What are some of the most common hair salon business expenses and how much does it cost to run a business as a hairstylist?
Doing great hair and knowing your hair salon business expenses are two different things! I’m sharing the most common business expenses for hairstylists. The cost of running a hair salon is pulled from all of the services you do, and you must take into account the real cost of doing each service.
If you have been following me on TikTok you will know I have been creating (what some might call) a triggered video. I’m talking about my price transparency posts where I break down the cost of each hair service. And let’s just say people do not like when they hear that I charge $80 for a haircut. And when I say people, it’s hairstylists.
I’m going to break down the cost of doing business and overall things they don’t teach you in beauty school, which is your hair salon business expenses. You will learn that hairstylists do not keep 100% of the service price. As a matter of fact, the amount of profit you may be taking home may surprise you, at least after I did my research. I was surprised at how little most of us take home after paying our hair salon business expenses.
If you are in the “charge your worth” club, then you are really going to love what I’m going to share with you!
You may have heard from your peers that you are overpriced, overcharging, price gouging… whatever you have been told, just know you are not the only one! I like to tell those people that they are not my target market and I don’t fit in their budget.
There is simply no reason for you to lower your prices to fit anyone’s budget. If your haircuts are $100 or $50 or even $10, then that’s your price! You do not need to justify your price for anyone at all! If you are a hairstylist who wonders why in the hell do some hairstylists charge so much? Then you might start rethinking how and what you charge.
First, let’s start with some research that I’ve done about income. According to salary.com, “the average Hairstylist salary in the United States is $27,560 as of November 29, 2021, but the range typically falls between $22,883 and $33,841. Salary ranges can vary widely depending on many important factors, including education, certifications, additional skills, the number of years you have spent in your profession.”
“The average Hairstylist salary in the United States is $27,560 as of November 29, 2021, but the range typically falls between $22,883 and $33,841. Salary ranges can vary widely depending on many important factors, including education, certifications, additional skills, the number of years you have spent in your profession.” – Salary.com
Notice how this mentioned NOTHING about location! That’s because I believe, your location in most cases, really doesn’t matter! People that live in less populated areas are still buying designer fashion, and spending an absorbent amount of money on other things. What makes you think that they won’t spend money on their hair? The cost of color supply is the EXACT same in Beverly Hills as it is in Ohio. However, if you are in a small town where people live more simply, then offering $500 services won’t make much sense. Basically what I’m saying here is to know your target market in your area.
Let’s break down why I think salary.com would say the average salary for a hairstylist is 22K to 33K…
Here is just one example:
Let’s say you are in the 6 figure club (which many stylists will brag about)… but what they won’t tell you (or maybe they don’t know) is that they are not making as much as they think! After they deduct everything I’m going to share, they only keep about 20% to 40% of their earrings!
Think about that? You bring in $100,000 dollars just to keep 20K to 40K of it.
Ok, are you ready for this cost breakdown? Keep in mind these are average prices for Southern California.
PS. take notes! These are some things you could potentially write off for taxes if you are an independent stylist.
Disclaimer: None of this is financial advice! Should you have any questions, please see a CPA who knows all about this stuff!
Cost 1 – Rent
The average cost of rent in SoCal is about $300 a week. On the high end, you can expect to spend $450 weekly. That’s $1800 a month and $21,600 a year! Rent is probably the most variable depending on where you live. However, It’s one of the top items to consider when defining pricing for your hair salon business.
Cost 2 – Insurance and Licensing
Let’s talk about insurance first. Insurance is a resource that is not acquired or used nearly enough. Protecting your business should be on the top of your priority list. You must and need business liability insurance. Insurance will cover accidentals like… if you accidentally burn someone’s hair or skin, allergic reactions, clients falling in your establishment that would cause medical attention, or even a visit to the ER.
“Protecting your business should be on the top of your priority list!”
And I know what some of you are thinking… “I don’t have any assets so they can’t sue me”. Well, let’s say this is not the only thing that could happen. There are ways that they can garnish your future wages and make your life miserable. I have seen a ton of ish go down and trust me, You will want the insurance! There are some low-cost options out there. This can run as low as a couple hundred to $1000 a year based on the type of coverage you get. This is the most important cost to factor when considering your hair salon business expenses.
