Looking for a hair salon business plan? You're in the right place.
A salon plan has to settle questions a lender will ask straight away. How many chairs go on commission and how many are rented as booths? What is a color specialist worth to the business? How much cash does the first winter take? What does retail add to a visit? A generic template will not answer any of them.
In this article we'll walk through a complete sample plan for an Atlanta hair salon, section by section, so you can see how the pieces fit before you write your own. We'll cover the executive summary, the SWOT analysis and, in particular, all of the financials.
Here's what you'll take away:
- The executive summary: see how to describe a salon with two pay models on one page, so a reader grasps the chairs, the booths and the ask in a minute
- The chair and booth mix: find out what a commission chair earns the salon against a rented booth, and how many of each a fourteen-station floor can carry
- The start-up budget: learn what build-out, stock and a first-year reserve cost, so the raise covers the slow months
- The marketing plan: see what a new salon might spend to win its first 310 clients, and which channels carry them
- The five-year profit and loss, cash flow and balance sheet: follow how each hire, price rise and chair filled shows up in the numbers
- The downside case: have an answer ready for "what if sales are 20% short?", with the steps the owner takes in response
- The stress tests and lender questions: see which single input, such as commission, color volume or an opening delay, moves a salon's cash the most
If you're opening a salon, read this before drafting your own. The salon is fictional, so keep what fits and change the rest.
In this plan
To turn this example into your own hair salon business plan, use the hair salon business plan template.
The Plan on One Page
Cranium Salon is a fourteen-station hair salon that opens on January 1, 2027 in about 2,400 square feet on a commercial street in east Atlanta. Ten stations are commission chairs for the owner, a color specialist and eight stylists. Four are rented as booths to independent stylists. A retail shelf of professional hair-care products sits at the front desk. Danielle Pruitt owns 75% and Tamika Rowe, who runs the color room, owns 25%.
The salon needs $415,000: $200,000 of Danielle's savings, $75,000 from Tamika for her 25%, and a $140,000 seven-year equipment and build-out loan. Build-out and equipment take $134,000, opening stock $16,000, license, legal, launch, training and deposit $38,700, and $226,300 stays in the bank as a reserve.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $361,300 | $618,200 | $790,500 |
| Net income after opening costs | ($139,862) | ($28,578) | $22,251 |
| Closing cash | $131,767 | $106,709 | $129,525 |
Year 1 opens with five of the ten commission chairs filled and two of the four booths let. Revenue climbs from $16,000 in January to $46,200 in December, and monthly operating profit appears only in that last month. Year 2 comes close to break-even before interest and depreciation, with EBITDA $1,354 below zero. Year 3 is the first profitable year, after a 71% jump in revenue in Year 2 as the later chairs fill, and its net margin is 2.8%.
A 20% shortfall in every revenue line is modeled too. With a smaller owner salary from month 7, a dropped hire, a late hire and less marketing, cash stays above $35,000 at each year end, although the salon loses money through Year 3 in that case. Without that response the same shortfall runs out of cash in Year 3. The margin is thin: a 10% shortfall with no response also turns Year 3 into a loss, and the stress tests after the financials show which inputs matter most.
The bet is on color. The working figure is a color client back every eight to ten weeks, and a specialist with her own stake in the salon has a reason to stay. The four rented booths add income that does not depend on how busy the floor is.
About Cranium Salon
Licensed name: Cranium Salon, LLC, a Georgia limited liability company. Owners: Danielle Pruitt 75%, Tamika Rowe 25%. Location: about 2,400 square feet of leased storefront, east Atlanta. Opening date: January 1, 2027. Stage: pre-opening. Lease terms are agreed in outline, including three months of free rent during build-out, and Tamika has agreed the partner agreement terms.
Chairs and booths
| Station type | At opening | By month 30 | How it earns |
|---|---|---|---|
| Commission chairs | 5 of 10 filled | 10 of 10 | The salon bills the client and pays the stylist a share of the sale |
| Rented booths | 2 of 4 let | 4 of 4 | A flat $900 a month from each renter |
Danielle and Tamika hold two of the commission chairs. The other eight go to stylists, three at opening and the rest added in months 5, 10, 16, 22 and 30.
What the salon sells
| Line | How it is priced | Share of Year 1 revenue |
|---|---|---|
| Color, balayage and corrective color | About $192 a visit | 45.3% |
| Cuts, styling and treatments | About $86 a visit | 38.2% |
| Booth rent | $900 a month per booth | 9.2% |
| Retail | Professional lines at shelf price | 7.3% |
Georgia licensing
The Georgia State Board of Cosmetology and Barbers licenses salons as well as people. Its salon rule says the salon must be licensed before it does business, that the name must include the word "Salon" or "Shop", and that the owner must complete a Board-approved health, safety and sanitation course. The license, or a current copy of the online verification, must be displayed within 15 feet of the entrance. For that reason the business operates as Cranium Salon. A separate Board rule sets continuing education for licensees at five hours on renewal, three of them in health and safety, with exemptions that include a first renewal. Each stylist is expected to hold a current individual license, which the Board can confirm. Training hours, exams and fees are the Board's to state, and none is quoted here. Whether renters work under the salon's license or need one for their booth, and how the Board and the IRS treat booth renters, are open questions for the Board and employment counsel before the first rental agreement is signed. The $1,800 for licenses and permits and the $1,000 to $2,200 a year for renewals and continuing education are planning figures.
Goals to 2028
- Seven commission chairs and four rented booths by the end of 2027.
- $618,200 of revenue in 2028, with EBITDA at break-even.
- Rebooking at checkout for 70% of visits by the end of 2028.
- Profit after tax in 2029, and the loan repaid on schedule, finishing in December 2033.
