Competitive Edge: Cutting It Close
The salon business is changing. With labor a salon’s largest expense, many have opted in recent years to rent chairs to independent stylists instead of hiring them.
Hairstylist Chris Kline owned Grand Hair & Beyond on St. Paul’s Grand Avenue for 26 years, where he experimented with both staff and rental models. Kline says employee-business model salons that are doing well operate on a 5 percent profit margin, but switching to a rental chair model increases that profit margin to 10 to 12 percent by slashing labor and, oddly, insurance costs.
“Most independent salons are pretty much just running on a cash-flow basis,” says Kline. Owners “try to eke out a living, but it’s pretty difficult.”
Staff stylists start around $9 to $10 an hour and advance to straight commission—at a rate of 40 to 55 percent, depending on the salon and the stylist’s tenure.
Instead of cutting payroll checks, a chair-renting salon collects weekly rental fees of $175 to $250 per chair; in return, a stylist receives space, lights, water, towels, shampoo and conditioner. Any additional products used during services, such as color, are at the stylist’s expense.
“While the majority of cash flow comes from services, a salon earns its greatest profit margin on retail products,” Kline says. For the stylist, this often means there is pressure to sell products, incentivized by a 5 to 12 percent commission.
Building a robust and loyal clientele helps stabilize income for both stylists and salons. But retaining stylists—and their clients—is a challenge. “It’s a really nomadic business,” says Kline. “People get disgruntled and move on easily.”
It can be tough for a small salon to recover from the loss of a revenue-generating stylist with a deep book of clients. When a key stylist at Grand Hair moved away, Kline and his wife opted to close up shop and rent chairs at another salon instead of waiting for a new stylist to build a clientele at his shop. “I am now doing what I love—the creative part of hair and making people feel better about themselves in a short time.”