How To Open a Nail Salon
Are you talented in nail art and enjoy working with people? Then, consider becoming a nail technician and opening your very own salon. Nail salons are everywhere these days. It is not surprising. Since 2013, Americans have spent over $8 billion each year on nail services.
But how do you start a successful nail salon? This step-by-step guide will walk you through the financial, legal, and business aspects of opening a nail salon.
Draft a Business Plan
A business plan is an excellent way to get your nail salon off to a good start. Creating a business plan puts your dreams and goals down on paper. It also helps to know what you will need for success.
Additionally, you use your business plan for loans or startup capital. Banks and investors want to see the roadmap of how you plan to run your business.
Your business plan should cover:
- Description of your nail salon
- Who will manage and work in your salon
- Your target market, meaning your clients
- Where you will locate the salon
- Who are your competitors, and what advantage do you have over them
- Anticipated startup costs, including supplies and equipment
- Estimates on prices charged, based on the market area
- Ongoing expenses and expected profits
Business plans do not have to cover every detail. However, they should address what makes your business better than your competitors.
Determine a Business Name
Choosing a business name is often the fun part of setting up your nail salon. However, there are specific rules in naming your businesses. First, be sure it is not in use or trademarked.
Search your Secretary of State Division of Corporation records to see if another business entity registers the business name. Use the Trademark Electronic Search Service (TESS) at the United States Patent and Trademark Office to check if the name already has a trademark.
There are also other do's and don'ts when naming your business. For example, do not use your street address in the name. You may move your salon or open new locations in other areas. Think carefully about the name because it becomes your brand. Changing it at a later date will cost time and money.
Choose and Register Your Business Structure
Consider a sole proprietorship, corporation, limited liability company (LLC), or partnership when starting a business. Look for liability protection and tax benefits when choosing your business structure.
A one-person business is known as a sole proprietorship. It is the most common business form and the easiest to create. Any profits or losses appear on your personal tax return. While this requires little paperwork, it does expose a business owner to personal liability.
A corporation separates business profits and losses from the business owner. A corporation also shields the business owner from the personal liability of the business operation.
However, you may pay taxes on the corporation profits and taxes on the income you receive on your personal tax return. This is "double-taxation." You can avoid double-taxation by applying to the IRS for an S corporation.
Limited Liability Company (LLC)
A limited liability corporation (LLC) has the tax advantages of a sole proprietorship and the liability protection of a corporation. As a result, an LLC is a popular choice among one-person businesses.
If you want to have a partner or partners in your nail salon, you might consider a partnership. However, similar to a sole proprietorship, all partners are personally liable for business lawsuits and debts.
You can get corporate protection for your partners by forming a corporation or limited liability partnership.
Register Your Business Structure
Once you choose your business structure, register it with the Secretary of State Division of Corporations in the state where the business operates. Find the formation documents for your business entity at your Secretary of State's office.
Apply for Employment Identification Number (EIN)
After you register your business structure, apply for an Employment Identification Number (EIN). This number is a taxpayer number for your business. You use it to file tax returns, open bank accounts, and obtain business licenses.
Find Your Salon Location
Finding a location to operate your salon is almost as important as the business name. You want to have foot traffic and convenience for your clients. Find a central location.
Nail salons generally do not need a lot of space. You might set up shop in an existing hair salon or find flexible arrangements.
In leasing space for your nail salon, be aware of local rules and zoning. Once you find the space to lease, you may negotiate with the property owner to build it out to your requirements.
You may want to have a business lawyer review your leases so there are no surprises. They can also help if you have problems with the landlord.
Apply for Business Licenses and Permits
A nail salon must have the necessary business licenses and permits to operate. Most nail salons need the following licenses:
General Business License
A general business license is issued by your state, county, or local municipality to operate your business. Check with all offices to see what licenses they require.
Some states require a seller's permit if you sell products (for example, nail polish) in addition to providing nail services.
