How to Open a Salon in 10 Steps: Startup Costs, Licenses and Financing
Opening a salon is about more than creating beauty — it’s about building a business, which means having a plan, securing the right licenses and finding enough money to get started.
According to beauty supply company Buy-Rite Beauty, startup costs for a salon can range from around $10,000 to $200,000 or more. The total depends on factors like where you open your salon, whether you buy or lease your space and if you invest in new or used equipment.
Here’s a step-by-step guide to help you turn your salon idea into a successful business.
- Opening a salon can cost anywhere from $10,000 to $200,000 or more, depending on the space you require, the equipment you purchase, marketing costs and other factors.
- Choosing your salon type before creating a business plan can help you estimate startup costs and define your target customers.
- Compare financing options based on your needs, budget and eligibility.
- Register your business and obtain all required licenses before opening to make sure you meet state and local requirements.
1. Research your market
Before you sign a lease or buy equipment, spend some time getting to know the market in your area. Look at similar small businesses nearby to see what services they offer, how they price them and what customers are saying in online reviews.
You may notice an opportunity to fill a gap, whether that’s affordable haircuts, luxury spa services or a salon that specializes in curly hair or color treatments. It’s also worth researching local demographics to make sure there’s enough demand for the type of salon you want to open. The better you understand your competition and potential customers, the easier it will be to build a business that stands out.
The type of salon you open should match both your experience and the needs of your local market. A barbershop, nail salon, hair salon and full-service spa will each require different skills, equipment and startup costs. Consider whom you want to serve, which services are in demand in your area and how much you can realistically invest before deciding which type of salon is the right fit.
2. Write a business plan
A business plan doesn’t have to be complicated, but it should answer some key questions about how your salon will operate and make money. Be sure to include:
- Your salon concept: Describe the type of salon you’re opening, the services you’ll offer and your target customers.
- Market research: Summarize your competitors, local demand and what will set your salon apart.
- Pricing strategy: Research what other salons in your area charge, then factor in your labor, supplies and overhead costs to set prices that are both competitive and profitable.
- Marketing plan: Explain how you’ll attract new clients through social media, referrals, promotions and other advertising.
- Financial projections: Estimate your startup costs, monthly expenses and expected revenue. A break-even analysis can help you calculate how many appointments you’ll need each month to cover your costs and start earning a profit.
3. Estimate startup costs
Depending on your location, the size of your space and the type of salon you want to open, you could spend anywhere from $10,000 to $200,000 or more to get your business up and running. To determine how much cash you’ll need to start your business, create a list of potential costs you’ll face.
| Expense | Typical Cost |
|---|---|
| Location | Varies widely based on lease/purchase, location, size of the space and other factors |
| Salon space build-out | $50 to $75 per square foot |
| Furniture and equipment (stylist chairs, nail stations, shampoo stations, mirrors and more) | $1,000 to $3,000 per operator or stylist |
| POS hardware and/or software | $800 to $3,000 or more, plus monthly processing fees |
| Styling tools and products | $300 to $700 per operator or stylist |
| Legal fees and permits | $2,500+ (varies) |
| Insurance | $3,000 or more annually |
| Marketing | $500 to $10,000 |
4. Choose a location
Where you open your salon can have a big impact on both your success and your startup costs. Larger spaces in high-traffic areas like downtown districts or busy shopping centers typically come with higher rent or mortgage payments, but they may also attract more walk-in customers. Meanwhile, a neighborhood location can be a better fit if you expect most clients to book appointments in advance.
Leasing a space usually requires less money upfront than buying a building, and purchasing an existing salon can help reduce renovation costs since much of the equipment and plumbing may already be in place.
5. Secure financing
Unless you have enough savings to cover every startup expense, you’ll likely need some type of financing to get your salon off the ground. The table below compares common financing options that could meet your needs.
| If you need… | Consider… | Why |
|---|---|---|
| Renovation and build-out funds | SBA loan | Longer repayment terms for large projects |
| Styling chairs and equipment | Equipment financing | Ability to use equipment as collateral for the loan |
| Inventory and supplies | Term loan for small business | Borrow with a fixed repayment term |
| Working capital | Business line of credit | Borrow only what you need, when you need it |
| Smaller startup expenses | Personal or business credit card | May be easier to qualify for than other options |
| Financing for construction | Commercial construction loan | Funding for construction or renovation of a property |
Before borrowing money, think about how much working capital you need, how quickly you’ll be able to repay the money and how much you can comfortably afford to repay each month. Compare interest rates, repayment terms, fees and borrowing limits and avoid taking on more debt than your salon will be able to repay.
6. Register your business and obtain licenses and permits
Before you open your doors, you’ll need to make your salon a legal business. Here are some important steps to complete:
- Choose a business structure: Many salon owners choose to form a limited liability company (LLC) because it can provide liability protection while keeping the business structure relatively simple. A corporation or sole proprietorship may also make sense depending on your goals and financial situation.
- Register your business: File the necessary paperwork with your state and apply for an Employer Identification Number (EIN) from the IRS if required.
- Get required licenses and permits: Requirements vary by state and local area, but most salons need a business license along with cosmetology, barbering or other professional licenses for the services they provide.
- Follow health and safety requirements: Your salon may need approvals or inspections from local health departments or other agencies before you can open. Check your state and local requirements early since the process can take time.
7. Buy equipment
Buying the right equipment is one of the biggest expenses when opening a salon, so it’s worth comparing your options before making purchases. New equipment can give your salon a fresh, professional look and often comes with warranties, but buying used items can help you save money when you’re starting out.
You may also be able to rent certain equipment instead of purchasing it upfront, which can help preserve your cash flow. Consider the condition, quality and long-term cost of each option before deciding. Investing in reliable equipment can help create a better experience for both your clients and your team.
