The price of your go-to colour or wax line goes up. Then your electricity bill. Then your rent. Suddenly, the profit margins you rely on are looking thinner than ever, even with a fully booked calendar.

This is the profit squeeze, and it’s the biggest challenge of salon owners today. It’s a clear sign that relying on excellent service alone is no longer enough. The most resilient business owners learn to shift their focus from just the craft to the cash flow, making strategic decisions that actively protect their bottom line.

This guide is built for that shift. It’s designed to give you a clear framework for understanding your numbers, improving your cash flow, and building a marketing engine that drives profitable growth. It’s a practical plan to help you take control and fund your future.

Your hair & beauty business health check

The true health of a business is measured by its profitability. Industry analysis from IBISWorld shows that net profit margins typically range between 8% and 15%.

Success, therefore, depends on managing the key drivers behind that margin. Thriving salons consistently track a few core Key Performance Indicators (KPIs) to monitor their financial health and identify opportunities for growth.

  • Average Client Spend. A crucial metric is the average amount a client spends per visit. The latest Q1 2025 data from Mocha Group shows commercial hair salons see an average client spend of around $161 and beauty salons around $136. Tracking this helps you understand the value of each appointment.
  • Retail Sales Ratio. A powerful way to improve profitability is through retail. According to the Aesthetic Beauty Industry Council (ABIC), retail sales typically account for 20% to 40% of total sales in Australian salons. While this range is broader than some market averages, it indicates a significant revenue opportunity for salons that manage to integrate retail into their business.
  • Rebooking Rate. Predictable revenue is built on repeat business. Current data from the Mocha report shows most commercial salons achieve a rebooking rate of 44–49% before a client leaves. Focusing on strategies to increase this number is a direct path to more stable cash flow.

Improving your salon’s cash flow and profitability

Cash flow is the movement of money into and out of your business, from customers paying you to the bills, wages, stock and expenses you cover. Positive cash flow means you’ve got more coming in than going out, and that’s what keeps the lights on.

Cash flow icon

Cash flow

The movement of money into and out of your business, from customers paying you to the bills, wages, stock and expenses you cover. Positive cash flow means you’ve got more coming in than going out, and that’s what keeps the lights on.

The 3-step routine for healthy cash flow

Mastering your cash flow comes down to three core principles.

  1. Maximise cash in. The goal here is to get more money into your business, faster. For a salon, this could mean implementing a deposit policy for large bookings to reduce costly no-shows, or bundling a retail product with a service to increase your average client spend.
  2. Control cash out. This is about managing your expenses smartly. Regularly review your stocktake to minimise product waste. When investing in new equipment, you could explore financing options to spread the cost and protect your cash reserves for day-to-day operations.
  3. Know your timing. The gap between when money comes in and when it goes out is critical. Try to align your major bill payments with your busiest periods. If you know the first week of the month is your peak for client bookings, schedule supplier payments for the 15th to give your bank balance time to build.

Why you need a cash flow forecast

A cash flow forecast gives you a clearer picture of how money moves through your business. It helps you plan for slower months, prepare for large expenses and make better decisions about when to invest or hire. For many small businesses, it’s also an essential tool when applying for finance.

If you want to dive deeper, this guide shows you exactly how to forecast cash flow and includes a free template to help you get started.

Attracting and retaining more clients

With your financial foundations in place, the focus shifts to the engine that drives your revenue. For a salon or spa, an effective marketing plan prioritises retaining loyal clients before chasing new ones, as this is the most direct path to predictable revenue.

Here are some proven retention tactics tailored for the hair and beauty industry:

  • Introduce a rebooking ritual. At the end of each service, while the client is admiring their new look, have your booking system ready. Suggest a specific timeframe for their next maintenance appointment based on their service, for example, “To keep this colour fresh, I’d recommend we see you again in about six weeks. Does a Tuesday afternoon work for you?”
  • Use client notes to build genuine connection. While recording technical details like hair colour formulas is a must, adding a personal note makes all the difference. Remembering a client’s upcoming holiday or a big work project shows you value them beyond the transaction.
  • Create a simple, value-based loyalty program. Rather than creating an elaborate points system, simply offer a straightforward reward. For instance, after their fifth visit, a client could receive a complimentary treatment upgrade or a discount on a new service they haven’t tried before.

