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Booth Rental vs. Employees in a Salon – Which is More Profitable?

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If you’re considering opening your own hair salon, you may be wondering whether to rent booths or hire employees.  You can rent out space in your salon to independent contractor stylists, which is known as booth rental. You can also hire salon employees and pay them by commission, by the hour or some combination of the two. There are various pros and cons to each scenario, depending on a number of factors such as type of clientele, salon location and the kind of salon atmosphere you desire. Let’s explore some of the differences in booth rental vs. employees in a salon.

Booth Rental
In a booth rental situation, you are basically a landlord who rents out space to stylists for their business use as they see fit. Salon owners using this model of business don’t pay their hairdressers, and their stylists are responsible for their own taxes. In fact, as a booth owner, you have no responsibility for managing the behavior and performance of employees, providing them with liability insurance or keeping liability insurance on them. You also don’t need to worry about advertising for their clientele. As long as the stylist pays his or her rent, you get paid.

This all may sound pretty good, but there are some things that many consider negatives to booth rental. When you aren’t really seen by the stylists as the boss, but as a landlord, you may run into some trouble maintaining consistency in your business practices. For example, you don’t set the standards and policies; each professional is essentially running her own business. This makes it hard to maintain a salon brand or image. In this business model, it’s easy for salons to end up with a damaged reputation and to see high turnover rates. Also, because each salon worker is an independent contractor, they are often only out for themselves. This leads to fights and competition among stylists, causing a stressful work environment and overall uncomfortable atmosphere.

Bookkeeping is pretty critical.  Check out BasicAccountingHelp.com for free spreadsheets to keep records straight.

Traditional Employees
Some reasons salon owners may not wish to hire employees outright may be because doing so requires more investment in training, advertising, management and accounting. Those who don’t care to take on the many roles of business management may prefer the less structured model of booth rental. In a traditional employee situation, you’re responsible for setting forth the standards and practices of your salon, as well as for enforcing them. That can be a bit stressful. You’re also responsible workers compensation, taxes and liability insurance.

There are several benefits to hiring traditional employees for your salon. Perhaps the biggest benefit is that you are in charge and have more control over your business because you have the final word on staff conduct, salon policies, advertising, professional development and products sold. You can market your salon how you choose and create a brand, image and reputation you’re proud of through customer service policies, employee dress code and ongoing trainings. And though you have to manage more fiscal related issues, you are less likely to risk a tax audit or penalty due to misunderstanding of tax codes and employment laws regarding independent contract workers.

The traditional employee model of running a salon business requires you to be much more hands-on, with a greater understanding of business practices. It also requires a huge commitment of time and dedication. However, many salon owners find it to be very rewarding to be involved in the success of their own business. They enjoy having a greater hand in how things are run and want to ultimately have more control in every aspect of the management of their salon. That’s simply something that the booth rental model does not allow.

These are the major differences between booth rental vs. employees in a salon. Which one is the right choice depends very much on your preferences, the kind of business person you are and other dynamics such as the clientele and the geographic location of your salon.

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