We are interested in reaching out to upscale hair salons in the Southwest U.S. to offer a unique advertising solution that also increases customer review scores on sites such as Yelp, Facebook, Google, etc. However, the hair salon industry is a n...

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We are interested in reaching out to upscale hair salons in the Southwest U.S. to offer a unique advertising solution that also increases customer review scores on sites such as Yelp, Facebook, Google, etc. However, the hair salon industry is a new category for us. We need to understand as much about the business side, including revenues, where they come from, how a salon works with individual stylists renting spaces, and what average P&L sheets look like - again for the upscale salons.

According to Leon Alexander of "Salon Today", the "new business model" for high end hair salons is majorly based on addressing new consumer demands. This new model places major emphasis on selling "experiences and lifestyles", rather than selling products. Alexander urges salons to focus on providing their customers with full on experiences, rather than a simple hair cut. Customers should walk into a salon and feel as though they are getting much more than what they initially intended on getting out of the experience.

Rent For Salon Spaces

We unfortunately couldn't find information specifically related to "how salons work with individual stylists renting spaces", but could find information regarding how renting a space is figured into the costs and profit for a salon.

Although a single figure could not be calculated to represent the cost of rent for high end salons across the country, due to every situation being entirely different, an explanation of how to calculate rent for salons was available. The following steps explain how to calculate rent for any given salon and is broken down by individual booth within each salon.

Firstly, it is recommended to calculate all costs associated with running the salon for one month. These costs may include: insurance, water, electricity, building costs, monthly pay for all staff members, including stylists and receptionists.

Next, it is recommended to add in an average net profit for the salon. The average net profit for high end salons in the United States is between 11% and 15%. This figure should be multiplied by the monthly cost to run the salon, then added to the total expenses per month. This should result in the salon's necessary revenue from each booth in the salon every month.

After calculating the needed revenue per booth, take that figure (total expenses) and divide it by the number of booths in the salon. This should result in exactly how much is recommended that the salon charges each booth to cover its monthly expenses to run the salon and make a profit.

It is recommended that this final figure is compared to all of the booth rental prices for other salons in the area. The price charged per booth should be competitive, while still allowing for a significant profit to be made off of each sale.

These calculations are often reevaluated once a year, therefore, may be slightly different each year.

P&L Sheets

Most profit & loss statement sheets, or P&L sheets, are broken down into two sections, which are then broken down into three sections each. The "profit" section of the financial statement sheet is broken down into: revenue, expenses, and net income (net profit). The "loss" section of the financial statement sheet is broken down into assets, liabilities, and equities.

As a more recent example of a P&L sheet could not be found, we are referencing a sample sheet from 2011, from a company called Skinwell. The report is quite lengthy, at 69 pages long. A major part of the report is an overview of the company's key roles and leadership positions within the company. On pages, 18, 19, and 20 of the report, financial information is listed regarding net income, equity, and cash flow, respectively.

In the company's "Statement of Comprehensive Income", its revenue was $56,572,376, its' gross profit was $39,741,997, its total comprehensive loss was $512,400, and so on. In the company's "Statement of Changes in Equity", its "group" total equity was $40,049,848, its "company" total equity was $36,577,770, and so on. In the company's "Statement of Cash Flows", its net cash used in operating activities was $2,448,483, its net cash from investing activities was $4,742,565, and its net cash from financing activities was $1,635,648, and so on.

Profitability of High End Salons

Examples of high end salon planned profitability will be listed below:

[CENTRE SALON & SPA, TIFFANY PLAZA]
TOTAL EMPLOYEES: 18
2014 PROFITABILITY: 13.6%
AVERAGE CUT & STYLE: $35
BEST-SELLING RETAIL: Aveda
COLOR: Aveda
TECH SUPPORT: SalonBiz, Demandforce

[HABITUDE SALONS AND SPA]
TOTAL EMPLOYEES: 85
2014 PROFITABILITY: 2.2%
AVERAGE CUT & STYLE: $60
BEST-SELLING RETAIL: Aveda, Bumble and Bumble
COLOR: Aveda

[METRO FOR MEN]
TOTAL EMPLOYEES: 12
2014 PROFITABILITY: 15%
AVERAGE CUT & STYLE: $42
BEST-SELLING RETAIL: M By Metro For Men Nioxin Aveda
COLOR: Goldwell Aveda

[NUOVO SALON GROUP]
TOTAL EMPLOYEES: 78
2014 PROFITABILITY: 6.3%
AVERAGE CUT & STYLE: $60
BEST-SELLING RETAIL: Aveda
COLOR: Aveda
TECH SUPPORT: SalonBiz, Demandforce

CONCLUSION

High end hair salons are always looking to implement the most recent and most successful business models, to ensure the success of their business. They are looking to offer every customer to "whole package", even when a customer is only looking for something basic. The salon industry is ever-growing and continues to evolve in different ways every year.
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