Atlanta's Hair Market
What the national numbers show
The Bureau of Labor Statistics put median annual pay for barbers, hairstylists and cosmetologists at $35,880 in 2025 and projects 7% employment growth from 2025 to 2035. It lists 48% of hairdressers, hairstylists and cosmetologists as self-employed and notes that some lease booth space from a salon owner. Those facts shape Cranium's pay model: a stylist who wants independence can rent a booth, and one who wants help building a book can take a commission chair. They also give a check on the commission rate. A Year 3 stylist in the model takes home about $38,400 in commission and tips, 7% above that median.
The plan does not quote an Atlanta client count or household spend. No primary local figure was used, and the volumes in the model come from chair capacity and the client math in the sales section.
Who else a client could use
| Alternative | What it offers | Why a client picks it | How Cranium differs |
|---|---|---|---|
| National walk-in chains | Quick cuts without an appointment | Low price, no booking | A color specialist and a booked, longer appointment |
| Suite and studio rentals | One stylist per private room | Privacy, one-to-one attention | Several stylists, so a client can move to another chair when her stylist is away |
| Independent full-service salons | Cuts, color and styling in one place | Established reputation | Color-led, with a published rebooking routine |
| Self-employed stylists at home or mobile | Low prices, flexible hours | Price and convenience | Licensed premises, a front desk and retail |
The table describes the categories and how Cranium positions itself. It is not a ranking. Prices change often, so none are quoted for competitors. The plan's own $86 and $192 averages are planning figures.
SWOT
| Strengths | Weaknesses |
|---|---|
| A color specialist with a 25% stake | The color business leans on one person's production |
| Booth rent that does not follow the season | Year 1 loses money and draws on the reserve |
| Ten commission chairs to grow into | A Year 3 net margin of 2.8% leaves little room for a revenue miss |
| Opportunities | Threats |
|---|---|
| Event work: weddings, proms and holidays | Stylists leaving with their clients |
| Retail attached to every color visit | Chain and suite competition on price |
| Cross-referral between renters and chair stylists | Classification disputes over booth renters |
The Salon's Clients
Who sits in the chair
Three groups make up most of the visits. Color regulars are planned at one visit every eight to ten weeks and $192 or more a visit. Maintenance clients come for cuts and blowouts every five to seven weeks. Event clients book for weddings, proms and holidays, which concentrate in spring and December. The visit cycles are the plan's working figures, not measured local data.
Who rents a booth
A renter is a licensed stylist with 80 to 150 regular clients of her own who wants to set her own prices and hours. At $900 a month, a renter needs roughly 15 to 20 of those visits a month just to cover the fee. Cranium wants renters who come with their own book, carry their own insurance and agree to the front-desk booking system.
Why clients leave
A stylist moves away. A color result is off and no one fixes it. A visit costs more than the client expected. The plan answers each with a standing routine: shared client records so another chair can take over, a free fix within seven days on color, and a price quoted before the bowl is mixed.
Rebooking targets
| Year 1 | Year 2 | Year 3 onward | |
|---|---|---|---|
| Visits rebooked before leaving | 65% | 70% | 75% |
| Clients from the prior year who return | – | 70% | 72% |
These are targets the plan sets for itself. Year 2's revenue growth depends on the second row.
From First Visit to Regular
First visit and second
A new client fills in a color history card, has a consultation before any product is mixed, and sees a price in writing. Every visit ends at the front desk with a rebooking offer, and a text confirms the booking the same day. Color clients get a reminder at six weeks.
What Year 1 asks of the books
About 520 clients visit in Year 1, for roughly 2,450 service visits, or 4.7 visits each. Danielle, Tamika and the three launch stylists bring about 210 of them. The remaining 310 have to be won, at a marketing cost of about $110 each. In Year 2 about 360 clients return and about 470 more are needed, at about $55 each.
Letting the booths
Booths are let on six-month agreements that renew. Two renters are lined up for January, and the third and fourth are expected in April and September. Once all four are let, a waiting list opens.
How prices are set
Prices are fixed by service and by stylist level, with color quoted by the length and amount of hair. Averages are $86 for cuts, styling and treatments and $192 for color. Prices rise 3% each January from Year 2. A card on file secures any color appointment, and a missed appointment is charged at half the service price.
Retail attached to the visit
Retail targets about 9 cents for each dollar of service revenue. The stylist recommends the product used in the chair, and the front-desk lead records every sale against a stylist so that attach rates can be reviewed each month. Stylists earn no retail commission in the base plan.
Getting Found in Atlanta
Year 1 marketing is $34,000, or 9.4% of revenue: $12,000 of launch spend paid from start-up capital and $22,000 of running spend. From Year 2 the budget is $26,000, then $24,000 a year, which is 4.2% of Year 2 revenue and 2.7% of Year 5.
Launch spend
| Item | Cost |
|---|---|
| Storefront signage and window graphics | $4,500 |
| Website, online booking page and photography of color work | $4,500 |
| Opening-month promotion | $3,000 |
Year 1 running spend
| Channel | Spend | New clients | What it does |
|---|---|---|---|
| Google Business Profile and local search ads | $7,200 | 110 | Captures people searching for a hair salon or color in the neighborhood |
| Instagram and Meta ads showing color work | $5,400 | 70 | Before-and-after work from Tamika's chair |
| Client referral credit ($20 off for both sides) | $3,600 | 70 | Turns satisfied clients into the cheapest channel |
| First-visit offer on a treatment add-on | $2,400 | 35 | Gives a new client a reason to try a stylist |
| Local partners: bridal shops, photographers, gyms | $1,800 | 25 | Event bookings and cross-referrals |
| Rebooking texts and email | $1,600 | – | Keeps current clients coming back |
Milestones
- January 2027: open with five commission chairs and two booths.
- May 2027: sixth commission chair.
- September 2027: all four booths let.
- October 2027: seventh commission chair.
- December 2027: $46,200 of monthly revenue.
- April 2028: eighth commission chair.
- October 2028 and June 2029: ninth and tenth commission chairs.
