How To Run A Profitable Beauty Salon

The beauty and fashion market is booming these days. With the advancement of modern technology and social media platforms, everyone became obsessed with having a unique and new hairstyle.

And you know what I see in that craze? I see it as a perfect business opportunity that’s waiting for the right person to catch it. If you’re interested in being that person, but you still want more details, then you’re still in the right place.

In this article, I’ll be presenting everything you need to know about beauty salons. It’ll include discussions about revenue and profitability. Additionally, I’ll present a simple guide about starting up your salon, and improving your profits through smart marketing ideas.

Let’s get started!!

Beauty Salons in Numbers

Unless you’re living under a rock, you must’ve heard about those people who are willing to spend top dollar on beauty salons. Whether it’s for a hairstyle or other beauty services provided by these shops, people are flocking into beauty salons like never before.

According to IBIS World, the number of beauty salon businesses in the United States has crossed the 1 million landmark, jumping from 991,117 beauty salon businesses in 2018 to 1,017,810 in 2019.

That’s more than 26 thousand new beauty salon business in one year with an annual growth rate of 2.6%. It’s fairly logical to say that those beauty salons and barbershops must be making good money. But how much money to be exact?

According to a statistical market research report, also done by IBIS World, beauty salons had total revenue of 46 billion dollars in 2018. Considering the number of salons they had at that moment, that means that, on average, a beauty salon makes about 46,000 dollars a year.

One of the things I liked the most about beauty salon businesses is that, unlike other businesses, the salons’ industry has a low market share concentration. This means that you won’t have to be facing unfair competition with big corporations, as there isn’t any company with a market share that exceeds 5%.

How Does a Beauty Salon Make Money?

To answer this question, we first need to identify all the income sources in a beauty salon, day spa, or a barbershop. Back in the day, beauty salons’ only source of income was from the services they provide.

This only included hair and skincare. However, most salons expanded their income sources by selling retail products, which are most likely beauty and self-care items.

To your surprise, some beauty salons rely on selling these items to make the major part of their profits.

Read: How To Create A Profitable Retail Center In Your Salon

What is the Profit Margin of Beauty Salon Businesses?

Having a running business means that there will be some money going out. This includes rentals, bills, taxes, insurance, cost of products, and salaries. To calculate how much money you can make from a business you either use “net profit” or a “profit margin”.

Net profit means how much money you have left after deducting all the earlier costs of running the business. This can be quite misleading, as you may find a tempting large net profit, but it’s much less than your total revenue.

The profit margin is the best representation of the amount of money you make from a business. It’s the ratio of what you end up with compared to your total revenue.

Unlike revenue, we can’t easily calculate beauty salons’ profit margins. They depend on many variables, such as the size of the business, number of employees, and the general economic climate.

There have been many attempts to put an average profit margin for beauty salons. Most of them agreed on a fluid margin between 8 and 10%. This means that if your saloon is making 100,000 dollars, you get to keep 8,000 to 10,000 of them as a profit.

However, tips can also play a huge role in the income of a beauty salon, which raises the profits dramatically and may even double the profits.

You can also improve this margin by selling more of these niche products and adjust your prices if they’re low. Moreover, advertising and selling your own line of products can do the trick, but more on that later.

Read: 11 Products You Should Offer In Your Beauty Salon

How to Start a Hair Salon Business?

Having a successful business is not a walk in the park. However, there are some steps that you can take to be on the correct path. Here’s a checklist of the most important steps to start a beauty salon.

Create a Beauty Salon Business plan

If you want any business to function properly, you need an accurate business plan, and beauty salons are no exception to this rule. A good beauty salon plan will be your guide to success in the beauty business.

A good business plan will save you a lot of time and effort. It will also point to important points that you might’ve missed while planning on your own. Even if your salon is up and running, you should revisit your plan regularly to check if you’re reaching your goals.

There are many websites that offer resources and templates for beauty salon plans and business forms, such as the US Small Business Administration, Entrepreneur, and Score.

Choose a Location

Some businesses give little to no regard for the location. However, a location for a beauty salon can make it or break it. A weak salon in a good location can do better than a great one in a bad spot.

To pick the correct location for your salon, it has to be a densely-populated area with good traffic. Try not to isolate yourself. Choose a location that lies within your target demographic roams, such as shops or malls.

If you plan to work with higher class clients, you should look for a spot in an upscale shopping district or downtown area.

If you target younger customers, find a trendy neighborhood that attracts new families. In both cases, your salon should be visible with large and clear signs.

Additionally, you should also hire an estate agent to help you with the process. Don’t be hasty about your location, as you might be stuck with it forever.

That’s why you should drive around the areas where you want your beauty salon to be, and search for those once-in-a-lifetime opportunities, and trust me, they’re many.

Wait – are you thinking of starting up a home salon in your own home? Check out our comprehensive Guide To Starting A Salon In Your Home.

Location isn’t everything. You should check the interiors. Not all places are fit to be a beauty salon. Try to gather as much information about your location and its surroundings before making a final decision.

You have to check that this place has ample parking space, as people will be staying for quite some time at your salon. It’ll be more convenient as the business grows and there are more people in the salon to make them worry less about their cars.

Check the Local Laws and Regulations for a Beauty Salon

After you’ve prepared your plan and found your perfect location. it’s time to turn this place into a beauty salon!

