When you’re running your own hair salon, there are a lot of things to do. Just keeping your staff and customers happy can take up most of your time.
But a hair salon is a business, after all, so making a good profit is at the top of your priority list. It’s what will keep your business running, and without a good profit, you don’t have the funds to invest in better equipment and training so you can stay ahead of the competition.
Hair Salon Revenue
In the United States, there are about 875,000 hair salons with a total annual revenue of about $47 billion. Revenue refers to the total amount of money made by a salon from providing services and selling products.
Considering the figures above, the average revenue for a hair salon is $53,714, but it varies depending on location, size, popularity, and pricing.
If your goal is to make your hair salon more profitable, you have to increase revenue or reduce overhead costs. We recommend you focus your efforts on increasing revenue. Cutting costs may be effective in the short term, but long term, it can have a detrimental impact on the quality of your services and reputation, resulting in a reduction in revenue.
Hair Salon Costs
Running a hair salon, much like any other business, comes with fixed and variable costs. Fixed costs are those that remain constant month after month regardless of how many clients you have. Rent is an example of fixed costs. Variable costs are those that increase or decrease depending on how many clients you have. Supplies are an example of variable costs.
If you’re thinking of opening a hair salon, it can take a few months or more than a year to start making a profit since you will need to buy equipment and pay for licenses, permits, and a security deposit on the rented space.
After that, about half of your revenue will go on paying your staff. Then you’ll also have rent, supplies, training, marketing, and insurance. According to Insuranks, hair salons need general liability insurance, property damage coverage, and workers compensation.
Profit Margin
The average profit margin of a hair salon is 8.2% which is higher than the 7.7% average for all businesses. The profit margin is the money left after you deduct your expenses from your revenue. It can be very high or very low, depending on how you run your salon.
As we mentioned before, the best way to improve it is by increasing revenue, and the best way to increase revenue for hair salons is to sell more retail products.
Treatments and services may be what attracts customers and account for the majority of sales, but it’s usually the retail products that will have the highest profit margins –as high as 50%.
And it makes sense because the sales you make from services are limited by the size of your salon, the number of employees you have, and the number of hours they work. In contrast, the number of products you can sell is not limited. Plus, most of your customers already buy haircare products, and they’ll be interested in what professionals use.