How To Open a Salon

This article is for educational purposes and does not constitute legal, financial, or tax advice. For specific advice applicable to your business, please contact a professional.

The idea of owning a salon has been in the back of your mind for a while, but now you want to make this a reality. How can you start a salon business that is a cut above the rest?

The truth is that starting a salon is a lot like starting any other type of small business: there’s research, licensing, hiringand plenty of decision-making involved before you can open your new salon’s door to clients.

Below, we’ll answer all of your questions about opening a salon, from an initial opening checklist to a full guide of common questions.

Opening a salon checklist

Before we dive into the details, here’s what you’ll need to accomplish as you prepare to open your salon:

1. Define your salon concept. Your salon concept should be woven into every aspect of your business, from the services offered to your style of customer service. Your concept should also be reflected in the name of your salon, your design, your decor and your price range.

2. Create a business plan for your salon. Your salon business plan should lay the foundation of your operations. Be sure to include an executive summary, company description, industry analysis, geographic analysis, target market analysis, sample services, marketing plan, management strategy and financial plan.

3. Register your business. In Canada, the registration process depends on the structure of your business. Are you planning on operating a sole proprietorship or partnership? It’s important to make sure you are aware of the specific registration steps of your province or territory. (Check out this guide to register a business in Ontario to get an idea of what to expect).

If you want to incorporate your business, you can do so federally or provincially. The best option depends on where you plan to open locations. A federal corporation allows you to operate under your business name across Canada. A provincial corporation limits you to the province of registration.

As a corporation, you’ll also need to register your business with the Canada Revenue Agency (CRA) and obtain a Business Number (BN). Even if you don’t incorporate, this applies to you if you make more than $30,000 a year, as you’ll need a BN to collect the GST/HST. You might think about trademarking your salon’s name, too. This can be done through the Canadian Intellectual Property Office. Read more about filing a trademark application here.

4. Select the right location. A salon’s location can make or break its success. Think about visibility and foot traffic, and evaluate the size and interior shape to decide if it’s the best fit for your business goals.

5. Order salon equipment. Equipment can get pricey, so you want to be strategic when selecting what to buy or lease. List out everything that you absolutely need versus what you want. Make decisions based on your budget and financial analysis.

6. Outline your offerings and services. Your services are the centerpiece of your salon and should reflect your concept and brand. Service descriptions are a marketing tool that can help convince new customers to try your salon, so they should be concise but appeal to your audience.

7. Hire the right staff. Make a list of how many staff you need to run your business efficiently. Then get to hiring. A tool like Square Shifts can take the guesswork out of managing your team’s time. This is also a good time to decide if you want to process payroll yourself or use payroll software.

8. Create a marketing plan. Before you open a salon, it’s important to develop a marketing plan that drives awareness, brings in new customersand creates a loyal following. Marketing tactics you might use include everything from social media to hosting a soft opening that drives hype.

How much does it cost to start a salon?

According to The Salon Business’s breakdown of costs, starting a salon can cost anywhere from USD $62,000 for a more basic physical salon location to up to USD $500,000 for a more complex salon. Startup costs for any salon business can vary significantly, but largely depend on:

• Size of the salon
• Location
• Licences and permits (use BizPal to find the ones you need)
• Business structure (i.e., chair rental versus hiring employees)
• Equipment
• Operational costs
• Marketing effectiveness
• Optimizing your scheduling

Since your goal is to be profitable as quickly as possible, planning is key: establish your salon startup costs, forecast your revenue potential and find your break-even point.

First, determine the fixed costs that you incur on a monthly basis. Fixed costs are your salon’s expenses that don’t change with sales volume, and are typically non-negotiable (we call them fixed for a reason). Some of these include:

• Insurance
• Rent and lease agreement
• Utilities
• Equipment

Variable costs, on the other hand, are easier to manipulate, which can help you cut costs and save money. These are the costs of labour and materials that change with sales volume. Variable costs associated with opening a salon include:

• Labour costs
• Products and tools used by hair stylists
• Shipping and delivery costs to replenish hair product
• Advertising and marketing

After you determine your salon’s expenses on a monthly basis, you should create a revenue forecast for your first year and determine your break-even point, which is where your revenue and expenses zero each other out.

Use your expenses and projected revenue to create a budget that keeps you on track and helps you avoid overspending.

What kind of salon equipment do I need to purchase?

You’ve just signed the papers and picked up the keys to your new salon space. One of the first things you need to do is fill your empty space. While it’s easy to get wrapped up in buying equipment, furniture and decor, you have to remember that these things come at a price (and it’s often a high one).

Salon equipment makes up a large portion of your startup costs, and many owners tend to overspend. To keep costs reasonable, create a basic checklist of the materials needed for your salon. Every salon needs the following:

• Salon stations that include a chair, mirror and storage space for hair and styling products
• Shampooing stations with a chair, shampoo bowl and storage space for products
• Drying stations for use during colouring services

The amount of equipment you need depends on the size of your salon and the number of employees you decide to hire. Most salons have one station per employee, but hair stylists with opposite working schedules may be able to share a station.

