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Starting a Beauty Salon Business
1. Conduct Market Research
Before ordering a single salon chair, it's important to do your due diligence by first conducting market research. As Small Business Administration (SBA) explains, "market research blends consumer behavior and economic trends to confirm and improve your business idea".
Start by gathering as much information as you can about your target customers. You can often do so by looking up demographic statistics about the area you're planning to open your salon.
Then, use every resource you can to answer questions like:
- Is there sufficient demand for a new salon in this area?
- How many potential customers will I have?
- Do my potential customers have enough disposable income to purchase salon services?
- Do my potential customers live nearby, or will I have to reach them in other areas?
- How many direct competitors will my salon be going up against?
- What are my competitors' prices, and how many customers are willing to pay them?
With those answers in hand, you'll be much better prepared to make smart business decisions and create a winning plan for your salon.
2. Decide Which Type of Salon to Open
From beach waves to elaborate nail art to laser skin treatments, the sky's the limit when it comes to the services your salon can specialize in.
That's because beauty salons might all belong to the same category, but that doesn't mean they're all the same. While one salon might offer hair services, another might offer tanning only — it all depends on the salon.
When choosing which type of salon to open, you can speed up the decision-making process by choosing which services to offer. Your options include:
Hair services
such as cutting, coloring and styling
Nail services
such as manicures and pedicures
Skin treatments
such as facials and waxing
Tanning
either with UV lights, or sprays
Wine bar
with plenty of choices for medium- and high-end wine
Sports bar
where people can enjoy the big game
Bar
specializing in live music or comedy
And once you've chosen a general type of salon, you can differentiate yourself even further by choosing more specific specialties, whether that means balayage, beach-ready spray tans or something else entirely.
3. Pick a Business Name and Make a Plan
Once you know which type of salon you want to open, it's time to give it a name. And during the brainstorming process, don't be afraid to get punny.
After all, the salon world is full of opportunities for cheeky names. Case in point:
The Mane Event
Shear Bliss
Hairway to Heaven
Hair's Looking at You
The Big Clipper
Nailed It
Rain and Nail
Face It
But if puns aren't your thing, you can always choose a name that's stylish and memorable. Even names as simple as 6th Street Salon or The Parlor have a certain ring to them.
Still stumped? No worries — our Business Name Generator can help.
Next, get your salon business ideas organized into a business plan. Be sure to include:
An executive summary
Summarize your entire plan's most important points here.
Main goals
Perhaps you want to hire three stylists within six months or acquire a certain number of clients by year's end.
A business description
Define what makes your salon unique and describe its location.
Market and demand analysis
What's the local competition like? Do customers want another beauty salon in town?
Your business structure
Most salons start as a Limited Liability Company (LLC) but be sure to research every business entity type before making a decision.
Your business model
For instance, will you hire stylists as employees or rent out chairs to them?
A marketing and sales plan
How will you get the word out about your salon? How will you encourage customers to buy more products and services?
Financial information
List your salon's expected expenses, revenue and profits.
Appendices
Put any notes or sources you'd like to refer back to here.
4. Estimate Expenses
When people go to a beauty salon, they usually expect to feel like a VIP. But as salon owners across the country already know, the space and supplies needed to provide the red carpet treatment are far from free.
Wondering just how much it costs to start a beauty business? The exact amount varies, but it typically costs between $40,000 and $250,000 to buy an existing salon or anywhere from $100,000 to $500,000 to build one from the ground up.
In addition to startup costs, it's also important to account for other potential expenses, including:
Licensing
Depending on where you're located, you might need to get a general business license sales tax license and/or retail license, and you'll definitely need a cosmetology license.
Hint
Our Business License Research Package can help you determine exactly which licenses and permits you need.
Equipment
Chairs, hair wash basins, tools, decor, drying hoods, massage tables, mirrors and retail shelving all add up fast, so be sure to calculate the cost of all the equipment you'll need.
Insurance
In case an accident happens, you'll definitely want to get your salon insured.
Rent
If you decided to lease salon space rather than buying or building it yourself, you'll need to pay rent on it.
Website and branding
Salons offer luxury services rather than necessities, so you'll need to entice customers to purchase with an attractive website and branding. You can keep expenses low by doing it yourself, but professional-quality work from a designer will cost more.
Marketing
If you're going to be placing ads for your salon or running marketing campaigns, remember to account for their cost.
Products
Many salons sell hair, nail and skin products to customers, and if you want to do so too, then you'll need to buy them first.
Utilities
Tools like hair dryers can use a significant amount of electricity, and washing each client's hair will send gallons of water down the drain. So, make sure your utility bills won't catch you off guard.
5. Register Your Beauty Salon
Ready to make things official and even more permanent than a good dye job? Register your beauty salon as a business entity with your state's government.
- Sole Proprietorship
If you don't formally register your salon, it will operate as a sole proprietorship by default. However, sole proprietorships offer zero personal liability protection in the event that your salon is sued or runs into financial trouble, so we don't recommend this option.
