Whether you are a seasoned industry veteran exploring new options, planning to open your first salon, or preparing to buy or sell an existing business, a detailed analysis of the location or potential location will provide you with vital information to help you to make sound business decisions.
You can conduct a basic business analysis by gathering the following info:
While additional costs and factors will come into play as you delve further into your analysis, this will provide a solid foundation to begin the process.
For purposes of this analysis we will use the following assumptions:
(lamp use and electrical consumption)
The average revenue of $5 per session and operating cost of $.30 per session, provides an adjusted gross profit of $4.70 per session.
Monthly expenses of $6,000/$4.70 = 1,277 sessions per month, or 43 sessions per day to break even.
Selling by the month or via EFT programs may be a more effective way to achieve your financial goals – as you are not relying on the sale of individual sessions and daily foot traffic to pay the bills. For example: You charge $30 for 30 days of tanning. We then estimate that the average customer who purchases this package will tan eight times per month.
Using $0.30 per session for operating cost x 8 sessions per month equals a cost of $2.40 per 30-day package (lamp use and electrical consumption).
$30 – $2.40 = $27.60 adjusted gross profit per session
$6,000/$27.60 = 218 (30-day packages per month) or 7 (30-day packages per day) to break even.
Other factors, such as the sale of lotions and accessories will contribute to the overall sales picture. However, one shouldn’t rely on these to break even. They, along with spray-tanning and other services should be calculated as separate profit centers within the business model.
A detailed, in-depth analysis should include the following:
Your Unique Business Model
The above is an over-simplified version of a true business analysis. It is provided to give you the basic fundamentals of how to begin the process and how to analyze your unique business situation.
If you would like assistance in preparing an analysis of your existing or potential business, please email jerry.deveney@fstanning.com
Jerry Deveney is the President of SunForce Marketing, Inc. He has been actively involved in the tanning, spa, wellness and fitness industries for more than 30 years. His company provides business analysis and consulting services in the areas of sales, marketing and operations. Jerry has worked in almost every industry sector including salon management, equipment manufacturing and distribution, new product development, regulatory affairs, and sales & marketing.
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