Data provided here comes from our team of experts who have been working on business plan for a hair salon business. Furthermore, an industry specialist has reviewed and approved the final article.
Are hair salon businesses profitable, and what is the income range for owners in this industry?Let's check together.
Revenue metrics of a hair salon business
How does a hair salon business makes money?
A hair salon makes money by charging customers for services and products.
What do hair salon businesses sell?
Hair salon businesses primarily sell a range of hair care and styling services to customers.
These services typically include haircuts for various lengths and styles, hair coloring and highlighting treatments, hair extensions, perms, and hair straightening or smoothing treatments.
Additionally, they may offer specialized services such as bridal or special occasion styling, beard trims for men, and treatments for addressing specific hair or scalp concerns. Apart from services, hair salons often sell a variety of hair care and styling products, such as shampoos, conditioners, styling gels, hair sprays, and hair accessories.
These products are intended to help customers maintain and style their hair between salon visits. Some hair salons also provide beauty services like eyebrow shaping and waxing.
What about the prices?
A hair salon offers a variety of services, each with its own price range.
Haircuts usually range from $15 to $80 or more, depending on the complexity and expertise of the stylist. Hair coloring services, including highlights, balayage, and full color, can range from $50 to $200 or higher, depending on the technique and length of hair. Styling services like blowouts and updos typically range from $30 to $70.
Hair treatments for conditioning, repair, and nourishment can cost anywhere from $20 to $100. Perms and texture services might be priced between $60 and $150. Extensions, such as clip-ins, tape-ins, or fusion extensions, can range from $100 to $500 or more, depending on the type and quantity.
Specialized services like keratin treatments for smoothing hair may range from $100 to $300.
| Service | Price Range ($) |
|---|---|
| Haircut | $15 - $80+ |
| Hair Coloring | $50 - $200+ |
| Styling (Blowout, Updo) | $30 - $70 |
| Hair Treatment | $20 - $100 |
| Perms / Texture | $60 - $150 |
| Extensions | $100 - $500+ |
| Keratin Treatment | $100 - $300 |
Who are the customers of a hair salon business?
Hair salons cater to a variety of customer types, ranging from those seeking a simple trim to those looking for more specialized services.
Which segments?
We've been working on many business plans for this sector. Here are the usual customer categories.
| Customer Segment | Description | Preferences | How to Find Them |
|---|---|---|---|
| Newcomers | Individuals new to the area or salon experience. | Open to trying new styles, may need guidance. | Local advertising, online promotions, community events. |
| Regulars | Loyal customers who visit the salon frequently. | Consistent maintenance of current style. | Membership programs, loyalty discounts, personalized offers. |
| Trendsetters | Fashion-forward individuals seeking the latest trends. | Interested in unique and edgy hairstyles. | Social media platforms, fashion shows, partnerships with influencers. |
| Event-Goers | Customers preparing for special occasions (weddings, parties). | Elegant and formal styles. | Collaboration with event planners, bridal expos, targeted ads. |
| Seniors | Elderly individuals looking for classic and manageable styles. | Easy-to-maintain and comfortable hairstyles. | Senior community centers, local newspapers, senior-oriented websites. |
How much they spend?
In our detailed assessment of the revenue structure, we find that clients generally spend between $50 to $100 for a single visit to a hair salon. These figures account for various services including haircuts, coloring, treatments, and other possible beauty services.
Regular customers tend to visit a hair salon around 4 to 8 times a year, depending on their personal grooming habits, hair type, and the need for professional hair services. Some may schedule visits more frequently, while others come in less often, especially for special occasions or style maintenance.
Calculating the lifetime value of an average salon customer, we estimate it to be from $200 (4x$50) to $800 (8x$100), based on their annual visits. This range considers both the clients who opt for basic services and those who indulge in premium offerings.
With a balanced view, it's reasonable to conclude that, on average, a single customer would contribute approximately $500 in revenue per year to a hair salon. This estimation acknowledges the variations in customer preferences and spending behaviors.
(Disclaimer: the figures provided above are generalized averages and may vary significantly based on the particular dynamics and demographic factors influencing your specific business environment.)
Which type(s) of customer(s) to target?
It's something to have in mind when you're writing the business plan for your hair salon business.
The most profitable customers for a hair salon business are often those in the "high-income professionals" profile.
They tend to be the most profitable because they prioritize self-care, have higher disposable incomes, and regularly invest in hair services.
To target and attract them, a salon can advertise in upscale neighborhoods, partner with nearby businesses to cross-promote, and offer premium services tailored to their specific needs and preferences. Providing a luxurious salon environment with personalized consultations and top-notch products can also appeal to this group.
To retain these profitable clients, it's essential to maintain a consistent level of service quality, offer loyalty programs, send personalized reminders for appointments, and keep communication channels open for feedback and recommendations. Building lasting relationships through excellent customer service is key to ensuring their continued loyalty and business.
What is the average revenue of a hair salon?
The average monthly revenue for a hair salon can range significantly, typically falling between $1,000 and $10,000, based on various factors such as location, services offered, and the clientele's purchasing power. Here's a more detailed breakdown.
