Tanning Salon Business Plan

Tropical Tan expects a profit margin of over 40% starting with year one. By year two, that number should slowly increase as the law of diminishing costs takes hold and the day-to-day activities of the business become less expensive.

Sales are expected to grow 15% per year. Total owner financing of $65,000 will become a return on equity paid in the form of dividends to the owners.

6.1 Important Assumptions

After researching the tanning industry in and around Chino Hills, the following assumptions have been made:

• Consumers are not happy with the two existing tanning salons’ equipment, so by bringing in top-of-the-line products we can provide a higher quality service as well as more clients per hour.
• Being located across the street from a popular gym we can assume a high amount of foot traffic resulting in higher sales.

6.2 Break-even Analysis

The following chart and table summarize our break-even analysis. With fixed costs of $10,332 per month at the outset (a bare minimum), we need to sell 1,041 monthly tanning sessions at $10.00 to break even to cover our costs.

6.3 Projected Profit and Loss

Our projected profit and loss is shown on the following table and charts. From our research of the tanning industry our annual projections are quite realistic. The detailed monthly projections are included in the appendix.

6.4 Projected Cash Flow

The monthly cash flow is shown in the illustration, with one bar representing the cash flow per month, and the other the monthly cash balance. The annual cash flow figures are included here and the detailed monthly numbers are included in the appendix.

6.5 Projected Balance Sheet

The balance sheet table shows managed but sufficient growth of net worth, and a sufficiently healthy financial position. The monthly estimates are included in the appendix.

6.6 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 7299.0105, Tanning salon, are shown for comparison. We expect to maintain healthy ratios for profitability, risk, and return.