How to Open a Salon or Day Spa

Operations

To begin with, you must consider your hours of operation carefully so you can accommodate the maximum number of clients during the business day. You undoubtedly already know that the beauty business isn't a 9-to-5 kind of industry. Salons are now open seven days a week and on some of the traditional holidays, and their hours may be extended around prom time or during peak wedding season. What has driven this demand has been the proliferation of two--income couples who manage the demands of raising a family while juggling careers and managing their own personal business. So while it wasn't so long ago that people wouldn't even consider getting a haircut on Sunday, salon hours on Sunday are now a must (even if on an abbreviated schedule). Even day spas are open on Sundays, since this may be the only time during the week that a busy career mom can get away for some personal pampering.

Typically, hair salons in metropolitan areas are open from 10 a.m. to 9 p.m. six days a week, unless the owners are enlightened and add those Sunday hours mentioned above, and from 10 a.m. to 6 p.m. in smaller communities. By design, Sunday and holiday hours often are the same as those of local retailers like malls and department stores, and they generally run from noon to 5 p.m. Lunch hours and early evening hours tend to be the busiest times for salons. You might also need to have special hours to accommodate special needs. For example, if you do a lot of wedding work, you'll probably have to be open earlier on Saturday mornings, say at 8 a.m., for the brides who have to get to church for a 10 a.m. service.

Pricing
Another important part of your salon development plan is the appropriate pricing of your services. Set prices too high, and you'll limit the number of people who can afford them; set them too low, and you'll limit your profit potential and possibly put the business at risk. Of course, the price the market will bear is very much dependent on the demographics of your service area. If you're in an upscale area with larger homes occupied by people with more disposable income, you can price your services accordingly and even offer high-end spa services. But if the surrounding community is peopled by young working families, you'll have to forego the spa services (or offer no more than the bare minimum) and concentrate instead on basic haircutting and color services that are affordably priced.

When setting prices, you must consider the three factors that will influence your prices: labor and supplies, overhead, and profit. Labor costs for salons include salary and benefits costs for both your stylist/spa staff and administrative people (including your manager, receptionist and other support staff). Your own salary is included as a part of this cost. This cost is generally expressed as a price per hour and can vary depending on the amount of time it takes your employees to cut hair or perform other services.

Next, you need to consider your overhead costs, which consist of all costs required to operate the business other than labor. This includes your mortgage or lease payment, utilities, and so on. It's reasonable to estimate that your overhead will be from 40 to 50 percent of your labor and materials cost. (This figure can be adjusted later as you accumulate financial data.) So let's say when you tally up all your labor and materials costs for the year, you arrive at a figure of $100,000. Your estimated overhead expenses (at 45 percent) would be $45,000. This would give you an overhead rate of 45 percent.

The last part of the pricing equation is profit. Salon owners generally can expect to have a net profit of 11 to 15 percent (although you can certainly make this profit figure higher or lower as you see fit). To arrive at the net profit you want, you have to add a markup percentage factor to your services so you'll arrive at the approximate gross amount you'll earn.

One way to simplify the process of setting prices to the extreme is to figure out how much the salon needs to make for the year and do the math to arrive there. For instance, let's assume you want the salon to make $52,000 per year. Here are the calculations you'd use to figure out your prices:

$52,000/52 weeks = $1,000 per week
$1,000/100 hours the salon is open each week = $10/hr
Add a 10 percent profit margin = $11/hr

 

How to Open a Salon or Day Spa

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