Salon Business Plan
Salon Business Plan
Salon Business Plan
Signature
Date
3.0 Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . 4
3.1 Competitive Comparison ......................................... 4
Trend Setters is a full-service beauty salon dedicated to consistently providing high customer
satisfaction by rendering excellent service,quality products, and furnishing an enjoyable
atmosphere at an acceptable price/value relationship. We will also maintain a friendly,fair,
and creative work environment, which respects diversity, ideas, and hard work.
Our Mission: To supply services and products that enhance our clients' physical appearance
and mental relaxation.
The timing is right for starting this new venture. Patiently searching for six months for the
perfect location, one was finally found. The demand from the owner's clients,as well as the
ambitions of the owner to one day start her own salon,and the procurement of highly
professional and qualified beauticians to support the salon, has made this business one of
great potential.
Stacey Spinale, co-owner with Frank Spinale,Jr., her husband, has worked in a prestigious,
upscale salon in Houston, Texas for the past two years. Stacey has created a large client
following through hard work and dedication. Stacey,and her talented team of beauticians,
has what it takes to make this venture an extremely successful one. We expect our growing
reputation to lead to new clients and beauticians to support our anticipated growth.
To achieve our objectives,Trend Setters is seeking $27,495 in additional loan financing. This
loan will be paid from the cash flow from the business, and will be collateralized by the assets
of the company,and backed by the character,experience, and personal guarantees of the
owners.
Highlights
$300,000
$250,000
$200,000
•Sales
$150,000 •Gross Margin
• Net Profit
$100,000
$50,000
Pg 1
1 .1 Keys to Success
Trend Setters will, upon commencement of operations, sell a wide range of beauty services
and products. We will provide quality hair, nail, and skin services, along with top lines of
beauty products. What will set Trend Setters apart from the competition is our commitment
to providing all of these services in one convenient location.
After spending several months searching for a salon to purchase, the owners decided to start a
salon from the ground up. The start-up capital will be used for the design, leasehold
improvements, and equipment of the salon.
Leasehold improvements will amount to approximately $32,500, and salon equipment will
cost about $27,000.
Table: Start-up
Start-u
Requirements
Start-up Expenses
Rent deposit $1,817
Other $0
Total Start-up Expenses $1,817
Fundin
Investment
Investor 1 $0
Other $0
Other $0
Total Investment $0
Current Liabilities
Accounts Payable $0
Current Borrowing $0
Other Current Liabilities $0
Current Liabilities $0
Start-up
$70,000
$60, 000
$50,000
$40, 000
$30,000
$20, 000
$10,000
$0
2.2 Company Locations and Facilities
The salon will be located in a retail strip mall at 1234A Westwood Road, Houston, Texas. The
salon will utilize 1,540 square feet. The location is strategically situated on one of the busiest
streets in Houston. It is a high profile area, with easy access from all parts of town.
3.0 Services
Trend Setters is considered an upscale full-service beauty salon. We will offer a wide range of
services that include:
• Hair: cuts, relaxers, perms, colors, shampoo, conditioning, curling, reconstructing,
weaving, waving.
• Nails: manicures, pedicures, polish, sculptured nails.
• Skin Care: European facials, body waxing, massage.
Trend Setters wants to set itself apart from other beauty salons that may offer only one or
two types of services. Having come from such a salon, Stacey has realized, from talking with
her clients, that they desire all of the services that we are proposing, but they remain
frustrated because they must get their hair done at one place, and nails done at another.
Although the focus of Trend Setters is hair services, we do wish to offer our clients the
convenience of these other services in one location.
There are a number of salons like ours, but they are mainly in the very high income parts of
Houston and surrounding areas. We do not intend to compete with these so called "Day
Spas." We wish to offer a middle ground for those clients who can't quite afford those high
end luxury salons.
Our business atmosphere will be a relaxing one where clients can kick back and be
pampered. Soft drinks will be offered to clients as they enter for service. Televisions will be
located in the waiting and hair-drying area area.
Our marketing strategy is a simple one: satisfied clients are our best marketing tool. When a
client leaves our business with a new look, he or she is broadcasting our name and quality
to the public. Most of our clients will be referrals from existing clients.
No major advertising campaigns are anticipated. Our research has shown that word of mouth
is the best advertising for this type of business. We will, however, run specials throughout
the week. We will also ask clients for referrals, and reward them with discounted or free
services depending on the number of clients they bring. We will also offer discounts to the
new clients who have been referred. There are plans for a lottery that will offer a free trip to,
say,
Cancun. A client would simply refer new clients to us, and we will place a card in a box for
each client he or she brings. The more they bring, the more chances they have of winning
the trip.
