Opening a salon is the career end goal for many stylists. Passion, paired with an entrepreneurial spirit, drives stylists to forge their own path and try their hand at opening their own salon. According to GlobeNewswire, the salon market has a compound annual growth rate (CAGR) of 6% between 2020 and 2026. A CAGR measures, on average, how much an industry will grow, per year, over a period of multiple years.
Despite a promising growth rate, recent reports indicate that 80% of salons close within the first year and a half of operation. Often, salon owners may be caught off guard by various logistics and requirements. And with a quickly expanding market, if you’re not ahead, you might be falling behind.
Opening a salon is a dream come true. But if you want to keep that dream alive for years to come, it’s important to fully understand what exactly goes into opening a salon. If you’re thinking about starting a salon business, keep reading for nine steps to take to set yourself up for success in a saturated, competitive & rewarding industry.
Step 1: Obtain Applicable Licenses & Register Your Business
Before you jump into opening your salon business, you’re going to need some licenses to legally do so. Without obtaining the proper licenses, you could run into trouble down the road, and even risk having your salon shut down prematurely. At the very least, you’ll need to make sure your cosmetology license is active and up to date. Depending on where you live, you’ll also need a business license. Research regulations for your area to ensure you’re covering all of your bases.
Of course, if you’re going into the salon industry, you’ll need a license to prove you’ve received adequate training and are adept at what you do. More than likely, you already have a cosmetology license. If so, great! If not, you’ll need to enroll in cosmetology school to rack up enough hours to fulfill the requirements. Each state has different requirements regarding the hours needed to graduate from cosmetology school. After completing your course, you’ll apply for your permit and sit for an exam. Assuming you pass, you’ll be awarded a license, can start practicing and eventually open your own salon.
Next, it’s time to jump to the business side of things. Depending on your state, requirements will vary for which business licenses you need your salon. Then there’s the matter of registering your business.
According to the United States Small Business Administration, you may not need to register your business if you’re a sole proprietor operating under your own name. However, by not registering your business, you may forgo some legal benefits, tax benefits and personal liability protection.
If you choose to register your business with the federal government, you’ll need to file some paperwork to get a federal tax ID. If your business falls under the following categories, you’ll also need to register in any state you operate in and find a registered agent to help you out before you file:
- Limited-liability corporation (LLC)
- Nonprofit corporation
Step 2: Define Your Concept & Identify Relevant Niches
Have you thought about the nitty-gritty details of what you’d like to see from your salon? How does your salon fill a gap that exists in your industry? Defining your business’s concept will help you iron out these details and state the purpose of your endeavors, which consumer problems it will solve and how your salon will fit into the larger landscape of the salon industry. Need help defining your concept? Ask yourself the following questions:
- What is the purpose of my salon?
- What need am I trying to address?
- How does my salon provide a solution to this need?
- What is my business model?
- How will I generate revenue?
- Why is my salon unique?
- What are my competitors doing & how can I learn from them?
While brainstorming your concept, identify any relevant niches. Finding a niche in the salon industry could be the key to long-term success as you’ll attract new clients looking for a specific service. If your salon is one of the few in your local area that offers a service—like hair braiding, for example—you’ll find loyal clients who will be excited to find somewhere that has the service they desire. Then, while they’re in your salon, you can always upsell other products or salon services since they’re already willing to buy from you because you serve their niche.
If you don’t have a niche service or are struggling to think of one, consider how you can put a unique spin on an existing, more commonplace salon service to help it stand out from the competition. Perhaps you offer complimentary drinks or scalp massages during appointments. Maybe you focus on delivering a high-quality customer experience, offer free touch-ups or have a unique space that attracts customers. Identifying what you will do to separate yourself from competitors is vital to stand out in a saturated salon market.
This is also a great time to identify your ideal client so you keep them in mind throughout the planning process. Defining your ideal client at the beginning of the process will help you keep them top of mind when making certain decisions, like the vibe of your salon or who to target with marketing efforts. To determine your ideal client, create a buyer persona. A buyer persona is the embodiment of your ideal customer, informed by data & information, rather than assumptions.
Step 3: Draft a Business Plan & Determine Costs
Next, create a business plan before opening a salon. Business plans are essential in keeping your business on track and organized. Having one will help you set clear, attainable goals and will outline every aspect of your business for yourself and any potential investment opportunities down the road. By creating a comprehensive business plan, you’ll bring your vision to life and set a strong framework to build upon. You’ll also lay out KPIs (key performance indicators) and benchmarks to help you stay on track and monitor progress toward goals. Even if you’re the sole proprietor, or don’t plan to ask for financing, having this plan laid out will keep you on track. So, what should be included in this business plan?
- An executive summary
In an executive summary, outline the high-level details of your business. Here, write out your mission statement, who is involved in your company, what your business does and any potential growth plans. This should be short, as you’ll elaborate on these points later.
2. A company description
Describe the purpose of your salon business. Identify the market gap your salon fills in this section as well. Describe who your clients will be. Explain how your salon will stand out from others, whether it’s your prime location or a service unique to your business.
3. Market & competitor analysis
In this section, write about your findings after conducting market research. To conduct market analysis, identify your direct and indirect competitors and see what they’re doing. Note what your competitors’ strengths and weaknesses are. After you identify a competitor’s weakness, consider how you could turn that into a strength for your business after opening.
4. Organization and management
How will you structure your business? If you have any partners who will run your business with you, identify them here. If you have levels of seniority or staff, include those in this section.
Clearly lay out what services & products you offer at your salon. If you plan to release any products or apply for patents down the road, lay out your ideas for those here.
Any successful salon business will invest in a marketing strategy. So, ask yourself the following questions:
- What will your marketing efforts look like?
