How Much Does It Cost to Open a Salon?

How much money do you need to open a salon?

There’s no one-size-fits-all answer to this question as the cost to start a salon can vary greatly, depending on a variety of factors. These include the size and location of the salon, the types of services offered, the quality of fixtures and equipment, and the cost of initial inventory. Nonetheless, a rough estimate for a small-to-medium sized salon might range from $60,000 to $90,000. This estimate includes leasehold improvements, furniture, and salon equipment, initial inventory, licenses and permits, initial marketing, and operating capital for the first few months. However, keep in mind that your actual costs might be higher or lower. Therefore, it’s essential to conduct a thorough analysis of your specific situation and develop a detailed budget before you start.

Beauty salon costs to consider.

As you navigate through the process of opening your beauty salon, certain costs will surface that need your immediate attention. From the rental costs of your physical salon space to the ongoing expenses for utilities, supplies, and staff salaries, we’ll break down each element so that you can strategically plan your budget and avoid any unexpected financial surprises.

Here are some of the most common beauty salon costs to consider.

1. Rent

Paying for a space to run your beauty salon will be one of your most significant monthly expenses. Additionally, you’ll need to consider that your space will probably undergo renovations. For example, it may need new flooring or proper plumbing. Rent ranges widely depending on the space you’re seeking. Renting a salon booth costs an average of $400 per month, but can range from $250 to $1,200. Normal salon spaces will cost you anywhere from $1,500 to $4,000 a month.

2. Salon equipment

With the right equipment, your salon should operate without a hitch. You can choose to either purchase your equipment up front or lease it. You may be able to lower equipment costs by purchasing used equipment from other beauty salon owners. However, most find leasing new equipment to be a better option.

3. Licenses and permits

Before opening your salon, do your due diligence. Each state requires different licensing and permits. If you fail to get proper licensing, you’ll potentially pay a hefty fee. At the minimum, you should have a business and cosmetology license. But if you plan on adding services such as facials or nail care, you’ll also need the respective health permits. You may also want to consider obtaining a resale permit if you plan on selling products in your salon. Licenses charge annual or bi-annual fees to renew. On average, business licenses and permits can cost anywhere from $50 to $1500 per year.

4. Supplies

When it comes to beauty, keeping up with the latest trends is a must. Having a variety of color dyes, stylizing products, and miscellaneous items in stock will allow you to accommodate last-minute client changes. Unfortunately, beauty supplies aren’t cheap—they can add up quickly and cost up to $20,000 to start.

5. Insurance

What happens if a fire breaks out? Or what if a client injures themself on your premises? In these situations, you can’t forgo renters insurance. Renters insurance will help mitigate the costs of any unexpected events, like property loss from a natural disaster or medical bills from an accident. The price of insurance depends on the number of policies and coverage you select. When thinking about how much insurance you need, consider the total value of your property and any potential lawsuits that may occur at your salon. Insurance for beauty salons costs from $500 to $2,200 annually.

6. Payroll

If you plan on having a few stylists, payroll will be a substantial expense on your operating budget. On top of paying their salaries, taxes, and benefits, the real cost of an employee is typically 1.25 times their base salaries. According to a study by JP Morgan, 62% of business owners struggle to consistently make payroll on time. So if you can’t make payroll consistently, you risk losing your best stylists. Almost half of Americans say that if they experience payroll delays twice, they’ll start looking for a new job.

7. Utilities

Electric, water, gas—running a beauty salon means plenty of utility bills. Larger salons tend to incur more expenses because of how much energy they consume. Your bills will also increase if your salon comes with extravagant lighting or televisions to keep clients entertained. Salon utility costs range from a few hundred to a couple thousand dollars.

8. Credit card processing fees

Most people use their debit or credit card to pay for services, which can eat up a sizable portion of your profits. Each time a client decides to pay with their credit card, you’re responsible for paying processing and transaction fees. Payment processing fees alone can cost you anywhere from 1.5% to 3.5% per transaction. For example, if you charge $50 for a haircut and your credit card processor charges you 2.7%, you’ll pay $1.35 in processing fees. While this may not seem like a lot of money initially, over time, it does add up.

