Being a successful cosmetologist takes a lot of talent and a lot of time spent learning your craft. While people with a flair for cosmetology often have the skills to provide top-notch beauty services, handling beauty salon expenses requires a completely different skillset.
Understanding the breakdown of business expenses for your beauty salon can help you determine if your salon is profitable. You can use this information to look for ways to cut costs, raise your prices or determine if you need financing to help meet cash flow needs.
Check out these common expenses for beauty salons to make sure you’re not missing anything when you list out your expenses.
Recurring Beauty Salon Expenses
Some of the biggest expenses your salon will face are recurring expenses. These are the expenses you will need to pay either monthly or annually. The good part about recurring expenses, however, is that you can usually plan for those costs. This makes it easier to set aside money in your budget for these known expenses.
- Salon Space – Regardless of whether you’ve purchased retail space or rented a salon space, you’ll have monthly payments toward your mortgage or lease. This is the most obvious and, realistically, one of the biggest beauty salon expenses you’ll face. Something that most owners overlook, however, is the need to update and improve an existing space over time. Your salon chairs will eventually wear out, and as styles change you may need to change the overall décor of your space. As part of the beauty industry, it’s important that you maintain a well-appointed space that’s aesthetically pleasing for customers.
- Licenses and Permits – To operate a beauty salon, your business must apply and pay for a business license. Beauty salons may also be required to hold health and safety permits. If you sell beauty products like shampoos or conditioners onsite, you’ll probably need a retail permit as well. Keep in mind these licenses and permits must be renewed. Typically, this annual or bi-annual renewal requires a fee.
- Wages – Whether you have one employee or ten, payroll is potentially a significant line item of your operating budget. You rely on your staff to serve your customers and help you run your business. Your staff relies on you to cover payroll. If a paycheck bounces, you risk losing good employees.
- Payroll Taxes – Depending on the business structure of the salon, you will need to pay either payroll taxes or self-employment taxes. Salon owners often pay taxes quarterly.
- Technology – 21st-century salons have more technology these days. You should account for a breakdown of business expenses related to technology, like a customer tracking system and a point of sale (POS) solution. In addition to hardware costs and installation fees, these software pieces have purchase and subscription fees.
- Cleaning Fees – Keeping a salon clean and sanitary takes a lot of time, plus the products and equipment that go into the cleaning. You can either pay for these yourself or budget for a cleaning service.
- Equipment Leasing – If you are leasing the equipment in your salon, you have to keep up with the monthly payments, or risk having important equipment repossessed.
- Insurance – In the event of a fire, an accident or any other unanticipated events, you need insurance to protect yourself and your business. Insurance costs for most salon owners cost approximately $1,000 per year.
- Utilities – It takes a surprising amount of electricity, water, and gas to keep a salon running. The amount you pay depends on the size of the space, the amenities you offer, and your location. However, utility costs for salons are almost always one of the biggest recurring expenses.
- Credit Card Processing Fees – While some businesses can “go retro” and run a cash-only establishment, many customers prefer to pay by card, which means you will need to pay processing fees. Every time you process a credit card it costs 1.5%-3% of the total transaction.
- Marketing – Word of mouth alone is not enough to build up a stable of loyal clients. Marketing your salon online, in print, or on-site takes an ongoing investment, but if you’re successful at it there is a large return.
Some beauty salon expenses are one-offs or unexpected but need to be handled nonetheless. Salon owners and operators need to have enough cash on hand to cover these costs if and when they appear:
- New Equipment – It takes a lot of specialized equipment to run a successful salon – chairs, commercial hair dryers, washing stations, and so on. Upgrading or entirely replacing your equipment at even a modest salon can still total tens of thousands of dollars.
- Legal Fees –Running a salon isn’t as easy as putting out a sign. As you navigate the certification, licensure or business planning processes you may need the help of a lawyer or business consultant. Expect to pay handsomely for their expertise. The plus side of this expense is that you’ll get expert advice to help you avoid legal or tax trouble down the road.
- Signage – Signage doesn’t have to be expensive, but paying more for big, bold signs helps your salon get noticed by new customers.
- Website – Every business needs a website, even a one- or two-person salon. Hopefully, you’ve invested in setting up a site to maximize the web presence of your business. This includes budgeting for the URL, domain fees and paying somebody to design your website. You will also have to pay for occasional website redesigns. Investing in an app that can schedule appointments is also a good idea for salon owners. Although there will be significant upfront costs, a scheduling app allows you to automate appointment setting so you can spend less time answering the phone.
- Beauty Products –You can’t run a salon without scissors, combs, hair dyes and beauty supplies of all kinds. Your budget should include an inventory with overstock since you should always have extra supplies on hand. Just be sure you’re not carrying too much inventory, since letting it go to waste could cost you more.
- Miscellaneous Expenses –Unexpected expenses pop up all the time at a salon. Plan to have a couple hundred dollars on hand at all times for when you need to make an unplanned purchase or cover an expected bill.
So, how much does it cost to own a salon?
When you add up all these costs it’s clear that operating a salon isn’t cheap. Depending on your location, clientele and size of your operation, you might be spending several thousand dollars a month to operate.
However, salons can also be incredibly profitable. You can generate a lot of revenue from returning customers. As word of mouth spreads about your skills, more customers will try to book appointments. Some salon owners even have to turn away business because they don’t have the resources to handle the demand.
To succeed as a salon owner, minimize your expenses through careful forecasting and planning, and maximize revenue by cultivating new and returning customers. Keep a source of emergency funds on hand for the occasional bad months, or for those once-in-a-lifetime opportunities that require some quick cash.
When you need money quickly and don’t want to deplete your cash reserves, consider small business loans designed specifically for ambitious entrepreneurs like you. They help you get the funding you need, fast, at fair rates and terms so you can spend a lot more time giving your customers an excellent experience at your beauty salon.