Inside the Salon
The space
About 2,400 square feet at $28.50 a square foot a year all-in, or $68,400, on a five-year lease with a five-year renewal option, a personal guarantee and a 3% annual escalator. The layout has fourteen stations, a color room with its own sinks and mixing counter, a shampoo area, a front desk and retail wall, and a small laundry. The build-out costs $80,000 after the landlord's tenant allowance. The rent, the allowance and the build-out cost are planning figures for the lease and a contractor's bid to settle. Because the build-out stays with the landlord, it adds little to the lender's collateral.
The color room
Every formula is weighed and logged. The color room tracks grams used against the service billed, so supply cost can be compared with the 8% of color revenue the plan allows. The color specialist and the assistants share the mixing counter, and the assistants shampoo, tone and set up color stations.
Retail and stock
Opening stock is $16,000, about $9,000 of retail and $7,000 of color back-bar. Reorders are made monthly by the front-desk lead. Retail is bought at 52% of shelf price.
Booking, cards and software
A booking and point-of-sale system takes appointments, holds cards on file and sends reminders. Software and subscriptions cost $5,400 in Year 1, about $450 a month. Card processing is planned at 2.8% of service and retail sales. Booth rent is collected by bank transfer.
Hours and staffing
The salon opens Tuesday through Saturday for 45 hours a week: 9 a.m. to 6 p.m. on Tuesday, Wednesday and Friday, 10 a.m. to 8 p.m. on Thursday and 8 a.m. to 4 p.m. on Saturday. It closes Sunday and Monday.
The front desk needs about 50 hours a week with an hour of opening and closing work each day. The front-desk lead is scheduled for 40, so months 1 to 8 are thin by about 10 hours a week, which Danielle covers on her two management days. The evening and Saturday shift of about 20 hours joins in month 9 and takes cover to about 60 hours. No overtime is budgeted for the lead.
The table below counts an assistant's time at 1.0 hour per color visit, 0.15 hour per cut visit and 5 hours a week of cleanup, and a chair's scheduled time at 36 hours a week for 50 weeks, with a cut booking 1 hour and a color visit 2.5 hours. All of these are the plan's working figures. Both assistant rows are per operating week, taking 50 operating weeks a year, and an assistant's paid hours are about 1,094 a year, or 21.9 a week on that basis.
| Year 1 | Year 2 | Year 3 | Year 5 | |
|---|---|---|---|---|
| Commission chairs in use, average | 5.9 | 8.0 | 9.6 | 10.0 |
| Service visits a week | 49 | 82 | 103 | 112 |
| Visits per commission chair a week | 8.3 | 10.3 | 10.8 | 11.2 |
| Share of scheduled chair time booked | 35% | 44% | 46% | 48% |
| Assistant hours needed a week | 27 | 43 | 53 | 56 |
| Assistant hours staffed a week, year average | 22 | 40 | 60 | 66 |
The commission chairs are a ceiling, not a forecast of full books. A stylist with a full book is taken as 24 appointments a week, a working figure, so the model's 8 to 11 visits a chair leaves room for books that take one to two years to fill. A booth renter's chair time is not in the table.
Assistant cover is thin in Year 1, with about 27 hours needed against 22, and in months 13 and 14, before the second assistant starts in month 15. It is also short for the three months before the third starts in month 28. Stylists shampoo their own clients in those weeks.
Pay: commission, booth rent and wage rules
Stylists are employees paid by commission, 42% of what they bill and 45% for Tamika, and they keep their tips. Booth renters are treated as independent operators, not employees, and pay $900 a month. The two models earn differently for the salon. A commission chair at the Year 3 average of $67,000 billed leaves about $31,400 after commission, payroll tax, tip tax and supplies, nearly three times the $11,100 a booth brings in that year, but only once the stylist's book is built. A booth earns from the day it is let.
Clients tip at about 15% of service billings, a planning figure. The salon pays the 7.65% employer Social Security and Medicare tax on those tips, and that cost is in direct costs. Section 45B of the Internal Revenue Code gives a business credit for the employer Social Security tax on tips in hair care. The model takes none, because it shows no income tax to set the credit against.
The federal minimum wage is $7.25 an hour, and Georgia's $5.15 does not apply where the federal Act does. The lowest hourly rate in the plan is $15.38, so no tip credit is used. The front-desk lead and the assistants are paid by the hour and are eligible for overtime. A commission stylist is also owed at least the federal minimum for her hours. With a thin book in her first weeks she may not reach it on commission alone, and no hourly guarantee is budgeted for that case.
Insurance and compliance
General liability, professional liability, property and workers' compensation cover is budgeted at $7,500 in Year 1, a planning figure to confirm by quote. Renters supply proof of an active license and their own insurance before they start, and Danielle reviews licenses at each renewal. Laundry, towels and shop supplies cost $6,000 in Year 1 and cleaning $4,200.
Who Runs the Floor
Danielle Pruitt, owner and salon manager
Danielle has twelve years behind the chair in Atlanta, the last five as lead stylist and floor manager at a multi-chair salon, and holds a Georgia cosmetology license. She invests $200,000 of savings, works three days behind a chair and spends two on scheduling, ordering and payroll. Her pay is a $32,000 salary plus 42% of her own billings, about $16,000 in Year 3, before tips.
Tamika Rowe, color specialist and 25% partner
Tamika has nine years in color, including balayage and corrective work, and runs the color room. She invests $75,000 for 25% of the salon and is paid 45% commission on her own services. Her stake vests over four years, and the partner agreement sets a buy-back price if she leaves earlier.
Front desk and assistants
A full-time front-desk lead, a part-time desk shift from month 9, a part-time shampoo and color-room assistant from opening, a second from month 15 and a third from month 28. The hours table above sets those dates.
