How To Open a Salon in 9 Steps
Opening a salon requires more than experience working as a stylist and a roster of loyal clients. You need a location in a high-traffic area, proper equipment and tools, a team of trained employees or booth renters and several state and local business licenses.
You also need funds to cover your startup expenses. Depending on your location and size, you can expect to spend anywhere from $60,000 to $500,000 to open your salon. Here’s how to get started.
1. Write a salon business plan.
The first step in starting a business is deciding on the services you want to offer. Creating a business plan helps you define your expectations, your strategy and how you’ll stand out from the competition.
All business plans typically include the same general sections. Your salon business plan should include:
- Executive summary: Explain your salon’s business objectives and mission statement.
- Company description: Describe details related to your salon’s theme or concept. Include a description of your desired market and target client demographic.
- Market analysis: Highlight your market research and how you plan to stand out in the field. Conducting a competitive analysis helps you better understand your competitors and how you plan to stand out in the market.
- Organization and management: Outline your salon’s personnel needs. How many managers, stylists and other term members do you expect to hire? You’ll also identify your salon’s business entity in this section. Your business entity reflects the legal structure of your salon. You may structure the business as a sole proprietorship, limited liability company, partnership or corporation.
- Services and products: Explain the services you plan to provide at the salon and any additional products you want to sell. Discuss where you’ll purchase products and how you’ll manage your salon’s inventory.
- Marketing and sales: Discuss your strategy for building a client base and increasing your salon’s brand awareness. Lay out your pricing plan in this section. We’ll discuss how to set salon prices later on.
- Funding request: This is where you’ll outline how much you need in funding, whether you’re applying for a small business loan or trying to attract outside investors. Give a detailed description of how much money you need, how you plan to spend it and how long you expect it to take to repay the loan or give investors a return on their investment.
- Financial projections: Create a financial outlook for the salon, including balance sheets, cash flow statements and income statements for your first five years in business.
- Appendix: Include any additional documents or forms your lender or investors might need, such as your resume, credit history or letters of reference.
Settle on a salon structure
In addition to choosing a legal business structure, you’d need to decide how to categorize stylists working at the salon. Stylists can either be employees or booth renters.
- Salon employees: Stylists work on the salon’s schedule and use salon-supplied products. Salon employees may earn tips and commissions. At year-end, they receive a W-2 form summarizing their yearly earnings.
- Booth renters: Independent contractors rent booth space for a regular fee and use their own products and tools. Renters set their own hours, have their own business licenses, do their own bookkeeping and pay self-employment taxes.
How you categorize your stylists affects your salon’s bottom line. For example, if stylists rent space from you, you receive the booth rental fee, and nothing else, from them each month. You might have more opportunities to generate profit if you hire employees, but you’ll also have employee-related expenses such as payroll taxes, workers compensation insurance and employee benefits.
2. Find a location.
Ideally, your salon location should have high foot traffic and visibility. For example, a busy shopping center or a location near businesses like clothing stores or restaurants is ideal, as those locations attract potential customers to the area.
It’s also crucial to assess the local competition and demographics. Understand who your target clientele is and whether they frequent the area. Also evaluate:
- The accessibility of the location, including convenient parking, proximity to public transportation and ease of access
- Whether the location is zoned for your specific type of business
- The size and layout of the space to ensure it can accommodate your salon’s equipment, workstations, storage, employee break room and client waiting areas. Most salons range from 1,200 to 2,000 square feet, but you may need more or less depending on the services you plan to offer.
Finally, a lot of salon equipment relies on electricity and plumbing, so make sure those systems function well before signing any paperwork on a location.
3. Obtain the proper licenses and permits.
You don’t need a cosmetology license to open a salon, but you do need one if you plan to perform salon services yourself. Cosmetology licensing requirements vary by state, but you generally need to complete several hours in cosmetology school and pass an exam. Each stylist working in your salon needs their own cosmetology license.
In addition to cosmetology licenses, you may need a:
- Business license
- Certificate of occupancy
- Retail license, if you sell products
- Building permit
Before you can open your salon, you’ll need to pass safety and sanitation inspections. This may include checking that you have proper electrical and fire safety practices, ventilation and disinfection protocols for supplies and equipment. Your state cosmetology board may conduct annual inspections to ensure your salon remains compliant.
