If you are planning on opening a beauty salon, planning everything financially might be a skill that does not come naturally to a lot of people. And, if this is happening to you, do not worry, it is completely normal – especially when you think about how stressful finances can be in the early days when you are still on a tight budget.
Being a businesswoman and owning a beauty salon that is successful will require you to have the right skill set. Besides that, you will need to have a solid idea for the number and that can begin with financial planning. This article will help you understand what you will need to financially plan your business. Let’s take a closer look:
Begin With The Basic Things
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When opening your business, there will be some crucial things that you will need to decide on. Before you actually start working, you will need to invest some money into obtaining specific licenses, as well as hire employees. The first thing you will need to get is the licenses and keep in mind that these might be different from state to state.
This is why you will need to check what permits you will need, as well as how often you will need to renew them. You should also consult a bookkeeper to see how you can structure your salon and how you can save on taxes. Also, you should decide on how you will hire your employees. There are two models you can opt from including:
1. A Commission-based model – where you hire experts to find employees and in return, you pay them a percentage.
2. A Booth Rental Model – where you rent a space to experts who then operate as their own businesses.
The decision you will make will depend on what you want to gain. If you choose the first model, you will have more control over the training and scheduling. While with the second model, you will lose some of the control, but you will lower the employment tax and the benefits you pay.
The Actual Financial Plan
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If you need a loan to start your business, the lender will require you to have a financial plan where you will state important things such as the startup or annual budget. You will also need to have a loss/profit report, a break-even outline, a balance sheet, and a business ratio that you can give them. Now, do not get stressed and overwhelmed by these things. Let’s breakdown everything:
You might be wondering, why do I need a profit and loss document when my business is not operating yet? Well, this document will state and preview the performance of your salon by the months, quarters, and years. This will be outlined by the expenses you have, the sales you gained, and the overall costs of running your business. It will also need to state how much money do you need for running the business and the income based on the various service you might offer.
Opt for including additional information such as the cost of the services you offer, commissions, sales taxes, amongst other things. Also, do not forget to include your lease fee, bills, and monthly payments that you need to make to the bank or loan company. Additionally, add any other thing that can impact your economic plan.
To prepare the cash flow document, you will need to use the same number from the previously mentioned document. But, there is a difference between the two documents – you will need to include all the money that goes in and out of your business as well. Hence, this means that you will need to include any loan payments that you have to make, taxes, or money that is not spent on the core of your business operations.
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This break-even analysis report will show the level at which the income you receive matches the expenses you have for operating your beauty parlor. This usually happens when the planned, fixed values meet your generated monthly income. Now, this is something that you might want to consider graphing or clearly stating.
The business ratio is what will assess the percentage of expansions, growth, sales, and expenses you had for one year. When assessing your business’s economic status, investors, banks, and analysts will want to see this document. Also, lenders will want to take a glimpse at some indicators like your net income and sales/debt trends.
You will want to include all expenses and profits that are not included in the Profit and Loss Statement in the balance sheet. It is basically a representation of all your assets, capital, and investments during all times. It will also allow you to have some insights into how your business progressed over the course of a month, quarter, or year.
Firstly, it is worth mentioning that the appendix is completely optional, hence, you can either choose to include it or not. However, it is a useful document for including additional information such as any permits, leases, and resumes that you want. If you think that something can be beneficial for you getting a loan, you can choose to place it in the closing part of your documentation, which is the appendix.
Conclusion
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A good financial and business plan will help you with securing a loan. However, it will also help you plan and set up your beauty salon on the road to success. It is worth mentioning that these documents are “living things”, which means that they will grow and change over a period of time.
In order to secure and ensure that your business is successful, you should often review your salon’s ability to meet the plan objectives, and you will also need to follow your progressions on a monthly, quarterly, and yearly basis. Hence, now that you know what you should do and what you need, do not waste any more time and start creating a financial plan that will allow you to open up the business of your dreams.
At the very end, we suggest taking a look at apps like Appointy that could be extremely helpful for your saloon business.
