Budgeting for Success: How to Create and Stick to Your Hair Salon Budget Plan

In business, just like in life, you’ll have to deal with many unexpected situations. 

Still, that unexpected is easier to manage when you have a plan. Sure, you’ll deviate from it for a short while, but you’ll get back on track following your plan.

Yes, I’m talking about financial surprises here.

As a hair salon owner, it’s easier to handle them when you have a hair salon budget plan.

A well-thought-out budget plan not only helps you cover all necessary expenses but also allows room for growth. Here’s how you can create a practical budget for your hair salon and make sure you stick to it.

Why Do You Need a Hair Salon Budget Plan?

A hair salon budget plan is basically a detailed guide on how to allocate every dollar you earn throughout the year. This approach helps you make the most of your money.

It helps you forecast and anticipate earnings and spending and understand whether you have enough profit to plan any other financial investments while having enough money for unexpected situations. 

Besides, as a salon owner, you should review your salon’s progress regularly. A hair salon financial plan gives you a clear understanding of the money going in and out. Simply put, a business plan keeps you on track as you grow, especially when you set precise goals (as we’ll see later).

How to Calculate Your Salon Budget?

Calculate your revenue

This is the entire income your salon brings in.

If this isn’t the first year you’ve been in business, you can calculate your revenue based on last year’s financial records. 

Startups and first-time owners don’t have their own financial records to use as a starting point, but if this is the situation you’re in, you can use industry averages from your area. Just make sure to pick a salon similar to yours.

Here’s how you can calculate your revenue accurately:

• Track daily earnings

This includes payments for services like haircuts, coloring, styling, and any other treatments you offer. Keeping a daily log helps you see how much money comes in each day, making it easier to track trends and patterns.

• Sum up monthly income

At the end of each month, add up your daily earnings. This gives you a clear picture of your total monthly revenue. Knowing your monthly income helps you plan for regular expenses and identify any fluctuations.

• Include product sales

Don’t forget to include revenue from product sales. Shampoos, conditioners, styling products, and other retail items can add a significant amount to your income. Make sure you track these sales separately to see which products are the most popular and profitable.

• Seasonal trends

Identify any seasonal trends in your revenue. Do you see more clients during the holidays or wedding season? Understanding these patterns helps you forecast revenue more accurately and plan for busy and slow periods.

Calculate your costs

• List your fixed costs

Fixed costs, also known as recurring costs, are the type of payments you have to make every month, and they are predictable because they don’t change that often. These are costs like rent, insurance, utilities, taxes, staff salaries, or equipment leasing fees.

If you’re just starting your business, you can check the rent in your area for a salon similar to yours and the utilities from your municipal website.

• List your variable costs

To manage your salon’s finances, you need to list your variable costs as well. These are things you might not use daily, and the amounts won’t be the same every time (shampoo, hair color, rubber gloves, and others).

If you’re doing a little bit of marketing to promote your salon (and you should), the money you spend on advertising and other promotions should be added to this list because you won’t run ads every month, and the cost varies. 

During busy months (wedding seasons or holidays) you and your staff might need to work extra hours. Even if salaries are a recurring cost, those extra hours during busy seasons can be added to variable costs because these will happen a few months a year.

Here, you can also add the equipment repairs and maintenance. You won’t do it every month, but it’s something you should set aside money for.

Estimate Your Profit and Loss

Once you have your income and expenses written down, you can estimate your profit and loss.

So, add together your total revenue and then subtract your costs. This will show you how much money you’re making each month and any areas where your business is losing cash flow.

Hidden costs often prevent salons from reaching that profit goal; that’s why managing your expenses is what really matters. Then, you can start thinking about ways to increase your profit.

Here are some tips.

Tips for Sticking to Your Budget & Increase Profit

Now that you clearly understand your revenue, it’s time to create a hair salon budget that covers all your expenses and allows for growth. Here’s a step-by-step guide to budgeting for your salon’s success:

1. Set financial goals

Everything is easier when you have a goal in mind. 

