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A key mistake a lot of booth rent salon owners make is incorrectly figuring out what they should charge to rent a booth in their salon. Usually, they only calculate enough to only cover the salon’s overhead expenses. Even then, they forget to account for every expense that goes into the operations of the salon.

 

Rent should not only cover the expenses to keep the salon in operation, but also, create a future nest egg. The future nest egg consists of monies saved incase of unforeseen emergencies (i.e. break-in, electrical code violations, broken water pipe, hydraulic chair repair, etc.) & salon updates or remodel. 

 

Finally, the other factor that is forgotten when calculating booth rent is an “owner’s cut.” The renting space in a salon is no different than a shopping center or office building, commercial property owners are in the business of making money off the businesses that lease from them, so why wouldn’t booth rent salon owners, too? 

 

The Sovereign Stylist team of business professionals (i.e. accountants, business advisors, CPA’s, attorneys, etc.) have created a formula to ensure you’re properly figuring out how much your booths should be rented out for:


 

Step 1: “Average Monthly Salon Overhead:”

Total up the salon’s average monthly business expenses. If an expense is paid once a year or on a quarterly basis, break it down into what it costs per month. For example, to be a member of the Chamber of Commerce you pay $500 per year. To figure out how much that is each month you’ll divide $500 by the 12 months there are in a year. Here is a list of the most common business expenses a salon has:

 

  • Building Rent/Mortgage

  • Building Insurance

  • Business Insurance

  • Liability Insurance

  • Utilities (Electric, Gas, Water)

  • Phone

  • WiFi

  • Magazine Subscriptions

  • Garbage

  • Janitorial Services

  • Business Licensing

  • Salon Licensing

  • Health Department Licensing

  • Security/Alarm Subscription

  • Cleaning/Paper Supplies

  • Property Taxes

  • Taxes Paid on Rent Income

  • Lawn Care

  • Window Cleaning

  • HVAC Checkups

  • Snow Removal

  • Advertising

  • Sound Equipment/Music Subscription

  • Chamber of Commerce/Business Association Dues

  • Parking Validation 

  • Backbar*

  • Receptionist*

  • Towels/Capes/Aprons*

  • Refreshments*

 

*Designates amenities, not a requirement to provide

 

Step 2: “Future Nest Egg Savings:”

This will be 10% of your monthly business expenses. 

  • Step 1 X 10% = Monthly Nest Egg Savings

 

TIP: We suggest that each month you separate this amount from the tenant’s payment and deposit it into a separate savings account, preferably an account that earns interest. 

 

Step 3: “Owner’s Cut:”

This is ultimately up to the salon owner’s discretion, but should be between 8-12%. For the purpose of this example we’re going to say the “Owner’s Cut” is 11%. It is su

  • Step 1 X 11% = Monthly Owner’s Cut

 

TIP: We suggest that each month you separate this amount from the tenant’s payment and consider it as personal income, depositing into your personal checking or savings account.

 

Step 4: “Monthly Salon Expenses:”

This is a grand total of salon business expenses.

  • Step 1 + Step 2 + Step 3 = Monthly Salon Expense

 

Step 5: “Monthly Booth Rent:”

Ultimately, each booth space costs the salon money to operate. Even if a booth is sitting empty & you’re waiting to lease it out, it is still included in the count because it is not the responsibility of the other tenants to cover the expense of empty booths. If the salon owner also works behind the chair, they are responsible for paying booth rent too, so don’t leave them out of the count either. If you choose to collect rent on a monthly basis, you can stop here after rounding up to the nearest $10. Another thing to keep in mind is that it is popular for rent to be discounted if it is paid a month at a time. The reasoning behind this is that less administrative work is involved for the salon owner. 

  • Step 4 ÷ Number of Booths + Round Up $10 = Monthly Booth Rent 

 

Step 6: “Weekly Rent:”

Rent is usually collected on a weekly basis. There is an average of 4.3 weeks in each month. 

  • Step 5 ÷ 4.3 + Round Up to the Nearest $10 = Weekly Rent

 

Step 7: “Daily Rent:”

Daily rent is a great way to have stylists who would be accessing the space less than three days a week. There is an average of 30.4 days in each month.

  • Step 5 ÷ 30.4 + Round up to the Nearest $10 = Daily Rent

 

TIP: The more time the rent payment covers, the more days out of the year the station is not only contributing to the expenses of each booth, it also guarantees you more income. Treat daily rent as a last resort and don’t be afraid to charge more by the day. For instance, instead of only rounding up $10, round up $20.

 

TIP: Another reason you might want to have a daily rate is for those special circumstances when you bring in a makeup artist for a wedding party. Or if you have a room to rent for a massage therapist who takes the occasional client at your salon.

 

Step 8: “Competitive Pricing:”

It is important to stay competitive with the other booth rent salons in your area. Research your competitors by comparing the amenities you offer versus them and what they charge for rent. This doesn't mean automatically charging the same because covering your expenses and making a profit for yourself are both priorities. 

 

Another contributing factor is the location of your salon. It only makes sense to charge more in a business shopping center where there is more foot traffic compared to a salon in a residential area.

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