According to IBISWorld, the number of hair and nail salons in the United States doubled over the past 20 years to 1.4 million businesses in 2023. The vast majority of these are small shops, with one or two people. While the number of businesses nearly doubled, industry revenue only grew by 30%, from $52 billion in 2004 to just over $67 billion today. Low barriers to entry and negligible economies of scale result in an industry dominated by small salons competing with bigger competitors: larger salons, franchises, and spas.
Most salon owners are highly skilled and love their craft, but only about 20% of salon businesses break the $100,000 revenue level. Clearly success is challenging in the salon industry. Nevertheless, well over a hundred thousand salon owners are doing very well. What are these successful salon owners doing better than everybody else?
Here are five keys to their success.
Keep It Fresh
Market analysts classify the salon industry as “mature,” but that doesn’t mean the industry is stagnant. Every year salon owners introduce new products, services, styles and techniques. Many of these innovations go nowhere, but some take off and quickly become mainstream.
If you want to succeed in this business, you need to keep up with the trends. You don’t need to blindly follow every new fad that comes along, but you do have to change with the times.
A few recent salon trends include:
- Moving away from products and treatments that use harmful chemicals, such as dibutyl phthalate, toluene, formaldehyde and phthalates.
- Shifting toward organic, environmental- and social justice-friendly products (such as fair trade, locally sourced, made without animal testing, etc.)
- Reducing water usage (“waterless salons” using dry scrubs rather than foot baths --- reducing water usage to benefit the environment while also minimizing chances of bacterial growth building up in foot basins and pipes)
- Offering CBD oil-infused products for pain relief and mood stabilization
But there are other ways to keep things fresh beyond simply following the latest trends. Of course you have to rely on your basic skills, but being a one trick pony usually works for only so long. If you want to stay in business over the long term, you need to diversify your product and service offerings.
Most salons generate 5-10% of their total revenue from product sales. Products sales are an excellent revenue source, particularly since products are usually a lot easier to sell than services. To keep it fresh, try out new products and new display arrangements on a regular basis. Watch your sales numbers carefully. Retire slow selling products and introduce new ones often.
Another strategy is to experiment with different bundles or packages. For example, bundle manicure and pedicure treatments together with nail extensions and nail artwork. Or bundle eyelash and eyebrow tinting when you purchase a hairpiece. The possibilities are endless, but customer feedback and actual sales results should be the main drivers.
Know Your Customers
Another key to success is really knowing your customers. There are several components to this. One is simply listening, talking to and observing your customers. Where do they shop? What do they like to do in their spare time? Where do they work? What do they like to eat? What are their favorite movies?
Another component is gathering information more systematically through surveys and polls. This is pretty easy to do these days, but it also requires some care since one can over-do it. Many salons send out automated texts or emails within a day of their latest appointment asking customers how their appointment went, how they would rate the salon, etc. This is a great idea but be aware that glitches may occur.
Sometimes the software is flawed and customers can’t complete the survey. With text messages, the signal is sometimes so weak the survey or poll doesn’t load properly so the customer can’t even begin to respond. A simple way to deal with these issues is to ask your customers if they received the survey or poll and how did they feel about the software you used.
Another recommended method to get to know your customers is through social media. Set aside some time (at least once a month) to scan social media to see what customers are saying about your salon, and respond to at least some of the comments. In particular, check out and respond to negative reviews on Google, Yelp, and other sites where your customers go.
If you have technicians and other staff working for you, talk to them too. Are their customers/clients happy with your salon? Do they like the latest hair extension and braiding bundle? How do they feel about the new product display?
Another way to get to know your customers is to host a few events at your salon. Almost any occasion will do --- the anniversary of your opening day, Fourth of July, Halloween, Valentine’s Day, etc. Or you can just have a wine and cheese party. The idea is to have fun, mingle with your staff and customers, and get to know everybody in a different context. You can also try out some new product/service ideas on a small scale --- just don’t be too salesy.
Never Stop Marketing
Given the steep competition, you might think salons spend an enormous amount of money on marketing. In fact, the average salon spends less than 1.5% of revenue on marketing. Given that the vast majority of salons generate less than $100,000 in annual revenue, this means most of them are spending less than $150 a month on marketing. This is woefully inadequate.
A print ad in a local newspaper relies on multiple insertions and the cost adds up fast. Direct mail is an option, but a direct mail print campaign can easily reach several hundred dollars a month. Given these price levels it is no surprise that the vast majority of salons avoid traditional advertising channels. Instead they focus on social media, word of mouth, do-it-yourself PR, email newsletters, text messaging and other low-cost approaches.
Social media platforms such as Facebook, Instagram, Twitter, TikTok, YouTube and LinkedIn are all either free or extremely inexpensive, and simultaneously allow both wide reach. The best approach is to concentrate on one or two of these platforms and post regularly, then add others over time as your business grows. One of the biggest mistakes I have seen clients make is to misuse social media by simply treating it as another advertising platform. The idea is not to garishly promote your service; instead you want to connect with your prospects and customers and help them connect with each other.
If you aren’t adept at social media, hire a freelance pro to get you started and maintain your campaign.
Another --- often misunderstood and neglected --- channel is Public Relations Inexpensive options include sending a local magazine, newspaper or affinity group an article or offering to do an interview or give a presentation. Another option is to subscribe to HARO (Help A Reporter Out) and responding to requests for interviews or articles on topics of interest to your customers. Alternatively you can issue your own press release through a service such as PRWeb. Pricing typically is in the $100 - $250 range, depending on which option you select. While nothing lasts forever, well written press releases and articles on the Internet can continue delivering targeted traffic a decade after they first appeared.