4. Secure hair salon financing.
As a rule of thumb, new business owners should aim to save enough funds to cover the first six months’ expenses before the salon is established. If that’s out of reach or you need additional capital, you may need outside financing. Options include:
- Equipment financing. Equipment financing allows you to purchase necessary tools and furnishings for your salon, like styling chairs, hair dryers and washing stations. The equipment itself serves as collateral for the loan.
- Startup loans. Startup loans help newer businesses cover initial expenses, but they typically require you to have been operating for at least six months. This option is best suited for companies already operating and generating revenue.
- Personal loans. Personal loans can provide quick access to funds, but they come with risks. If the salon business isn’t profitable and you default on the loan, the lender can take your collateral or, in the case of an unsecured loan, your personal credit will take a hit.
- Taking on a partner. A business partner can help shoulder the financial burden of starting a salon and potentially bring additional expertise or industry connections. However, it also means you may need to compromise instead of doing everything your way. A partnership agreement can help you establish responsibilities, resolve disagreements and proactively decide what will happen if one partner wants out of the business.
- Scaling up. Many salon owners start by operating a home-based business or renting a booth inside an established salon. This approach allows you to save startup funds and build a client base to scale up to a full salon once you’ve saved enough.
5. Set your hair salon prices.
Once you decide which services to offer, you must determine a pricing structure. Prices can heavily impact your business — high prices could limit your customer range, while low prices could restrict your profit success. Consider the following factors as you set your prices:
- Costs, including salary and benefits, supplies, rent or mortgage payments, utilities, marketing and advertising, taxes and licenses, professional fees, insurance, software, etc.
- What competitors charge for similar services in the market. Nationwide, the average cost of a haircut ranges from $10 to $90.
- Your ideal profit margin. You need to charge more than the costs that go into each service to turn a profit.
Pricing isn’t set in stone. Monitor your profit and make changes as you go along so your prices reflect your experience, costs and profitability.
6. Insure your salon.
Salon owners need to carry several small business insurance policies to protect themselves against the unexpected. You may need to purchase:
- General liability insurance: Covers your business’s liability for any property damage or injuries customers sustain when visiting your salon.
- Professional liability insurance: Covers errors you or your employees make (or are accused of making) while performing services.
- Commercial property insurance: Covers the salon’s physical space, including equipment, tools, products and furniture. Your landlord or lender may require you to purchase property insurance.
- Health/life insurance: As a business owner, you provide your own health and life insurance coverage. You may also want to offer health insurance for your employees, depending on the size of your staff. The federal government requires you to provide health insurance if you have at least 50 full-time (or full-time equivalent) employees.
- Workers compensation insurance: Required if you have employees. It provides benefits for employees if they have a work-related injury or illness.
7. Buy furniture and equipment.
Essential equipment and furniture may include:
- Stylist stations
- Chairs
- Carts and trolleys
- Mats surrounding styling chairs
- Mirrors
- Reception desk
- Table and couches for the reception area
- Shampoo bowls and chairs
- Cabinets for shampoo room
- Towels
- Light fixtures
- Optional manicure or makeup stations
- Advanced air filtration system if you provide chemical treatments for clients.
Purchase your equipment about eight to 12 weeks before opening day. This should give you enough time to handle any unforeseen financing options or delays in the supply chain.
Your fixtures and furniture can be as basic or elaborate as you like. If you prefer uniformity throughout your salon, you may also want to supply items like hair dryers and flat irons to ensure all stylists use the same tools. Otherwise, each stylist can provide their own tools.
Don’t forget to stock up on products
When choosing which products to stock for your salon, consider the needs and preferences of your clientele. Research reputable brands that are well-known in the industry for delivering reliable results, and consider partnerships with distributors that offer wholesale pricing or bulk discounts.
Stocking the salon with products like shampoo, conditioner and hair color eat up 10% to 20% of revenue in most salons, depending on the prices of the items you’re using. But selling these products can give you another revenue stream. Across the beauty industry, salons have an average profit margin of 8.2%, but products sold in salons have an average profit margin of 42% to 48%.
