Salon Business Models: Which is the Best for a New Business or Career?

If you haven’t already heard, there are several different ways to run a beauty business. As a stylist, spa or barber professional there are also a ton of employment and self-employment opportunities out there for you.

It can be quite confusing to sort through which is the best model-commission, hourly, team-based, hybrid, traditional salon booth rental, salon studios or even a mobile salon. If you’re opening a new salon, the decision to have a successful salon is easy, how you get there is an entirely different topic!

If we haven’t met yet, my name is Susan Wos, I am the founder of Salonspa Connection where we promote salons for sale, help beauty industry professionals find jobs and a host of other helpful things that salons today tend to struggle with.

Take Salon Employment Opinions with a Grain of Salt

There are lot of opinions out there about what is the “best” way to have a solid business or career in the industry. Ultimately, when entering this space, it’s best to think through your personal wants and needs before making a decision.

I will detail the facts about each model in this blog to provide you with the keys to success, along with a few facts about current workplace beauty trends.

The Employee Based Salon Business Model

Just like in the title, an employee based salon is a place you work or own where there are clear employee-employer relationships. Most of the time these salons are commission-based salons, team based pay, hourly or a blend of all 3.

Employee based salon businesses are more prevalent on the east coast, specifically New Jersey and Pennsylvania as booth rental is currently prohibited in those states.

Commission Beauty Salon Model

Commission models are the most popular of all employee based salon businesses. Some salons offer a guaranteed hourly wage to stay compliant with the IRS, some offer a commission percentage split such as a 40/60 or 50/50. Business today looks different for commision models, they took the biggest hit from covid-19 where many stylist flocked to salon suites for safety and privacy.

Salon services are performed in brick and mortar businesses, employees receive paychecks and sometimes benefits. This situation is ideal for a stylist who doesn’t want or can’t run their own business.

For owners who want to provide the best salon environment with a stable and uncapped revenue stream, commission pay is often the go-to choice.

Team Based Hair Salons and Spas

Team based businesses offer a guaranteed wage, sometimes a salary to team members and achievement bonuses. This less common model is more or less an all for one and one for all, mentality.

Med spas often offer the team based pay model while hair salons have yet to widely adopt this salon management strategy. Designed to maximize cash flow, pros tend to prefer being compensated based on their own achievements, rather than being dependent on others for more money in their pockets.

Hourly Salon Business Strategy

There are two ways the hourly salon model works:

Corporate Models– This would be businesses like Great Clips or Super Cuts. You make an hourly wage, often with tips, you get benefits and the support of a franchise to help you build salon clients. This is a stable, yet limiting career choice unless you want to move up the corporate ladder, manage or are perfectly OK with an in-the-box type of environment. Many stylists enjoy this option while some would never consider a corporate position.
Hourly Pricing: New Business Model & Pay– A newer concept in the industry is charging by the hour, and getting paid based on your time. Started by a salon coach group, this movement is more than just about compensation, it’s about equality and flexibility in an employee based model. Tipping is not allowed in this particular model but this salon business plan encourages professionals to price to include what they would make in tips.

Objectives of Salon Business Employee Based Models: A Great Salon Experience

Many salons who hire, rather than house independent contractors are there for the client experience. Hair care, nail care, facials and more are provided by skilled and trained professionals with standards in beauty services. Services and retail are of the highest priority, profit margins can soar, and style is maintained by leaders committed to haircare.

This gives salon owners the ability to control the salon’s business trajectory, provide a great career and make the salon visit an experience customers will remember.

Independent Beauty Salon Business Models (Booth Rental)

Booth and suite rental businesses are environments where hair stylists, barbers, nail technicians, estheticians and massage therapists work as self contained, self-employed, salon industry professionals. This model requires a greater need for professional’s financial planning with less overhead for owners.

Often, beauty professionals get into booth rental too early and end up financially strapped or leaving the industry, altogether. This is due to not understanding what is involved in self-employment and lack of calculating the cost of booth rent before moving to self-employment.