9. Marketing

As a salon owner, it’s up to you to bring in new clients. Even if you have loyal customers, you’ll need more than word of mouth to make people come through the door. That’s why creating marketing campaigns is an effective way to pick up new customers. However, marketing your business frequently can be expensive. Although social media and email marketing can generate leads at minimal cost, Facebook ad campaigns can set you back a few hundred dollars.

10. Salon software

In today’s digital age, implementing salon software can streamline your administrative tasks and enhance the overall customer experience. This software aids in appointment scheduling, inventory management, payroll, and even marketing efforts. Many platforms also offer features like online booking and automated reminders, contributing to client convenience and retention. Although the cost of salon software varies depending on the features and number of users, it’s seen as a valuable investment for efficient salon management. Expect to pay anywhere from $25 to $50 a month per software, with premium features coming at an additional cost.

12. Staff salaries

Payroll is more than just the basic salaries you pay your staff. It involves managing commissions, bonuses, and possible overtime. Salon employees might be paid an hourly wage, a fixed salary, or commission-based earnings, depending on their job role and responsibilities. Hair stylists, for instance, can earn between $20,000 to $50,000 a year on average, while salon managers may earn an average salary in the range of $30,000 to $70,000. To attract and retain talented staff, you might also need to factor in the costs of additional benefits such as health insurance, paid vacation, and professional development opportunities. These added expenses should be carefully considered when calculating your overall payroll costs. Remember that a well-compensated, satisfied team can be one of the most valuable assets to your salon business.

13. Training and continued education

Continuous learning is essential in the beauty industry to stay updated with the latest styles, trends, and techniques. As a salon owner, it’s your responsibility to ensure that your stylists are well-versed in the latest methodologies and possess advanced skills. This might mean investing in masterclasses, seminars, certification programs, or online courses for your employees. You may also need to participate in business management or customer service courses to enhance your managerial skills. The cost of training and education varies widely, so it’s important to include this in your budget planning.

How to finance a salon.

Starting a salon involves several upfront costs which may require considerable investment. While personal savings and loans from family and friends can serve as a financial base, there are various other financing options available that can help you fund your salon business.

1. Business loans

Many banks and financial institutions offer business loans designed to help entrepreneurs start or expand their business. These loans often come with reasonable interest rates and repayment terms, but be prepared to present a solid business plan to demonstrate your salon’s potential profitability.

2. Small Business Administration (SBA) loans

The SBA provides loans to small businesses that may not qualify for traditional bank loans. The SBA guarantees a portion of the loan, reducing the risk for lenders and making it easier for businesses to secure financing.

3. Equipment financing

This involves getting a loan specifically for purchasing salon equipment. The equipment serves as collateral for the loan, which can make it easier to qualify even if you don’t have an extensive credit history.

4. Personal loans

If you have a strong personal credit score, you may consider securing a personal loan to finance your salon. However, keep in mind that a personal loan ties your personal finances to your business, so ensure you have a solid repayment plan in place.

5. Investors

Securing investment from venture capitalists or angel investors is another viable option. This option typically involves selling a portion of your business equity in exchange for capital.

6. Crowdfunding

Platforms such as Kickstarter and GoFundMe allow you to raise small amounts of money from a large number of people, usually in exchange for some kind of reward. This can be a creative way to raise funds, particularly if you can create compelling rewards related to your salon business.

Remember, every financing option comes with its own set of advantages and disadvantages. It’s crucial to thoroughly research each option, and consider seeking advice from a financial advisor or experienced mentor to determine the best course of action for your salon business.

Financial challenges for salon owners.

The financial journey of starting and operating a salon can be complex, filled with various costs and financial decisions at every turn. From initial setup expenses to ongoing operational costs, it’s essential to have a clear understanding of where your money is going and how you can manage your finances effectively. Additionally, exploring various financing options can provide the necessary funds to kickstart or grow your salon business. While the financial challenges can be significant, with careful planning, budgeting, and a keen eye on industry trends, your salon business can thrive and grow. As a salon owner, your commitment to financial health is as important as your commitment to beauty and style.