Salon Business
Salon business questions test whether you can price a service honestly, control stock and read a simple profit figure. You do not need advanced accounting, but you do need the arithmetic and the vocabulary.
Core concepts
- Fixed costs stay the same regardless of clients (rent, salaries, insurance); variable costs rise with each service (product, laundry, disposables).
- Cost per service = (monthly overhead ÷ services performed) + product cost + direct labour.
- Price = cost + margin. Retail markup differs from service margin, so do not mix them.
- Break-even = fixed costs ÷ (price minus variable cost per service).
- Stock control: FIFO, expiry dates, par levels and monthly stocktake; shrinkage from theft or waste is a cost.
- Records: appointment book, daily cash sheet, GST invoices and client cards. In India, service providers register for GST once turnover crosses the threshold, generally 20 lakh rupees for services.
- KPIs: average ticket value, rebooking rate, retention and retail-to-service ratio.
Worked example
Rent is 20,000, salaries 40,000 and utilities 5,000, with 300 services a month, product 80 and direct labour 100. Reasoning: fixed overhead is 65,000 ÷ 300 = 216.67 per service; cost is 216.67 + 80 + 100 = 396.67. A 30% margin gives about 515, so a price of 520 is defensible. Charging 350 would lose money on every service.
Traps
Calling revenue profit; leaving the owner's own salary out of costs; discounting below cost to fill the book; ordering stock without checking expiry; keeping no record of no-shows.