How to start a hair salon business: a founder's guide

Starting a hair salon is an exciting venture that blends creative styling with business savvy. The industry is a multi-billion dollar market, fueled by a steady demand for cuts, coloring, and styling from a wide range of clients.

This guide will take you through the practical steps of securing funding, obtaining necessary licenses, selecting the right location, and acquiring equipment to help you launch a successful hair salon business in the U.S.

Step 1: Plan your business and research the market

Define your niche and local demand

First, decide on your salon's focus. Will you specialize in color, cater to a specific hair type, or offer a luxury experience? Walk around your target neighborhoods at different times. Observe the foot traffic and demographics to gauge potential demand for your concept.

Look up local competitors on Google Maps and Yelp. Study their service menus, price lists, and customer reviews to find a gap in the market. Many new owners make the mistake of copying a successful salon instead of building a unique identity that attracts a different client base.

Forecast your startup costs

With a clearer market picture, you can forecast your finances. The initial investment can range from $25,000 to over $125,000, depending on your location and vision. It is wise to have at least six months of operating expenses in cash reserves before you open.

Here is a typical breakdown of one-time expenses:

• Salon build-out and design: $10,000 - $75,000+
• Professional equipment (chairs, stations, dryers): $5,000 - $25,000
• Initial product inventory: $3,000 - $10,000
• Licenses, permits, and legal fees: $500 - $2,000

Here are 4 immediate steps to take:

• Draft a one-page summary of your salon concept and target client.
• Visit three potential neighborhoods to compare foot traffic and visibility.
• Create a spreadsheet of at least five local competitors, noting their prices and top services.
• Build a preliminary budget based on the cost ranges provided.

Step 2: Set up your legal structure and get licensed

Choose your business structure

Most salon owners form a Limited Liability Company (LLC). This structure protects your personal assets if the business faces debt or lawsuits. It also offers pass-through taxation, so profits are taxed on your personal return, which avoids the double taxation of a corporation.

Operating as a sole proprietor is simpler but offers no liability protection. This is a risk many new owners take that you might want to avoid. Registering an LLC with your state typically costs between $50 and $500.

Secure your licenses and permits

Once your business is registered, get an Employer Identification Number (EIN) from the IRS. It is free and you will need it to hire staff and open a business bank account. This is your federal tax ID.

Next, contact your state's Board of Cosmetology. They issue the main salon license, which can take 4-8 weeks to process. You will also need a local business license from your city or county clerk and a Certificate of Occupancy to confirm your space is safe.

Here are 4 immediate steps to take:

• Decide on a business structure and file the paperwork with your state.
• Apply for a free Employer Identification Number (EIN) on the IRS website.
• Research your state's Board of Cosmetology for salon license application forms.
• Contact your local city hall to ask about business license and permit costs.

Step 3: Secure your insurance and manage risk

Key insurance policies for your salon

You will need several types of insurance. General liability covers slips and falls. A typical policy with $1 million in coverage might cost between $400 and $700 per year. This is your foundational protection against common accidents.

Professional liability is specific to your services. It protects you if a client claims a haircut went wrong or they had an allergic reaction to a product. Some new owners overlook this, which can be a costly mistake if a claim arises.

If you own expensive equipment, you will want property insurance. Once you hire your first employee, workers’ compensation is legally required in most states. It covers medical costs if a stylist gets hurt on the job.

Budgeting and finding a provider

Expect to pay between $800 and $3,500 annually for a comprehensive package. You can often get a better rate if you bundle policies. Consider providers like Hiscox, The Hartford, or Next Insurance, as they specialize in small business coverage.

Here are 4 immediate steps to take:

• Request quotes for a Business Owner's Policy from two different providers.
• Ask each provider about their specific coverage for chemical treatment claims.
• Confirm if your state requires you to have workers' compensation insurance.
• Review the coverage limits for professional liability to ensure they are adequate.

Step 4: Find a location and buy equipment

Find your physical space

Look for a space between 1,000 and 1,500 square feet for a salon with 3-4 stations. This size allows for a reception area and a small backroom. Before you commit, confirm the property is in a commercial zone with your city’s planning department.

When you negotiate your lease, ask for a Tenant Improvement (TI) allowance. This can help pay for plumbing and electrical work. A mistake some new owners make is skipping this negotiation, which leaves them to cover all build-out costs themselves. A 3-5 year lease is typical.