A small reception area is also necessary for most salons. You’ll want a seating area for clients waiting to see your stylists, as well as a front desk. Most importantly, you’ll want a sleek point of sale for managing bookings and payments.

How do I hire the right hair stylists?

Hiring the right staff for your salon is essential as the quality of your staff’s work makes or breaks your success. So before you start the interview process, create a list of what you are looking for in an ideal candidate. Here are some things to consider:

• Skill set: The candidate’s skill set and capacity to learn are both important to consider when interviewing. Think about the years of experience you want your stylists to have. Do you want each stylist to have proficiency in colouring? Or are you going to hire dedicated colourists?

• Attitude: A candidate’s attitude and work ethic determine their dependability, ability to work with others and overall customer service.

• Personality: A candidate’s personality should match the company culture you infuse in the salon. Whether you are aiming to be an upscale boutique or a family-focused shop, you want your company culture to be naturally instilled in your employees.

Obtain a Business Number (BN)

Before you hire anyone, make sure you have a Business Number (BN) with the Canada Revenue Agency. This nine-digit number is used to identify your company for tax and payroll purposes. You need it to open a payroll deductions account, which is a mandatory step for employers. This allows you to remit income tax, Canada Pension Plan (CPP) and Employment Insurance (EI) contributions. For more information, consult the CRA’s resource page for hiring and managing employees.

Nail down the hiring and retaining process

Ready to grow your team? Make sure you’re following the correct procedures when hiring employees. You need to confirm their eligibility to work in Canada, register for coverage with your province or territory’s Workers’ Compensation Board and set up payroll deductions for income tax, CPP and EI. If you want to run a background check, you must obtain written consent and comply with federal and provincial privacy laws.

Once you’ve hired and onboarded your employees, you might feel like your job is done. Not so fast. The salon industry is competitive, and you often see hair stylists jump from one salon to the next.

In order to prevent employee turnover at your salon, you have to provide your employees with reasons to stay. Here are a few ways to boost employee engagement and retain staff:

• Build strong relationships with your direct reports and encourage team bonding activities outside of working hours.
• Outline a career path and learning opportunities for employees, and give your hair stylists an opportunity to advance.
• Promote from within before you hire outside your salon; this encourages stylists to stay.
• Offer competitive compensation compared to salons in the area.
• Provide perks like employer-sponsored pension plans, health and dental coverage plans and flexible hours to keep employees feeling valued. Nearly half of Canadian workers say their employer’s health care and retirement plans are key to their decision to join a company, according to a Willis Towers Watson (WTW) survey.

Choose the right hair salon compensation model

You have a number of options for pay structures at your salon, including:

• Booth renters
• Independent contractors
• Salaried employees
• Employees with hourly pay
• Hourly pay with flat-rate or tiered commission
• Hourly pay with performance bonuses

What’s the best salon software?

Once you have stocked your salon with supplies and hired stellar stylists, it’s almost time to open your doors. But before you do, make sure you have a way to accept payments and operate your business with salon management software.

Point-of-sale (POS) system

Let’s start with taking payments. Look for a payment processor with clear pricing and no hidden fees. Your payments system should allow you to take whatever form of payment your clients want to use, including chip cards and NFC (mobile payments like Apple Pay). Many younger clients are also using buy now, pay later (BNPL) to cover their more expensive treatments, so you may want to look for a point-of-sale system that offers BNPL payments in person and online.

When assessing different payments processors, ask the following questions:

• What is the setup process like?
  Look for a payments processing system that is easy to set up.

• How fast will deposits hit your bank account after a transaction?
  You want to get paid for your services quickly and not endure lagging processing time.

• Is the payments processor secure?
  A payments system should have security measures and be PCI compliant. Ask about chargeback protection and fraud detection to get a better sense of how protected you are.

But don’t think of your payments processor as a silo. Ideally, you want your payments processor to be integrated with a point of sale that can help you run your entire business. The right salon point of sale should integrate your payments system with other operations — like appointments, marketing and team management — to make your day-to-day management more efficient.

– Halim Touidjine, founder of l’Atelier

Scheduling software

A POS system like Square can act as a receptionist and support your salon scheduling strategy. By integrating online scheduling with your POS system, customers can access hair stylists’ calendars and book appointments 24/7. You can create appointment notes on clients, and all customer information is saved in a customer directory for a smoother checkout.

Additionally, you can access sales reports, customize discounts, sell online and manage inventory in real time with Square, all of which give you a holistic view of your salon and help you manage your business from anywhere.

– Jamie Randolph, owner of Steel N Ink

How do I develop a salon marketing plan?

Marketing plays an essential role in the competitive salon industry. The right efforts can help your salon stand out and build up a loyal base of repeat clients, which is crucial for any beauty business.

Build a marketing strategy based on your salon

It’s time to go back to your salon business plan: What are your business goals, and who are your target customers? What makes your salon unique or sets it apart from the local competition? Do you sell retail products or have a cafe on site? These are all factors to consider as you frame your business concept and market your brand.

