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Is Salon a profitable business?

POSTED BY Sophie Jobs

Salon Business

Yes, the Salon business is profitable! 

Denying the fact that it is a highly profitable industry these days would not be an ideal statement! 

In this modern world, the beauty and wellness industry is adopted by almost every other person. 

Why? There is a reason behind it!

My research says that it gives stress-relieving solutions to today’s hectic lifestyle. The stylists, beauticians, and professionals of Salon advise their customers on the skin, hair care that propels customers’ interest and gives rise to business growth. 

When I researched, it was found that the global Salon market was approximately 144.48 Billion in 2019.  And believingly, it will rise to 6% and will touch 217.25 Billion by 2026.

Considering Salon employment– the barbers, hairdressers,  cosmetologists, and hairdressers will experience a growth of 7% till 2028 compared to 2018. The contribution of haircutting and styling is 45% approximately of the beauty business revenue. Whereas hair coloring and tinting have a contribution of 17.1%.

The above figure confirms that owning a Salon business is assuredly a worthy investment. However, to make you more convinced, I will uncover all the important aspects related to it! From the startup cost to revenue, and profit margin, everything will be explained. Let’s find out!

Beauty Business Startup Costs

#1. The premises

When you are just starting up, and working on the premises, then, its spending may go from $100,000 to $500,000. But, there are several factors on which the cost is dependent, that includes, location, size, and the state of the premises. However, if the salon is already in the operating stage, then, there is a spending of around 40,000 to $250,000. 

#2. The Equipment

In simple terms, the cost depends on the budget you have to invest in. When it is about the equipment, then, it will cost you approximately  $27,000. This range has everything, such as hood dryers, scissors, clippers, etc.  Additionally, you can pick different stylist stations with chairs as per your budget. The market price can be US$1,000 or US$200. 

What is the Revenue rate of the Salon Business?

Salon’s came under the slab for revenue of $245,000. Annually, the US itself has noticed a revenue of $63 billion in almost 257,000 Spas and Salons.

Are you aware of the term “revenue”? Dear Folks, it is the number of Sales closed by the Salon.  Sales of retail products and salon services are included in it. Running a promising Salon business without underlying revenue is not acceptable. 

While starting as a salon owner, the prime objective has to be to generate profit, build a sustainable, beneficial, and long-lasting business.  Here, our concern is not towards selling more products or services, you need to work on the additional ways to enhance the Salon earnings, such as Profit Margin, Service Pricing, Salon Retail Sales Percentage, etc.

What should be the Profit Margin of the beauty business?

The beauticians and stylists have confirmed that 8.2% is the approximate profit margin that allows the Salons to yield $19,100 as profit annually. 

If the sales of your Salon is $100,000/year, then 10% is the profit margin accordingly. This implies there is the disbursement of $90,000/year on paying rent, salaries, insurances, education, marketing, products, etc.

What is the strategy to control the Salon profit margin?

Profit Margin of the beauty business

Definitely, there are several tips to manage Salon’s profit margin. Raising or reducing the price, selling extra services or products, etc. How? Read on:

Are you following an accurate cost structure of salon services?

First thing first, increase the price range of your Salon services. Let’s say, your plans are already covering the cost of your services. So, if you raise the service cost by 1$ then, it will enhance the profit rate. Hence, it is essential that you are spending enough time to understand the service charges before losing potential customers.

Do not be shy when it is about increasing the rate. Usually, the irrational thoughts do not let the owner notify customers regarding higher rates, are you one of those? If you ask us- do not follow it! Believe in your doings and simply do not leave the money on your desk! However, do not be crazy also! Just increasing the pricing is not the right approach, provide the services with more enthusiasm. 

Eventually, the prices you are setting in the market are what will reveal the assessment of your profit. A sound way to estimate cost is to divide the price you set per service by the time it consumes for completing it. With it, you will get a ratio and a benchmark on the services to know if the prices are low or high.

What is the percentage of low-cost and high-cost products or services you are selling? 