Purchase your salon equipment

With your location secured, you can buy your equipment. You will need your cosmetology license to open accounts with professional suppliers like SalonCentric or CosmoProf. Some may require a minimum opening order, often around $500.

Here are some average costs for new items:

• Styling chairs: $300 - $800 each
• Shampoo stations: $600 - $2,000 each
• Hood dryers: $400 - $900 each
• Reception desk: $500 - $3,000

Here are 4 immediate steps to take:

• Research commercial listings for spaces between 1,000 and 1,500 square feet.
• Contact your city’s planning department to verify the zoning of a potential location.
• Price out a basic equipment package from two different suppliers.
• Gather your cosmetology license to open accounts with professional suppliers like CosmoProf.

Step 5: Set up your payment processing

Your clients will expect to pay with cards and digital wallets. You might also consider taking deposits for large appointments like color corrections to reduce no-shows. This is a common practice to protect your time and revenue.

When you review payment solutions, watch out for high transaction fees and hidden hardware costs. Many new owners get locked into systems with rates between 2.5% and 3.5%. Look for transparent pricing and no long-term contracts to keep your options open.

For salons that need to accept payments on-site or on-the-go, JIM offers a streamlined solution. With JIM, you can accept debit, credit and digital wallets directly through your smartphone. At just 1.99% per transaction with no extra hardware, it is particularly useful for independent stylists.

Here is how it works:

• Get Started Download the JIM app for iOS.
• Make a Sale Type the sales amount, hit sell, and ask your customer to tap their card or device on your phone.
• Access Funds Your money is available right on your JIM card as soon as the sale is done, with no waiting for bank transfers.

Here are 3 immediate steps to take:

• Compare transaction fees from at least two payment solution providers.
• Draft a policy for when you will require appointment deposits.
• Download the JIM app to explore its features on your phone.

Step 6: Fund your salon and manage finances

Secure your funding

The Small Business Administration (SBA) 7(a) loan is a popular choice. Lenders will want to see a strong business plan and a credit score above 680. Loans can range from $50,000 to $350,000, with interest rates often between 9% and 12%.

Another option is equipment financing, which is a loan specifically for buying chairs and stations. The equipment itself acts as collateral, which can make qualification easier. Some new owners make the mistake of using personal credit cards instead of seeking these dedicated business loans.

You might also look for industry-specific grants. The Professional Beauty Association (PBA) sometimes offers programs for salon professionals. These are competitive but do not require repayment.

Calculate your working capital

Your loan should cover more than just one-time startup costs. You need enough working capital for your first six months of operating expenses. This includes rent, payroll, and utilities before your salon turns a profit. Many new owners get tripped up by underestimating this amount.

For a small salon, this could mean having $30,000 to $60,000 in cash reserves. This buffer ensures you can pay your bills and stylists while you build your client list. Without it, cash flow problems can arise quickly.

Here are 4 immediate steps to take:

• Draft a detailed business plan to present to lenders.
• Check your credit score to see if you meet the typical 680+ requirement for an SBA loan.
• Calculate your total estimated operating expenses for six months.
• Visit the Professional Beauty Association (PBA) website to look for current grant programs.

Step 7: Hire your team and set up operations

Assemble your salon staff

Your team is your biggest asset. Stylists typically work on a 40-60% commission. A mistake some owners make is to misclassify stylists as independent contractors to save on taxes, but this can lead to IRS penalties if they function as employees. All stylists must hold a valid state cosmetology license.

You might also hire a front desk coordinator to manage appointments and greet clients. Their pay is often between $15 and $20 per hour. This role helps ensure a smooth client experience from the moment they walk in.

Streamline your daily operations

To manage bookings, you can use software like Vagaro or Square Appointments. These systems handle online scheduling and client history, which frees up your time. As you build your team, keep an eye on productivity. A healthy salon sees each stylist generate revenue of three to five times their pay.

Here are 4 immediate steps to take:

• Decide between a commission or booth rental model for your stylists.
• Post a job opening for a licensed stylist on a platform like Indeed.
• Verify the state cosmetology license for any potential hire during the interview process.
• Explore the features of salon software like Vagaro or Square Appointments.

