn About Legal Requirements and Responsibilities to Employees

You do have certain responsibilities and requirements for hiring employees. In addition to getting a proper employment contract in place with them, you have a duty to provide them with a safe working environment, proper training, regular pay and certain other criteria. OSHA covers your health and safety requirements, while the U.S. Department of Labor provides information on other responsibilities.

Useful Online Tools for Your Beauty Salon Business

Here are some really great online tools for managing your beauty salon business. They will reduce the time you spend on administration, help you collaborate with others and free up your time to grow and manage your new venture.

Conclusion

As you can see, starting a beauty salon can be a great way to grow a thriving business. A strong focus on the best treatments, understanding your clientele and local marketing will position you for success. Good luck!