With the visibility on the profitability of the service, you can enhance the Salon productivity with promotions and concentrate on pushing higher-margin products. In addition to this, work in Salon retailing as well. Certainly, with retail selling, achieving a higher rate of profit is probable.

What about the approximate margin on Salon retail?

 According to research I conducted, it is 50% of highly sold salon products. With selling more retail, negotiation is possible with the supplier.  This is more than salon services because the time you need for retail is only a few minutes more than the Salon service, which usually endures 30 to 90 minutes.

Though, the percentage margin is not that essential. Emphasize the cash you are observing on selling the products. There are products that have less profit margin, however, when the product is costly, then, you will receive more profit on the sold products.  It is an ideal way to keep inexpensive products in the assortment.

How to define the Salon retail sales percentage?

12% is the approximate Salon retail percent. Besides, the salons with more profitability hold 15% to 20% of the sales from retail. Even though some salons are noticing 30% to 40% of the sales and are enjoying more margin on Salon profit.

Is your Salon Cost in Control?

Is your Salon Cost in Control

Salon businesses cannot have a fixed cost, it can vary as well. The fixed one remains the same each month despite the customers you are locking. On the other hand, the variable is the one that exceeds when sales increase and lowers with the decrease of the sale.

Fundamentally, the cost has to be fixed rather than varied. This is because it will give chances of risks when there are fewer sales.  In addition to that, neglecting the salaries of staff members is not the right approach. Approximately, for Salon sales, your staff is 48% to 55% responsible. Moreover, there are products, insurances, marketing, education, equipment, rent, etc. Each of these is vital for salon success, but, you need to have transparency on their cost to know if there is any change or is there any option of less cost available. 

Who should be the target market of the Salon business?

target market of the Salon business

The beauty business target market has:

  • Young customers of age from 15 to 25.
  • Professional customers of age 26 to 55.
  • Senior customers from the age of 56 and older.

Of course, the customers of age 34 to 45 make their visits on a regular basis to salons. Accordingly, you can work on any of these age groups considering the marketing aspect. Choosing the one will be your part of your niche when you are performing it uniquely and positively to stay ahead in the competitive market. 

What more you can do is; find what age group your competitors are approaching. Considering so, you can concentrate on serving others other than that age and define that as your niche. Also, you can serve other less-served target market segments in your location.

How can the earning potential be defined?

I already mentioned above that $19,100/ year is the approximate salon net profit.  It is the amount that is gained when every debt and expenditure is computed from the total revenue.   However, the total earning Salon potential relies on:

Your efforts in marketing

  • resources you are using, like, newspaper, radio, word-of-mouth, social media, etc.
  • how regularly you are marketing on these marketing channels,
  • knowing if the marketing practices are approaching the customers or not.

The prices of your services or products

  • find the approximate amount of each selling service.
  • Charge more or less according to the customer’s preference and how the staff is performing.

How usual the customers are visiting the salon for requesting services

  • Many customers may require hair-do touch-ups on a weekly basis
  • Few customers require the hair-do to be done on a monthly basis
  • And, there are some who prefer doing so on special events only

What are the profitable marketing strategies for the beauty business?

When your business is set up, then, you have to implement below of the marketing tricks for Salon business promotion:

  • Update or promote the brand name on different social media channels.
  • Create loyalty programs or rewards systems or compelling packages
  • Provides offers and discounts to customers
  • Establish partnerships with other salons
  • Get Reviews from customers for the services provided, etc. 

Concluding Remarks

There are many do’s and don’ts while thinking about investing in the Salon business. Do not take it for granted, because it is an expensive process, so be careful while spending time and money. However, it is sure that when everything is done with the right approach then, no one can stop you to achieve the heights of success.

I highly recommend you use the Salon booking system to streamline the day-to-day functioning of Salon activities. There are many solutions available in the market. You can choose the one that you think fits your budget. Salonist software is one of our choices. It includes the features, pricing plans as per the business size your salon has. 

However, with this article, I have tried to cover the major aspects you might be thinking about. So, get your hands on it and share your experience with us. Thanks for reading!