Gaps and cover
Danielle has not owned a salon before and has not run payroll for a team. Payroll software and an outside accountant, paid from the $5,500 of Year 1 professional fees, handle both. If Tamika is away, her color clients can be moved to a stylist who has trained under her, but the dollars at risk are the plan's largest single concentration, and the partner agreement includes key-person life and disability cover on her. Stylist agreements carry a non-solicitation term, which counsel should review for Georgia. If Danielle is away, the front-desk lead runs the floor for short periods.
Ownership and the lender
Danielle owns 75% and Tamika 25% of Cranium Salon, LLC. The lender takes a personal guarantee from Danielle and a lien on the equipment and business assets, and the loan terms require annual accounts. The collateral is thin: the equipment cost $54,000 new and the stock $16,000, against a $140,000 loan, and the $80,000 build-out stays with the landlord. The first lease term of five years is shorter than the seven-year loan, so the loan outlasts it unless the renewal option is exercised. Legal work for the partner agreement and the lease is in the $6,500 of professional fees in the opening costs.
Finances, 2027 to 2031
The tables run month by month for 2027 and year by year to 2031. They open with the money needed to start, then the working figures, the four revenue lines, payroll, and the three statements, and they end with a downside case. Stress tests and the questions a lender would still ask follow the tables.
Opening costs and capital
| Use of funds | Amount |
|---|---|
| Build-out: plumbing, floors, color room (net of landlord allowance) | $80,000 |
| Fourteen stations, shampoo bowls, dryers, color bar, laundry | $54,000 |
| Opening stock: retail line and color back-bar | $16,000 |
| Salon license, city business license, permits | $1,800 |
| Lease review, entity and partner agreement, accountant set-up | $6,500 |
| Launch: signage, site and booking page, opening promotion | $12,000 |
| Front-desk and assistant training before opening | $7,000 |
| Lease security deposit (two months) | $11,400 |
| Cash reserve for the ramp and a slow second year | $226,300 |
| Total uses | $415,000 |
| Source of funds | Amount |
|---|---|
| Danielle Pruitt's savings | $200,000 |
| Tamika Rowe's investment (25% of the salon) | $75,000 |
| Equipment and build-out loan | $140,000 |
| Total sources | $415,000 |
Danielle puts in $200,000 of savings. Tamika Rowe, the color specialist, invests $75,000 for 25% of the salon, which brings equity to $275,000, or 66% of the $415,000 total. Tamika pays $3,000 per percentage point against Danielle's $2,667, because Danielle carries the personal guarantees on the lease and the loan. The other $140,000 is a seven-year equipment and build-out loan at 9.75%, repaid monthly from the first month. Neither the rate nor the term comes from a lender's quote; both are working figures for the example. The bank takes a lien on the equipment, stock and business assets, which cover well under the loan, and the build-out stays with the landlord, so the guarantee does most of the work. The model books every opening cost in January 2027, although in practice the build-out and equipment are paid in the last quarter of 2026 from the same funds. It counts the $11,400 lease deposit as spent, even though the deposit is refundable at the end of the lease, so every cash balance below is $11,400 lower than it would be with the deposit held. The $226,300 reserve is the largest single use of funds, and it is sized to the downside case rather than the base. In the base case cash never closes a year below $106,709, at the end of Year 2. In the 20% downside below, after the owner's pay cut and the other responses, the lowest year-end cash is $35,287 (Year 4), and a two-month opening delay leaves at least $68,253 at a year end.
Figures behind the forecast
- Fourteen stations in about 2,400 square feet: ten commission chairs and four booths. Five commission chairs are filled at opening (Danielle, Tamika and three stylists). Further stylists start in months 5, 10, 16, 22 and 30, which fills the tenth chair in June 2029. Counting the owners, the commission chairs in use average 5.9 over Year 1, 8.0 over Year 2, 9.6 over Year 3 and a full 10 from Year 4.
- Cuts, styling and treatments average $86 a visit and color services average $192 (foils, balayage, toner and corrective work) in 2027. Both are planning figures that a survey of local salon price lists would test before opening. Prices rise 3% each January from Year 2. Year 1 comes to about 1,600 cut visits and 850 color visits, Year 3 to about 3,300 and 1,900, and Year 5 to about 3,600 and 2,000.
- Stylists keep 42% of what they bill and Tamika keeps 45%, so color commission averages 43.2% when about 40% of color is billed at Tamika's chair, as in Year 1. Employer payroll taxes and workers' compensation add about a tenth on top of commission. Supplies add 3% of cut revenue and 8% of color revenue. Clients tip at about 15% of service billings, a planning figure, and the salon pays the 7.65% employer Social Security and Medicare tax on those tips, which adds 1.15% of service revenue. Retail is bought at 52% of shelf price, and stylists earn no retail commission.
- Line by line, direct costs are 50.35% of cut revenue, 56.67% of color revenue and 52% of retail, and booth rent carries none. The engine applies a single direct-cost rate to every year, and booth rent falls as a share of revenue, so 50.9% is charged in every year, the blend of those line rates on the Year 4 mix. That is about $8,100 more than the line rates give in Year 1 and $5,800 more in Year 2, and it matches them within $1,700 from Year 3.
- Booths rent at $900 a month ($208 a week). Two are let in January, three from April and all four from September. From Year 2 they are 97% occupied and the fee rises 3% each January. Renters are expected to bring 80 to 150 regular clients, set their own prices, buy their own supplies and carry their own insurance.
- Retail sells about 9 cents for every dollar of service revenue (8.8% in Year 1, 9.1% in Year 3). The $16,000 of opening stock (roughly $9,000 of retail and $7,000 of color back-bar) stays at that level throughout the five years.
