How smart pricing and operational optimization can boost profits with minimal lift
Every salon owner wants to build a successful, sustainable business — but that’s easier said than done, especially when salon profit margins are so thin. Owners must balance expenses like rent, labor costs, and utility bills against service menu pricing and client retention, and every dollar counts.
It’s not all doom and gloom, though. Through clever pricing, inventory management, and client retention, you can maximize your salon profit margin rates with relatively minimal lift. Here, we’ll walk through average industry profit margins, as well as some optimization strategies that can help you boost revenue with the systems you might already have.
Average salon profit margins
To understand the average salon profit margin, we must first answer, “How much do salon owners make a year?”
According to Gitnux, the average salon’s annual revenue in the United States is $245,000. This number represents the total income a salon brings in from services and retail purchases. Meanwhile, a salon owner's average take-home salary is around $61,000, according to Indeed. Of course, these values will fluctuate depending on your salon’s location, how much business it pulls in, and how much you charge for services on your menu.
Other expenses that can eat into your salon’s revenue include:
Wages for additional staff
Rent and utilities
Licensing fees
Supplies, equipment, and retail inventory
Insurance
Taxes
These expenses will vary significantly depending on the size and location of your business, but you’ll likely be paying for most or all of these expenses running your salon.
Considering total revenue and expenses, the average salon profit margin shakes out to around 8.2%. This is generally in line with NYU’s findings of the average profit margins across U.S. businesses in all industries, which is 8.54%
So, if we use the average salon’s annual revenue — $245,000 — a salon would need to keep expenses at or below $224,910 to hit the average salon profit margin rate.
How to increase salon profits
Now that you know what to expect for your salon profit margin, you’ll need to pull on whatever levers you can find to maximize revenue while keeping costs low. Luckily, you have tools at your disposal that you can start using right away to optimize your margins.
Offset credit card fees
Credit card fees are a hidden menace that can take a huge bite out of your profit margins if you’re not careful. Credit card companies often charge, on average, anywhere from 1.5% to 3.5% of the total cost of the service, along with a flat 10-cent fee on top of that.
It doesn’t sound like much, but every credit card transaction adds up. And since the total amount can fluctuate based on the number of transactions, it’s difficult to predict how much you’ll pay from one month to the next. Ultimately, this can create a situation where you’re spending thousands of dollars of invisible processing fees when they could be going toward paying rent or improving the business.
Rather than eat the cost, you can offset those fees onto your clients. Tools like Boulevard Offset automatically add a 3% charge to your client’s bill to account for the credit card fee, leaving you with a remaining 1% fee to cover. Boulevard’s clients have saved an average of $9,600 through the Offset program, helping them stabilize a large chunk of their costs in the process.
If you plan to offset credit card fees, just remember to be transparent. No one likes to be hit with hidden fees, least of all your clients. Display messaging on your website and at your salon to explain this offset and encourage clients to use cash to avoid paying for the fee entirely.
Experiment with pricing
It’s tempting to lean on lower prices or discounted rates to lure in new clients. However, you might actually be charging too little compared to the value of the service you’re offering clients, effectively leaving potential profits on the table.
The psychology of pricing affects how clients perceive the value of the products and services they buy. Charge too much, and you’ll scare away clients with sticker shock. Charge too little, and they might perceive services as low-quality rather than as a bargain.
While this value will be different for every salon, there’s a good chance you could increase the prices on your menu without negatively impacting client opinion — especially if your salon is steadily booked and your retention rates are high.
Additionally, there are ways to influence clients' purchasing behaviors by offering them more choices. Tactics like price anchoring (which positions a more expensive item as a baseline against less expensive options) or decoy pricing (which points clients toward more expensive items with higher profit margins by making them just a little more expensive than other tiers) put the value of your services front and center while directing them toward the most profitable options.
As always, be sure to do your research and take a look at what other salons in your area are charging for similar services. You may discover that you can squeeze more profit out of your services without changing much more than the dollar value associated with them.
Bolster your retention efforts
Clients today are drowning in choices. Getting them to walk through your doors instead of the competition is already hard — keeping them coming back is even more challenging. That’s why removing as many barriers as possible between your client and their ability to book an appointment is essential.
Online booking is a vital tool for breaking down those barriers, and it’s proven to retain more clients than other booking methods. According to our Official 2023
Salon Industry Client Retention Report, 78% of clients who book their first appointment online return for a second appointment, compared to 39% of walk-in bookings.
Retained clients aren’t just loyal to your brand — they’re also loyal to the stylists who work for you and are likely to spend more as a result. Our findings show that clients who can book with a specific stylist spend 30% more than those who don’t, and clients are far more likely to request that stylist during the online booking process if the option is available.
That’s why it’s smart to leverage tools from your marketing suite, like email campaigns and loyalty programs, to keep clients coming back once you’ve acquired them. Not only will you avoid losing money on the initial client acquisition, you’ll also maximize the lifetime value of each client you keep.
Find other ways to optimize and streamline operations
In addition to optimizing your menu pricing and client retention efforts, there are other ways to leverage your salon marketing suite to help you eke out more profit without a significant overhaul to salon operations. Consider actions like:
Set up “Fill Slow Day” campaign efforts to entice clients into the door during downtime. Tools like Boulevard’s Precision Scheduling can help you automatically fill scheduling gaps while maximizing revenue by offering add-ons along the way.
Closely monitoring product inventory to stock up on hot products at the right time to minimize waste. You can also use this information to help you clear old stock. For example, you can check your reporting to see which products have been sitting on your shelf the longest, then set up a summer sale campaign and get them into the hands of bargain-hungry clients.
Got a cancellation? Offer special booking opportunities to current clients to fill sudden gaps in your schedule.
Some of these may seem like small steps, but combining them over a long enough timeline can increase your salon profit margin rates by several percentage points. Plus, by making processes more efficient for stylists, you’ll help them take on more clients and earn more money. It’s a win-win.