Step 8: Market your salon and get clients

Build your online presence

Start with your Google Business Profile. This is how new clients will find you on Google Maps. Fill out every section with photos, services, and hours. Encourage your first few clients to leave reviews, as this can significantly boost your local ranking.

Use Instagram as your visual portfolio. Post high-quality before-and-after photos and videos of your work. Use local hashtags like #[YourCity]Hair or #[YourNeighborhood]Salon to attract nearby clients. A strong visual presence builds trust before they even book.

A mistake some new owners make is to ignore their online reviews. You should always respond to both positive and negative feedback professionally. This shows you care about the client experience and helps manage your reputation.

Drive bookings with local marketing

Create a grand opening event or a "New Client Special" that offers 20% off a first service. Promote this on local Facebook groups and with flyers in nearby cafes. This initial push can fill your appointment book for the first few weeks.

You can also partner with other local businesses. Offer a cross-promotion with a nearby boutique or wedding planner to access their established customer base. A simple referral card system works well for this.

Here are some marketing ideas to get you started:

• Referral Program: Give clients $20 off their next service for every new client they refer.
• Email List: Collect emails at checkout and send a monthly newsletter with styling tips and special offers.
• Local Ads: Run targeted ads on Instagram or Facebook for users within a 5-mile radius of your salon.

Here are 4 immediate steps to take:

• Set up and fully optimize your Google Business Profile.
• Create an Instagram business account and post five high-quality portfolio images.
• Design a "New Client" offer, like 20% off the first cut and color.
• Draft an email to one local business to propose a cross-promotion.

Step 9: Set your prices and create a service menu

Choose your pricing model

First, calculate your cost-plus price. Add up your monthly expenses like rent and utilities, then divide by your total service hours to find your hourly cost. Your prices must cover this base cost plus a profit margin. Many salons aim for an 80-85% service margin before labor.

You might also consider tiered pricing. This model sets different prices based on a stylist's experience. For example, a haircut could be $65 with a Junior Stylist but $95 with a Master Stylist. This structure provides a path for stylist growth and options for clients.

Research competitors and set your rates

Look at the service menus of 3-5 local salons that attract your target client. Do not just copy their prices. Instead, use them as a benchmark to position your own. Your pricing should reflect your unique brand, skill level, and the client experience you provide.

A mistake some new owners make is to underprice their services to attract clients. This can devalue your work and make it difficult to raise prices later. For retail products, a standard markup is between 50% and 100% over your wholesale cost.

Here are 4 immediate steps to take:

• Calculate your salon's hourly operating cost to find your break-even point.
• Create a price list for three local competitors to compare their rates.
• Decide if you will use tiered pricing based on stylist seniority.
• Draft your service menu with prices for at least five core services.

Step 10: Maintain quality and scale your business

Set your quality standards

To ensure consistent service, track your client retention rate. A healthy goal is to have 60-70% of new clients return for a second visit. You should also monitor your re-do rate, which is the percentage of clients who come back for a fix. Aim to keep this number below 3%.

Your online reputation is another key metric. Check your Google and Yelp ratings weekly, with a goal to maintain an average score of 4.5 stars or higher. This feedback provides direct insight into client satisfaction and helps you spot issues before they grow.

Know when to grow

Before you hire another stylist, check your booking data. A good signal to hire is when your current stylists are consistently 80% booked for two to three consecutive months. Some owners hire too soon, leaving new stylists with empty chairs and hurting salon morale.

Consider expanding your physical space only when the entire salon operates at over 80% capacity and you have a consistent waitlist. You should also have at least three to six months of operating expenses saved before you commit to a larger lease or renovation.

Salon management software like Phorest or Mindbody offers advanced analytics to track these key performance indicators. Use their reports to make data-driven decisions about growth instead of relying on guesswork.

Here are 4 immediate steps to take:

• Calculate your client retention rate from the last three months.
• Set up a system to track your re-do services each week.
• Review your stylists' booking percentages in your appointment software.
• Explore the analytics and reporting features of a system like Phorest.

Opening your salon is about more than just business steps, it's about creating a space where people feel great. Remember that your unique style and the client relationships you build are your strongest assets. You have the plan, now go make your vision a reality.

And as you welcome those first clients, getting paid should be simple. For an easy payment solution, JIM turns your phone into a card reader. It has no extra hardware and a flat 1.99% transaction fee. Download JIM to get started.