- In Year 3, service sales of about $684,000 break down as roughly $135,000 at Tamika's chair, $38,000 at Danielle's on her days behind the chair, and $67,000 for each of 7.6 average stylist chairs, or about $5,600 a month. Tamika's chair bills about $65,000 in Year 1. Year 1 stylists average about $51,000 on a ramping year, Year 2 stylists $63,000 and Year 5 stylists $75,000. At 42% commission and tips of 15% of billings, a Year 3 stylist takes home about $38,400, against the $35,880 median annual pay the Bureau of Labor Statistics lists for the occupation in 2025.
- Year 1 serves about 520 clients, for about 2,450 service visits or 4.7 each. About 210 follow Danielle, Tamika and the three launch stylists, and 310 are won through marketing. Year 1 marketing totals $34,000, made up of $12,000 of launch spend from start-up capital and $22,000 of running spend, which works out to roughly $110 for each of the 310 won clients. In Year 2 about 360 clients return (70% of Year 1), about 470 must be won, and the $26,000 budget brings the cost to roughly $55 apiece.
- Full-time wages carry a 27% load and part-time wages a 15% load, covering payroll taxes, health contributions and workers' compensation. Stylist commission, with its own taxes, sits in direct costs, which leaves the payroll table with the owner, the desk staff and the assistants. Every employee other than the owner is paid by the hour: the front-desk lead $32,000 a year (about $15.38 an hour on 2,080 hours), the part-time desk shift about $15.50 an hour for roughly 1,000 hours a year, and each assistant about $16 an hour for roughly 1,100 hours. The wages listed are launch rates, and a separate line adds 3% annual raises from Year 2.
- The federal minimum wage is $7.25 an hour (29 U.S.C. 206), and Georgia's own $5.15 does not apply where the federal Act does (U.S. Department of Labor state table, updated July 1, 2026). The lowest hourly rate in the plan is $15.38, so no tip credit is used, and the front-desk lead is scheduled for 40 hours a week with no overtime budgeted.
- The all-in rent is $28.50 per square foot per year, escalating 3% annually under a five-year lease with a five-year renewal option. Year 1 rent is $68,400, or 18.9% of revenue, and Year 3 rent of $72,550 is 9.2%. The rent, the escalator and the build-out are planning figures; the final lease and a contractor's bid set the real ones. The outline terms give three months of free rent while the space is built out, so rent in the model starts on opening day, and a tenant allowance is netted from the $80,000 build-out. The build-out is depreciated over ten years, matching the lease and its option. Utilities are $10,000 a year.
- Payment is taken at the chair, so the only receivable is about two days of card settlements. Suppliers and stylists are paid on a 15-day cycle, which leaves $7,561 owed at the close of Year 1.
- Tax is charged at the 21% federal corporate rate and 5.19% for Georgia, and losses carry forward. The engine's tax base leaves out the $38,700 of opening costs and ignores the federal rule that lets a carried-forward loss offset only 80% of a later year's taxable income. Tax is nil in the tables because the $129,740 of Year 1 and Year 2 losses exceeds the profit in Years 3 to 5. With the 80% limit it would be about $1,100 in Year 3, $2,000 in Year 4 and $2,400 in Year 5. Section 45B of the Internal Revenue Code gives a business credit for the employer Social Security tax on tips in hair care, which the model does not take. BDO reported in June 2026 that Georgia cut its corporate rate from 5.19% to 4.99% for 2026, with further cuts possible; the model keeps 5.19% as a cautious figure, to be confirmed with the Georgia Department of Revenue. An LLC of this size could elect pass-through treatment instead, which puts the tax on the owners' own returns.
- No distributions are paid in the five years. Net income after opening costs is still cumulatively negative at the end of Year 5 (a deficit of $57,587), so any payout would return capital, not profit. Cash reaches $210,023 by then, and the loan balance is $50,101.
Where the dollars come from
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cuts, styling and treatments (commission stylists) | $137,900 | $231,000 | $299,000 | $330,000 | $346,000 |
| Color, balayage and corrective color | $163,600 | $296,000 | $385,000 | $422,000 | $438,000 |
| Booth rental to independent stylists | $33,300 | $43,200 | $44,500 | $45,800 | $47,200 |
| Retail products | $26,500 | $48,000 | $62,000 | $68,000 | $71,000 |
| Total revenue | $361,300 | $618,200 | $790,500 | $865,800 | $902,200 |
| Growth on prior year | – | 71% | 28% | 10% | 4% |
Color is the largest line, at 45.3% of Year 1 revenue and 48.7% of Year 3. Cuts, styling and treatments are 38.2% and 37.8%. Booth rent is the steadiest income, because it does not move with the season, but it is capped at four booths, so its share falls from 9.2% to 5.6% by Year 3 as the commission chairs fill. Growth slows from 71% in Year 2 to 28%, 10% and 4%: after the tenth commission chair arrives in month 30, increases come from price rises and fuller books rather than from new chairs.
Month by month in 2027
| Month | Cuts, styling and treatments (commission stylists) | Color, balayage and corrective color | Booth rental to independent stylists | Retail products | Total revenue | EBITDA |
|---|---|---|---|---|---|---|
| Jan 2027 | $6,800 | $6,300 | $1,800 | $1,100 | $16,000 | ($12,960) |
| Feb 2027 | $7,900 | $7,900 | $1,800 | $1,400 | $19,000 | ($11,488) |
| Mar 2027 | $9,400 | $10,000 | $1,800 | $1,700 | $22,900 | ($9,574) |
| Apr 2027 | $10,500 | $11,600 | $2,700 | $1,900 | $26,700 | ($7,709) |
| May 2027 | $11,500 | $13,700 | $2,700 | $2,200 | $30,100 | ($6,041) |
| Jun 2027 | $12,100 | $14,800 | $2,700 | $2,300 | $31,900 | ($5,158) |
| Jul 2027 | $11,000 | $13,200 | $2,700 | $2,100 | $29,000 | ($6,581) |
| Aug 2027 | $11,000 | $13,200 | $2,700 | $2,100 | $29,000 | ($6,581) |
| Sep 2027 | $12,600 | $15,300 | $3,600 | $2,400 | $33,900 | ($4,176) |
| Oct 2027 | $13,600 | $16,900 | $3,600 | $2,700 | $36,800 | ($2,753) |
| Nov 2027 | $14,700 | $18,500 | $3,600 | $3,000 | $39,800 | ($1,281) |
| Dec 2027 | $16,800 | $22,200 | $3,600 | $3,600 | $46,200 | $1,860 |
January is the quietest month at $16,000. Spring events lift March to June, July and August dip, and September to December climb to $46,200 in December. Monthly operating profit appears only in December. On the monthly basis the lowest month-end cash balance in 2027 is about $123,000, at the December close, net of two days of receivables and before the amounts owed to suppliers. The yearly statements close December at $131,767, because they count those payables and measure receivables on average sales, and cash never closes a year below $106,709. The monthly view spreads Year 2 evenly, so a winter low inside Year 2 is not shown. If January and February 2028 ran 15% under that year's monthly average, gross profit would be about $7,600 lower over the two months, which is small against that cash.
