How Much Does it Cost to Open a Salon - Understanding the Costs

If you’ve ever dreamed of opening your own salon, you’re not alone. Every year, tons of aspiring entrepreneurs take the leap and create their own businesses. But before you decide to dive in, you need to understand how much it will really cost to start up your salon. In this article, we’ll provide an overview of the expenses associated with setting up your own salon, from initial investments to ongoing costs.

Key Points:

• Start up costs for opening and operating a salon will vary depending on location, size, and services offered.
• Initial costs will include rent and property expenses, equipment, supplies, and employee wages and benefits.
• Ongoing costs will include monthly rent, taxes, license fees, insurance, and advertising and marketing. 
• Business owners should also include a contingency fund in their budget to cover unexpected costs.

One-Time Costs of Opening a Salon

Opening a salon doesn’t happen overnight. It’s a big investment and it requires significant upfront costs. It’s important to understand the various one-time costs associated with opening a salon so that you can determine if the venture is viable and the resources you will need to get your salon off the ground.

Licenses and Permits

In order to legally operate a salon, you’ll need to obtain the necessary business licenses and permits for the state in which you plan to do business. These costs vary from one location to another and from one business to another, so be sure to check with your local government to understand the requirements and fees associated with the necessary licenses and permits.

Rent or Mortgage Down Payment

If you’re renting or buying the space in which you are setting up the salon, you’ll need to pay a one-time payment to secure the space. For those buying the space, this could include a down payment on a mortgage. Renters will typically need to pay a security deposit and the first and last month’s rent, as well as ongoing monthly payments, of course.

Building Improvements

If you’re looking to get a bargain price on your space, buying or renting a space that needs some fixing up requires some grit, but a lot less money. You’ll need to make some improvements to the salon’s building in order to get it up to code and match it to your own aesthetic. Some of these improvements may include painting, new lights, flooring, or other changes that are necessary for the salon to be deemed safe and suitable for customers and staff.

Legal Fees

You may need to hire a lawyer or law firm to help you with any legal paperwork associated with your business, including contracts, employee agreements, and licensing or permit applications. This is where a lawyer’s services come in handy, as they can ensure you have the appropriate documents and agreement forms in place.

Insurance

In order to protect your business, you’ll need to purchase appropriate insurance for it. This could include things like general liability insurance, property insurance, and professional liability insurance. Your insurance broker will be able to help you determine the right policies for your salon.

Salon Equipment

Outfitting a salon with the necessary furniture, fixtures, and equipment can be one of the most costly one-time expenses associated with opening a salon, and will likely require some salon equipment financing. This includes things like chairs, styling stations, wash bowls, towels, shampoo and styling products, storage materials, and other basic necessities.

Staffing and Training

Once the salon is open, you’ll need to hire and train employees. This includes hiring a receptionist, stylists, and/or barbers. You’ll also need to invest in staff training when you’re first out of the gate, both in terms of product knowledge and customer service.

Salon Website

Having an online presence is essential for salons and other businesses. This may include creating a website and other online campaigns to reach a wider audience and promote your business. 

Advertising and Marketing Materials

Developing a marketing and advertising plan to promote your salon is essential. This could include print and digital advertising campaigns, promotional materials, and other marketing efforts. All of these will require upfront costs to implement, so you’ll need to consider this when budgeting for the one-time salon opening costs.

Ongoing Costs of Operating a Salon

Operating a salon can be a rewarding and lucrative business; however, it is important to be aware that there are many ongoing costs related to running a salon. Keeping up with these costs can help maintain a sure and steady cash flow.

Rent or Mortgage

The first cost to consider when you own a salon is rent or mortgage payments. If renting, these payments are typically on a monthly basis and will likely be a significant expense. If the salon is free-standing, the business must pay the mortgage and other related costs, such as property tax, depending on the type of building.

Utilities

There are also monthly utility bills for running a salon. Depending on the size of the salon and the type of services being offered, these bills can be quite high, but the cost will ultimately vary by your location and the utility providers you use. 

Supplies 

Any salon requires a steady flow of supplies to keep things operating smoothly. From products like shampoo and conditioner, to gloves and gowns, there needs to be a budget for replacing these items on a regular basis.

Insurance

Another unavoidable expense of running a salon is insurance. Business owners need to insure the building, contents, and services they provide. As the business grows, insurance costs will likely increase, so this should be taken into account.

