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7 Steps to Start a Hair Salon Business

Photo: Unsplash

Like any brick-and-mortar business, opening a hair salon requires more than just hair-styling know-how and a passion for doing hair. You need to pick a solid location (in a high-traffic area), all the equipment and tools, a reliable team of trained stylists, and more than enough money to open your storefront.

If you’re buying an existing salon, expect to spend up to $250,000 on the building alone. If you plan to build the business entirely from scratch, expect it to be closer to a seven-figure investment. Owning a hair salon might seem stressful and difficult to build, but having a plan can help you go into it prepared, dramatically increasing your chances of success.

1. Consider the time commitment for opening your salon

Am I willing to work at my hair salon for the next 10 years? When you start a business, you’ll need to make several decisions. The first decision should be whether or not you truly want to devote the time, energy, and resources to make a business successful. According to the Bureau of Labor Statistics:

  • 20% of businesses fail within their first two years of operation.
  • 45% fail before they reach the five-year mark.
  • 65% fail before their 10-year anniversary.
  • By 15 years, three out of every four businesses have failed.

The six most cited reasons for this (according to Investopedia) revolve around location, poor planning, and financing. The first step to planning is evaluating your readiness for such an undertaking in the first place.

Especially in the case of a physical business like a hair salon, you’ll be fighting an uphill battle—and that means you need to accept the challenge ahead of time. Otherwise, you risk losing everything just because you lost interest.

2. Develop your salon business plan

If you’re committed to following your passion and seeing it through to the end, you can move on to the actual planning. A business plan is a comprehensive overview of how you plan to secure startup funding, monetize your service, find new customers, and grow. Writing a business plan is fairly similar in every industry; they all have the same basic components:

  • Executive summary: Explain the objective of your salon, how you plan to achieve it, and (in a few sentences) how the salon will be different from other salons.
  • Company overview: Outline your mission statement, the type of services offered, customer demographics, and other details about the business. Include the theme of your salon and how you expect it to look.
  • Market research and analysis: How many other salons are around you? How much does it cost to run those businesses? How do they find new customers? And what do they do to stay competitive? Answer all the questions you possibly can about the salons you want to compete with.
  • Organization and management: Determine what you need to manage your salon and how much that will cost. For example, you need to hire employees or find independent contractors, secure insurance, purchase hair salon scheduling software, and set up in-house policies. In this portion, you will also outline what kind of business you will start.
  • Financial plan: Figure out how much money you need to open the salon (and sustain it for the first few months) and what sources of financing you can tap into. According to research published by NerdWallet, the most common methods of financing a business are personal savings, credit cards, and small business loans from banks and credit unions. Given the high startup costs for a salon business, you’ll probably use a multitude of different methods.
  • Services and products: Describe the services you plan to offer and any additional products you will sell (hair care products or accessories).
  • Marketing strategy: Outline how you plan to attract new clients, such as advertising campaigns, word-of-mouth marketing, referral programs, etc.

Alternatively, you could enlist a professional business plan writer to help you make sense of all the information and ensure nothing falls through the cracks.

3. Set up your business

The best legal business structure for your salon depends on whether you decide to hire full-time stylists or rent booths to independent contractors. There are benefits to both.

  • Salon employees work on W-2s, and you are responsible for the payroll taxes associated with their employment. You’ll have greater profit-generating opportunities, but you will be on the hook for any employee-related issues.
  • Independent contractors are responsible for their own taxes and insurance. You only charge them booth rental fees for the space or a percentage of monthly sales. Working with independent contractors lowers your overhead cost and employee-related risk. However, your customers will follow independent contractors (who yield higher turnover rates) to their next rental booth, meaning your customer loyalty depends on the loyalty of your stylists.

4. Find a location

Location will either make or break your salon, especially in the beginning. Walk-ins are your opportunity to convert strangers into clients. When choosing a location, consider the following:

  • Proximity to other hair salons
  • Foot traffic
  • Building costs/rent
  • Safety of the surrounding area
  • Parking availability
  • Public transportation access

Areas with high foot traffic usually cost more to rent, but they are worth the investment if they enable you to charge more, attract more immediate customers, or extend your customer base.

5. Get the proper certifications, licenses, and permits

You don’t need a cosmetology license to open a salon unless you plan to deliver the services yourself. Your employees or independent contractors will. However, you do need the following:

  • Business license to legally operate the business
  • Employer Identification Number (EIN) for federal income tax reporting purposes
  • Sales tax permit if you plan to sell retail items
  • Certificate of occupancy, which is issued by the local government to certify your salon meets all the minimum fire and building codes
  • Building permit may be needed if you are doing any remodeling
  • Health permit to demonstrate compliance with sanitation codes

6. Secure financing for your salon

A good rule is to have enough funds saved for the first six months of business expenses. This way, you’ll have wiggle room in the event of an unexpected cost. For a new hair salon owner, that means having tens or hundreds of thousands of dollars saved. Most first-time business owners aren’t eligible for bank loans without being in business for a full year, but there are alternative business financing options. These include:

  • Family members
  • Angel investors
  • Crowdfunding
  • Small business grants
  • Peer-to-peer loans
  • Business credit cards
  • Invoice factoring

Taking out a loan on your home or using any other kind of personal collateral should be done as a last resort.

7. Set up and start doing business

Once you have your financing, location, and business plan squared away, you can finally run a successful hair salon business. This stage will look different depending on how you want to structure and market your business, but it will typically involve:

  • Promoting yourself on Snapchat, TikTok, and other social media
  • Networking in person and building your brand locally
  • Attracting talented stylists
  • Ensure that your business feels professional by using things like employee badges. Remember you can outsource employee ID badge printing to guarantee quality.
  • Creating a comprehensive salon menu
  • Advertising your services
  • Hiring front desk staff
  • Organizing and decorating the salon
  • Setting up a cohesive online presence with a website, booking calendar, and payment system.

Endnote

A hair salon is definitely not the lowest-cost business to start, nor is it the easiest. However, if you love to cut hair and want to build a business around it, the reward will be worth the effort. Carefully consider whether business ownership is something you’re willing to commit to. If it is, focus on setting it up, then focus on organic growth through networking, word-of-mouth, promotion, and SEO services.

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About Lilach Bullock


Hi, I’m Lilach, a serial entrepreneur! I’ve spent the last 2 decades starting, building, running, and selling businesses in a range of niches. I’ve also used all that knowledge to help hundreds of business owners level up and scale their businesses beyond their beliefs and expectations.

I’ve written content for authority publications like Forbes, Huffington Post, Inc, Twitter, Social Media Examiner and 100’s other publications and my proudest achievement, won a Global Women Champions Award for outstanding contributions and leadership in business.

My biggest passion is sharing knowledge and actionable information with other business owners. I created this website to share my favorite tools, resources, events, tips, and tricks with entrepreneurs, solopreneurs, small business owners, and startups. Digital marketing knowledge should be accessible to all, so browse through and feel free to get in touch if you can’t find what you’re looking for!

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