Payroll, with commission chairs on the side
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Owner and salon manager | $32,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Front-desk lead | $32,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Front desk, evenings and Saturdays (part time) | $15,500 | Month 9 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Shampoo and color-room assistant (part time) | $17,500 | Month 1 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Second assistant (part time) | $17,500 | Month 15 | – | 0.5 | 0.5 | 0.5 | 0.5 |
| Third assistant (part time) | $17,500 | Month 28 | – | – | 0.5 | 0.5 | 0.5 |
| Total payroll incl. on-costs | $107,347 | $136,001 | $154,449 | $159,480 | $159,480 |
The table lists W-2 payroll only. Tamika and the stylists are paid commission, which sits in direct costs, and the booth renters are not employees. Danielle works the floor three days a week and manages two, so her $32,000 salary covers management and she also earns 42% on her own chair, about $16,000 in Year 3 on $38,000 of billings, before tips. Her full pay is therefore above the table's figure, and the salon's profit is measured after both parts. The front-desk lead and one assistant are in place from opening. An evening and Saturday desk shift joins in month 9, a second assistant in month 15 as the color volume passes what one assistant can set up, and a third in month 28. The second and third assistants are the hires the downside case delays or drops.
Profit and loss
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $361,300 | $618,200 | $790,500 | $865,800 | $902,200 |
| Direct costs: stylist commission, color and shop supplies, retail cost | ($183,995) | ($314,823) | ($402,568) | ($440,915) | ($459,452) |
| Gross profit | $177,305 | $303,377 | $387,932 | $424,885 | $442,748 |
| Payroll incl. on-costs | ($107,347) | ($136,001) | ($154,449) | ($159,480) | ($159,480) |
| Rent | ($68,400) | ($70,450) | ($72,550) | ($74,750) | ($77,000) |
| Utilities | ($10,000) | ($10,300) | ($10,600) | ($10,900) | ($11,200) |
| Marketing | ($22,000) | ($26,000) | ($24,000) | ($24,000) | ($24,000) |
| Insurance | ($7,500) | ($8,000) | ($8,500) | ($9,000) | ($9,500) |
| Professional fees | ($5,500) | ($5,800) | ($6,000) | ($6,300) | ($6,600) |
| Software subscriptions | ($5,400) | ($6,000) | ($6,600) | ($7,000) | ($7,400) |
| Card processing fees (about 2.8% of service and retail sales) | ($9,200) | ($16,100) | ($20,900) | ($23,000) | ($23,900) |
| Towels, laundry and shop supplies | ($6,000) | ($8,000) | ($9,500) | ($10,500) | ($11,000) |
| Cleaning and waste contract | ($4,200) | ($4,400) | ($4,600) | ($4,800) | ($5,000) |
| License renewals and continuing education | ($1,000) | ($1,800) | ($1,800) | ($2,200) | ($2,200) |
| Repairs, music licensing and decor | ($2,800) | ($3,500) | ($4,200) | ($4,800) | ($5,400) |
| Chair, dryer and color-bar replacement | $0 | ($3,500) | ($6,000) | ($8,000) | ($9,000) |
| Bad debt and gift-card write-offs | ($400) | ($800) | ($1,000) | ($1,100) | ($1,200) |
| Annual pay raises (3% a year) | $0 | ($4,080) | ($9,406) | ($14,788) | ($20,016) |
| EBITDA | ($72,441) | ($1,354) | $47,828 | $64,267 | $69,852 |
| Depreciation | ($15,714) | ($15,714) | ($15,714) | ($15,714) | ($15,714) |
| Interest | ($13,006) | ($11,510) | ($9,862) | ($8,046) | ($6,044) |
| Income tax | $0 | $0 | $0 | $0 | $0 |
| Net income before start-up costs | ($101,162) | ($28,578) | $22,251 | $40,507 | $48,094 |
| Opening costs expensed (license, legal, launch, training, deposit) | ($38,700) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($139,862) | ($28,578) | $22,251 | $40,507 | $48,094 |
The Year 1 loss is $101,162 before opening costs and $139,862 once the $38,700 of them is counted. Year 2 sits at the break-even line on EBITDA (a loss of $1,354) and loses $28,578 after depreciation and interest. Years 3 to 5 earn $22,251, $40,507 and $48,094, which is 2.8%, 4.7% and 5.3% of revenue. Tax is nil in every year, because the early losses exceed the later profit. The margin is thin: a 10% revenue shortfall with no response takes Year 3 into a loss (see the stress tests).
