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Opening a Hair Salon Costs $63,500 to $203,000

Are you looking to start your own hair salon? As part of your business plan, make sure to budget for the startup and operating costs to start and run a hair salon or barbershop.

We’ve identified that it costs on average $63,500 to $203,000 to start a hair salon with 5 hair stylists plus $32,500 to $43,000 in operating costs per month to run the business the first few months.

Want to know more? In this article we’ll go through all the different costs you will need to incur to start your own hair salon or barbershop. Read on!

For more information on hair salons & barbershops, make sure to read our guides below:
How to Open a Hair Salon / Barbershop: Complete Guide
How To Build a Financial Model For a Salon?
7 Strategies To Increase Revenues For Your Hair Salon
How to Write a Hair Salon Business Plan: Complete Guide

Hair Salon Startup Costs

Most hair salons cost anywhere from $63,500 to $203,000, depending on whether you plan to lease the commercial space or buy it. Indeed, if the latter, you would have to take a loan and make a substantial deposit upfront instead.

So, we have decided to give you a clear overview of all the key costs you can expect to start a small barbershop below. Note that these costs are for illustrative purposes and depend on a number of factors which might not fully apply to you.

Startup costAmount
Lease Security Deposit or Loan Down Payment$10,500 (leasing) – $100,000 (buying)
Building Improvements & Renovation$5,000 – $25,000
Hair Salon Furniture & Equipment$27,000
Essential Supplies$20,000
Other (POS, licenses, etc.)$1,000 – $3,000
Total$63,500 (leasing) – $203,000 (buying)

Download the Hair Salon financial model template

  • Lender & investor-friendly
  • Easy-to-use Excel template
  • CPA-developed financials
  • 30+ charts and metrics

Lease Security Deposit (or loan downpayment)

If you want to lease a property, you must pledge to stay there for a number of years and provide a refundable security deposit. This will vary based on the property’s location and size. In a prime location in a city like Portland, for instance, you would spend around $40 per square foot each year.

Therefore, if you lease a 1,000-square-foot location, you can anticipate paying around $3,500 per month. If you are asked to submit a security deposit equal to three months of rent, you must set aside $10,500.

If you choose to purchase a commercial property rather than lease one, you will need a down payment of at least 10 percent (unless you have a fat wallet). Therefore, if the commercial property costs $1 million, a 10 percent down payment would include an initial payment of $100,000.

If you are acquiring an existing salon rather than constructing one from scratch, you may expect to pay anywhere from $40,000 to $250,000 or more. The price will depend on variables such as the age of the structure, the state of the equipment, the size of the property, its location, etc. Even in this circumstance, you may need to obtain a loan.

Hair salon renovation costs

After acquiring the hair salon premises, there will likely be costs involved with renovation. Renovating might involve installing new flooring, window treatments, paint, plumbing, etc.

Assuming you have leased a property, leasehold renovations and repairs might range in price from $5,000 to $25,000. However, this cost might climb dramatically if you buy a new salon space and need to set up everything from scratch.

Hair Salon / Barbershop furniture & equipment costs

Once the hair salon space is ready, you need to have the right equipment in place. This cost will significantly depend on the services you will offer. Some of the common equipment you will need for your salon will be:

  • Drying stations
  • Shampoo stations
  • Styling stations
  • Supply trollies & carts
  • Storage and display cabinets

Other essential supplies will include scissors set, clippers set, styling tools (such as curling iron, diffuser, blow dryer, flat iron), clips & caps, brushes & combs, handheld mirrors, and more.

If you are purchasing an existing salon, most of these will already be there, but some of them may require replacement.

For a new salon, the cost can be as high as $27,000, but it can exceed well over that mark depending on the quality.

Hair salon supplies startup costs

Apart from the equipment, you will need to have an initial stock of hair care products and other supplies such as:

  • Shampoos & conditioners
  • Specialty polishes
  • Perm rods
  • Sanitizers
  • Towels
  • Hair capes
  • Aprons, Etc.

