How to Open a Hair Salon

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Styling hair is a labor of love, but it can have a huge payoff. Sure, it may take Kim Kardashian a whopping 13 hours to dye her roots, but her luxurious extensions cost a whopping $6,000. Some celebrity stylists, like Ted Gibson, pull in $1,200 for a single crop. That’s not really the norm, but America still spends $46 billion at salons every year.

Despite the huge market, it’s shockingly easy for a salon to fail. Without the proper financial and legal planning, even the most popular salons will find themselves sweeping up the last bits of hair from the floor and placing a “for rent” sign in the front window. This opening a salon checklist can help you plan your success. It’s the creativity and work that count, but a little business savvy never hurt.

Pick Your Business Model

Before you open a hair salon, it’s important to understand your business model. Are you starting from scratch or purchasing an already successful salon? Are you buying a franchise, which is typically a steeper investment but has a built-in customer base? You’ll also need to sort out your employee structure.

A hair salon typically works one of two ways. Either you hire stylists as employees who work on commission, or you have stylists who are independent contractors who rent a chair. With the latter, stylists carry their own insurance. With the former, you’ll need to cover the employee-related expenses (like workers' compensation insurance), but you stand to make the biggest profit if you expand. It is possible to have a salon that uses both business models, but it’s important to never change the pay structure once you get started because you’re likely to lose your team (and they’ll take their clients with them).

Prices vs. Hair Salon Expenses

Regardless of the business model, you’ll have to set your prices competitively. If prices too high for your niche, you’ll struggle to find customers. If they’re too low, you won’t be able to keep the lights on after all your hair salon expenses. Most hair salons have different tiers that are based on experience, ranging from junior stylists to master stylists. The more experienced a stylist, the higher the price.

“At the end of the day, it’s a business. There’s overhead, bills, employees etc.,” said Kristine Murillo, owner of the Port Jefferson, New York-based salon Fedora Lounge. “Don’t sell yourself short. Know your worth! Family and friends may take advantage of you, and some clients may be looking for the next Groupon deal. Stay true to who you are and let them realize, when family and friends get a discount, it’s you that’s paying for it. When clients find a deal, it’s because you are slow and trying to keep the lights on.”

Write a Business Plan

Hair salon expenses can bankrupt a business if they're not properly planned. There’s rent, equipment, employees, insurance and licenses. Before you open a hair salon, make a business plan to help you stay ahead of the fold. Where is your revenue coming from, who is your ideal customer and how do you plan to get the money to turn a profit?

Your business plan is also your key to financing. You’ll need about six months of operational costs in your savings to be safe, and that doesn’t include the startup costs. If you need outside financing, you might opt to ask friends and family or take out a personal loan. After a year in business, you can try to secure a loan through a bank or credit union.

Find a Location

Location is make or break in the salon industry. You can crash and burn if you find yourself in a place with little foot traffic and too much competition. The average salon is 1,200 square feet, but there’s no hard and fast rule. Tony Gordon, the master hair designer behind Gordon Salons, believes targeting an affluent neighborhood is the best bet.

“Most people will seek out a local business for their beauty services,” he said. “Because of this, you want to make sure your salon is located near residents with a high disposable income. Wealthier people seem to care less when the economy slows, and they will continue with their normal beauty routine, while customers with a tighter budget will space out their services. Before choosing your location, I’d also suggest driving around to really get a feel of the neighborhood rather than relying on realtors' advice alone.”

Handle the Legal Stuff

If you plan to open a hair salon, you’re going to need some permits. This includes a business operations license, a certificate of occupancy, a building permit, a fire department license and a state cosmetology license. If you plan to sell hair products, which most salons do, you’ll need a retail license as well. Luckily, applying for the permits isn’t typically very difficult. You can find the requirements on your state and local municipality's websites. Most accept online applications.

A cosmetology license, which is perhaps the defining license in your business, is more difficult to obtain. You’ll need to attend an accredited cosmetology school, pass an exam and make sure you renew your license as required. This can cost anywhere from $5,000 to $20,000.

You’ll also need to decide on your company’s tax structure. Are you a partnership, or will you incorporate? Most small businesses start out as an LLC, or limited liability company. An attorney can help you decide what suits your needs best.

Find Your Team

Your opening a salon checklist isn’t complete without some killer stylists and employees. These people make your salon your salon. They’re the unique reason people keep coming back, which is why they’re so important. Ian McCabe, whose eponymous salon services everyone from White House bigwigs to the cast of "Orange Is the New Black," believes every salon owner should choose his team with the utmost care.

“I actually lost a few very important key players early in my business journey. From that point, I knew I wanted to only start with just a select and small team,” he said. “I did not post any job openings on recruitment sites; instead, I relied on word of mouth. I asked trusted connections for recommendations and pursued a small team who knew they weren’t going to earn a lot of money at first rather than hiring a bunch of stylists and colorists to fill a room. Quality over quantity is important to me, and the fact that they stuck with me through thick and thin means a lot.”

As far as hiring goes, you can absolutely start small, just as McCabe did. If you plan on being a stylist or colorist yourself, you may want to hire someone to handle the heavy lifting with office duties. This includes scheduling appointments, managing employees and handling the cash. Salons also typically have assistants who work on shampooing and setting things up for higher-level stylists.

“I didn’t realize how much energy and effort it would take to manage my employees alone,” said McCabe. “This is why you need a support system. Find someone on your team who will oversee your employees. I couldn’t get distracted. I needed to focus on my craft but also needed someone who will mediate my employees and deal with our salon’s internal issues. This all goes back to your support system and hiring the right people.”

Purchase the Equipment

Besides real estate and cosmetology school, one of the biggest upfront hair salon expenses is equipment. The following things should be on your opening a salon checklist:

  • Salon stations (which include a chair, mirror, storage space and various hair products)
  • Shampoo stations with sinks, chairs and storage
  • Drying stations for color services
  • Furniture like a desk and couches for the reception area
  • Smocks for customers
  • Products for retail

Most salons have one station per hair stylist, so the costs are dependent on how many stylists you plan to hire. You can typically get a discount on certain salon furniture with your cosmetology license, and you may opt to partner with hair product brands to secure wholesale deals on retail stock.

Get to Marketing and Go

You’ve made it this far; now it’s time to press the launch button. In order to attract new customers, you’re going to have to have a solid marketing plan in place. This can include everything from Groupon deals to a foolproof Instagram and Pinterest strategy. It may help to work with a consultant who understands what it takes to get a new salon noticed.

“Working with a consultant is worth every penny, especially if you are opening your first hair salon,” said Gordon, who was able to expand his business to four salons across the Chicago area. “A consultant can recommend outside help and strategies to make sure each part of the business is done to perfection.”

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About the Author

Mariel Loveland is a small business owner, content strategist and writer from New Jersey. Throughout her career, she's worked with numerous startups creating content to help small business owners bridge the gap between technology and sales. Her work has been featured in publications like Business Insider and Vice.