November 14, 2019

Costs Of Opening A Salon That Will Thrive in 2020

Costs Of Opening A Salon

Opening a salon for the first time can be one of the most exciting adventures of your life. You will have full control over the direction you take and how you run your business. But with this opportunity comes a huge amount of responsibility.

Running a salon is hard work. While you might get into the business because you are a creative soul, your creativity might need to take a backseat to the business planning side every now and then. Your salon will struggle to thrive and you will make expensive mistakes if you don’t take the time to learn how to run a business.

Many salon owners will make the leap into running their own site after running a mobile business. This can be a great place to start as you will acquire a lot of skills along the way. But remember, running a salon is a lot more difficult than running a mobile business. There will be new expenses to consider and keeping an eye on your profit margins will be essential.

When you are running a mobile business, a slow month isn’t a huge disaster because you don’t have as many outgoing expenses. When you run a salon, you need consistent income or you could quickly fall behind with your payments. 

You don’t have to be an accountant to run a successful salon business. But you do need to learn how to keep an eye on your finances. Read on to discover our tips for running a successful and thriving salon business in 2020.

Calculate your break-even amount

Before you do anything, you need to know the minimum operating costs every month. Your break even figure is the amount you need to earn to be able to pay all of your monthly expenses. This might vary throughout the year. Some expenses might be monthly while others are quarterly or annual.

To find out your monthly operating costs, make a note of the following expenses:

  • Rent
  • Business rates
  • Insurance
  • Heating/ electricity
  • Water bills
  • Product wholesale costs
  • Your salary
  • Staff costs
  • Cleaning
  • Accountant fees
  • Salon booking software
  • Loan repayments
  • Refreshments
  • Advertising

Once you have a final monthly amount for these expenses, you will then need to calculate how many customers you need every month to break even.

For example, if your total monthly expenses will be £2,490 and you charge an average of £30 per treatment, you will need at least 83 customers per month to break even.

Your break even should be the absolute minimum amount that you aim for every month. If you think you will struggle to reach this amount, then you will need to try the following:

Option 1: Reduce your expenses

Can you use cheaper products without compromising on quality? Could you do your own cleaning to help save money? Could you delay hiring another member of staff until you are more financially secure?

Look for ways to save money on your monthly expenses and you will be able to reduce your break even amount.

Option 2: Charge more for your services

Can you justify increasing your prices? If you are basing your prices on your mobile salon price list, you could consider a small bump in price for your treatments.

For example, if your monthly costs are £2,490 and you increase your prices from £30 per treatment to £35 per treatment, you would need 72 customers per month to break even instead of 83.

Charging more for your services can be a great way to increase your profits. But you have to consider if your current customers will be willing to pay more for your services. Location will often play a key part in your pricing strategy. If you are in a popular area, you could consider increasing your prices. And if you offer a service that no one else in the area offers, you could consider charging a little more.

Put aside some extra money for unexpected costs

So far we’ve looked at the monthly expenses which you can expect every month. But what about emergencies? Putting aside a little extra money for emergencies can help your business to thrive. Here’s why.

Imagine you arrive at work one morning and the plug sockets in your salon don’t work. You know you have to call an electrician to fix the fault, but you don’t have any spare money at the moment. You have to cancel your appointments for the rest of the week until you can get the money to pay an electrician.

If you had set aside some money for these unexpected expenses, then you could have called an emergency electrician the same morning and continued trading as normal. While putting aside some money can seem like an added expense, it can save you money in the long term. You might never need this money, but if you do, it could save your business.

How many clients can you expect?

No salon can thrive without clients. If you’re starting from scratch, you’re going to have a long and hard journey to convince people to trust you with their beauty treatments. If you’re moving from a mobile business to a salon, then you’ll have a head start. But don’t assume that you’ll enjoy the same amount of business right away.

Not all of your existing clients will follow you to your new salon. Some people choose a mobile stylist because it’s easier. And some will be unwilling to travel to your new location. Some simply won’t know that you are starting a business and could find another stylist in the meantime.

While you won’t know for certain until you make the switch, you should have a general idea about which of your clients is likely to follow you. This can help you to work out how many additional new clients you need to bring in every month to break even.

From the example above, if your monthly expenses are £2,490 and you increase your prices to £35 per treatment, then you know you need 72 customers per month to break even. Of your current clients, you feel confident that at least 35 of the 60 monthly regulars will follow you to your new site. This means you need to find a way to generate at least 37 new customers per month.

It might seem like an unnecessary extra step to start thinking about hypothetical customers, but this is a vital part of running a thriving salon business. Without this kind of planning, you will be heading into your new business venture blindfolded.

How much will you spend on marketing?

To continue with the example above, as you now know that you will need 37 new customers per month, you will have to think about how you will generate this business.

If your business is based in a busy area with lots of foot traffic, you can be pretty confident you will be able to attract new business from the street. But even this won’t be free. You will need to think about how to attract people from the street and get their attention. This might mean putting up signs, hosting a launch event or running an introductory offer.

For some more traditional marketing methods, you could try building a website and getting traffic from search engines. You could also try advertising on social media. Social media gives you the chance to put your business in front of a very targeted audience.

You could also consider approaching businesses in the area to see if you could put up flyers or leave leaflets with them. It doesn't have to be businesses with foot traffic, if you could get your flyer in the break room of a local office, this could generate a lot of interest from people who work in the area.

And finally, you can also think about running promotions. This might include bundling your services to make it slightly cheaper, or it could mean offering a discount for last minute appointments. You might make less money on these appointments, but it can help to generate brand awareness.

Reaching the more budget-conscious demographic can be a great way to fill empty spaces in your appointment books and increase awareness of your business. You don’t have to run these promotions for ever – and that is the beauty of running your own business, you get to call the shots!

Think about hiring an accountant

Keeping a close eye on the numbers isn’t a task that you can do once and then forget about. To have a thriving salon business, you need to keep a finger on your business’s financial pulse. If this doesn’t come naturally to you, don’t worry, you’re not alone.

It’s not uncommon to hire an accountant to help keep an eye on the money side of things. They can help you to plan for the future and look for ways to expand and grow your business. While an accountant might be an added monthly cost, they can help you save money in the long term.

Running a successful salon is about more than just being good at what you do. You need a firm grasp on the numbers and a good team on your side. With the right salon booking software, you can help to generate more income by minimising no-shows and increasing repeat bookings. Request a Salon Iris demo today to discover how our salon booking software can help you grow your business.

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