- How much do you want to spend on marketing?
- What do you hope to achieve with marketing?
If you’re not sure what goes into it, check out our comprehensive Marketing Guidebook which also provides a template for creating your very own marketing strategy.
7. Financial needs
If you’re planning on applying for loans or funding, you’ll want to identify your financial needs. Lay out why you’re requesting these finances and how you plan to use any money to accomplish your business goals.
8. Financial projections
After conducting market analysis, looking at your budget and setting your prices, you’ll want to provide a financial projection. This section is especially important if you’re looking to secure funding from any outside investors. This will show potential investors that your business will be stable and profitable.
Before completing your business plan, you’ll need to determine start-up costs to open. This will also tell you whether you should consider applying for an SBA loan or a microloan. When considering potential costs, take everything into account, like rent, payroll, inventory and various bills, as well as potential dips in business. Of course, you can’t predict the future, but it’s better to over-prepare rather than find yourself in an unprepared position.
Step 4: Pick Your Salon Location
Which factor plays the most important role in determining the success of a business? Location, location, location! A prime spot gets lots of foot traffic, features conveniences like parking and is far from direct competitors. Accessibility is so important when deciding where to set up shop. Even before opening, you want to set yourself up for success. If clients have to fight to find parking or have a long walk from the nearest bus stop to get to you, they’re less likely to choose your business. Avoid making it difficult for new customers to get to you. While a spot close to downtown may be more expensive, it’s also more likely to interest clients & spark interest in passers-by.
Step 5: Order Necessary Salon Equipment
Of course, to get started after opening a salon, you’ll need the proper salon equipment. After outlining your budget, decide how much you can afford to spend on this imperative start-up cost. Be sure to order the basics like chairs, basin sinks, hair products and any other items, like décor, that you may need to open your salon.
Don’t forget about business equipment that may not be directly salon related. You’ll need booking software to help you find clients so you hit the ground running once you’re officially open for business. Consider a booking software with features like payment processing, inventory tracking, reports & marketing tools. Vagaro is an excellent all-in-one salon software solution that makes opening and running your business easy. Learn more about what Vagaro can do for you to help you get started & succeed.
Step 6: Choose Staff Members
Unless you’re a solopreneur, you’ll want to hire some help after opening a salon. Or, if you start solo, you may consider hiring staff members down the road. Either way, you want to work with people you like and those who have similar values to you. After all, this is your salon. To achieve this, take a moment to consider what you’d like your company culture to look like. How do you want staff members to interact with clients and one another?
In interviews, ask culture-related questions about a candidate’s experience. Ask how candidates prefer to be managed. What is their communication style? Find out their values to see if they’re aligned with your salon’s values. Remember, you’ll be working closely with any hired staff and want to build a positive work environment where everyone feels supported, seen and is on the same page.
At Vagaro’s iconic.22 conference, Venus Williams spoke about how she leads her companies. “Work on the culture of your organization,” she said, “When you’re able to lead with culture, it takes out the guesswork.” You know your employees are invested in your vision and they know you’re invested in their growth. Set yourself and any employees up for success by establishing a strong, uplifting culture.
Step 7: Create a Service Menu
Clients won’t know what you offer at your salon if you don’t have a clear service menu. This should list each service your salon offers with clear pricing. If you have an online booking system, be sure to write a short blurb about each service. Since clients need information to book, you’ll want to be informative and answer any questions a prospective client may have about a service before they ask. Be clear and transparent about your pricing so there are no surprises.
If you’re curious about how to create an effective service menu, check out this article to learn more.
Step 8: Create a Salon Marketing Plan
Marketing will get the word out about your business both before & after opening your doors. As such, it’s imperative to invest time (and money) into creating a salon marketing plan. This plan will give you a blueprint for all your marketing efforts. While these plans can take a while to produce results, producing high-quality marketing materials can lead to success in the form of new business.
Lots of marketing tools, like social media accounts, are low-cost or free to start with and are a great way to get the marketing train rolling. Need some inspiration? Check out our article featuring 13 salon marketing tips. And if you’re ready to create the best salon marketing plan possible, download our comprehensive Marketing Guidebook that will walk you through the steps and tools needed to create an impactful marketing strategy for your salon.
What Else Should I Consider When Opening a Salon?
Before you begin your journey to becoming a salon owner, consider finding a mentor. Maybe it’s a local stylist you admire or someone you trained under. A mentor is a support system that understands what you’re going through while opening your salon and what you need to be successful. They can help acquire resources and offer guidance on how to achieve your goals. In fact, business owners are five times more likely to be successful if they have a mentor, according to SCORE, a volunteer mentor organization funded by the U.S. Small Business Association.
Sheila Head, a veteran salon owner spoke at Vagaro’s iconic.22 conference on how having a mentor helped her take her already thriving salon to the next level. Soon, she’ll achieve a longtime dream of releasing her own hair care products, which she credits to having a mentor. Learn more about Head’s experience here.
Use Vagaro to Help Open Your Salon
Vagaro helps business dreams come true. Whether you start solo or have a team, the software scales to meet your particular needs. Our model allows you to grow and design the best booking software your salon needs. Add the features you want, and none of the ones you don’t. Our à la carte model gives you full control over which tools your salon needs to succeed after opening. Looking for advice on how to get started? Check out this case study featuring a real Vagaro customer. Ready to take your salon business to the next level? Sign up for a free 30-day trial to discover everything Vagaro can do for you!
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Vagaro is a cloud-based scheduling software commonly used by beauty, fitness, and wellness businesses to manage booking, credit card payments and processing, marketing, payroll, inventory management, reporting, and much more.