Trend Setters Hair Studio
Financial Plan
Forecast
Key Assumptions
The financials that are enclosed have a number of assumptions:
- 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.
- 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.
- There can occasionally be issues with commission base related to reporting revenue, but we are a small salon with the owner mostly present.
- 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.
- 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.
- 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
Expenses by Month
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 | |
---|---|---|---|
Revenue | $336,570 | $427,600 | $437,600 |
Direct Costs | $146,214 | $200,400 | $200,400 |
Gross Margin | $190,356 | $227,200 | $237,200 |
Gross Margin % | 57% | 53% | 54% |
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 |
Total Operating Expenses | $128,231 | $161,027 | $187,601 |
Operating Income | $62,124 | $66,173 | $49,600 |
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 |
Net Profit/Sales | 13% | 12% | 8% |
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 |
Total Assets | $103,000 | $130,971 | $140,163 | $114,584 |
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 |
Total Liabilities | $52,000 | $44,708 | $34,655 | $24,396 |
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 | |
Total Owner’s Equity | $51,000 | $86,263 | $105,508 | $90,188 |
Total Liabilities & Equity | $103,000 | $130,971 | $140,163 | $114,584 |
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 | |||
Net Cash Flow from Operations | $57,191 | $58,787 | $44,408 |
Investing & Financing | |||
Assets Purchased or Sold | |||
Net Cash from Investing | |||
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) |
Net Cash from Financing | ($19,220) | ($39,595) | ($59,986) |
Cash at Beginning of Period | $50,000 | $87,971 | $107,163 |
Net Change in Cash | $37,971 | $19,191 | ($15,578) |
Cash at End of Period | $87,971 | $107,163 | $91,584 |