How do I tell what a hair salon owner actually takes home?

A salon owner who also cuts hair is earning two incomes at once: a stylist’s income and an owner’s return. Statements often blend them, so the headline profit can look larger or smaller than what a new owner would actually keep. Before you rely on any figure, rebuild it piece by piece. The owner’s own role in the salon is a good place to start.

Separate the chair from the business

Ask how many hours the owner works behind the chair and what a hired stylist would be paid to cover them. If you plan to stay out of the chair, ask your accountant how that cost shows in the figures. If you plan to cut hair yourself, you are buying a job as well as a business, and both parts belong in your plan.

Commission, booth rent and employees

Stylists can be paid by commission, rent a chair, or work as employees, and each arrangement changes what the salon books as revenue and as cost. For example, a booth renter’s rent may be booked as income, while a commission stylist’s sales may be booked in full with a pay cost beside them. Ask for the written terms, and read how booth rental changes what you are buying. Your accountant can tell you how the statements treat each type.

Retail and add-backs

Retail product sales add to the picture, but only after the cost of the stock and any product left unsold. Look at add-backs the seller proposes, such as personal vehicle costs, family wages or one-time repairs. Ask for proof of each one. An add-back you cannot document is only an opinion.

• Hours the owner works in the chair, and who covers them after the sale.
• Written pay terms for every stylist, including booth renters.
• Retail sales, product cost and stock on hand.
• Proof behind every add-back the seller lists.

Compare these against the running costs in what to review before buying a hair salon.