Now licensing fees vary by state and county or city. For example, in Orange County CA, you can expect to spend about $50 for state licensing, and around $150 to have a city establishment license. Some cities don’t require business licenses but most do. So just check with your local city hall to be sure you are operating legally.
Cost 3 – Supply!
I’m talking retail, color, sanitation, foil, gloves, maintaining shears, tools, camera, and computer! This list can go on and on! Just to simplify some things, let’s just pretend you have all your initial supply to fully operate as a hairstylist. If you are a six-figure stylist, you can expect to spend anywhere from $200 to $600 weekly on supply. Again this is variable depending on the type of services you offer. If you are looking for a generalized initial investment cost, I would guesstimate you will spend about $15,000 on quality tools and supply just to get started. After that, you are maintaining your inventory.
Cost 4 – Booking systems and credit card processing fees!
Everything is digital today, including money. Most stylists use a POS system like Square . It is free to use. However, if you run a salon, it can cost about $250 a month to use the marketing features, booking system, online store, and payroll system. Generally, credit card fees are about 3% of the client’s total. Basically, if you are making $2000 a week, $60 of that is going to paying your credit card system. That’s about $3120 per year.
Cost 5 – Website maintenance and marketing fees!
I am all about websites and being present on social. It’s a must when running a hair salon business! Websites and hosting can cost a couple of hundred dollars a year if you maintain it yourself. On the low end, expect to pay over $1000 for someone to do it for you, here and there.
As far as marketing fees, you could use free marketing tools like Mailchimp. Although that creates a little extra work for you collecting information. This is why I love using square because it’s all integrated for a little extra fee. I can send out email blasts for around $35+ a month.
Cost 6 – Professional subscriptions!
You have to treat your hair career like a business. That means using tools or apps to help streamline your hair salon business. I’m talking systems like Quickbooks for all your accounting and to keep tabs of your expenses. This can cost you about $20 a month, and if you don’t have that yet, it’s a must! Adobe Premiere for editing video or photoshop if you want something more elevated to use. This can cost you about $99 a month.
Finally, tools like Canva help you create tons of marking content for really anything! I use the paid version for Canva, but just know this is variable too. Some things you can use for free, and some features require a subscription.
Cost 7 – Payroll!
You have to pay yourself right? What about your assistant? Having a payroll system helps you pay taxes. It can be a huge write-off if you have employees like an assistant. Again, I use square for payroll, but if you’re running solo, QuickBooks is a great option. Expect to spend about $50 a month on a payroll system.
Cost 8 – Utilities like water, electricity, internet, phone
If you run a big salon, then you know these bills all too well. And if you are flying solo, congrats! Your rent covers most of these utilities except for a couple like Internet and phone! Generally, you will spend about $200 a month on the internet and a mobile phone, and hello? You totally need a phone to respond to all those 3 am messages from your crazy clients.
Cost 9 – Continued education.
Not only do we need to feel inspired but we need to know all the new tricks and trends. It’s important for us to know terms like money piece, halo highlights, balayage, and babylights. Education can be free like this blog post or my Youtube, to thousands if you go to an event or hair show. Investing back into your craft is the best thing you can do to elevate business.
Learn more about the professional courses I offer here
Cost 10 – CPA and taxes
If you are running a six-figure business, you will want to get a certified personal accountant, or CPA. They will run you about $800+ and help you with filing your quarterly taxes. After your CPA has claimed all your expenses and deductions, your business will need to pay upto 20% to 35% of your earnings.
Now lets tally all this up!
Let’s pretend you made $100,000 and deduct your hair salon business expenses (on the low to mid-end). You now have about $51,000. But wait! You, in fact, now have to pay at least 20% taxes. Which is a little over $10,200 and now leaves you with $40,800. Now let that sink in for a minute.
We now know WHY the internet says we make on average $27K a year! Most of us don’t charge our worth! We are working too damn hard, and not charging enough to cover our expenses! Honestly, I was really surprised to learn that most hairstylists only keep about 20% to 40% of the profits!
Honestly, I was really surprised to learn that most hairstylists only keep about 20% to 40% of the profits!
Now please ask me again why I charge $80 for haircuts? It’s because I know the cost of doing business and I don’t treat my business like a hobby. I hope after reading this, you will look back at your expenses and take a look at your current pricing. I hope it will motivate you to rethink the way you do business.
So I leave you with this… Stop thinking with your wallet! Your price is your price. You are not in the business of charity, you are in the business of financial stability for you!
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