While people with a flair for cosmetology can be skilled salon operators, handling beauty salon expenses requires a different kind of know-how. Even years after opening and operating a salon, owners may find themselves struggling with the books and wondering, are salons profitable? The answer depends on how well a salon business owner understands the expenses. With that in mind, explore this complete breakdown of all the beauty salon expenses business owners need to plan and prepare for.
Recurring Beauty Salon Expenses
These are the expenses you will need to pay either monthly or annually:
- 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 to account for. What doesn’t always occur to owners, however, is that over time you should also expect to invest in regular updates and improvements to your space. Without a well-appointed salon space, you don’t have a business.
- 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, as well as a retail permit if beauty products are sold on site. Keep in mind these licenses and permits must be renewed (typically annually or bi-annually), which requires a fee.
- Wages – Whether you have one or ten employees, payroll is typically a significant line item of your operating budget. Since you rely on your staff to serve your customers and help you run your business, you should be prepared to consistently cover payroll, or 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. Typically, these taxes are paid quarterly.
- Technology – 21st-century salons have more technology these days, so business owners should account for the costs of items 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. Over the course of a year, insurance costs will total roughly $1,000.
- 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, but in all cases, this is one of the largest recurring beauty salon 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.
- 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 (and maybe an app) to maximize your business web presence. This includes budgeting for the URL, domain fees, and paying somebody to design your website and/or app. You will also have to pay for occasional website redesigns.
- 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.
- 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.
When you add up all these costs it’s clear that operating a salon isn’t cheap. But, to return to the question of are salons profitable, they also generate a lot of revenue from returning customers. Salons that are run well can be incredibly lucrative and create exciting growth opportunities.
To succeed as a salon proprietor, 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. 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.