What running costs should I review before buying a hair salon?
Rebuild the monthly cost base from the records, line by line: how stylists are paid, colour and back-bar product, retail stock, booking software and card fees, laundry and supplies, and rent. A salon’s costs move with how it pays its people and how much colour work it does, so ask for the detail behind each line.
Statements alone may not show what it costs to open the doors each month. Two salons with the same sales can have very different cost bases, depending on how the stylists are paid and how much of the work is colour. Ask for monthly statements and the records behind them, then rebuild the cost base yourself. Your accountant can help you read the statements and check your rebuilt version against them.
How the stylists are paid
Ask about this line first. Some stylists are employees paid commission, some are paid hourly, and some rent a chair and pay the salon a set amount. Each arrangement hits the books differently. Ask for the pay split per stylist, any guarantees, and who is on payroll versus paying rent. This page on booth rental explains how renters change what you are buying.
Colour, back-bar and retail stock
Colour, toners, developers and treatments are used up every day, and the cost swings with the service mix. Ask how product is ordered and tracked, and whether waste is measured. Retail stock is different: it sits on shelves until it sells. Ask what is on hand, how old it is and whether any of it is on consignment or still owed to a supplier. The cost of goods sold line will show how the books treat it.
Software, card fees, laundry and supplies
Small recurring costs add up. Look for the booking system subscription, card-processing fees, towels and laundry, disposable supplies, insurance and cleaning. Check whether any of them are billed to the owner’s personal card or paid by a family member. This page on online booking covers what happens to the system and its client list.
Rent and the cost of the space
Read the lease for the rent, the extras charged on top and when it ends. Ask what the landlord must approve for a sale. Today’s rent can change at renewal, so ask your lawyer how the lease treats that. Then compare the lease to the figure in the books.
- Pay arrangement and split for each stylist
- Colour and back-bar ordering records
- Retail stock on hand and amounts owed to suppliers
- Software, card-fee and supply invoices
- The lease and the rent paid
Related reading
15 pages on the same subject, grouped by topic.
Buying
- Expert answerWhat trade rules and worker questions should I check before buying a hair salon in Canada?
- Expert answerWho owns the clients when I buy a hair salon?
- Expert answerWhat should I do in the first month after buying a hair salon?
- Expert answerHow do I read a hair salon for sale listing?
- GuideBuying a hair salon in Canada
- Expert answerHow does booth rental change what I am buying in a salon?
- Expert answerDoes the online booking system transfer when I buy a salon?
- Expert answerWhat salon equipment should I inspect before I buy a salon?
- Expert answerWhat does a salon owner do day to day if they are not a stylist?
- Expert answerHow do I find a lash or brow business for sale?
- Expert answerHow do I check the lasers and devices when buying a med spa?
- Expert answerWhat should I check before buying a laser hair removal clinic?
Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentWhat are financial statements?
- 02Business Development Bank of CanadaGovernmentWhat is the cost of goods sold (COGS)
- 03Canada Revenue AgencyGovernmentInventory and cost of goods sold
- 04Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
Deavo is an advertising and listings platform, not a brokerage, law firm or valuation firm. This page is general information, not legal, tax, accounting or valuation advice, and rules differ by province. Confirm anything you rely on with a qualified professional before you act on it.