All successful salons also regularly communicate with both prospects and existing customers through email and/or text messaging. Be sure to monitor and maintain your prospect and customer lists so they are accurate and up to date. Starting out you can just send out the same message to everyone, but as you grow you will get much better results if you segment the lists and customize your messages so they are targeted to specific audiences. Top email marketing platforms such as MailChimp, Constant Contact, etc. make this much easier to do now than it was even just a few years ago.
Control Your Costs
Hair and nail salon profit margins average around 7%-9%. This is higher than some industries such as grocery stores, but it is still low enough to drive plenty of salon owners out of business within a few years. Turnover in the salon industry is high, particularly for the smaller salons --- roughly 15% of small salons close each year, only to be replaced by new ones.
The single highest cost for any salon is people. Good people are hard to find, and even harder to keep. They want to make a good living and are willing to work hard to do so. The key for salon owners is to find the right compensation balance, so your technicians and other staff are well cared for, but not paid so much that you can’t make a profit.
Of course you don’t want to be at the other extreme either --- if you pay too little your best people will leave and your turnover costs will kill you. This appears to be the case with the giant salon businesses, such as Regis Salons and Sport Clips. (I wouldn’t mention these by name)
Small salon owners are fortunate in that mountains of academic and business studies have shown that pay is just one of the reasons employees stay with their employers. Just as important are the intangibles, such as: Do you treat your employees with respect? Do they ever get time off? Is work just work or is it fun at least some of the time? Do you reward people for going above and beyond the call of duty (such as coming in early or staying late to handle an emergency)?
The good news is that if you make an effort to take the grind out of work, make it more pleasant and accommodate reasonable requests from employees, you will have lower turnover, better performance and less pressure to “just pay more”.
Rent is another major cost, particularly for small salon owners. Small business owners generally have very little control over their rent, so this one is really challenging. You have the most leverage initially when you first sign the lease. Make sure you go through the lease agreement carefully. Watch out for rent escalation clauses, “hidden” fees, and other issues. Also make sure you can get out of the lease easily if the landlord does not follow through on obligations with respect to building maintenance and safety. If possible, work with a tenant representative or a real estate attorney to help you negotiate more favorable terms for yourself.
Another place where I have seen out-of-control spending is on equipment, fixtures and decorations. All of these costs come into play when starting out, but also five or ten years later when upgrading or expanding your salon. Of course you want to make it look great, but that doesn’t mean you have a blank check. First, look at your historical and projected financials, and establish a budget. Second, research different brands and suppliers to see where the best deals are. Don’t forget to look into gently used items, which are often available at huge discounts. Finally, be creative --- talk to different architects, interior decorators and designers to see what ideas they have that fit your budget.
The salon industry may be all about people, but a little technology can help customers buy your products and services, simplify appointment scheduling, help you communicate with customers, and manage your daily business operations.
Most small salon owners simply sign up for a salon management software system rather than putting all the pieces together themselves. A few popular options are Gloss Genius, Zenotti, Fresha, Squarespace Scheduling, Ovatu, and Rosy Salon Software. But there are literally dozens of other options on the market. For reviews, simply search for “Salon Management Software” or similar keywords.
But most management systems are good at some things and bad at others, so mixing and matching eventually becomes necessary. Here are a few technology components to think about.
Appointment scheduling is one of the areas where technology has become absolutely essential. You may still want to have someone answering phones and making appointments the old fashioned way, but they should tie into an appointment tracking system of some sort.
Many salons also allow customers to schedule their own appointments using software alone. The key here is to make sure that the systems are working properly and talk to each other --- otherwise you’ll end up with lots of angry and frustrated customers when their appointments are lost or technicians are overbooked.
Payments are another area where technology is useful. By now almost every salon in the country has a POS system in place, but that is just part of the story. You need to dig a little deeper and make sure everything is working properly, that you accept payments from the most important systems (MasterCard, Visa, Discover, Apple, etc.) and that you are not paying exorbitant transaction fees.
Another component of salon marketing is building a customer list (ideally with home addresses. phone numbers, email addresses, as well as information about their favorite treatments, products, etc.) Here the main ingredient is a CRM --- or Customer Relationship Management --- system. There are literally dozens of systems out there, so a little research is needed before you decide which one is best for you. Whichever system you decide on, be sure to invest at least some time customizing it so it works for your business. Your CRM system is where you will store most of your customer information, so access needs to be carefully monitored, and rules put in place so confidential information stays confidential and contact information stays up to date.
As your business grows you can tie multiple systems together so you reduce time spent on duplicate manual data entry. Tools such as Zapier are incredibly good at this, but recognize that no software system is perfect so you will always need to do at least some duplicate data entry work.
Other useful technology tools include things like Google alerts to check for social media reviews and news about your salon, as well as social media management software such as Hootsuite or Spout Social, which allow you to schedule and post to multiple social media platforms with minimal effort.
Again, you may have to hire freelance talent to help you with these technologies.
About the Author: Andrew Clarke is President of Ground Floor Partners. Over the past twenty years he has advised hundreds of small businesses, including salons, on strategy, marketing, real estate, and finance. He is passionate about small business, social and environmental justice, and is a proud member of the American Sustainable Business Network, Food and Water Watch, Green America, Food Consultants Group, and the American Planning Association.
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