Commission vs Leasing: What’s the Difference?

When starting out in the beauty industry, new stylists are always excited about learning all kinds of different coloring techniques, cutting techniques, and even business-related tips and tricks! The one thing that I have noticed throughout the industry, however, is that beauty schools often forget to educate their students on life outside of school after you obtain your license. It can be a very stressful time trying to figure out all the different job opportunities this career path holds! Whether you're wanting to learn the perks of working at a commission salon, or you are looking into how to run your own private business with leasing, here is some key information to keep in mind when focusing on your path after cosmetology school!

With leasing, the biggest perk that most stylists find is they are their own boss! When you lease, you take on every single responsibility of your business without having to own a full multi-chair salon and have employees. You cover all expenses from the color products you use down to your tools, plus weekly or Monthly rent. Another perk with this is you get to choose your own color line and products that you want to use on your clients and get to decide which products you have behind your chair! You also get to structure your service menu to include everything you want to specialize in and say goodbye to any unwanted services you aren't passionate about! Probably the biggest upside to leasing is getting to decide the hours/days you work! Now some cons about leasing. When you are your own boss and run your own business, that comes with multiple jobs outside of being a hairstylist. You have to maintain your salon space, cover all expenses from the products you use, software you use, purchase supplies for your upcoming appointments, you are responsible for not only your end-of-year taxes but you also owe an additional 15% self-employment tax. This is normally covered by an employer, but as a business owner, it's on you! Unfortunately, it's also very common for booth renters to operate illegally . Yes, you heard that right. If you are paid a commission, or even worse paying a commission while a 1099 booth renter, that is an illegal business structure. The owner is essentially dodging the self-employment tax, and taking their cut tax-free while you are stuck with the bill. If you pay a 50% commission to your landlord, they get to keep that and pay income tax on it, but you have to pay income tax and self-employment tax on your "half". Leaving you with best case 30-35%. With leasing, you are the one responsible for how much money you make every week, and if you don't monitor closely you can be unprofitable very easily! When you see big numbers coming in, you feel like you are making lots of money. You don't realize that your bills are just as high! In general salons operate at a 10% profit margin. If you are truly exceptional, you can push this higher to ~25%. If you aren't monitoring, you can easily spend more than you take in, and are essentially borrowing money from your business to pay your personal bills. If you don't schedule clients and work a specific amount of hours, that will reflect in your numbers! The reality is you end up being your own advertiser, scheduler, customer service, accounting, tax prep, inventory manager, buyer and everything other tasks to support your business in addition to taking clients! All of this might not be a downside to some stylists, but not everyone is looking to take on that responsibility outside of the salon, which is okay! Many artists want to focus on their art and building relationships with their clients. While leasing can be a great choice for many stylists, if your goal is to come to work and take clients behind the chair, make competitive pay, and be a part of a team take a look into a commission salon!

Working in a commission-based salon can be one of the best business choices you make in your career! There are many different commission structures out in the industry which makes it easier to narrow down your search when finding your salon home outside of school! The basic understanding of what a commission salon is is a business run by an owner(s) who employ other stylists in the industry to work alongside and help create a uniform branded salon environment! Some of the many perks of working at a commission salon is that all products are provided for you! That's right, everything down to the bowls you mix your color in. No need to worry about replacing any products that you finish; the salon has you covered!

Another perk is you don't have to be the only one advertising to find clients to fill your schedule . Most commission salons have a business phone that clients can call in requesting an appointment with you, which means no late-night conversations on social media platforms trying to maximize your schedule! You get to come to work, do what you love, and go home and relax knowing you can return to work the next day and have a full schedule! The last of many perks that I am going to talk about is you get to work in a team-oriented salon with coworkers who love working together! From gaining new work relationships to collaborating on a fun project with another coworker, you get to enjoy your time at work engaging with everyone, and share in each other's passion! With all the perks of working at a commission salon, there are of course some potential downsides that certain stylists might find! With having full advantage to the color and products the salon provides, if you want to try out any new products that your salon doesn't carry, you are responsible for purchasing that product unless your salon owner agrees to try it out. Commission salons have many perks , including beverages, snacks, free marketing, salon incentives, bonuses, product commissions and even taking reprieve of having a salon manager to handle client escalations. Another potential disadvantage to commission salons is that you don't take home everything you make from your services. With this, many new stylists can become a little confused with this type of structure and how it reflects in their paycheck, but it's actually very similar to how much money you make as a leasing stylist! On average booth renters make about 5% more than a commission stylist annually. Not at Mykala and Co! At our salon our stylists benefit from a minimum 30% commission with a tiered scale up to 70%! When you are a commission stylist, the salon you work for pays for everything that you use, but also pays for everything on the back end of the business that you would end up needing to take care of yourself as a leasing stylists! From employer taxes, maintaining a full color and product back bar, stocking products on the shelf, paying insurance, utilities, advertising and legal costs, maintaining the salon you work in, your salon takes care of so many things to keep the business and yourself covered! A percentage of your earnings goes towards these costs to ensure you don't need to worry about anything while you are doing what you love! At the end of the day, leasing stylists are still responsible for all of these costs as well, they are just the only ones having to keep track of these things instead of having someone to take care of it for them!

In our industry, the options are endless, and at the end of the day, there is not one right choice nor is there a wrong choice! Having the knowledge of what each job title entails is the first thing you should look into when you are looking at salons! Of course, there is so much more that goes into commission and leasing salons, and there truly isn't a right or wrong choice when it comes to choosing the best option for you! At the end of the day, this industry has many routes you can choose from and all of them have their own perks that can mirror what kind of business you want to emulate! If you are curious about commission opportunities, give us a shout at mykalaandco@gmail.com. If you are considering Mykala and Co Salon, please check out these other posts! Job Opportunity

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