10 Business Elements Every Salon Owner Needs to Know

Woman Hair Stylist and client in hair salon

As a salon owner, there are a lot of things you need to consider about your business. It can start to get overwhelming!

We’re here to help you figure it out. Just start small, with one or two things from this list, and build up as you go.

10 Elements of a Strong Salon Business

1. Market Penetration

How deep is your market penetration? Do you have the ability to attract the number of new clients that can sustain long-term growth? How does the number of clients you have compare to your local population?

2. Operating Margin

Operating margin is the amount of profit a company makes after paying for its operating expenses such as payroll, rent, utilities, overhead expenses such as insurance, etc. The operating margin does not include interest on loans or taxes. A simple way to calculate your business’s operating margin is to divide your operating income by net sales. Generally speaking, the higher the ratio, the more healthy your business is.

3. Profitability / Net Income

Profitability or net income represents the amount of money you take home as the business owner after all expenses have been paid. Unlike operating margin, net income takes into consideration taxes and interest. Net income represents the final measure of profitability for a company. 

4. Branding

A successful business is a brand whether you recognize it or not—one that people remember, understand, and feel a connection to. You can have a strong brand within your salon even if staff members are seen as individuals rather than extensions of the company. Companies who are successful in building a strong brand do so, in part, by giving clients an experience they’ll remember and want to share with others.

5. Business Model

Every business is designed to generate profit, but the question is: how? This goes beyond just knowing your costs and growing your revenues. How will your services be sold? What makes you different from what’s currently already in the market? How does this help clients?

6. Operational Excellence

A business’s operational excellence is its ability to deliver a smooth and efficient customer experience from the second they walk in the door until the moment they leave. This process begins when customers contact you, continues through their service time, and even extends after they pay for their products or services.

7. Balance Sheet

The balance sheet provides a snapshot of your salon’s financial health and allows you to identify what you own (assets), what you owe (liabilities), and the difference between the two (owner’s equity). When done correctly, it’s an accurate representation of how well your business is positioning itself for long-term success.

8. Scalability

Scale refers to the salon’s ability to meet the demand for its products or services. A business can be scaled in an infinite number of ways, including geography (opening other locations), production (adding more staff), service offerings, and target market.

9. Exit Strategy

Every business has a life cycle, and it’s important to be aware of where you are in the process. Are you in startup mode? Are you in growth mode? Is your salon beginning to mature? You need to know when it’s time to sell or take your business public.

10. Competitive Advantage

What makes you unique? How are you different from everyone else in your market? What do you have that other salons don’t? A salon owner should be able to identify their competitive advantage and then create a business model that can maintain it.

The Bottom Line

With the right planning and preparation, starting your own salon can be a great way to achieve success in the beauty industry. Contact Indie Studio Suites today to tour our customizable salon suites and see if we are a good fit to help you on your path of opening up your own salon business.