Cash in and out
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($134,566) | ($8,895) | $40,627 | $57,385 | $64,371 |
| Build-out and equipment | ($134,000) | $0 | $0 | $0 | $0 |
| Funding received | $415,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | ($14,667) | ($16,163) | ($17,811) | ($19,628) | ($21,629) |
| Owner distributions | $0 | $0 | $0 | $0 | $0 |
| Net change in cash | $131,767 | ($25,058) | $22,816 | $37,757 | $42,741 |
| Closing cash | $131,767 | $106,709 | $129,525 | $167,282 | $210,023 |
Cash closes every year above $100,000. Opening build-out and equipment take $134,000 in Year 1, and loan principal of $14,667 is repaid. Year 2 is the low point at $106,709, after $8,895 of cash used in operations and $16,163 of principal. No distributions are paid, so cash builds to $210,023 by Year 5. The $11,400 lease deposit is counted as spent, so these balances leave it out.
Balance sheet
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $131,767 | $106,709 | $129,525 | $167,282 | $210,023 |
| Accounts receivable | $1,980 | $3,387 | $4,332 | $4,744 | $4,944 |
| Retail and color stock | $16,000 | $16,000 | $16,000 | $16,000 | $16,000 |
| Build-out and equipment (net) | $118,286 | $102,571 | $86,857 | $71,143 | $55,429 |
| Total assets | $268,032 | $228,668 | $236,713 | $259,169 | $286,395 |
| Owed to suppliers and stylists | $7,561 | $12,938 | $16,544 | $18,120 | $18,882 |
| Equipment and build-out loan | $125,333 | $109,169 | $91,358 | $71,730 | $50,101 |
| Paid-in capital | $275,000 | $275,000 | $275,000 | $275,000 | $275,000 |
| Retained earnings | ($139,862) | ($168,440) | ($146,188) | ($105,681) | ($57,587) |
| Total liabilities and equity | $268,032 | $228,668 | $236,713 | $259,169 | $286,395 |
Break-even, margins and debt cover
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -20.1% | -0.2% | 6.0% | 7.4% | 7.7% |
| Net margin (before start-up costs) | -28.0% | -4.6% | 2.8% | 4.7% | 5.3% |
| Payroll incl. pay raises as share of revenue | 30% | 23% | 21% | 20% | 20% |
| Revenue per full-time equivalent at year end | $120,433 | $176,629 | $197,625 | $216,450 | $225,550 |
| Average monthly revenue | $30,108 | $51,517 | $65,875 | $72,150 | $75,183 |
| Monthly revenue needed to cover operating costs | $42,410 | $51,747 | $57,753 | $61,237 | $63,322 |
| Debt service cover (EBITDA / interest + principal) | -2.6x | -0.0x | 1.7x | 2.3x | 2.5x |
Operating costs are covered when average monthly revenue exceeds the figure in the second-to-last row. Year 1 averages $30,108 against $42,410 needed, and Year 2 $51,517 against $51,747, which is $230 short each month. Loan cover is negative in Year 1 and about nil in Year 2 (a negative EBITDA of $1,354 against $27,673 of interest and principal), which means the reserve, not that year's earnings, makes the loan payments. It reaches 1.7x in Year 3 and 2.3x and 2.5x in Years 4 and 5. A 1.25x test would fail in Years 1 and 2 even in the base case. The revenue-per-person row counts payroll staff only, so it overstates what each person earns for the salon: commission stylists are not in it.
If sales run 20% under plan
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $289,040 | $494,560 | $632,400 | $692,640 | $721,760 |
| Net income before start-up costs | ($127,407) | ($56,151) | ($15,307) | $2,564 | $7,937 |
| Net income after start-up costs | ($166,107) | ($56,151) | ($15,307) | $2,564 | $7,937 |
| Closing cash | $104,406 | $50,981 | $35,706 | $35,287 | $37,759 |
This case cuts every revenue line, booth rent included, by 20% in every year. Commission and supplies in direct costs, card fees, laundry and towels, and bad debt fall with sales from the first month. The management response starts in month 7, when the shortfall would show: Danielle takes a 30% cut to $22,400 and keeps her commission, the second assistant starts in month 21 instead of month 15, the third assistant is never hired, and marketing is cut by 20% from Year 2 (Year 1 stays at $22,000 of running spend). Rent, insurance, the desk shift from month 9 and the other fixed costs are unchanged, and no distributions are paid in either case. On those terms cash stays at or above $35,287 at every year end, with the lowest in Year 4, though the salon loses money through Year 3 and earns $2,564 in Year 4 and $7,937 in Year 5. Equity at the end of Year 1 is $108,893, and the lowest month-end cash in 2027 is about $97,000 at the December close, on the same monthly basis as the base case. Loan cover in this case is -3.57x, -1.05x, 0.37x, 0.95x and 1.07x in Years 1 to 5, so a 1.25x test would be breached in all five years. The owners would ask the bank for no cover test before the Year 5 accounts and 1.0x from then, plus a first year of interest-only payments, which would defer $14,667 of Year 1 principal. With no response, the same shortfall leaves cash below zero in Year 3 (see the stress tests).
How the Plan Holds Up When One Input Moves
Each row changes one input from the base case, takes no management response and leaves everything else as in the base case. Where a row moves sales, the costs that follow sales move with it: commission and supplies in direct costs, card fees, laundry and towels, and bad debt. Rows that move every line together, and the opening delay, take direct costs at the base 50.9% of the sales they remove. That blended rate also credits some saving on lost booth rent, which carries none, so those rows are slightly generous: at line rates their cash at the points shown would be about $1,400 to $3,100 lower. Rows that move a single line use that line's own direct-cost rate, which is 0% for booth rent and 56.67% for color. The direct-costs row adds 3 points to the 50.9% in every year. Cash is the closing balance at a year end.
