We know it can be challenging to stay on top of your books while running a busy business and taking care of your clients. Wondering how to best manage your finances as a hairdresser? We’ve got you covered. Here are a few tips to ensure you’re staying on track financially while growing your business:
- Understand your financial plan and budget before renting a studio space
- Calculate the minimum amount of money you need to make monthly
- Use a business bank account for salon expenses or be diligent about tracking business related expenses
- Take advantage of tax and accounting software
- Stay on top of tax credits and deductions
Understand your financial plan and budget before you rent studio space
One of the decisions you make as a hairstylist is where you’ll conduct your business. If you’re thinking about renting a chair or studio space from a salon, we recommend making at least a general budget before moving forward with a rental agreement. Because this is a big financial decision and an important one for your business, understanding how much you can afford to invest in your space will help you select one that fits within your budget and help you feel confident about other financial decisions in your business. Another thing to consider is where your customers live. If something fits into your budget but is in a location that’s inconvenient for your target customers isn’t ideal, so be sure to plan around this as you figure out your studio location. If you’re looking for help figuring out your small business budget, we have an article on that too! Check it out here.
Calculate the minimum amount of money you need to make monthly
One way you can ease financial strain is to calculate how much money you need to make per month to cover your expenses and basic lifestyle needs. Once you have this number, figure out how many clients you need to book per month to achieve that income. Having clarity on exactly how much you need to make and how many people you need to book to make it happen will help you prioritize other purchases more easily and make it easy to see how close or far you are from your desired revenue for that month.
Use a dedicated account for salon expenses
We recommend using a business bank account for your salon expenses. This makes it easier to separate your personal and business expenses, which simplifies keeping track of your taxes and finances. If you only use the bank account for business expenses, it’ll also make it easier for you to see your business’s spending patterns and make more confident purchase decisions. Even if you don’t start a dedicated business account, however, being diligent about recording and tracking your expenses in whatever way is convenient for you will make your accounting much easier.
Take advantage of tax and accounting software
Doing taxes on your own while running a small business can be very overwhelming and time consuming. We recommend using a software that helps you stay organized and keep track of everything. There are many on the market, and some cater specifically to hairdressers. Finding a software that suits your needs will make the bookkeeping and accounting process faster and easier, so you can focus your time and energy on your clients and growing business.
Stay on top of tax credits and deductions
Understanding tax credits and deductions will help you save money by getting certain expenses deducted from your taxes or getting refunds and tax credits. For example, as a hairdresser, you likely attend continuing education, trade shows, and other educational workshops to grow in your skills and knowledge. These types of professional training may qualify you for the IRS Lifetime Learning Credit, an up to $2000 tax credit to cover tuition and expenses. Additionally, much of salon and hair styling equipment is tax deductible. Even if you end up working with a professional doing your taxes and bookkeeping for you, you’ll make better and more confident financial decisions having at least a general understanding of what types of expenses you may be eligible to write off or receive a credit for. To read more about what might qualify as a deduction or credit, check out the IRS resource guide on this topic here.
We hope these tips give you a sense of what to stay on top of and keep track of as you manage your finances as a hairdresser. Get started today!