The cost of these supplies can vary significantly based on the brands you select. However, as a professional hair salon, you must use high-quality specialty products. These can add another $20,000 to the startup cost.

Even if you are buying an existing salon, you must consider replacing the old supplies.

Retail inventory (Optional)

You may want to add a retail segment in your salon and sell hair care products of different brands. The entire cost will depend on the size of the retail segment of your salon. Attaching a dollar value to this cost is difficult because it will depend on the number of products you are selling, the brands (costs can vary depending on the brands), and of course, the display set up to attract customers.

If you opt for retail sales, it is better to start small and then adjust depending on the demand.

Certification

To operate a barbershop, a cosmetology license is a must. This is the most critical license you must possess, regardless of state. The most significant requirement is that the license is issued in the same state where the salon will be located.

You must complete several hours of instruction and pass a certification exam.

The license cost itself differs from one state to another but is relatively cheap. For example licensing costs in California only are $50 for barbers & cosmetologists.

Hair salon licenses & permits

Apart from a cosmetology license, you will need the following licenses to operate a hair salon:

  • Salon business operation license
  • Salon retail seller permit
  • Employer identification number
  • Certificate of occupancy & building permits

Typically, a small business license costs around $100, but the price can vary depending on your state of operation. You can learn more about licensing requirements by visiting SBA’s reference to state licenses and permits.

Similarly, the retail seller permit (which is also known as resale ID, resell permit, reseller number, permit license, etc.) cost will vary from one state to another. This license can be free or cost less than $50.

For instance, a seller’s permit in California doesn’t cost anything, but you may need to pay a security deposit to cover unpaid taxes at a later date that may be owed if the business suddenly closes. You need to contact your local state authorities to get this license.

An employer identification number (EIN) is issued by the IRS, and it does not cost anything. You can apply for EIN online.

The certificate of occupancy and building permits will usually depend on the size of the salon, type of construction, square footage, and other factors. There will be inspections to ensure that it is compatible with zoning rules, meets landscape requirements, and more.

The cost of obtaining a certificate of occupancy will vary from one state to another, but the ballpark estimate is $250. You can learn more about the certificate of occupancy here.

In general, you can expect the licensing fees to be around $500.

POS System

Your barbershop will need a computer and POS system for processing payments including credit & debit cards, Apple Pay, Venmo, etc. You will also need a receipt printer, cash register, etc. 

There are many players on the market and many of them offer all-in-one solutions. For instance, Square Register offers hardware, software, and payments for just $799.

Note: Neither do we endorse Square Register and nor are we promoting it. It is only for illustrative purposes.

Employee Uniform (optional)

Adding employee uniforms will give your salon a professional boost, but again, that is entirely optional. You can ask your employees to maintain a certain dress code, which happens to be a much cheaper alternative. Also, you can use branded aprons (aprons with your salon name printed on them) and give your employees the freedom to choose their wardrobes.

If you decide to go for a uniform, you can expect to pay anywhere between $15 and $50 per uniform. So, if you have 3 employees, you can end up spending $90 to $300 for uniforms assuming that you are offering two sets for each employee.

Hair Salon Operating Costs

Now that we have looked at the costs you should expect to start a hair salon, let’s now focus on the operating costs you would have to incur each month to keep the hair salon running. 

Hair salon operating costs typically include salary costs, supplies, rent and staff. 

Operating cost Amount (per month)
COGS$5,000
Rent/Mortgage Payment$3,500 – $6,000
Employee salaries (incl. taxes)$19,200
Utilities$1,000 – $4,000
Cleaning$2,000 – $4,000
Marketing$1,000 – $2,500
Other (software, insurance, etc.)$1,000 – $2,500
Total$32,500 – $43,000

Download the Hair Salon financial model template

  • Lender & investor-friendly
  • Easy-to-use Excel template
  • CPA-developed financials
  • 30+ charts and metrics

Hair salon Cost of Goods Sold (COGS)

This is one of the most important costs you need to consider. It will cover things like shampoos, conditioners, hair colors, oils, shine sprays, etc.