5.0 Management Summary
Trend Setters will be organized and managed in a creative and innovative fashion to generate
very high levels of customer satisfaction, and to create a working climate conducive to a high
degree of personal development and economic satisfaction for employees.
Training classes to help improve employee product knowledge and skills will be conducted on
a regular basis. As the business grows, the company will consider offering an employee
benefit package to include health and vacation benefits for everyone.
Stacey T. Spinale: Owner. Stacey has been a beautician for two years. A graduate of Bellaire
Beauty College in 1994, she has quickly developed the trade skills that have led to her
success. She loves dealing with people, and has the drive, ambition, and discipline to
manage the business and its employees. This career is her life -- her calling.
Frank D. Spinale, Jr.: Owner. Frank has a Bachelor's degree in Finance from the University of
Houston. He has extensive experience managing people and businesses. He has worked as a
business consultant for Office Organizers, Inc., and he is the owner of Guardian Financial
Group, a financial services company with over 120 clients and over $1.2 million under
management.
The personnel plan calls for a receptionist who will greet customers and receive payments for
services and products. There will be five hair stylists, one barber, one nail technician, one
facialist, and a massage therapist. Everyone but the receptionist will be contract workers,
and will be paid a sliding commission scale based on the amount of revenue created. Future
plans include the hiring of a shampoo technician as the business expands.
In the first year, assumptions are that there will only be three hair stylists, a barber, and
part time nail, facial, and massage technician until the business can build a reputation that
will attract others to work there.
Table: Personnel
Personnel Plan
1997 1998 1999
Receptionist $14.400 $15.120 $15.876
Shampoo Tech. $8.000 $12.400 $13.000
Other $64.400 $80.000 $95.000
Total People 0 0 0
Total Payroll $86.800 $107.520 $123.876
6.0 Financial Plan
Our goal is to be a profitable business beginning in the first month. The business will not have
to wait long for clients to learn about it since the stylists will already have an existing client
base.
Revenues will grow at an annual rate of 15%, increasing 20% in November and
December due to a historical jump in revenues at this time of year. We anticipate this
increase to stay steady throughout the following year to account for the normal flow of
new clients coming into the salon. Estimates for sales revenue and growth are
intentionally low, while anticipated expenses are exaggerated to the high side to
illustrate a worst case scenario.
We did not use cost of goods sold in our calculations of net sales because most sales
are coming from services. We included all costs, however, in the operating expenses
area of the profit and loss table. Product sales are a minimal part of our market. We
are not quite sure how much revenue will be derived from products so we took a low
ball approach and estimated sales of $800 a month. This figure is included under the
title "Other" on the profit and loss table. Also under "Other" in the sales projections
table are services such as nails and massages. We are not quite sure how much
revenue these two services will generate. We are certain that in time these services
will be a large part of our revenue, but to err on the conservative side, we estimate
revenues from these services to be only $1,500 a month for the first year.
To assure the start-up funds lender that the owners are financially stable, a
personal financial statement is enclosed illustrating other sources of income that
include interest and dividend income from investments ($2,840), salary income
($29,658), and commission income ($15,000).
6.1 Break-even Analysis
The break-even analysis shows that Trend Setters has a good balance of fixed costs and
sufficient sales strength to remain healthy. Our break-even point is only 126 clients a month.
This was derived by using an average revenue of $45 per client, and fixed costs of $5,691.
Products sales were not included in this figure, but it does include an owner withdrawal of
$2,000 a month.
Break-even Analysis
$6,000
$4,000
$2,000
_.,.,...,.,..-
$0
""""""
"""
($2,000)
($4,000)
($6,000)
Assumptions:
Average Per-Unit Revenue $45.00
Average Per-Unit Variable Cost $0.00
Estimated Monthly Fixed Cost $5,691
6.2 Projected Profit and Loss
We expect income to hit $172,800 at the end of the first year of business. It should
increase to more than $262,340 by the third year, as the reputation of the salon, its stylists
and services become apparent to the general public. Second year revenues also anticipate
the addition of one new stylist.
We expect to manage cash flow over the next three years simply by the growth of the cash
flow of the business. The business will generate more than enough cash flow to cover all of its
expenses.