Regardless of how you acquire it, here are some essential pieces you’ll want on hand:
- Stylist stations
- Chairs
- Carts and trolleys
- Salon chair mats
- Mirrors
- Reception desk
- Table and couches for the reception area
- Shampoo bowls and chairs
- Cabinets for shampoo room
- Towels
- Light fixtures
- Optional manicure or makeup stations
- Advanced air filtration system if you provide chemical treatments for clients
When choosing which products to stock for your salon, consider the needs and preferences of your clientele. Research reputable, well-known industry brands and consider partnerships with distributors that offer wholesale pricing or bulk discounts.
According to salon business software platform Vagaro, stocking your salon with products like shampoo, conditioner and hair color can eat up 5% to 15% of revenue, depending on the prices of the items you’re using. But selling these products can give you another revenue stream. Across the beauty industry, salons have a profit margin of 8% to 15%, but products sold in salons have an average profit margin of 40% to 50%.
Keep your inventory stocked with roughly three times your monthly retail sales in inventory to ensure you have enough products on hand to meet customer demand without tying up cash in inventory. For example, if you sell $500 in product each month, keep $1,500 worth of product on hand. Keep your bestselling items fully stocked to meet customer demand.
8. Insure your salon
Salon owners need to carry several small business insurance policies to protect themselves against the unexpected. You may need to purchase:
- General liability insurance: Covers your business’s liability for any property damage or injuries customers sustain when visiting your salon.
- Professional liability insurance: Covers errors you or your employees make (or are accused of making) while performing services.
- Commercial property insurance: Covers the salon’s physical space, including equipment, tools, products and furniture. Your landlord or lender may require you to purchase property insurance.
- Health/life insurance: As a business owner, you provide your own health and life insurance coverage. You may also want to offer health insurance for your employees, depending on the size of your staff. The federal government requires you to provide health insurance if you have at least 50 full-time (or full-time equivalent) employees.
- Workers compensation insurance: Required if you have employees. It provides benefits for employees if they have a work-related injury or illness.
9. Hire staff or rent booths
When you open a salon, you’ll need to decide whether to hire employees, rent booths to independent stylists or do a little of both. Hiring employees gives you more control over scheduling, services and the overall client experience, but you’ll also be responsible for payroll, taxes and benefits. Booth rental can lower your overhead because stylists operate as independent professionals, but you may have less control over how they run their businesses.
Consider your initial business budget, management style and long-term goals before deciding the best approach for your salon.
10. Market your salon
Marketing your salon is essential for attracting clients, especially when you’re just getting started. Your initial marketing budget may go toward building a website, creating social media profiles, running local ads, printing promotional materials and offering opening specials or referral incentives.
You may also want to invest in professional photos of your space and services to showcase what makes your salon unique. Encourage happy clients to leave online reviews, since word of mouth can become one of your most valuable marketing tools over time.
Remember these ongoing expenses to keep your salon thriving
A successful salon can be a profitable business, especially when you build a loyal client base and keep your expenses under control. However, opening the doors is only the first step. You’ll need to budget for ongoing costs to keep your salon running smoothly and continue growing.
Common ongoing expenses to plan for include:
- Payroll and employee costs: If you hire stylists, receptionists or other team members, you’ll need to budget for wages, payroll taxes, benefits and training.
- Rent or loan payments: Your location will likely be one of your biggest ongoing expenses, especially if you operate in a high-traffic area.
- Utilities and equipment costs: Plan for electricity, water, internet, software subscriptions, equipment maintenance and any rental payments.
- Inventory and supplies: Hair products, beauty supplies and retail inventory need to be replenished regularly.
- Marketing expenses: Continue investing in advertising, promotions and customer retention efforts to bring in new clients.
- Working capital: Keep cash available for unexpected costs or slower months. Financing options like a business line of credit can help cover short-term expenses when needed.
- Ongoing legal and permit fees: Legal expenses to run your salon can vary by state, and some costs may be required on an annual basis. Make sure to research the permits and legal costs you’ll need to cover for your salon and how often you need to pay them.
Resources for salon owners
Having an arsenal of resources and tools can make your life easier as a new salon owner. Here are a few to check out.
Trade organizations
Connect with other professionals in the industry and find support through trade associations and organizations. You could become a member of one or more of the following:
Booking tools
Booking software and platforms can streamline the scheduling process for salon owners. Here are a few tools that may fit your budget:
Marketing resources
New salon owners can find tips and tricks from online blogs covering best marketing practices for salons. If it’s in your budget, you may even consider hiring a marketing firm to create campaigns for your business. Here’s some information from a few agencies to get started:
Hiring help
Running a salon is drastically different from working as a salon employee, and many stylists find it difficult to transition to owning a business. You’ll need to have handbooks and operational systems in place to make sure the business runs smoothly.
Before opening a salon, consider taking a few business courses and finding a reliable accountant and attorney to help iron out the details. Here are some resources to consider:
Frequently asked questions
Opening a salon can cost anywhere from $10,000 to $200,000 or more, depending on factors like your location, salon size, equipment choices and whether you lease, buy or renovate a space.
A salon can be profitable when you manage expenses, price services appropriately and build a steady client base. According to salon customer experience software platform Boulevard, salon owners can make $40,000 to $80,000 annually, with top performers hitting six figures. Your profits will depend on your revenue, operating costs and how efficiently you run the business.
You typically do not need to be a licensed cosmetologist to own a salon. However, your salon and employees may need to meet state licensing requirements, and you may need a licensed professional to oversee certain services.
Opening a salon can take months, up to a year or even longer. Tasks like finding a location, completing renovations, securing financing, obtaining licenses and hiring staff can all affect how quickly you can open your doors.
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