Unfortunately, hair supplies aren’t cheap. Logically, the cost will depend on your number of clients and the quality of the products you buy.

On average, expect to spend 10% of your sales in COGS.

So assuming that you and your team attend to 30 clients a day with a mix of services like hair cutting, straightening, shampooing, coloring, shining, etc. with an average order value of $60, the total monthly revenue they would generate is about $50,000 (assuming 6 days a week). Therefore COGS would be anywhere around $5,000.

Hair salon rental costs

If you leased a hair salon space, you will need to pay rent. On the other hand, if you took a loan to buy the salon space, there will be monthly mortgage repayment. However, the amount you pay per month will depend on a number of factors including the size of the space, location, lease or purchase, and more.

Assuming an average of $40 per square foot per year in a premium location in a city like Portland, you would be paying around $3,500 per month in rent for a 1,000-square-foot space.

Similarly, if you take out an SBA business loan of $500,000 with a 3% SBA fee, 8% APR, and 15% down payment, you will end up paying around $6,000 per month for a 10-year loan tenure.

Hair salon staff costs

Employee salaries make up another major cost of operating a barbershop. Here is a quick list of some of the most important salaries you need to pay:

Assuming that you hire 5 hair stylists, you would be paying a total monthly salary of around $13,000. In addition with a salon manager for another $3,000 a month, the total monthly salary cost (including taxes and benefits) would be around $19,200.

This represents 40% of your total sales, which makes total sense as the service payroll benchmark for the spa and salon industry is about 35% of revenue.

Expect to pay approximately 40% of your sales in salaries

Utilities

A hair salon, in general, will use electricity, water, and gas to run different types of salon equipment. Plus, there will be lighting decor, AC, a TV to entertain people waiting in line, and more. According to Sage, you can expect the utility bills to be between $1,000 and $4,000. Of course, the exact cost will depend on the scale of your business.

Cleaning services

You need to keep your hair salon health-compliant. Regular housekeeping is necessary and that will require vacuums, mops, bleach, toilet paper, wipes, and more. Those supplies can cost you anywhere between $50 and $200 a month.

You can call for professional cleaning services that can charge you up to $200 for a weekly visit. But even if you are taking this route, day-to-day upkeep will be necessary that you and your crew members must take care of.

Assuming that you go for a combination of professional and self-services for cleaning, you can expect a monthly cost of approximately $4,000.

Insurance

A hair salon belongs to the personal care business industry. The average insurance costs for the industry, according to Insureon, are:

  • General liability insurance: Median monthly premium – $35
  • Business owners’ policy: Median monthly premium – $70
  • Professional liability insurance: Median monthly premium – $40
  • Workers’ compensation insurance: Median monthly premium – $80

If you consider buying all types of insurance, you will be paying $225 a month.

Hair salon marketing costs

To attract loyal consumers to your hair salon, you must engage in appropriate marketing. Therefore, make sure you put up a marketing and advertising budget. Your hair salon’s marketing expenses will vary based on the media employed and the intended audience.

Marketing and paid advertising will often be more expensive during the first six months of business. Before you can rely on organic growth (word-of-mouth), you will require a sizable expenditure to market your hair salon as you launch your firm.

Ideally, you should not spend any more than 2% to 5% of your gross revenue on marketing. 

So, using the hair salon example above of $50,000 gross revenue, you should typically be spending between $1,000 and $2,500.

You can spend that amount for offline advertising such as billboards, posters, etc., or you can allocate a part of the fund for online advertisements such as PPC ads and social media ads.

For PPC advertisements and social media ad campaigns, you can set a monthly budget. It is totally your choice and budget. Some people spend up to $500, while others can spend up to $2,000 or more.

If you want to run radio campaigns for example, it can cost you anywhere between $20 and $80 per ad spot