You can also estimate your own revenue by considering different scenarios with our financial plan for a hair salon business.
Case 1: A simple hair salon in a small town
Average monthly revenue: $1,000
This type of hair salon often operates in a small town and provides basic hairdressing services without the frills of upscale establishments. The customer base might be limited due to the population in the area, and the average spend per visit is generally lower.
Services are usually restricted to haircuts, hair washing, and perhaps simple styling. Because of its limited market and lack of high-priced treatments like coloring, extensions, or sophisticated hair treatments, revenue remains comparatively low.
Assuming an average service fee of $10 and around 100 appointments in a month, the expected monthly revenue for such a hair salon would be approximately $1,000.
Case 2: A standard hair salon in an urban area
Average monthly revenue: $10,000
Located in a busier urban environment, this hair salon attracts a higher number of customers and can offer more diverse services. It stands apart from small-town salons by providing more comprehensive services, including sophisticated haircuts, coloring, styling, and various treatments, appealing to a broader demographic.
The salon might also sell professional hair products, further enhancing their revenue. Additionally, the urban setting allows for walk-in clients beyond the regular customer base.
With a wider array of services, prices per service might average around $50. If the salon serves roughly 200 clients per month, it would generate about $10,000 in monthly revenue.
Case 3: A high-end boutique salon in a metropolitan area
Average monthly revenue: $30,000
This category represents the crème de la crème of hair salons, often situated in affluent metropolitan areas. These salons offer a luxurious experience and a wide range of high-end services performed by industry-leading professionals. Here, clients can indulge in advanced hair treatments, premium coloring, stylish cuts, and purchase luxury hair care products.
Beyond hair services, these establishments might also provide additional pampering treatments, such as massages or facials, broadening their revenue streams. The prestigious location and high-quality service allow for charging premium prices.
Given the upscale offerings and client experience, the average service charge could be around $150 or more. If such a salon serves approximately 200 clients per month, monthly revenue could soar to $30,000 or higher, depending on product sales and additional offered services.
In conclusion, a hair salon's revenue depends significantly on its location, the range of services it provides, and its target market's characteristics. Tailoring the business model to the clientele and continuously adapting to market trends can drive a salon's financial success.
The profitability metrics of a hair salon business
What are the expenses of a hair salon business?
Hair salon business expenses include hair care products, salon equipment, rent or lease fees for the salon, staff wages, and marketing efforts.
| Category | Examples of Expenses | Average Monthly Cost (Range in $) | Tips to Reduce Expenses |
|---|---|---|---|
| Rent/Lease | Salon space rent/lease | $1,500 - $5,000 | Negotiate lease terms and consider sharing space. |
| Utilities | Electricity, water, gas, internet | $100 - $300 | Optimize energy usage and choose cost-effective plans. |
| Salon Supplies | Haircare products, styling tools, towels | $500 - $1,500 | Buy supplies in bulk and look for wholesale discounts. |
| Insurance | Liability insurance, property insurance | $100 - $300 | Shop around for insurance quotes to get the best rates. |
| Salon Equipment | Chairs, hairdryers, mirrors | $200 - $800 | Consider used or refurbished equipment to save money. |
| Marketing | Advertising, website maintenance | $200 - $500 | Focus on cost-effective digital marketing strategies. |
| Licenses and Permits | Salon license, business permits | $50 - $200 | Ensure compliance to avoid fines and penalties. |
| Employee Wages | Stylist salaries, commission | $2,000 - $10,000 | Manage staffing levels efficiently and consider performance-based pay. |
| Taxes | Income, property, and sales taxes | Varies based on income | Consult with a tax professional to maximize deductions. |
| Maintenance | Repairs, cleaning, upkeep | $100 - $300 | Schedule regular maintenance to prevent costly repairs. |
| Software and Technology | Appointment booking software, POS system | $50 - $200 | Choose affordable software solutions that meet your needs. |
| Training and Education | Stylist training, workshops | $100 - $500 | Invest in ongoing education to retain skilled staff. |
When is a a hair salon business profitable?
The breakevenpoint
A hair salon becomes profitable when its total revenue exceeds its total fixed costs.
In simpler terms, it starts making a profit when the money it earns from haircuts, styling, coloring, and other services becomes greater than the expenses it incurs for rent, salon equipment, salaries, and other operating costs.
This means that the hair salon has reached a point where it covers all its fixed expenses and starts generating income; we call it the breakeven point.
Consider an example of a hair salon where the monthly fixed costs typically amount to approximately $10,000.
A rough estimate for the breakeven point of a hair salon would then be around $10,000 (since it's the total fixed cost to cover), or between 100 and 250 clients paying for services ranging from $40 to $100.
You have to know that this indicator can vary widely depending on factors such as location, size, service fees, operational costs, and competition. A large, luxurious salon would obviously have a higher breakeven point than a small salon that does not need much revenue to cover their expenses.