Get your staff involved by setting realistic targets and tracking metrics like new client bookings, recurring customers, retail profits, and upselling. 

To make this worthwhile for your employees, offer incentives like free services, bonuses, or commissions for exceeding goals.

These goals shouldn’t be overly complicated. They can be something like:

• Increase revenue: Raise your monthly income by attracting more clients, offering new services, or adjusting prices.
• Cut costs: Reduce expenses without sacrificing quality, such as finding savings on supplies, utilities, and marketing.
• Save for investments: Set aside money for new equipment, salon upgrades, or expansion to stay competitive.

2. Use salon software to help you

The right salon software will not only save you time by helping you with automatic appointment scheduling but will also help with reporting so you can see how your salon has been doing in the past months. 

Goldie is an appointment scheduling app that helps you manage your calendar. It offers daily, weekly, and monthly views, automatic color-coding for easy navigation, and notifications for upcoming appointments. Goldie also supports recurring appointments to help you maintain regular clients.

And if we’re talking about profit, with Goldie, you can reduce no-shows by sending automated text reminders for appointments. Your clients will remember their appointments, and you won’t lose money. It also has your back in case the client doesn’t show up because you can ask for appointment deposits.

Moreover, Goldie makes tracking your salon’s performance easy with detailed financial reports. It helps you identify trends by breaking down data by service or client and simplifies tax season by allowing you to download comprehensive income reports with a single tap. It also provides graphics to highlight revenue and appointment trends and lets staff members see their individual tips, helping you understand your business better.

And these are just a few of the features Goldie offers. You can access so many others that will help you grow your business. 

3. Create and stick to a budget

A hair salon financial plan is important, but sticking to it requires discipline. 

Track every expense and make sure to update your expense log regularly. Review your progress monthly and quarterly to see what works, identify areas for improvement, and adjust as needed. 

Another important thing is to compare your actual expenses to your budget regularly to stay on track. Cut unnecessary costs and find areas to save money, like buying supplies in bulk or finding a cheaper supplier.

4. Plan your marketing carefully

Plan your marketing as carefully as your finances. You can use budget-friendly marketing tactics, and use paid advertising only now and then when you want to promote something time-sensitive.

Here are some promotion tips that won’t dent your budget:

• Use social media: Be active on Instagram, Facebook, and TikTok to showcase your work. Post before-and-after photos, hair tips, and promotions. Engage with your followers by responding to comments and messages. Read more about social media for hairstylists here.
• Offer referral discounts: Encourage your current clients to refer friends and family by offering discounts or free services for successful referrals.
• Collaborate with local businesses: Partner with nearby businesses to cross-promote services. For example, team up with a local boutique to offer discounts to each other’s customers.
• Run promotions: Offer limited-time promotions or discounts to attract new clients. You could offer a discount on a first visit or a special rate on a particular service.
• Use email marketing: Collect email addresses from your clients and send them regular newsletters with salon news, special offers, and hair care tips.
• Google My Business: Make sure your salon is listed on Google My Business. Encourage happy clients to leave positive reviews, which can attract new customers.
• Offer loyalty programs: Implement a loyalty program that rewards clients for repeat visits. Offer a free service or discount after a certain number of visits.

5. Set a budget for supplies

Spend no more than 15% of your total monthly revenue on back bar supplies like lightener, bowls, brushes, and shampoo. For example, if you spend $1,000 on supplies and your revenue is $6,000, your supply cost is 16.6%. Keep it at 15% or less to maximize profit.

Read more about how to improve your salon inventory management.

6. Set a budget for rent

Aim to spend 12% of your total revenue on rent. If your rent is $1,200 per month, you need to make $10,000 in revenue to meet this goal. Many stylists spend 20-25% of their revenue on rent, which reduces profit. 

Conclusion

Creating a hair salon budget plan might seem difficult at first, but with a little effort, it becomes second nature. Understand your revenue, list your expenses, set clear goals, and track everything. This way, you can ensure your salon stays financially healthy and continues to grow. Happy budgeting, and here’s to your salon’s success!