Keep your inventory stocked with roughly three times your monthly retail sales in inventory to ensure you have enough products on hand to meet customer demand without tying up cash in inventory. For example, if you sell $500 in product each month, keep $1,500 worth of product on hand. Keep your bestselling items fully stocked to meet customer demand.
8. Hire and train stylists.
Finding skilled and reliable employees can be a challenge for any business owner. Consider attending networking events, workshops and trade shows to connect with stylists or other professionals in the industry who can recommend talented stylists.
Cosmetology school graduates may also be interested in full-time work or internships. However, you may need to provide extra training to recent graduates who haven’t worked in a salon.
Whether you hire experienced pros or new graduates, have them demonstrate their work on a mannequin as part of the interview process. This lets you see their work in action and get a sense of their skills and demeanor.
9. Spread the word about your salon.
Promote your salon within your community to reach local customers. Here are a few ideas for marketing the business:
- Website: You need an online presence, including a functional website that allows customers to book appointments online.
- Social media: Create profiles on social media platforms like Facebook, Instagram and TikTok. Posting “before and after” photos showcases your services and attracts customers. You can also engage people through online giveaways or exclusive deals.
- Email marketing: Consider collecting emails from clients and sending a regular salon newsletter to stay top-of-mind with your clients.
- In-person networking: Connect with nearby businesses and distribute flyers at local events.
- Print advertising: You may also consider advertising in local publications if that’s within your marketing budget.
Tip: Consider a brand partnership.
If you want to be affiliated with a large salon brand, you need to establish a partnership with the company. The vendor supplies retail products for your salon, stylist training and branded signage for your space.
For example, Aveda partners carry Aveda products and purchase Aveda marketing materials in exchange for customer referrals, help recruiting talent, ongoing education and marketing support. While there’s a cost to partnering with a well-known brand, it can help you bring in new clients.
How much does it cost to open a salon?
On average, opening a salon costs anywhere from $60,000 to $500,000. How much you spend depends on the size and location of your salon, whether you own the building and whether you buy an existing salon or start one from scratch.
Here’s a look at the major cost categories to help you plan your budget:
- Buying or leasing the space: Leasing retail space costs an average of $18 per square foot in the U.S. So leasing a 1,200 square foot salon would cost an average of $21,600 per year, or $1,800 per month. Buying a salon building is more expensive initially, but you can build equity as you pay off your mortgage and the building increases in value.
- Build-out and renovations: After buying or leasing a property, you typically need to renovate the property to fit your business. Expect to spend anywhere from $5,000 to $25,000 or more, depending on what you’re starting with.
- Salon equipment and supplies: Budget between $50,000 to $100,000 for salon equipment plus another $5,000 to $10,000 for supplies.
- Licenses and permits: Securing the necessary business licenses and permits costs an average of $2,500 annually.
- Insurance: Insurance costs depend on the size of your salon, the number of people you employ, coverage limits and your operations, but in general, small businesses can expect to pay around $87 per month.
- Marketing and branding: You can expect to pay around $300 to $700 for a basic website. Other marketing and advertising expenses depend on the types of initiatives you use. Running ads on social media or in print publications can be costly, while handing out flyers and asking friends, family, employees and clients to spread the word costs little to nothing.
- Technology. You need a way to collect payment from customers. Expect to pay around $550 to $2,300 for a computer and point of sale (POS) system.
Resources for new salon owners
Having an arsenal of resources and tools can make your life easier as a new salon owner. Here are a few to check out.
Trade organizations
Connect with other professionals in the industry and find support through trade associations and organizations. You could become a member of one or more of the following:
- Professional Beauty Association
- International Salon & Spa Business Network
- Associated Hair Professionals
Booking tools
Booking software and platforms can streamline the scheduling process for salon owners. Here are a few tools that may fit your budget:
Marketing resources
New salon owners can find tips and tricks from online blogs covering best marketing practices for salons. If it’s in your budget, you may even consider hiring a marketing firm to create campaigns for your business. Here’s some reading material from a few agencies to get started:
Hiring help
Running a salon is drastically different from working as a salon employee, and many stylists find it difficult to transition to owning a business. You’ll need to have handbooks and operational systems in place to make sure the business runs smoothly.
Before opening a salon, consider taking a few business courses and finding a reliable accountant and attorney to help iron out the details. Here are some resources to consider: