Starting a business is already daunting, but not knowing how to budget your finances is even harder. What goes into starting a hair salon, and what are the recurring costs of running that salon? What can you expect when you consider the licenses needed, and what costs are you looking at when it comes to your physical space?
How much does a hair salon cost?
For most hair salons, expect a startup cost of around $100,000 to $125,000 depending on location and whether the building is purchased or leased. Annual cost to run a hair salon averages around $100,000.
- Certification: one-time cost of $5,000 to $15,000
- Licensure: annual cost of $100 to $5,000
- Legal Fees and Insurance: annual cost of $1,500 to $5,000
- Physical Space, Equipment, and Supplies: annual cost of about $100,000 on average
- Social Media and Website: startup cost of $250 to $750, marketing costs vary
When you’re just starting out your business, there are going to be some major costs. These start-up costs are going to be a one-time thing for you, so don’t worry—you won’t be paying for many of these things every month.
1. Certification: one-time cost of $5,000 to $15,000
Before you even consider starting your own salon, you need to make sure you have the proper licensure and certifications. The first license you should have is your state cosmetology or beautician’s license. If you’re planning on doing any work as a stylist in your salon, this is required. If you’re just looking to own a salon and plan to open up booths or hire employees, though, most states only require you to have a salon manager license. The key is that whoever is styling hair must have that license, or you may be subject to fines or jail time.
Getting this certification means you will have to attend cosmetology school. The American Association of Cosmetology Schools website has more information on where you can attend to receive this license in your state. Most fees for cosmetology school are $5,000 to $15,000.
2. Licensure: annual cost of $100 to $5,000
On top of your certification, you’re going to need some licenses for your business. First, you must have your federal employer identification number, which allows you to be taxed by the government. You can find more information about it at the Internal Revenue Service website. When you get a physical location, you will need a certificate of occupancy, which can be acquired through your local government.
On top of the federal EIN, you must have a business operation license before you do any business. It protects you from any issues that may arise between you and your clients. Find out what the requirements are for your state or city by visiting the U.S. Small Business Administration’s website.
While most income in a hair salon comes through services provided—haircuts, colors, styles, perms, etc.—you can make additional profit by selling retail items. To do so, you are required to have a seller permit or vendor license.
Most of these licenses typically have a small registration fee. Some of these permits will require you to renew them annually.
3. Legal Fees and Insurance: annual cost of $1,500 to $5,000
No matter how skilled you are in business, you should always make sure to hire some sort of legal representation during the creation of your business. You may need assistance in getting a loan or working through a lease agreement, so these fees usually land around $200 per hour.
In the same vein, you should make sure you also have insurance on your salon. It varies based on whether you’re hiring employees or renting a booth, so make sure your employees have insurance, too. This could range from about $500 to $1,000 per year.
4. Physical Space, Equipment, and Supplies: annual cost of about $100,000 on average
Your physical building is the most important cost you’ll incur at the start of your journey. While it doesn’t matter if you purchase or lease, this is also going to be the highest cost item. Leasing a building means you could be looking at $20,000 to $50,000 annually for 2,000 square feet building. If you want to purchase your building, it could be between $40,000 and $250,000 for an existing salon and upwards of $500,000 if you want to build a salon. Your ongoing costs can range about $1,600 to $5,000 per month.
Make sure you budget down the road any funds for building improvements. While this is dependent on the building location, you should still consider that factor as you budget for your salon.
With the building also comes the equipment—not just the building equipment like chairs and hood dryers, but scissors, shampoo and conditioner, clippers, and everything in between. This could cost around $55,000 for a full equipment set., including a stock of supplies and inventory. This also includes your point-of-sale system, which can cost up to $2,500 annually.
Don’t forget about utilities—that could run you around $750 to $1,000 per month.
You should also include funding for cleaning. While supplies can cost upwards of $200 per month, you can hire it out for about $200 per visit.
What about profit? Learn how you can maintain your beauty salon and make it profitable!
5. Social Media and Website: start up cost of $250 to $750, marketing costs vary
It’s important to have an online presence in our media age, so make sure you’re looking into not only social media pages but your own website. The build on this can usually range from about $250 to $750. Marketing through these can also be free, but make sure you’re setting aside enough funding to market your business.
There are also several costs that will vary greatly depending on your business, and that’s both taxes and wages. While you should budget for these items monthly, an average is impossible to determine without knowing more about your business, your area, and the amount of clientele you bring in. Budget for those items as you plan for the opening of your business, and you’ll be well on your way to success.
When it comes to hiring in my salon, which is best: booth rental or hiring employees on commission?
Both business models are used in hair salons across the country. Booth rentals is where you go into a rental agreement with an independent contractor, who rents the booth. You do not have control over what they do, and cannot fire them, as they are technically self-employed, but you make a more consistent income from their booth rental fees and do not have to do their taxes. Hiring on commission means you have actual employees in your salon and you receive a portion of their income based on each client they bring in. Choose based on your priorities and whether you want a flat rate income or based on commission.
What education do you need to start your own hair salon?
If you’re just managing a hair salon, you simply need a salon manager license. No further education is required, although a business background is encouraged. If you plan on styling hair in your salon, you will need a cosmetology or beautician’s license provided by the state following the proper education.
Looking to start your own Salon? Get the documents you need to get organized and funded here.
Please note: This blog post is for educational purposes only and does not constitute legal advice. Please consult a legal expert to address your specific needs.