Loyalty is vital for growth, but so is a steady stream of new clients. Here are some cost-effective ways to attract them:

  • Optimise your Google Business profile. For a local service business, this is your most valuable free marketing tool. Ensure you include high-quality photos of your work, your full service menu with pricing, and your correct opening hours. Actively encourage happy clients to leave reviews, since a high star rating signals trust in the eyes of a potential client.
  • Build a local partnership network. Create a reciprocal referral program with a non-competing local business that shares your target audience, such as a boutique, a bridal store, or a popular cafe. Offer their customers an exclusive introductory discount, and provide the same for their staff.
  • Showcase your best work on social media. For a visual business, platforms like Instagram are ideal. Focus your efforts on high-impact content like before-and-after transformations and video testimonials from happy clients. This provides convincing social proof to potential customers. If time is an issue, this guide shows you how to create a simple social media strategy in just 60 minutes.
  • Launch a “refer-a-friend” program. Encourage word-of-mouth by rewarding it. Offer both the existing client and their referred friend a tangible benefit, such as a discount or a complimentary add-on service for their next appointment.

You don’t need to implement all of these ideas at once. Choose one or two that feel most achievable for your business, set some clear success metrics, and test them over the next three months.

Growth strategies for your salon

A healthy salon begins with a strong and loyal client base, but real growth comes by making strategic moves to scale your operations. Here are some proven models for taking your hair or beauty business to the next level.

  • Expand your service menu. Introduce a new, high-margin service that complements your existing offerings. For a hair salon, this could be adding advanced hair treatments or specialised colouring techniques. For a beauty clinic, it might mean investing in technology for services like LED therapy or microdermabrasion.
  • Develop a dedicated retail program. Move beyond having a few products on a shelf to creating a curated retail experience. Training your team to act as consultants who prescribe home-care routines for clients can build a significant new revenue stream that supports your service income.
  • Increase your capacity. This could mean renovating to add more chairs or treatment rooms to your current location, allowing you to serve more clients simultaneously. Alternatively, it could be a bigger step like opening a second, smaller ‘express’ location in a neighbouring suburb to capture a new client base.
  • Grow your team strategically. Hire or partner with a specialist to bring in new skills the market is demanding. You could also invest in an apprentice to build your talent pipeline for the future. A larger, more skilled team directly increases your business’s earning potential.

Many of these growth plans can be funded over time through your business’s profits. When an opportunity requires a more significant or immediate investment, it’s worth exploring the funding options available to accelerate your growth.

Funding your hair and beauty business’ growth

Australian business owners are actively planning their next big move, with a recent YouGov report showing that 30% of small business owners plan to access external funding in the next 12 months. They are directing these funds toward key growth activities like expansion (35%), marketing (35%) and equipment upgrades (32%).

Two of the main funding solutions for salons are a business loan and a line of credit.

Business loan (or term loan)

A business loan provides a lump sum upfront, repaid in fixed instalments over a set period. These loans are often used for larger, planned investments. Think of that major salon refurbishment you’ve mapped out, or finally purchasing that state-of-the-art laser machine that will add a new, high-margin service to your menu.

The benefits of this option are predictable repayments and access to higher loan amounts. If timing is critical and you lack assets for security, consider unsecured term loans from alternative lenders like Prospa, which can fund up to $150K without tying up your assets.

Line of credit

A business line of credit gives you flexible access to funds up to a set limit, letting you draw and repay as needed while only paying interest on what you use. It’s ideal for managing the salon’s fluctuating demands, like bulk-buying retail stock ahead of the Christmas rush or having a safety net to cover a quiet period without stress. Prospa’s Business Line of Credit offers ongoing access to funds, which can be drawn anytime via the Prospa App.

To learn more about these and other funding options, explore our guide on business loans and financing options.

Ready to take your salon to the next level? Check how much you could borrow with Prospa in minutes.