Cash
$6,000
$5,000
r'"
$3,000
r--- t----- - r--- - - t----- - t----- t----- -
• Net Cash Flow
$2,000 • Cash Balance
I-- I-- - I-- - - I-- - I-- I--
-
$1,000
$0
r--- t----- - r--- - - t----- - t----- t----- -
($1,000)
Jul I Aug I Sep I Oct I Nov I Dec I Jan I Feb I Mar I Apr I May I Jun I
Table: Cash Flow
Cash Received
Cash from 0 erations:
Cash Sales $172,800 $228,122 $262,340
Cash from Receivables $0 $0 $0
Subtotal Cash from Operations $172,800 $228,122 $262,340
As shown in the balance sheet, we expect a healthy growth in net worth, from approximately
$1,491 in year one to $43,448 by the end of year three.
Assets
Current Assets 1997 1998 1999
Cash $4,966 $19,763 $41,491
Other Current Assets $600 $600 $600
Total Current Assets $5,566 $20,363 $42,091
Lon -term Assets
Long-term Assets $59,500 $59,500 $59,500
Accumulated Depreciation $8,146 $16,292 $24,438
Total Long-term Assets $51,354 $43,208 $35,062
Total Assets $56,920 $63,571 $77,153
Paid-in Capital $0 $0 $0
Retained Earnings ($1,817) $1,491 $18,572
Earnings $3,308 $17,081 $24,876
Total Capital $1,491 $18,572 $43,448
Total Liabilities and Capital $56,920 $63,571 $77,153
Net Worth $1,491 $18,572 $43,448
Business ratios for the years of this plan are shown below. Industry profile ratios based on
the Standard Industrial Classification (SIC) Index code 7231, Beauty Shops, are shown for
comparison.
Table: Ratios
Ratio Analysis
1997 1998 1999 Industry Profile
Sales Growth 0.00% 32.02% 15.00% 7.50%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 100.00% 100.00% 100.00% 0.00%
Selling, General & Administrative Expenses 98.09% 92.51% 90.52% 73.40%
Advertising Expenses 2.08% 1.67% 1.60% 2.50%
Profit Before Interest and Taxes 2.66% 10.40% 13.17% 3.20%
Main Ratios
Current 1.01 2.88 5.40 1.79
Quick 1.01 2.88 5.40 1.34
Total Debt to Total Assets 97.38% 70.79% 43.69% 58.70%
Pre-tax Return on Net Worth 308.18% 127.74% 79.52% 5.20%
Pre-tax Return on Assets 8.07% 37.32% 44.78% 12.50%
Activity Ratios
Accounts Receivable Turnover 0.00 0.00 0.00 n.a
Collection Days 0 0 0 n.a
Inventory Turnover 0.00 0.00 0.00 n.a
Accounts Payable Turnover 29.27 28.65 29.45 n.a
Payment Days 11 136 142
Total Asset Turnover 3.04 3.59 3.40 n.a
Debt Ratios
Debt to Net Worth 37.18 2.42 0.78 n.a
Current Liab. to Liab. 0.10 0.16 0.23 n.a
Li uidi Ratios
Net Working Capital $54 $13,281 $34,303 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.33 0.28 0.29 n.a
Current DebtfTotal Assets 10% 11% 10% n.a
Acid Test 1.01 2.88 5.40 n.a
Sales/Net Worth 115.92 12.28 6.04 n.a
Dividend Payout 0.00 0.00 0.00 n.a
Appendix Trend Setters Hair Studio- Sample Plan
Sales Forecast
Sales J"l A" Dot Nov Deo Jao Feb Mac A c Joo
Owner $3,600 $3,600 $3,600 $4,400 $4,400 $4,400 $4,400 $4,400 $4,400 $4,400
Stylist #1 $3,600 $3,600 $3,600 $4,400 $4,400 $4,400 $4,400 $4,400 $4,400 $4,400
Barber#1 $1,200 $1,200 $1,200 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500
Stylist #2 $1,700 $1,700 $1,700 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
Other $2,500 $2,500 $2,500 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Total Sales $12,600 $12,600 $12,600 $15,300 $15,300 $15,300 $15,300 $15,300 $15,300 $15,300
Direct Cost of Sales J"l Aug Se Dot Nov Deo Jao Feb Mac Ar Ma:t Joo
Owner $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Stylist #1 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Barber #1 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Stylist #2 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Direct Cost of Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Pg 1
Appendix Table: Personnel
Personnel Plan
J"l A" Dot Nov Deo Jao Feb Mac Joo
Receptionist $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200
