There are so many aspects to running and opening a successful salon business, and as a salon owner, you’re responsible for everything — especially the financial aspects. Handling finances can be one of the most challenging parts of owning and operating a business. Like every other business, salons have operating expenses, overhead costs, talent and client acquisition costs and more. Not only that, but salons also require a lot of upfront investment to ensure they are fully stocked with the salon supplies stylists use and high-quality salon equipment.
Aside from managing the everyday costs and financial aspects of your salon, business owners may also have financial goals for the long run like saving for a renovation, investing in new equipment or being able to reach an income milestone.
Whether you feel like finances are your least favorite part of operating a salon and you want to become better versed in them or you are looking toward the long game and want to start saving for new business opportunities, we will show you how.
We have created a guide that breaks down the important aspects and must-know lessons that will help you create a financial strategy like a boss, as well as help you to feel more balanced and on top of things.
Expected Costs to Run and Operate a Salon
There are yearly, monthly and daily costs you can expect to incur as you operate your salon. We have outlined some of the operating costs that should always be top of mind.
- Salon Loans and Interest – If you’re opening a salon or you are in your early years of salon ownership, you probably have a few loans that you are paying on. Using salon equipment financing is smart if you need to invest a lot of money into equipment and tools. Salon loan payments and interest are monthly expenses you should plan to have.
- Scheduling and Booking Software – Every salon needs software to help manage bookings and schedules. Depending on the software, you could pay upfront for a yearly subscription or monthly.
- Insurance and Licenses – Salons need insurance and licenses to operate. While licenses may be paid for and renewed yearly, insurance plans are typically monthly expenses.
- Talent Costs – Acquiring talent and paying them is a big overhead cost that you will always need to take into account for weekly expenses.
- Salon Space Rental or Mortgage – Whether you own your salon or you’re renting, always make sure to factor in costs to occupy your space.
- Digital Products – Aside from the costs that occur within your physical space, you also need to factor in the costs of your website, social media presence and domain.
- Products – While you will absolutely make a return on investment with your retail products, you will have to put up the funds to stock your shelves. You will also need to make sure your inventory is healthy so that stylists always have the products they need to offer incredible service.
- Equipment Investments and Upkeep – Whether you’re investing in all new equipment or you are upgrading salon chairs to give your space a facelift, salon equipment costs should always be top of mind.
Financial Planning Tips for Salons
Now, let’s talk about strategies you can use to keep yourself ahead of finances, as well as ways that you can handle finances to increase profit, build savings and position your salon to reach financial milestones that are important to you.
- Set a Budget Every Year and Review It Every Month – At the beginning of every year, you should set a budget and business plan that includes all of your overhead and operating costs and outlines in detail your financial goals for the year. Whether your financial goals are to reach a certain revenue number or to have enough money at the end of the year to renovate your salon, it’s important to get specific. At the beginning of every month, you should carve out time to review your budget and make sure you are on track to reach your goals.
- Get a Financial Advisor – If you would feel more comfortable having a professional assist you with budgeting or finances, you can hire an advisor. This will not only give you peace of mind, but advisors can also help identify areas of your business that are ripe for growth, as well as helping you choose where you can save costs.
- Evaluate Your Pricing Regularly – Whether you’re constantly adding new services or your offerings stay the same, it’s a great idea to evaluate your prices regularly. You can do this by conducting a market analysis to see what other salons around you are charging and gathering feedback from clients to see what they are comfortable paying. Making this a regular practice ensures that your salon is staying competitive and also taking advantage of new revenue opportunities.
- Get Serious About Payroll Practices – How do you compensate your people? Today, your employees have so many opportunities and options when it comes to finding work at different salons. In order to keep your employees happy, you should take your payroll practices into consideration when it comes to evaluating and handling finances. Whether you invest in payroll software or you have hired people to manage the process, make sure you have set your salon’s finances up in a way that allows you to consistently pay your employees on time with little hiccups.
- Create a Savings Account – It’s inevitable that you may incur surprise expenses and costs as the year plays out, which is why it’s important to be prepared with a savings account. Who knows when you may need to complete a repair or purchase new equipment? A savings account can not only help your salon adapt to any challenge quickly, but it can also help you achieve your long-term goals and improve your salon.
We know that financial planning can be a frustrating and difficult challenge for salon owners, but this is one of the most important aspects of your business. We hope you can use these strategies to help you feel more confident when it comes to financial planning.
