"Even if you are already in operation, it never hurts to review your budget."
How to Create a Salon + Spa Budget
Even though you're probably already in operation as a salon or spa business owner, it never hurts to review your budgeting. If you're like most stylists, you probably don't have a set-in-stone budget - you buy things as you need them, and on good days you might keep the receipt or log the purchase. You might think this strategy is working for you now, but without a concrete budget plan you may be unintentionally hemorrhaging profits.
There are two primary phases of business for which you'll likely need distinct financial plans. We'll be discussing both of them within this article: both the Startup Budget and the Ongoing Budget are two important financial roadmaps for your salon or spa. Keep in mind that a complete budget will need to contain details regarding both your expenses and your revenues in order to determine your true profits - the money that's left for you at the end of the month.
profit = revenue - expenses
Startup Budget and Business Plan for Salons + Spas
The SBA recommends that you anticipate overhead costs prior to commencing any business venture, but we're going to go ahead and check that off the list now (better late than never). If you're a super-boss who's already completed a formal budget, feel free to follow along and cross-reference your existing itemization with some of the budget items we will be discussing.
SALON + SPA START-UP COSTS and BUDGET
| Licensing | Individual Stylist/ Aesthetician licensure + Salon or Spa Business Licensure |
| Business Formation | Costs will vary depending on whether you opt for an LLC or a Sole Proprietorship. |
| Accounting Management | You can manage your own finances or opt to have an accountant / bookkeeper assist you. You’ll need to make sure you are properly registered with your state treasury to collect and remit taxes on your services. Canadian pros will need to register to collect and remit HST or GST plus PST as needed. |
| Insurance | At a minimum, you should obtain both general and professional liability insurance. Depending on your locale, you may also need Workman's Compensation Insurance. You might also have monthly health insurance premiums. |
| Suite Rent | You’ll have costs associated with paying your suite lease and deposit, as well as any costs for modifications and moving expenses. |
| Devices + Tools | Obviously you need Pro Tools! Suites typically come equipped with a standard chair, mirror, and some counter space, but you’ll likely want to expand upon these offerings. |
| Product | You'll have to identify appropriate brands for both professional use as well as retail based on your unique service attributes and the economic background of your clientele. |
| Furniture + Decor | In order to support your primary emotive aesthetic, you'll need to tell a visual brand story through your suite decor. |
| Technical Expenses | You'll need a Website, Booking Software, Business Phone, Camera, Ring Lights / Lighting, and of course, an Answering Service such as the one we provide here at My Salon Desk! |
| Marketing | Social Media Templates, Social Media Management, SEO Services and Advertising Management. |
| Professional Development | You may have joined beauty business collectives or attended seminars to prepare you for entrepreneurship, or perhaps you might take advantage of a business coach. |
Ongoing Budget and Business Plan for Salons + Spas
As your business ultimately launches, you’ll still have a similar set of expenses, but you’ll also have to factor in projected earnings and revenues. Each month you should be completing a Profit + Loss Statement (download a free template at the following link: https://wise.com/us/income-statement/profit-loss-statement) in which you detail all of your business expenses, assets, and income. Your budget for business expenses may vary month to month based on your available revenues – for instance, in a slow month you may have to cut your marketing budget.
This is an excellent opportunity to test out the mathematical logic of your pricing structure and your backbar / professional tool selections – you don’t want to end up offering high-end hair / skin products within a low-revenue business.
SALON + SPA ONGOING COSTS and BUDGET
| Licensing Renewal | Depending on your locale, you’ll need to pay to update your licensure every year or so. |
| Business Formation | Costs will vary depending on whether you opt for an LLC or a Sole Proprietorship. |
| Accounting Management | Your accountant or accounting management software will likely come with monthly fees. You’ll also owe state and federal taxes on your business’ earnings. |
| Insurance | You’ll have to pay monthly or annual premiums for insurance. |
| Suite Rent | Your Landlord or Suite will auto-deduct your rent each month from your payment method on file. |
| Devices + Tools | Eventually your irons, drills, tweezers, etc. will need to be replaced! |
| Product Replenishment | As you use (or sell) product, you’ll need to replenish your stock. |
| Decorative Updates | You might want to set aside a budget for adding decorative items for holidays or other events, or even for replacing old items and renovating. |
| Technical Expenses | Your tech services and devices may have monthly payments or maintenance costs - learn more about our My Salon Desk Plans! |
| Marketing | You might opt to maintain ongoing marketing costs in order to maintain a high digital visibility and grow your clientele. |
| Professional Development | As a beauty pro, you probably already know that beauty school never really ends - you can always afford to learn more. |
Revenue Strategy for Beauty Businesses
In addition to expenses, you'll also have to anticipate revenues for your business. Many beauty professionals often get confused between revenues and profits - what you "make" is actually considered your profits.
Let's consider the various sources of income a.k.a revenue that your salon or spa will bring in, so that you'll know how to allocate your budget appropriately.
- Services and Gratuity – The bulk of your earnings will likely come from your service costs in addition to any tips your clients opt to provide. This may also vary depending on how many hours per week you plan to work.
- Retail Sales – A solid retail sales strategy can have a significant impact on your bottom line – you’ll need to select merchandise wisely!
- Endorsement + Education – Those of you with professional followings may have opportunities to earn extra income via brand ambassadorship and education, or you might even develop your own e-course.
Bonus: How Much Money do I Need to Open a Salon or Spa?
1. In the event of an unprecedented emergency – like a global pandemic
2. It gives you flexibility to try new strategies or ideas without being overly concerned with financial obligations
3. It gives you the confidence to say “NO” It gives you the confidence to say “NO” to undesirable clients and hold true to yourself as a businessperson.
Even if you have difficulty amassing 6 months of savings, stock up as much as you can. You should also consider maintaining a 2nd job or side hustle until your business takes off – consider a work-from-home position, or maybe you could work a day or two each week as a contractor in somebody else’s business.
Also, bear in mind that it is generally financially prudent to maintain an emergency fund containing 6 months of living expenses (residential rent, healthcare + insurance, food, transportation costs (car +insurance, public transportation, etc.), clothing, debts (loans, credit card payments, etc.), and other personal affects. You should have an emergency fund regardless of whether or not you are pursuing entrepreneurship.
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