| Case | Net income, Year 2 | Net income, Year 3 | Net income, Year 5 | Lowest year-end cash | Year 3 loan cover |
|---|---|---|---|---|---|
| Base case | ($28,578) | $22,251 | $48,094 | $106,709 (Year 2) | 1.7x |
| Revenue 10% lower, every line and year | ($56,426) | ($13,402) | $7,429 | $47,244 (Year 4) | 0.4x |
| Revenue 20% lower, no response | ($84,274) | ($49,055) | ($33,236) | ($111,494) (Year 5) | -0.8x |
| Direct costs 3 points of revenue higher | ($47,124) | ($1,464) | $21,028 | $77,399 (Year 3) | 0.9x |
| 10% retail commission paid to stylists | ($33,858) | $15,431 | $40,284 | $98,731 (Year 2) | 1.5x |
| Payroll wages 10% higher | ($42,586) | $5,865 | $30,144 | $81,966 (Year 2) | 1.1x |
| Rent 10% higher | ($35,623) | $14,996 | $40,394 | $92,824 (Year 2) | 1.5x |
| Color revenue 15% lower | ($45,894) | ($341) | $22,400 | $79,123 (Year 3) | 0.9x |
| Booth rent halved in every year | ($50,178) | $1 | $24,494 | $68,577 (Year 2) | 0.9x |
| Opening two months late | ($28,578) | $22,251 | $48,094 | $68,253 (Year 2) | 1.7x |
| Loan rate 2 points higher | ($31,095) | $19,997 | $46,583 | $103,191 (Year 2) | 1.6x |
The result is fragile. A 10% sales miss or 3 points more in direct costs each turn Year 3 into a loss. A weaker color book takes it to break-even, at a loss of $341, and halving booth rent leaves it at $1. A 10% rise in wages leaves it $5,865 ahead. The 20% case with no response is the one the owners could not fund: cash falls below zero in Year 3, at negative $32,261 on the year-end balance. The management response in the downside table above is what keeps that case alive.
In the late-opening row the salon opens on March 1, 2027. The whole Year 1 ramp moves two months later, so January and February earn nothing and the plan's November and December are not reached in 2027, which takes Year 1 revenue to $275,300 from $361,300. Rent, payroll and its hires, the loan and the other fixed costs start on the original dates, while card fees, laundry and towels, and bad debt fall with the lower Year 1 sales. Year 2 onward is as in the base case. Year 1 loses $139,618 before opening costs and closes with $91,982. The lowest month-end cash in 2027 is about $85,000, at the December close on the monthly basis. The reserve covers that case.
The 10% retail commission row adds 11% of retail sales (the commission plus its payroll load), which is 0.8 to 0.9 points of revenue in each year. The booth row halves booth rent in every year, including the Year 1 ramp, and saves no direct cost, since booth rent carries none, so payables stay at the base level. The color row removes 15% of color revenue in every year at color's own rate.
What a lender would still ask
- The lease. The term sheet, the guarantee (rent over the first five years comes to $363,150) and how much of the build-out the landlord pays, and when. The $80,000 is net of that allowance. Each $10,000 less allowance comes out of the reserve and lowers every year's closing cash by $10,000.
- Lease against loan. The renewal option has to be exercisable by the tenant for the lease to cover a seven-year loan, and a bank often wants the landlord to waive its lien on the equipment.
- Build-out bids and permits. A contractor's bid, a contingency (none is carried beyond the reserve) and the permit timeline against a January 1 opening. A two-month delay leaves $91,982 at the end of Year 1 and at least $68,253 at any year end.
- Debt cover. A 1.25x test fails in Years 1 and 2 even in the base case, with cover of -2.6x and about nil, and passes from Year 3 at 1.7x. The owners would ask for the first test at the Year 3 accounts. In the downside it stays under 1.0x until Year 5.
- Thin margin. Year 3 net income is 2.8% of revenue. The evidence for the 42% commission and the book each stylist brings is signed commitments and client counts before opening.
- Tamika's book. Her chair bills about $65,000 in Year 1 and $135,000 in Year 3, and a 15% weaker color line takes Year 3 to about break-even. The partner agreement's key-person cover and buy-back terms matter to the bank.
- Booth renters. Written rental agreements, the Board's position on licensing for a booth and the IRS test for an independent renter. If renters were reclassified as employees, payroll tax and workers' compensation would apply to their earnings, and the model does not carry that cost.
- New stylists' pay floor. The model pays commission only, with no hourly guarantee for a stylist whose first weeks of billing fall below the federal minimum for her hours.
- Owner pay and global cash flow. A $32,000 salary plus about $16,000 of commission in Year 3, before tips, against Danielle's personal guarantee on a lease and a loan. A bank asks for her personal financial statement.
- Investor return. Tamika's $75,000 earns no cash distribution in five years. Cumulative net income after opening costs is still negative at the end of Year 5, a deficit of $57,587, and cash is $210,023.
Sources
- Bureau of Labor Statistics, Barbers, Hairstylists, and Cosmetologists, Occupational Outlook Handbook: 2025 median pay, 2025 to 2035 projection, self-employment share and booth leasing.
- Georgia Rules and Regulations, Rule 240-12-.01, Application for Cosmetology/Barber Salon/Shop, and Rule 240-3-.01, Continuing Education (via Cornell Legal Information Institute).
- U.S. Department of Labor, State minimum wage laws, updated July 1, 2026: Georgia's $5.15 and the federal $7.25. The federal rate is also set by 29 U.S.C. 206.
- Federal corporate income tax: a flat 21% rate under 26 U.S.C. 11, with 26 U.S.C. 172 limiting a later year's loss deduction to 80% of taxable income for losses arising after 2017.
- Employer payroll tax and the tip credit: 26 U.S.C. 3111 (6.2% and 1.45% employer taxes) and 26 U.S.C. 45B (credit for employer Social Security tax on tips, which lists barbering and hair care).
- BDO, Georgia Enacts Income Tax Reduction Bill, June 5, 2026: H.B. 463 cuts Georgia's corporate rate from 5.19% to 4.99% for 2026, with further cuts possible. The model uses 5.19%; confirm the current rate with the Georgia Department of Revenue.
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