- Partnership
This is like a sole proprietorship but with two or more owners. Also like a sole proprietorship, a partnership probably won't be able to provide the liability protection you need.
- Limited Liability Company or LLC
As the most popular entity type for salons, an LLC is affordable and easy to set up but will keep your personal assets protected. Translation? Your house won't be at risk if your salon goes under.
- S Corporation
This entity type is best for corporations with under 100 shareholders, but a small salon typically won't have a reason to become an S Corp.
- C Corporation
A large chain of salons might want to register as a C Corp, but the process is far too complex and costly to be worth it for most independent salon owners.
Most entrepreneurs find an LLC to be the best choice for starting a new beauty salon. If the same is true for you, you can easily file your LLC now.
6. Get Funding and a Location
Looking good isn't often cheap, and neither is opening a beauty salon. So, you may need to secure outside funding in order to open yours.
To raise capital for your salon, you can turn to:
Traditional loans
Available from major banks nationwide, these loans have desirably low interest rates but can also come with strict requirements and lengthy funding times.
SBA loans
These government-backed loans range from small microloans to larger 7(a) loans.
Investment groups
If you're willing to give up 100 percent ownership of your salon, you might want to pitch your business to investment groups.
Friends and family
Not keen on taking out loans from banks or other lenders? See if you have any friends or family members who'd be willing to help (just be sure to put everything in writing to avoid conflict down the road).
Crowdfunding
If you're able to drum up enough interest from your community, crowdfunding platforms like Kickstarter may be viable options.
Once you have funding secured, it's time to rent or purchase a location for your salon (sites like LoopNet can help you find nearby salons for sale), get your equipment set up and plan your grand opening.
7. Upgrade Your Tech
You wouldn't want to trade in your smartphone for a cell phone from the 80s, so why would you run your salon with a cash register that is?
When choosing which technologies to use in your salon, pay attention to these key areas:
Cash register
With a built-in cash drawer and receipt printer, the Square Stand Kit is a modern and relatively affordable option for any salon.
Point of sale (POS) software:
Square's POS integrates scheduling and appointments, making it ideal for salons. Similar options include Vagaro, Fresha and Clover.
Salon management
DaySmart Salon combines digital booking, client management, salon metrics, online booking, payment processing and more, all in a single solution. Comparable options include Mangomint, Zenoti and Rosy.
Website building
Squarespace, Wix and GoDaddyGoDaddy can all help you design a stunning site for your salon, no design or site development experience needed.
Communication
Group texts can get confusing, so consider using platforms like Slack and Flock to stay in touch with your team. You can even use a virtual phone service like Grasshopper to ensure all your calls from clients stay organized.
8. Maintain Your Beauty Salon
Once your salon is up, running and beautifying the community one client at a time, you'll still have to keep it compliant by performing some regular maintenance tasks.
File Annual Reports
In most states, LLCs and corporations must submit annual reports describing their earnings, management changes, contact information and other key details.
Pay Taxes
Due on a quarterly basis, estimated taxes are required for almost all self-employed Americans.
In addition to your estimated taxes, you'll also need to prepare and file a yearly tax return for your salon. Don't forget about sales tax and payroll tax, too.
Not a numbers person? Don't sweat it — our Accounting and Bookkeeping service can take the stress out of tax season.
Renew Contracts, Permits and Licenses
If stylists rent out chairs at your salon, you'll need to renew your agreement with them on a regular basis.
Remember to keep your salon's permits, licenses and supplier contracts updated, too.
A Deeper Look at the Beauty Salon Industry
So you're in the process of opening your own beauty salon, but do you know the details of the industry you're entering? It's ready for its close-up.
As of 2022, the U.S. beauty salon industry (that includes hair, skin and nail salons) was worth an impressive $53 billion.
Even better, the market for both spas and beauty salons is expected to grow at a rapid rate, from $116 billion in 2020 to a staggering $244.5 billion by 2030.
Salon owners directly benefit from that growth, with the median salon owner salary being over $69,000. That's significantly higher than the United States' Q2 2022 median annual salary of about $54,000.
So know that as a future beauty salon owner, you're about to join a thriving industry that isn't showing signs of slowing down.
Common Questions About Starting a Beauty Salon
Get answers to some of the most frequently asked questions about opening a beauty salon.
Is Opening a Salon Profitable?
Yes, beauty salons are profitable businesses. The average salon makes $19,000 in profit each year, and salons' average profit margin is 8.2 percent.
What Are The Ongoing Expenses For a Beauty Salon?
When running a beauty salon, you'll likely encounter certain types of expenses on a regular basis. These might include:
- Rent (or commercial mortgage payments).
- License and permit renewal fees.
- Credit card processing fees.
- Insurance premiums.
- Loan repayments.
- Product costs.
Less frequently, you might also have to upgrade your salon's equipment and decor.
How Much Money Do You Make From Owning a Salon?
For hair salons, the average annual revenue is $245,000.
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