Certificate of Use and Occupancy
A certificate of use and occupancy allows the nail salon to operate at the business location. However, because your business uses chemicals, there are questions regarding the storage and safety of hazardous materials.
Your state board of cosmetology licenses and regulates nail technicians. You need a cosmetology or nail technician license to perform nail services to the public.
In addition, some states require formal nail school education and passing an exam. Check the licensing requirements in your state.
You most likely will need a business loan for your nail salon. The average cost of a nail salon startup ranges from $137k to $246k. But, of course, depending on your area, it could be much higher or lower.
In your loan application, remember to include all equipment that you need for your salon. In addition, calculate your ongoing costs and taxes, payroll, supplies, rent, equipment repairs and maintenance, and insurance.
Purchase Supplies and Equipment
Be sure to get all the supplies and equipment you need for your operation. For example, you'll need manicure stations, pedicure chairs, sanitizing and ventilation equipment, and nail polish displays.
Look for deals and consider what is essential for your business. For example, a pedicure spa chair costs anywhere from $1,000 to over $7,000.
Purchase used equipment or take over equipment from other salon owners going out of business. Or look into leasing equipment from a salon finance company.
Obtain Insurance and Reduce Risks
Any business open to the public has some form of liability. However, a nail salon has particular risks—for example, bacterial infections and allergic reactions.
Protect your business with insurance and learn how to reduce the risks in your operation.
Salon owners should look into business insurance for a nail salon. Some of those are professional liability, general liability, property liability, and worker's compensation.
Professional liability insurance is also called Error and Omissions insurance. This insurance covers medical and legal expenses and any damages as a result of your services. For example, if a client develops a severe nail infection, they may have a personal injury claim.
General liability insurance protects against property damage claims, personal injury, and product liability. Here are typical examples of when these insurances apply:
- Property damage to a client's property – a technician accidentally spills nail polish remover on a client's designer purse.
- Personal injury claims – a client slips and falls getting out of a pedicure chair.
- Product liability – a nail polish you sell causes a client an allergic reaction.
Property insurance covers damages to the building or leased property and the contents in the building. It also covers loss of income for business disruption. For example, a fire in the salon will close your business for some time. Property insurance covers repairs to your salon and lost income while shut down for repairs.
If you employ nail technicians, you must have worker's compensation insurance. This insurance covers lost wages for an employee who suffers injuries on the job.
Nail salons carry some risk of injury to clients and staff. Look at your business activities and take steps to reduce the risk of injuries.
There are many toxic chemicals used in nail salons. Work in a well-ventilated place to avoid overexposure. Follow Occupational Safety and Health Administration's (OSHA) regulations concerning health hazards in nail salons.
Sanitary care is critical in nail salons. Failure to keep equipment clean causes infections and possible personal injury claims. Be sure to train your nail technicians in sanitizing tools and equipment.
As a salon owner, you can hire employees who work for you or rent out booths to independent contractors. It is helpful to know the difference between the two.
Most nail technicians are independent contractors. Salon owners prefer independent contractors over employees. That way, they do not have to file payroll taxes and withholding.
The Department of Labor Wage and Division outlines when a nail technician is an independent contractor versus an employee. Consider whether your nail technician:
- Rents their stations
- Purchases all tools and supplies for their use
- Has own customers and sets up own appointments
- Sets rates for services and paid directly by customers
- Has own business licenses
For more information, try this 20-factor test for salon owners to determine if they have employees or independent contractors.
Advertise & Market Your Salon
There are many ways to advertise your nail salon business. Use social media, referral programs, and customer rewards to attract new customers and keep them coming back.
However, know the laws when advertising and marketing your business. For example, do not use another salon's logo, slogan, or advertisement.
You may have talents in providing nail services and exceptional customer service. However, you'll need help when opening a successful nail salon business. Contacting a local business attorney can help with your business formation, leases, employment agreements, licenses, and permits.
You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.