Salon Business
Domain 7, Salon Business, tests pricing, product cost, inventory, recordkeeping, legal structure, insurance, and client retention. The exam expects practical math and the difference between markup and profit margin.
Core rules
- Service price must cover direct product cost, labor, overhead, and profit. Overhead includes rent, utilities, insurance, and administrative costs.
- Markup is added to cost; margin is profit as a percentage of selling price. They are not the same calculation.
- Keep client records accurate and confidential, including service history, formulas, patch-test notes, and consent where required.
- Inventory control means tracking usage, rotating stock, and ordering based on actual service volume, not guesswork.
- Booth renters and salon owners should confirm licensing, insurance, and tax responsibilities under New Mexico rules.
Worked example
A service uses $6 of product, $18 of labor, and $9 of overhead, and the owner wants $7 profit. Price = 6 + 18 + 9 + 7 = $40. If the owner instead wants a 30% profit margin on a $30 cost, price is 30 ÷ (1 − 0.30) = $42.86, not $30 + 30%. Reasoning: margin is based on the selling price, while markup is based on cost. Confusing the two underprices the service.
Traps that cost marks
- Pricing only by competitor rates while ignoring product, labor, and overhead.
- Calculating a 30% markup and calling it a 30% margin.
- Keeping client formulas in an unsecured place or sharing them without consent.
- Ordering large inventory without tracking actual usage and expiration dates.