Owning a salon is every stylist’s dream, right? When you’re good at what you do, why not do it for yourself instead of someone else? We might think this is true, but it isn’t always the case. Opening a salon has enormous costs and surprisingly thin profit margins. Here’s the bottom line: it’s possible to make a profit running a hair salon, but it’s a lot of work. And the unexpected price tag of doing business often comes as a surprise.
How Profitable Are Hair Salons?
Profit margins at hair salons are surprisingly slim. According to the blog The Salon Business, the average profit is just $19,000 per year. The blog says the average salon profit is 8.2 percent but can range from just 2 percent to 17 percent, depending on how well you manage the salon. What many stylists learn the hard way is that they’re artists rather than managers.
What Are The Hidden Costs of Running A Salon?
According to the beauty education organization Salt Society, operating expenses can eat up as much as 80 percent of a salon’s revenue. Opening costs alone can reach $60,000, which means taking on debt (unless you’re a genius at saving). For some owners, it’s a risk worth taking, but others find that it’s not worth it when so many reputable salons are hiring with excellent pay and benefits.
According to Business News Daily, some of the highest costs of running a salon include:
- Real estate (renting a space): monthly lease and a security deposit. In Northern Virginia, commercial leases often run over $30 per square foot each year. For a 1,000 square foot salon, that would mean over $3,000 per month in rent alone.
- Licenses and permits
- Employee payroll
- Equipment, including salon supplies, sinks, chairs and dryers
- Technology including point of sale and scheduling software
- Inventory for hair care products where margins tend to be higher than salon services
- Taxes including payroll and business taxes
Are You an Artist or a Manager?
As a stylist, do you consider yourself an artist or a manager? For many stylists, it’s the former. Creativity and client interaction are where their passions lie. In a comfortable employee setting, these skills can grow and thrive. When you open a salon, everything changes. You have to be a businessperson as well as a stylist. You need entrepreneurial and management skills in addition to your awesome cut and color skills. Here are just some of the things you might need to manage:
- Creating and sticking to a business plan
- Applying for small business loans
- Building and retaining a client base
- Developing and implementing a marketing plan. You’ll be amazed at how much time you’ll spend on email, social media and advertising. It may sound fun at first, but it can quickly become a time-consuming drag.
- Human resources: from one shampoo assistant and a receptionist to multiple commission hair stylists, dealing with employees always means headaches and a huge time commitment.
Is Owning A Salon All It’s Cracked Up To Be?
In pricey Northern Virginia, many stylists are finding the answer to that question is no. Real estate prices are skyrocketing, and good help is hard to find. Many of the region’s top stylists have rediscovered the long list of perks of working for a high-end salon.
At Radiance, stylists make commissions of 50 to 60 percent with no back-bar fees. New stylists are guaranteed a healthy salary while they build their books. And don’t forget about tips, which tend to be quite generous. We offer the security of competitive benefits, including a 401K and a warm and supportive team environment. There’s a truly liberating feeling from knowing you’re not in it alone. At the end of the day, our stylists appreciate the ability to focus on their craft. At Radiance, these artists can do their very best work for their clients instead of worrying about day-to-day operations. You just can’t put a price tag on that.