Commission split or booth rent: how each one changes your salon P&L

Under a commission split, service revenue is yours and stylist pay is a cost that rises with every ticket. Under booth rent, the stylist keeps service revenue and you collect fixed rent. The first gives you more revenue and more risk; the second gives you smaller, steadier income. Which one is more profitable depends on your chair utilization.

How a commission salon looks on the books

Every service is recorded as salon revenue. Stylist commission is recorded as a direct cost, alongside product used on the service. Your gross margin is what is left after commission and product, and it has to cover rent, front desk, software, marketing and everything else. Busy months are very good months; slow months still carry payroll.

How a booth rent salon looks on the books

Your revenue is rent from each chair, collected weekly or monthly, whatever the stylist books. Service revenue does not appear on your P&L at all. Costs are mostly fixed occupancy costs. Income is predictable, but a strong stylist's growth does not flow to you.

The numbers worth tracking either way

• Revenue and margin per chair, not just per salon.

• Chair utilization: the share of available hours actually booked.

• Retail sales per stylist, since retail margin often decides whether a location works.

• Profit by location, if you run more than one.

Hybrid models

Many salons run both: some commissioned stylists and some renters. That works, but only if the books separate the two streams. Otherwise the renters' fixed income can mask a commission side that is losing money.

Classification is not only a bookkeeping question

Whether a booth renter is truly independent is a legal and tax question with real consequences. Talk to your CPA or attorney about how your arrangements are structured. Our job is to make sure the books reflect whatever structure you have, clearly and consistently.

If you want a second set of eyes on your own numbers, book a free 20 minute call with Julia at calendly.com/juliaspahiu.

Edi & Sienna Group provides bookkeeping, accounting and fractional CFO services. We are not a licensed public accounting firm and this post is general information, not tax, legal or accounting advice for your specific situation.