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.
According to a 2021 Dun & Bradstreet report, the U.S. hair care services industry includes about 84,000 businesses with a combined annual revenue of 24 billion dollars. As of May 2021, the number of new hair salon businesses is up 3.6%. California, New York, and Florida are the states with the highest number of hair salons.
How much does it cost to open a salon? Costs can vary depending on how large of a salon you’d like to open, where you are located, and business structure. Here are a few costs to keep in mind.
Salon startup costs
Licenses and permits for a salon
Licenses and permits needed for a salon will change from state to state, but you can check with your local or state Chamber of Commerce for more specific guidance. Some commonly needed licenses and permits include:
A Federal Employer Identification Number (EIN): An EIN is a unique number assigned by the IRS to businesses operating in the U.S. for identification.
Cosmetologist or professional license: Each state will have its own set of cosmetology requirements. Prerequisites for these licenses will include minimum age restrictions, training requirements to meet, and renewals of licenses. Depending on the services you offer, there are different types of cosmetology licenses, such as barber, esthetician, and electrologist licenses.
Seller’s permit: Many salons sell retail products such as shampoo or conditioner, which typically require a seller’s permit. This permit will allow you to sell products and make sure the appropriate related taxes are collected. There are states that do not collect statewide sales taxes in which you might not need a sellers’ permit, so be sure to check for guidance on your area.
Salon business operation license: A business license is needed to operate a business in any state. You can apply for one through the U.S. Small Business Administration. If your salon is planning on offering additional services, such as manicures or tanning, you may need additional licenses depending on where you operate. A business license can range between $50 to several hundred dollars.
Certificate of occupancy: You will need this certificate whether you are renting or have purchased the space for your salon. This certificate ensures your property is compliant with the business you are operating. These can range in cost from $20 to $80.
There also are OSHA (Occupational Safety and Health Administration) regulations that your salon will have to adhere to. You may incur some additional costs ensuring that your business is compliant with these guidelines.
Decide on your salon’s structure
There are several structures you can choose for your salon, each with its own pay structures for your employees. In addition to the type of salon you want to own, think about what kind of business entity your salon will be. The form of business you choose could affect your taxes, earnings, and more.
Chair or booth rental salon
In a chair or booth rental salon, the owner acts a bit like a landlord. You can rent out chairs or booths and the individual stylists are responsible for processing payments, setting their rates, booking appointments, restocking supplies, and marketing themselves. As the owner you would charge a rental fee and stylists in your salon would be like renters. You would not be responsible for typical benefits associated with a full-time employee like health insurance or other benefits. Think of your stylists running their own mini businesses with yours.
This salon would operate more like a traditional small business. You, as the salon owner, would hire stylists as employees. You can set the schedule, rates, appointments, and salon policies. In this business structure you would also typically provide employee benefits like health insurance. For this type of salon you have several ways of paying your employees, the two most common are flat-rate commission and tiered commission.
Necessary salon equipment
Whether your salon specializes in color or cuts, there is some equipment to consider when calculating the costs to open your salon, including:
- Salon chairs
- Combs and brushes
- Dryer chairs
- Shampoo stations
- Scissors or haircutting shears
- Shampoo, conditioner, dyes, and other products to treat and style hair; you may also need to stock the back bar with products and supplies for services
- Cleaning supplies
- Stylist trolleys
Operational costs of a salon
Beyond permits, licenses, maintenance, and equipment, there are some additional operational costs that you will want to keep an eye on.
Bookkeeping and payroll software: If you are hiring employees, you may want to invest in a payroll system, hire an accountant, or use accounting software to streamline managing costs and employees.
An online presence: If you are planning on connecting with customers online, you may want to invest in your social media presence or a website.
Salon insurance: According to The Salon Business, salon insurance can range from $50 to $1,000 a month. This range is due to the number of employees, state it is based in, and services offered, among other criteria.
Utilities and bills: From water to electricity, there are recurring bills to account for when thinking about starting a salon business.
A Point of Sale System: If you are processing payments, consider a Square Point of Sale system for your business.
Scheduling software: You can schedule appointments through Square Appointments for free, which integrates with your Square Point of Sale system. As you hire more staff, there is a monthly subscription and processing fee plan that can scale depending on the size of your team. You can also add flat-rate or tiered commissions to incentivize and compensate your team.
Renting or buying physical space: Whether you rent or buy your salon, you’ll need a physical location to service your clients.
If you’re just starting your business, putting together a business plan as well as conducting market research will help you make sure your business has everything it needs before opening its doors.