You have to check all the local laws and regulations needed for your beauty salon. These laws will vary according to the type of salon and the state it’s following. Different states require different licensing to open a beauty salon.

Similarly, a beauty salon that sells beauty products might require different licenses from a salon that is only providing services.

While this part is sometimes forgotten or even neglected, some people get struck by the fact that their perfect location doesn’t meet the requirements for beauty salon licenses. This makes it highly essential to check laws as early as you can to avoid interruption of the process.

Here are some of the most common license and permits required for beauty salons:

  • Salon Business Operation License
  • State Cosmetology License(s)
  • Federal Employer Identification Number (EIN)
  • Compliance with the OSHA requirements
  • Salon Retail Seller Permit
  • Building Permit

Stand out Against Your Competitors

Whether it’s a small town or a large city, You have to know that there is a beauty salon on every corner. To enter this market and achieve the success you wish for, you have to stand out among the crowd.

Think of all the reasons that make your beauty salon unique. Is it the quality of your service? Your accumulated experience? The staff’s behaviors?

The best way to shine is by making this specialty the main focal point of your salon’s identity and call it a signature service.

You should also study your competitors, check their strength and weakness points, and work on providing a better service where your competitors fall short.

Moreover, always survey customers on their opinions so you can form a better idea about improving the salon’s services. This will also help to improve your relationship with the customers.

As a beauty salon owner, you should put your clients on the summit of your priority list. That’ll lead them to return again, and with time, you’ll have your loyal client base.

And remember, having a loyal customer base is one of the strongest reasons behind the success of any beauty salon.

Prepare the Salon

Now that you’ve found the location and got your paperwork all settled, it’s time to contact distributors to obtain units and items to your salon.

This includes mirrors, chairs, washing and drying stations, in addition to products and appliances, such as hairdryers, brushes, and scissors.

However, you should also put the retail inventory into considerations. Items such as shampoos, conditioners, scrubs, and styling creams can bring in a lot of money as well.

With time and experience, you’ll learn about your customers’ favorite brands. It’ll be great if you contact these brands to have them offer their products exclusively or with decent discounts at your beauty salon.

Hire a Professional and Friendly Team

You might be the only employee in your newly established beauty salon. But with time and good skills, more customers will be on the waiting list, and you’ll need to hire additional help.

While hiring a team, talent shouldn’t be the only thing you’re looking for. You should also put personality into perspective. You can always teach the skill, but you can’t teach someone to be friends with your clients.

How to Increase Your Beauty Salon’s Profit Margin?

If you think that your salon hasn’t reached its full potential yet, try some of these tips to increase its profitability.

  • Don’t Be Shy to Increase the Prices

In the beginning, many beauty salon owners charge little for their services in order to attract more customers. However, they become a bit shy when it’s time to increase the prices.

With some time and further research, you’re going to form a better idea of your salon’s skill level. If you think that your charging less than your worth, it’s time to raise the prices a little. Want to compile a great Profit and Loss Report to help you manage your salon? Check out some great templates here!

Don’t fall into the pit of charging as much as other salons in the area. If you excel at what you do, people will pay for it.

In fact, a reasonable price might be a good way to filter your clients and raising your customers’ level up a notch. This also gives more room and caring time to customers who pay for good quality.

This means that if you lose a bit of money from some customers, others will compensate with higher pays and better tips.

  • Think Outside The Box For Revenue Opportunities

Most salon software programs have ways to grab client email addresses or phone numbers for text reminders. Make sure you’re reminding your clients occasionally of your services and let them know when you add new products.

Check out our article on the 5 Best Salon Software for you!

  • A Website Has Many Advantages

While every business should have a website nowadays, beauty salons are in a special position to profit off of this. Consider becoming an affiliate of beauty companies you respect and recommend.

Create a place on your site for recommended products where, if someone purchases one from your link, you earn a small commission. While a $1 commission for a bottle of shampoo doesn’t sound like much, it can rapidly scale up depending on your online reputation and how you utilize your social media.

  • Never Ignore Social Media

It’s essential to post regularly on social media platforms to keep your clients engaged. For local exposure, it’s best to go with Facebook or your local neighborhood sites (such as NextDoor).

Additionally, salon montages are gaining more audience recently, and it can be an additional source of money and new customers.

Having a hard time thinking of new ways to market your salon? Check out our article on 10 Creative Ways To Market Your Salon!

  • Create a Professional Logo

Make sure that you have a professionally designed logo. And get it printed on uniforms, tools, business cards, and even specialty products.

A catchy logo has magical powers to grab customers’ attention and appeal to different demographics of clients.

Moreover, selling quality products that have your name on them is a great way to advertise your salon and maybe expand your market beyond your neighborhood.

  • Redesign Your Salon

If you have spare funds that you can spend, it’d be great if you hire a professional designer to redesign your salon, especially if it has been looking the same for over 5 years.

Fresh looks open doors for first-time customers to try out the salon and become potential regular customers. They also give an old single-time client to give your salon another chance.

Wrap Up

There you have it. A detailed start-up guide to a beauty salon that has everything you’ll need to begin your next entrepreneurial journey.

A beauty salon is a promising business opportunity, and it can be quite profitable if you pay attention to your customers and manage your resources correctly.