If you’ve worked in a salon, you’ve thought about it;
why does the owner get to keep half my money?
In fact you’ve probably also thought to yourself,
I can’t wait until I build enough to go rent a chair, or open my own salon. Then I get to keep everything! And also do what I want, when I want.
That’s okay, I used to think that as well. Until I became a salon owner myself. Then the grim reality started to set in. But before we go any further, let’s put this in perspective and remember that you, the hairdresser, are being paid a percentage of the what is being billed to the client by the salon. You are not paying the salon a portion of what you bring in, it’s the other way around. And thanks to my friend Alberto Cirillo for mentioning that to me.
Now this isn’t going to be about rental vs commission, that’s another discussion. This is about educating you as to what goes on behind the scenes to keep the salon where you work running smoothly. Actually, even just to keep the doors open.
I own salons in a very expensive city. I will try to break down the rent and basic expenses in just one of my locations, an 1800 sf salon with 12 stations on a decent street, not a huge amount of walk-by, in Vancouver Canada,. Now I know the rent alone is going to seem insane to some readers, but you can figure out your own rental situation. Most other costs will be very close for a similarly sized location.Remember, these are monthly expenses.
The build-out on this location cost $150,000. It’s beautiful, or at least it was at one point. It’s seen better days for sure, and needs a bit of an overhaul if I’m being objective. And I know my staff wonder when it’s going to be renovated. Most salons need a fresh look within 5 years, but it also helps when the team tries their hardest to keep colour off the floors and the walls.
$11250– $75 per square foot gross rent
$150– telephone and internet
$6000– receptionist and support staff to keep the salon clean, towels folded, shampoos and blow-outs for when you are running behind or to allow you to double book, lunch runs, products ordered and deal with all the other things so you can focus on your clients.
$400– liability, fire and theft insurance
$300– hydro and utilities. Water is not metered here thankfully. Talk to my friends in California about their water bills in a larger salon.
$500 miscellaneous expenses, like paper, toilet paper, cleaning supplies, light bulbs, garbage bags, new towels, washer and dryer maintenance, coffee cups, coffee and tea.
I’m sure I’m forgetting a few things here. I don’t know what my monthly credit card processing is immediately, but I’ll make it $200, which may be conservative. So we have a monthly fixed cost of $18,800 before we’ve even started doing any hair. Let’s round it to $19000, but I’m sure it’s closer to $20000. Each month.
Now let’s talk about the cost of doing business. What does it cost to do that $60 haircut and the averaged $120 colour? I assume roots and grey coverage are substantially less than a full balayage.
The cutting costs are generally covered by the above expenses, as the physical hard cost of a haircut is the square footage, the hydro, and the product used. Colour costs are a very different story though.
Firstly, the cost of your station is about $800 per month in rent. Simple math is the 1800 square feet divided by 12. Obviously the station itself is much smaller than this but you and your 11 co-workers are the ones generating all the money I’m getting to keeping so I like this as an easy cost of the station.
If you are fully booked doing $60 haircuts and average $120 colours (roots and grey coverage are a lot cheaper than a balayage) you would have an average ticket price of $90. A fully booked stylist doing these numbers generally should bill about $11000 per month. Do you bill this much? Most of my staff doesn’t. The average full-time, on the floor stylist in my company would do about $7000 per month, but I develop talent and don’t hire people with a book, so my situation is likely different than yours. But chances are you know what you bill and the people around you are billing.
From that $7000 per month, you get half, $3500. It’s pretty clear cut here. You get an annual salary of about $42000 each year. $42000 for being mediocre at your job. I say mediocre not as an insult but as a fact. If you are full-time and only generating $7000 a month, you are simply being average. But hopefully you are growing each month and getting better and more booked. Sadly many people stagnate though. You don’t get to say you are doing well until you are hitting at least $10000 each month
Things are much more complicated when we talk about my share of that $3500. From that $3500, we have a monthly fixed cost of $1580, which is assuming all 12 chairs are doing that average figure. So now we have $3500-$1580= $1920. Not bad, I’m still taking almost $2000 of your money. I’m still getting rich, right? But we’ve forgotten about all the other expenses involved in you generating that $7000. Like colour costs. Have you ever wasted any colour? Is your bowl clean and empty after every application? As an owner, I would say “no, it isn’t.” And what happens when your toner goes wrong or a colour goes bad? Who eats the costs here? And if a client isn’t thrilled, you drop the price a bit, making sure that your end is covered but the salon’s margin gets smaller and smaller. If you are renting your chair, I guarantee you make sure to not over-mix, but employees always over mix, even the ones I train from the beginning to mix small and remix often. So now we need to take a conservative $400 in colour costs off of our $1920. This leaves your employer with $1520.