Next, think about where your target customers find new products and services through a market analysis and determine where you want to direct your marketing efforts — whether that’s on social channels, through email marketing or via paid ads. For a deeper dive into marketing strategies for your salon, consider new ways to attract clients to your business and use these ideas to boost your marketing efforts.

– Cait Bousfield – co-owner of Good Fortune Barbershop

Stay up to date with industry and marketing trends

As a beauty business, it’s no secret that staying up to date with the latest trends is key to winning new clients and keeping them coming back. Talk to your clients during their appointments about what their pain points are and what they’re interested in (this could be anything from products to treatments to how they want to hear from you). Join industry forums or communities to stay on top of what’s happening. Follow influencers or other prominent leaders in your space on social media. And stay up to date with trends, industry reports and data-backed findings on what beauty customers want.

As you gather information, think about what applies the most to your business concept — what is your salon known for that customers want, and how can you get the word out? Also consider any new areas of opportunity — what are you learning about client interests, and is there anything new you could incorporate to cater to them? Think: new services, live classes, online tutorials or group events. Be sure to talk to your staff and get their take on marketing opportunities and new ideas.

Offer gift cards or a referral program

The final piece of the marketing puzzle is getting your salon some organic word-of-mouth marketing from loyal and satisfied clients. Since many salons are reluctant to offer discounts or promotions, consider offering gift cards or a referral program where happy customers can refer their friends in return for some sort of perk.

What makes a salon profitable?

Profitable salons come in many forms, but repeat clients and diversified revenue streams are what tend to help salons succeed in a hyper-competitive industry.

Consider offering a client loyalty program to reward repeat clients. What you offer as part of your loyalty program is up to you, but points that clients can redeem for products and services, special offers and deals, free merchandise, invitations to special events or the chance to test new products and services before they’re released are all popular salon loyalty program options. Once your loyalty program is up and running, it’s a very helpful tool to track client spending and boost profits.

Loyalty programs aren’t the only way to entice clients to return. Diversifying your revenue with new offerings also helps both interest and attract clients and allows your business to be more adaptable to financial pressure and industry change. Take note of how other businesses have successfully expanded their offerings.

How do I open a salon with no money?

Even if you don’t have adequate savings or enough funding up front to open a salon, there are still a few options to consider.

Limit your up-front costs

Consider leasing equipment so you don’t have to pay the full cost of your salon equipment up front or opening your salon in an already established business, such as a salon suite or a booth rental. Both of these options allow you to bring on clients, market your business and build savings without having to take out a loan or pay the full rent for a storefront.

Recruit investors

There are plenty of avenues to raise money for your business, including:

• Consider friends and family or people in your network or community that may be interested in investing in your salon.
• Attend industry events or conferences to make new connections that could help lead to funding.
• Apply to an accelerator program that can help broaden your connections and support new business growth.
• Look into an angel investor that will provide initial funding for an eventual return on their investment.

Before you commit to any kind of investment, do your due diligence to be sure the investment is sound, or consult a legal or financial advisor.

Apply for a small business grant or loan

If you’re set on a standalone salon that’s all your own, there are plenty of different types of business loans that can help you get there. Online lenders, banks, peer-to-peer lending sites and lenders backed by the Canada Small Business Financing Program are some of them.. If you use Square, you may be eligible for a customized loan that you can automatically repay with a percentage of your sales.

Why do some salon businesses fail?

Sticking to your business plan, relying on the right salon management software and ensuring you have a loyal client base will help your salon remain profitable. That said, some salon businesses do end up closing, so keep the following scenarios in mind as you plan and operate.

• Inadequate cash reserves. You need cash reserves for unexpected costs and fees that you may incur when opening a salon.

• Lack of industry experience. Without expertise in the industry, you can struggle with day-to-day operations and forecasting for future growth. Many top-performing salon owners have been in the industry for several years.

• Failure to keep up with trends. Salon trends change frequently, and sticking to your old ways can lead to a downturn in business. Promote continued education for your staff and encourage them to learn new skills and expand their services.

• Failure to manage appointments. Salon owners who find it difficult to manage walk-in appointments and reccurring clients often have a hard time staying afloat. It is essential to warmly welcome walk-in customers without tarnishing relationships with existing clients and bogging down the scheduling system.

• Competition. Because of the industry’s saturation, competition is a top struggle for many salon owners. Owning a salon is a lucrative business that attracts a lot of entrepreneurs, so it is important to constantly assess neighbouring salons and remain competitive with prices, services and overall customer service.

How can I make running and operating my salon easier?

There are plenty of aspects that make operating your salon easier, like reliable staff and a consistent cash flow, but the right salon management tools and software can make or break your operations.

Square for Beauty is built for and used by salons across the globe, helping sync and simplify all sides of your business so you can save time and focus on clients and growth. Allow clients to book 24/7, take payments anywhere, automate scheduling and manage your entire team and multiple salon locations — all from a centralized point of sale.

All loans are issued by Square Canada, Inc. Actual fee depends upon payment card processing history, loan amount and other eligibility factors. A minimum payment of 1/18th of the initial loan balance is required every 60 days and full loan repayment is required within 18 months. Offer eligibility is not guaranteed. All loans are subject to approval. Terms and conditions apply.