Staff Wages

Hiring staff to run the salon is a necessary expense. Wage costs will depend on the size and scope of the salon, and should take into consideration any overtime and holiday pay. While you won’t need to do as big of a push as you will when you initially open, you’ll likely have to hire additional employees from time to time. 

Payroll Taxes

As a business owner, you must pay payroll taxes as well. These taxes are typically taken out of the employees’ wages and must be reported to the government.

Salon Licenses

Depending on where the salon is located, there may be additional fees associated with licensing and permits. States have different standards and requirements, so make sure you’re doing your research on these state-specific laws. These fees should be included in the annual budget in order to avoid any costly surprises.

Accounting Services

If you’re a salon owner, you likely spend all of your time with clients or helping employees, so you don’t have time to manage the headache that is your business’s financials. You’ll likely need to hire a reliable accountant to keep track of the salon’s finances and ensure accurate record-keeping. This can help to identify any areas where costs can be reduced and help to plan for the future.

Continuing Education

Providing continuing education for your employees (and yourself) is incredibly important for staying ahead of industry trends and ultimately, increasing customer satisfaction. Continuing education can come in the form of attending seminars and conferences, purchasing books, or any other educational materials that benefit you and your staff. Investing in the development of your team is key to promoting growth and success in your business.

Maintenance and Repairs

Much like any other business, ongoing maintenance and repairs are necessary to keep a salon functioning correctly. As equipment and furniture age, it’ll require maintenance or repairs that might require a technician. Maintaining your premises is also important to create a pleasant and inviting atmosphere for customers.

POS System and Software

Having an up-to-date POS system is necessary for efficient and secure transaction processing, inventory tracking, and customer loyalty management. The right POS system can go a long way in making sure your customers have a seamless and enjoyable experience in your salon. Any additional software that might be needed to run your business, such as QuickBooks or payroll software will also require regular maintenance fees.

Bank and Credit Card Fees

Using a credit card processor and connecting it to your POS system is a great way to save time and simplify transactions. However, processing fees from banks and credit card networks add up over time and should be taken into consideration.

Salon Website and Marketing

Having a website for your salon is important for customers to find information about services, prices, staff members, or any other relevant information. Additionally, investing in marketing can help you drive more customers to your salon, whether it be through online or traditional methods.

Equipment Leasing or Loan Payments

If you’re leasing or purchasing equipment for your salon, you’ll need to account for regular payments. This could include hair dryers, styling stations, or anything else necessary for your business operations. Additionally, if you decide to lease or purchase larger items, such as furniture or salon management software, you should earmark money for those payments as well.

How Much Does it Cost to Open a Salon: The Total Cost 

Things to Consider Before Opening a Salon

Opening a salon is an exciting venture, but one that needs plenty of preparation and planning. There are a number of things you should consider before you make the decision to open a salon. 

What Type of Salon Would You Like to Open?

One of the first questions you should ask yourself is what type of salon you want to open. Do you want to specialize solely in haircuts, or offer additional services such as coloring and styling? Knowing what you want to offer will help you determine the space, supplies, and additional services you may need. 

Do You Want to Open a New Salon, Join A Franchise, or Buy an Existing Salon?

It’s important to consider if you want to open a new salon, join an existing franchise, or buy an existing salon. Opening a completely new salon requires growing from the ground up, whereas joining a franchise grants you access to an established business model and resources. Buying an existing salon means that it is already up and running, but may require more capital to buy. 

Do You Already Have a Client Base for Your Salon?

Gathering a client base before you open your salon is an important part of success. Consider if you have existing customers who you can bring to your new salon, if you have a network of people who may become customers, or if you need to invest in marketing to bring in new clients. 

What Budget Do You Have to Open Your Salon?

Opening a salon requires a considerable budget, not just for the initial salon start up costs, but also for ongoing expenses. Consider what budget you have available to open and maintain your salon. This will help you determine where you can cut costs and where you need to invest. 

Is It Better to Rent or Own the Salon Property?

When it comes to the salon property, you should consider if it’s better to rent or own. Renting gives you the flexibility to leave if necessary, but you won’t have the same level of control or potential for long-term investments. Owning the property gives you more control and the potential to have a greater return in the future.

What Affects the Cost of Opening A Salon?