But this isn’t bad, is it? Well, I can only speak for Canada, but here we have 2 weeks paid holidays per employee, 3 weeks after 5 years. That totals $145 each month, leaving us with $1375.
Again, not so bad, right? Well I also pay medical benefits at $80 each month, $160 if you are married. Even more if you have a child. So now we are at $1295.
Now here is the kicker, the thing you probably didn’t know about:
Whatever is deducted from your paycheque other than tax, we pay at lease equal to what you pay. So here is a breakdown:
The average $3500 paycheck in British Columbia has the following deductions:
Employment Insurance- $65.80
Canada Pension Plan- $159.92
Your employer has to also pay $159.92 for the CPP, and has to pay 1.4 times what you paid in EI, making it $92.12. So now we deduct another $252.04, leaving the salon owner with just $1042.96. From this money, the employer must pay off the original cost of their build-out, pay surprise expenses, and of course pay themselves. I have several employees that make more money than I do. And just recently I myself had the unexpected expense of nearly $4000 in replacing both water tanks in a salon after just 5 years.
But in this perfect scenario, the salon might still make $50,000 a year in profit or about $4150 each month after the owner gets paid. This equals about 5% profit if the owner pays themselves $100000 a year, if your keeping score.
But let’s talk about me and my situation, because I know a lot of owners are just like me. Today, we have two salons, two academies and a product company. I drive a nice car and live in a nice house. After 22 years behind the chair, I don’t do hair anymore and you might say I have a nice life.
But what you likely didn’t see was the decade of 7 day weeks, countless hours of struggling, of personally coaching everyone on my team and losing money year after year until we eventually became profitable. Today you see the end result of the equivalent of a lifetime of dedication to the craft of hairdressing and to creating a salon company. You don’t see what got me to this point. And 99% of salon owners will never get to where I am today. That’s not bragging, it’s stating how difficult it is to actually be profitable.
A well-run salon can absolutely make a profit, but all too often the scenario isn’t perfect, and things get chipped away. Like when an employee decides that their employer is getting too rich off their backs and deliberately erodes the salon client relationship by whispering things like “I’m leaving soon. I’m tired of my employer getting me to push product on you. I just want to be your hairdresser, I don’t want to be forced to pressure you into buying his over-priced shampoo.”
Eventually this stylist gets enough of the client contact information and has slandered the owner enough that when they quit, the clients are ready to leave with them. Now imagine if a friend or two leave with them. The salon owner doesn’t stand a chance.
So let’s talk briefly about retail. When your employer asks you to sell a little more retail, yes, the profits from those sales are extremely helpful to the salon’s bottom line. Yes, the salon owner needs these sales in order to keep the salon looking good and running flawlessly, as well as allowing the owner to sleep at night and not be miserable to be around because the business is thriving. Those retails sales allow the salon to hire an extra assistant and to allow the staff a little more leeway. To permit the owner to provide better education with special independent guest artists not paid by product companies. To make sure the annual Christmas party is good and all expenses covered. To make the salon a better place to work.
But we don’t want you to pressure those retail sales. We want the clients to see us as experts in their hair and trusted advisers on what products will solve their hair problems. You see, retail sales are actually a barometer of how well you are doing your job and how the client views you. People don’t buy from people they don’t trust. They also don’t send friends and family to people they don’t see as amazing. By you adding “fixing your clients’ hair problems and giving styling lessons to everyone” to how you view your role as a hairdresser, you will see your retail AND service dollars start to skyrocket. And that is a really good thing for you, and when you are performing well and making a great living as a hairdresser, the salon starts to increase profits. Both of these are wonderful things for all parties. It’s win/win.
So the next time your employer seems grumpy, consider the pressure this person is carrying each day just to try to keep their dream and investment alive. And then go out there and give a styling lesson and sell some damn product.