Four Ways to Pivot During Economic Changes in the Salon Industry

Ten years ago, salon businesses began booming as more and more people saw the value of salon services. Simultaneously, salon owners began to recognize their value, resulting in prices that matched the quality of the services they provide. Fast forward to today, and previously thriving salons are facing a new set of challenges.

First, as the economy has changed, so have profit margins and client spending habits. Salons' overhead costs and costs of goods sold (COGS) have seen an increase, while customers aren't returning as often due to inflation and cautioned spending.

In addition to economic changes, many talented stylists went self-employed and while they created short-term business plans, didn't fully understand the financial side of things.

Thirdly, salon owners are seeing a lower demand of seasoned stylists wanting commission, with a higher demand from new stylists requiring more of a financial investment upfront, putting salon owners in a tight squeeze. 

Some say TikTok and how-to videos are lowering the demand for hiring professionals, as consumers are more confident than ever, they can DIY everything. But stylists would argue that coloring is a craft and maintaining the health of the hair and the scalp are as important if not more so than style. Many are saying it's time to get back to the basics - no frills and fillers - just cutting, coloring, styling, and caring for the overall health of the client.

No matter how you 'cut it', the salon industry needs to pivot; to get smarter about business, investing money that guarantees a return, knowing every dollar that is coming and going, which services are boosting profits, and how to add value to the industry, while providing the best value to clients.

Here are some steps you can take now:

1. Take advantage of the slow period. Educate your staff on best practices for social media and marketing, simplifying your brand messaging. Through these channels and in person, focus on client relationships, spending more time communicating with existing clients, nurturing those relationships, to increase referrals for new clients. And don't be afraid to include a review link at the bottom of client emails, especially post service emails. Happy clients LOVE to spread the word about their great experience!

2. Every service needs to be priced for profit. Make smart price increases based on facts and data (know your numbers!) that will increase long-term sustainability.

3. Understanding the right commission structure for your stylist is crucial to remain profitable while covering overhead costs, payroll, and owners' pay, leading to less turnover in the salon, and better relationships.

4. Invest in a finance team. Setting up systems and knowing your numbers can increase profits and owners' pay. A successful salon is one that covers overhead costs, payroll, and a weekly salary for the owner. Your salon is not a hobby - it's a business. Learn more about hiring a finance team and get a free estimate.

Remember, owning a business is hard work and the fact that you've started is a huge success! When things get rough, and they will, don't forget to glean from and lean on the experts for support.