How Does a Beauty Salon Work?

People go to beauty salons for services such as hair care, nail care and skin care, which are provided by trained professionals who are currently licensed in their state to perform one or more of these services.

Licensing and Registration

All salon workers who provide cosmetology services to clients must be licensed by the state in which they work. Rules and restrictions vary from state to state, so visit the website of your state's board of cosmetology to find out what's required. Licenses must be posted prominently for clients to see.

As a business owner, you need to register your salon with the federal government by getting a tax ID number, also known as an Employer Identification Number (EIN). The application is free on the website of the Internal Revenue Service (IRS). You must also register your business with local authorities at the municipality or county level.

Health and Safety Regulations

Each state board of cosmetology sets forth health and safety regulations. Salon owners and workers must be familiar with the safe practices that are required and be prepared for regular and routine inspections by the local health department. Health and safety rules govern cleanliness and sanitation of the salon and its equipment, use of hazardous chemicals, and proper procedures for the performance of services and worker safety.

How Salon Workers Are Paid

Beauty salon work is often compensated with a percentage of the cost of services, usually 30% to 50%. For example, if a salon charges $40 for a haircut, the stylist earns $12 to $20 from the salon, plus whatever tip the client gives. Some salon workers rent space from a salon owner. In such cases, the worker pays a flat fee or a fee plus a small percentage of earnings for the space, keeping the money earned from tips.

In some salons, workers are paid an hourly or annual salary. Such an arrangement provides consistency for both salon owners and employees, but stylists who see more clients than other stylists or have more experience may find the system unfair. Salary plus a commission offers a solution.

How Salon Prices Are Set

Salon prices are set according to services performed, the experience and reputation of the stylist, and what the local market can bear. For example, in a small- or medium-sized town with several beauty salons, prices are likely similar from one salon to another unless clients can receive a unique experience at a particular salon. A haircut from an award-winning stylist or a perk such as a wine or juice bar at a nail salon can be justification for higher prices.

Selling Products in Your Salon

Selling hair, skin or nail care products in your salon is a good way to boost revenue. Salons typically purchase their products wholesale from distributors, who are the middlemen between manufacturers and salon owners. When considering which products to offer in your salon, keep the following in mind:

  • Target audience: Look at the needs, preferences and spending habits of your clientele. For example, if your salon offers affordable hair care for the entire family, offer affordable product lines. 

  • Look at the competition: Find out which products are sold by other salons in your area and offer your clients something different.

  • Limit the brands you offer: Choose no more than three brands to offer your clients. More than that confuses clients and creates clutter on your display shelves.

  • Offer private-label products: Private label products are not just for franchised salons. Manufacturers such as Aware Branding, Dreamline Beauty, Genesis and Private Label Beauty Products work with you to develop products and produce them under your salon's label.