Curious about the profitability of your hair salon? Try out our user-friendly financial plan crafted for hair salons. Simply input your own assumptions, and it will help you calculate the amount you need to earn in order to run a profitable business.
Biggest threats to profitability
The primary threats to a hair salon's profitability are often high overhead costs, like rent and staff wages, which can cut into earnings significantly.
Reduced customer demand due to economic downturns or shifting fashion trends can lead to fewer appointments and lower revenue.
Fierce competition with neighboring salons can make it challenging to attract and retain clients, potentially impacting profits.
Rising expenses for haircare products and tools can shrink profit margins, while maintaining and updating equipment can be costly.
Managing staff turnover and ensuring a skilled and motivated team can be an ongoing challenge.
External factors, such as health crises like a pandemic, can disrupt operations and reduce customer traffic, further affecting profitability.
These threats are often included in the SWOT analysis for a hair salon business.
What are the margins of a hair salon?
Gross margins and net margins are financial metrics used to gauge the profitability of a hair salon business.
Gross margin reflects the difference between the revenue gleaned from hairdressing services, sales of hair products, and other related services, and the direct costs tied to rendering those services.
Essentially, it's the profit remaining after subtracting the costs directly tied to providing the salon's services, such as hair products, staff wages, and utility bills for the salon space.
Net margin, conversely, accounts for all expenses the salon incurs, including indirect costs like administrative expenses, advertising, rent, and taxes.
Net margin delivers a more comprehensive view of the salon's profitability, encompassing both direct and indirect costs.
Gross margins
Typically, hair salons can expect an average gross margin in the range of 50% to 70%.
For instance, if your salon generates $20,000 per month, your gross profit might be approximately 60% x $20,000 = $12,000.
Let's illustrate with an example.
Consider a salon with a steady clientele, each paying an average of $100 for services. With 200 service appointments in a month, the total revenue would be $20,000.
However, the salon experiences costs for hair products, utilities, and staff wages.
Assuming these costs sum up to $8,000, the salon's gross profit would be $20,000 - $8,000 = $12,000.
Here, the gross margin for the salon would calculate as $12,000 / $20,000 = 60%.
Net margins
Hair salons generally see an average net margin ranging from 8% to 25%.
Simply put, if your salon brings in $20,000 per month, your net profit might hover around $3,000, equating to 15% of the total revenue.
We'll use consistent numbers for clarity.
Let's stick with our salon's 200 service appointments, each garnering $100, for a total revenue of $20,000.
The direct costs, as previously stated, come to $8,000.
Beyond that, the salon shoulders various indirect costs such as marketing efforts, insurance, accounting services, taxes, and rental fees. Suppose these indirect expenses total $9,000.
Subtracting both direct and indirect costs, the salon's net profit is $20,000 - $8,000 - $9,000 = $3,000.
Thus, the net margin for the salon would be $3,000 divided by $20,000, resulting in 15%.
As a proprietor, comprehending that the net margin (as opposed to the gross margin) offers a clearer insight into the actual earnings of your hair salon is crucial, as it factors in the entirety of costs and expenditures involved.
At the end, how much can you make as a hair salon owner?
Now you understand that the net margin is the indicator to look at to know whether your hair salon is profitable. Essentially, it tells you how much money is left after you have paid all the expenses.
The amount you will make depends largely on your execution, business strategies, and customer satisfaction.
Struggling hair salon owner
Makes $800 per month
If you start a small salon, perhaps in an unfavorable location, skimp on salon upkeep, use lower-quality products, or fail to engage sufficiently with customers, your total revenue might not exceed $4,000 a month.
If you're not keeping a close eye on expenses, perhaps due to high product costs, poor inventory management, or oversized staff, your net margin might not go above 20%.
Simply put, under these conditions, your monthly earnings would be around $800 (20% of $4,000).
As a salon owner, this represents the financial challenge of a start-up not yet finding its market fit or a business in need of a new strategy.
Average hair salon owner
Makes $6,000 per month
If you're operating a well-maintained salon in a decent neighborhood, offering a variety of services like haircuts, coloring, and styling, you might be making up to $25,000 in revenue.
Assuming you're keeping expenses under control by negotiating with suppliers for better prices and efficiently managing staff and utility costs, you could be looking at a net margin of around 30%.
This means your monthly take-home could be around $6,000 (30% of $20,000).
Exceptional hair salon owner
Makes $30,000 per month
If you're dedicated to providing superior experiences, perhaps your salon is in a prime location, offers luxurious services, uses top-of-the-line products, and employs highly skilled staff. You might even offer complimentary services, loyalty programs, and engage in savvy marketing. With this approach, your revenue could soar to $100,000 a month.
By strategically managing expenses, utilizing efficient inventory systems, and retaining top talent without oversized staffing, you could achieve a net margin of up to 40%.
For the high-achieving salon owner, this translates to about $40,000 in monthly earnings (40% of $100,000).
Success like this isn’t beyond reach! If you aspire to operate at this level, it all starts with a comprehensive, well-thought-out business plan for your salon, and a commitment to customer satisfaction and continuous improvement.