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Hair And Beauty Salon Business Plan

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Trend Setters Hair Studio

Financial Plan

Forecast

Key Assumptions

The financials that are enclosed have a number of assumptions:

  1. We’ll be using a full commission model with stylists and barber getting 60% commission on revenue. Industry average runs 45-65%. We’re on the high end because we are not offering a guaranteed base. This is what we’re used to. The owner will take a straight salary plus dividends on profits. 
  2. We’ve looked at the booth rental model but we’re used to commission and that creates a more orderly process for payments too, with all stylists able to use our credit card account.
  3. There can occasionally be issues with commission base related to reporting revenue, but we are a small salon with the owner mostly present.  
  4. We project revenues lower than average over the first few months, and then stable. We anticipate annual 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.
  5. Our direct costs are mainly stylist and barber commissions plus direct costs of the products we intend to sell, plus an estimate for the ongoing cost of products, supplies, etc. 
  6. 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.  Also 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.

Revenue by Month

Chart visualizing the data for Revenue by Month

Expenses by Month

Chart visualizing the data for Expenses by Month

Net Profit (or Loss) by Year

Chart visualizing the data for Net Profit (or Loss) by Year

Financing

Use of Funds

We estimate initial purchase of $50,000 in equipment plus $1,000 for starting inventory and $2,000 for other current assets (supplies mostly) and $9,000 in initial loss for expenses incurred before launch. These include legal, location fix-up, early marketing expenses, branding, logo, and social media. 

We also estimate needing $50,000 cash cushion when we start. 

Total starting costs, therefore, are $9K in expenses plus $103,000 in assets including $53,000 tangible assets and $50,000 cash in the bank. 

Sources of Funds

We anticipate $60,000 in owner investment from owner savings, which shows up as paid-in capital in the initial balance; plus a 5-year $50,000 vendor/manufacturer loan to finance initial equipment. 

Statements

Projected Profit & Loss

FY2019 FY2020 FY2021
Gross Margin $190,356 $227,200 $237,200
Operating Expenses
Salaries & Wages $90,000 $106,500 $126,825
Employee Related Expenses $13,500 $15,975 $19,024
Rent $18,000 $30,000 $33,000
Marketing $6,731 $8,552 $8,752
Amortization of Other Current Assets $0 $0 $0
Interest Incurred $1,832 $1,457 $1,065
Depreciation and Amortization $10,000 $10,000 $10,000
Gain or Loss from Sale of Assets
Income Taxes $5,029 $5,472 $3,853
Total Expenses $291,307 $378,355 $402,920
Net Profit $45,263 $49,245 $34,680

Projected Balance Sheet

Starting Balances FY2019 FY2020 FY2021
Cash $50,000 $87,971 $107,163 $91,584
Accounts Receivable $0 $0 $0
Inventory $1,000 $1,000 $1,000 $1,000
Other Current Assets $2,000 $2,000 $2,000 $2,000
Total Current Assets $53,000 $90,971 $110,163 $94,584
Long-Term Assets $50,000 $50,000 $50,000 $50,000
Accumulated Depreciation ($10,000) ($20,000) ($30,000)
Total Long-Term Assets $50,000 $40,000 $30,000 $20,000
Accounts Payable $2,000 $1,395 $1,906 $2,040
Income Taxes Payable $2,341 $1,372 $966
Sales Taxes Payable $192 $192 $192
Short-Term Debt $9,220 $9,595 $9,986 $10,393
Prepaid Revenue
Total Current Liabilities $11,220 $13,523 $13,457 $13,591
Long-Term Debt $40,780 $31,185 $21,198 $10,805
Long-Term Liabilities $40,780 $31,185 $21,198 $10,805
Paid-In Capital $60,000 $60,000 $60,000 $60,000
Retained Earnings ($9,000) ($19,000) ($3,737) ($4,492)
Earnings $45,263 $49,244 $34,681

Projected Cash Flow Statement

FY2019 FY2020 FY2021
Net Cash Flow from Operations
Net Profit $45,263 $49,245 $34,680
Depreciation & Amortization $10,000 $10,000 $10,000
Change in Accounts Receivable $0 $0 $0
Change in Inventory $0 $0 $0
Change in Accounts Payable ($605) $511 $133
Change in Income Tax Payable $2,341 ($969) ($406)
Change in Sales Tax Payable $192 $0 $0
Change in Prepaid Revenue
Investing & Financing
Assets Purchased or Sold
Investments Received
Dividends & Distributions ($10,000) ($30,000) ($50,000)
Change in Short-Term Debt $376 $391 $407
Change in Long-Term Debt ($9,595) ($9,986) ($10,393)
Cash at Beginning of Period $50,000 $87,971 $107,163
Net Change in Cash $37,971 $19,191 ($15,578)

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