Salon Business
Ownership and compensation
A sole proprietorship is the simplest structure and puts personal assets at risk; partnerships, corporations, and LLCs shift liability and taxation. Compensation models differ sharply: salary or hourly pays a fixed wage; commission pays a percentage of service and sometimes retail revenue; booth rental makes the stylist an independent contractor who sets prices, keeps all revenue, and pays self-employment tax plus their own insurance and supplies.
Pricing and costing
Cost per service equals total monthly costs divided by services performed. Markup is applied to the cost of goods; margin is the percentage of the retail price that is profit. A 100% markup on a $6 product gives a $12 retail price and a 50% margin - do not confuse the two. Track retail with a perpetual inventory system and set par levels so reorders happen before stockouts.
Records and marketing
Keep client service records, product usage, and financial records for the period your state requires. Rebooking is the cheapest retention tool; referral programs and social media cost less than acquiring a new client. Carry general liability, professional liability, and property coverage.
Worked example
A stylist bills $2,400 in services and $300 in retail in one week. At 40% commission, she earns $960 plus whatever retail percentage the salon pays. If she instead rents a chair for $250 per week plus about $200 in supplies, she keeps roughly $2,250 - the rental wins only if her clientele is stable enough to fill the chair, and she now owes self-employment tax.
Traps that cost marks
Confusing markup with margin; treating a booth renter as an employee; ignoring self-employment tax and liability insurance; pricing services without knowing cost per service.