Shampoo Tech. $0 $0 $0 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000
Other $4,700 $4,700 $4,700 $5,700 $5,700 $5,700 $5,700 $5,700 $5,700
Total People 0 0 0 0 0 0 0 0 0
Total Payroll $5,900 $5,900 $5,900 $7,900 $7,900 $7,900 $7,900 $7,900 $7,900
Appendix Trend Setters Hair Studio- Sample Plan
General Assumptions
J"l A" Dot Nov Deo Jao Feb Mac A' Joo
Plan Month 1 2 4 5 6 7 8 9 10 12
Current Interest Rate 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00%
Long-term Interest Rate 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Tax Rate 28.00% 28.00% 28.00% 28.00% 28.00% 28.00% 28.00% 28.00% 28.00% 28.00%
Other 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Calculated Totals
Payroll Expense $5,900 $5,900 $5,900 $5,900 $7,900 $7,900 $7,900 $7,900 $7,900 $7,900 $7,900 $7,900
New Accounts Payable $11,490 $11,620 $11,764 $11,908 $14,248 $14,248 $14,248 $14,248 $14,392 $14,392 $14,392 $14,392
Appendix Trend Setters Hair Studio- Sample Plan
Total Operating Expenses $11,938 $12,188 $12,388 $12,588 $14,788 $14,788 $14,788 $14,788 $14,988 $14,988 $14,988 $14,988
Profit Before Interest and Taxes $662 $412 $212 $12 $512 $512 $512 $512 $312 $312 $312 $312
Interest Expense $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Taxes Incurred $185 $115 $59 $3 $143 $143 $143 $143 $87 $87 $87 $87
Net Profit $477 $297 $153 $9 $369 $369 $369 $369 $225 $225 $225 $225
Net Profit/Sales 3.78% 2.35% 1.21% 0.07% 2.41% 2.41% 2.41% 2.41% 1.47% 1.47% 1.47% 1.47%
Include Negative Taxes
Appendix Table: Cash Flow
Pro Forma Cash Flow J"l A"9 Sep Dot Nov Deo Jao Feb Mac Ape May Joo
Cash Received
Cash from 0 erations:
Cash Sales $12,600 $12,600 $12,600 $12,600 $15,300 $15,300 $15,300 $15,300 $15,300 $15,300 $15,300 $15,300
Cash from Receivables $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash from Operations $12,600 $12,600 $12,600 $12,600 $15,300 $15,300 $15,300 $15,300 $15,300 $15,300 $15,300 $15,300
Expenditures J"l A"9 Sep Dot Nov Deo Jao Feb Mac Ape May Joo
Ex enditures from 0 erations:
Cash Spending $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Pa:tment of Accounts Pa:table $6,657 $11,495 $11,625 $11,769 $14,113 $14,248 $14,248 $14,248 $14,253 $14,392 $14,392 $14,392
Subtotal Spent on Operations $6,657 $11,495 $11,625 $11,769 $14,113 $14,248 $14,248 $14,248 $14,253 $14,392 $14,392 $14,392
Net Cash Flow $4,943 $105 ($25) ($169) $187 $52 $52 $52 $47 ($92) ($92) ($92)
Cash Balance $4,943 $5,049 $5,023 $4,854 $5,041 $5,093 $5,145 $5,196 $5,243 $5,151 $5,058 $4,966
Appendix Table: Balance Sheet
Assets
Current Assets Starting Balances J"l Aug Se Oct Nov Deo Jao Feb Mac !j>c Ma:t Joo
Cash $0 $4,943 $5,049 $5,023 $4,854 $5,041 $5,093 $5,145 $5,196 $5,243 $5,151 $5,058 $4,966
Other Current Assets $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600
Total Current Assets $600 $5,543 $5,649 $5,623 $5,454 $5,641 $5,693 $5,745 $5,796 $5,843 $5,751 $5,658 $5,566
Long-term Assets
Long-term Assets $59,500 $59,500 $59,500 $59,500 $59,500 $59,500 $59,500 $59,500 $59,500 $59,500 $59,500 $59,500 $59,500
Accumulated Depreciation $0 $633 $1,316 $1,999 $2,682 $3,365 $4,048 $4,731 $5,414 $6,097 $6,780 $7,463 $8,146
Total Long-term Assets $59,500 $58,867 $58,184 $57,501 $56,818 $56,135 $55,452 $54,769 $54,086 $53,403 $52,720 $52,037 $51,354
Total Assets $60,100 $64,410 $63,833 $63,124 $62,272 $61,776 $61,145 $60,514 $59,882 $59,246 $58,471 $57,695 $56,920
Long-term Liabilities $61,917 $60,917 $59,917 $58,917 $57,917 $56,917 $55,917 $54,917 $53,917 $52,917 $51,917 $50,917 $49,917
Total Liabilities $61,917 $65,751 $64,876 $64,016 $63,155 $62,290 $61,290 $60,290 $59,290 $58,429 $57,429 $56,429 $55,429
Paid-in Capital $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Retained Earnings
and Capital