The cost of opening your own salon can vary greatly and is largely affected by several key factors such as:

• Size of the salon space. If you have a huge salon you plan to fill with equipment, the costs are going to be a lot higher for you than someone opening a simple barbershop only they’re going to work at. 
• Amenities. The amenities you choose to offer your clients will have an effect on the cost of opening your salon. If you choose to include items such as a spa, a nail or hair salon, or a massage room, the cost will be higher. 
• Quality of products and services. The type and quality of products and services you offer will affect the cost of opening a salon. Higher quality products and services will typically cost more. 
• Licensing and legal requirements. Depending on the type of salon you’re opening and the area where you’re operating, you may need to obtain certain licenses and permits (for example a cosmetology license). These can have associated fees that will add to the cost of opening a salon. 
• Marketing and advertising. You’ll need to invest in marketing and advertising to help promote your business and get customers in the door. This can involve costs associated with designing a website, creating promotional materials, and paying for digital and print advertisements. 

Is Opening a Salon a Good Idea?

The outlook for the salon industry is very promising for those considering opening a salon. According to the Bureau of Labor Statistics, the employment of hairdressers, hair stylists, and cosmetologists is projected to grow 11% from 2021 to 2031, which is faster than the average for many other occupations.

Attitudes toward personal appearance and wellness, as well as the trend of self-care, have all contributed to the expected increase in salon services over the next decade.

Overall, the salon industry is a great opportunity for those looking to start their own business or invest in a franchise opportunity. There is a large customer base and potential for strong returns given the industry's projected growth over the next few years.

How Do I Get Financing to Open a Salon?

Opening a salon can be a costly investment and you may need to look into financing options that are available. There are a few types of financing typically used to help someone finance a salon. These include:

• Bank loans. Loans from a bank are one of the most common sources of financing for salon owners. These loans for beauty salons are typically long-term, with competitive interest rates for those with good credit, and they generally offer higher loan amounts.
• Beauty salon loans from online lenders. Salon loans from online lenders could provide a convenient and accessible option for someone looking to finance the opening of a new salon, allowing them to secure funds quickly and easily without needing to go through a traditional bank. However, it's important to be aware of the risks associated with online lending, such as higher interest rates and fees, and to carefully consider all options before making a decision.
• SBA loans. Small-business loans from the Small Business Administration (SBA) may also be available, depending on your qualifications. These loans typically offer longer terms and agreeable interest rates, making them more attractive for salon owners.
• Business credit cards. Business credit cards may also be a viable option for business owners. They tend to offer generous credit limits and can provide more flexible repayment plans, but should only be used for short-term needs, as they have high interest rates. 
• Crowdfunding. Crowdfunding sites are becoming increasingly popular among business owners. This is where entrepreneurs turn to the public, seeking donations and investments to fund their projects.
• Angel Investors. Angel investors may also provide financing for a salon or business. These investors often provide financing in exchange for equity or an interest in the business.

Further reading - Useful Resources

Future business owners are often completely taken aback by the process of opening a business. In other words, it’s a lot. Here are a few resources to help you get started:

• Small Business Administration. The SBA provides information on loans, training, and other resources to help entrepreneurs launch and manage a salon.
• Make sure to check with your state's department of Business & Licensing for all the licensure requirements needed to open a salon. 
• SCORE. SCORE offers free and low-cost mentoring and workshops for entrepreneurs who wish to learn the business basics of starting a salon. 
• Local Chambers of Commerce and Community Development Corporations. Connect with local organizations to help you build relationships with the business community and potential customers. 
• National Aesthetics Alliance. The National Aesthetics Alliance offers webinars, educational resources, and networking opportunities to help salon owners stay abreast of the latest industry trends. 
• The Salon and Spa Professional Association. The Salon and Spa Professional Association provides support for salon owners, as well as industry discounts, newsletters, and events.

Final Word

Opening a salon can be a daunting task with many factors to consider. From choosing the right location to getting the proper permits, there are tons of important decisions to make. Financially, the costs involved in opening a salon can vary significantly based on factors like salon size and amenities. The expenses will include setting up the physical space, employee salaries, and other operational costs that include license fees, product costs, and maintaining a website.

Overall, there is no one-size-fits-all answer to the question of how much it costs to open a salon. The exact amount will depend on many factors and every entrepreneur must closely consider their individual business needs in order to determine the amount they must invest.