The Three Types of Salon Self-Employment

Open concept. An open concept booth rental salon is where stylists, nail techs or barbers are working in the same room.
Salon & Spa Suites. Suites are rooms you rent to perform services. These can be single, double or large suites that accommodate multiple people.
Freelancers. Freelancers tend to travel to on-location types of events, such as a wedding or movie set.

Salon studio suites are the fastest-growing of all salon businesses. They are perfect for beauty pros who can manage their money, prefers booking through a personal system and for those with good business sense.

The downside of suites is little to no socialization, a more difficult environment to build salon clients and a complete lack of quality control of who rents suites around you. Open concept salons generally get more new customers based on their location and offer a more social and supportive atmosphere.

Freelancing has its ups and downs as well. Unless you have a steady contract or connections that keep you busy, freelance work can be challenging to find. On the bright side, freelancers enjoy immediate gratification, freedom and often travel to fun places to perform services.

Create Your Free Booth Rent Salon Financial Income & Expense Sheet

If you feel the best business structure for a hair salon business is booth rental, make sure to calculate booth rent costs, first. When booth rental is on your mind for the future, but you need the support of an employee based salon, consider working at a hybrid salon, spa or barbershop.

If owning a salon suite or booth rental salon is on your mind, make sure to do a SWOT analysis BEFORE you open! There are more than enough just OK salons, spas and barbershops out there… in order to be competitive, you will need to offer things like a wine bar, services like Botox or non-typical salon services and get your head around what your salon’s culture will be about.

Hybrid Salons, Spas and Barbershops: The Best of Both Worlds

Hybrids offer both employment and independent beauty pros the opportunity to work with you and choose which employment type fits best for any point in time for their careers. While hybrids are the most challenging for business owners to run, they are very attractive to salon professionals who crave both flexibility and freedom.

Hybrids are more rare- investigate a mixed employment salon in your area to find out if this model fits well with what your goals are. Read more information on the hybrid employment model in the salon industry here.

How Marketing Strategy Determines the Right Choice for Salon Owners

What works today won’t necessarily work tomorrow with marketing. Regardless of the business type you choose, recruitment for salon professionals and new salon client acquisition will be an ever-present issue.

In a booth or suite rental model you are not responsible for client recruitment although that is a great perk for renters. Employee based salons come with a certain expectation of help to build your staff.

If you’re already working it on Instagram, you have gotten a piece of marketing figured out. Search engines, relationships and ongoing effort, coupled with a great social media presence are key to keeping your chairs and online booking full!

FAQ

How do you run a salon business?

Start with outlining your goals and evaluate your capacity to manage people. If you plan to be behind the chair while owning, get your business profitable so you can focus on the business’s growth.

Hire a salon or spa mentor, stay on top of regulations and systemize your daily time consuming tasks as much as possible.

What are the three types of salons?

The three types of salons are: employee based, non-employee based and hybrid.

How can I make an Additional Income Stream as a Hairstylist?

In person retail sales or professional skincare & salon affiliate programs are a great way to add extra cash in your pocket! Get a job in hair education or learn how to be a salon coach, once you have experience under your belt.

How Big is the Beauty Salon Market?

Beauty salon statistics show there are approximately 450,000 salons, spas and barbershops in the United States.

Conclusion

Whether you’re a beginner in the industry or a seasoned pro, finding the best route to take when choosing a salon employment model can be challenging. Understanding the kind of service you deliver, your capacity to manage a business and future goals are a great place to start.

One business model is not superior to another, it is a matter of personal preference. Often, professional product lines will influence these decisions stating “commission salons are the best” or “go independent”.

Please DO NOT let corporate giants influence your career or your choice in work environments. They will most certainly not be there to support you in your journey, outside of selling you more product!

Think through any career move you plan on making, and don’t hesitate to reach out if you need help! You can find me on LinkedIn, Facebook or just shoot us a DM on Instagram.

Best of luck to you in your career!

Yours in service,

Susan Wos

Salons For Sale

Salon Business Models Explained: Which is the Best for a New Business or Career?