Someone sent me an E-mail from this board looking for some advice. I thought I would post it here too.
Quote:
I've been reading your posts on the forum for a while now. You definitely know a lot about the industry and are well respected on the site. I hope you can answer a question for me.
I read your comments discouraging people from opening a salon with $200,000 thst it's not enough, that they are not buying enough equipment, don't have enough electric or A/C.
Are you just trying to get them to be realistic, do you really think they can't make money, are you just playing devil's advocate?
I'm not trying to be confrontational...I just want real advise. I ask because I plan to open salon in a rural area with only about 60,000 people about half of them white. It is also a college town (small) with tanners not included in the demographics. There is no dedicated tanning salon, though there are a few beds in hair and nail salons, gyms, etc. I've talked with contractors, realtors, attorneys, manufacturers, etc. and I've really done my homework...I have a degree in finance and have done the P & L's, cash flows and build-out estimates. It still looks profitable for me to open with 7 beds and a sunless.
My question really is "Why won't it work?". What is the reason behing your advise? What am I not seeing?
Hope you're willing to help. I really am seeking constructive criticism and objective advise.
Thanks, |
Here's my reply:
Well let's see,
First off, electric upgrades cost lots of money. An overhead service upgrade can run 8 to 15 thousand and if you have to trench a parking lot to go underground you are looking at 20 to 40 thousand just for electric.
A/C will run you about 15 to 20 thousand for about 10 tons.
These two upgrades will chew about a third of your budget right there. Always try to negotiate these things in your lease as they are upgrades to the landlords property but you may end up paying for a good chunk of it depending on how negotiations go.
An HP bed will tax the electrical service for 100 amps three phase and 3 tons of A/C alone to run properly and the cost of a bed like this is in the 40 thousand dollar range.
Large VHR beds will need 60 amp three phase and 1.5 to 2 tons of A/C. Beds like this cost in the range of 20 to 35 thousand dollars.
Your smaller beds will consume about 30 amps to 50 amps a piece and need 1 ton of A/C and be in the price range of 5 to 15 thousand dollars.
Now we are approaching that $200,000 budget and we haven't even started the build out yet which can run 75 to 150 thousand dollars for construction costs.
Next is the timer and computer system, sound system, security systems, furniture, retail stock, and dozens of misc. items that you will need to purchase to complete the package.
Now that we invested about 300,000 dollars we need to advertise. Now keep in mind that this business is seasonal with three to four good months of moneymaking. The rest of the time you sit around bored off your ass with no customers coming in still having to cover rent which is in the range of 3 to 5 thousand a month plus other basic expenses. If you decide to lease all of the equipment you are looking at paying large sums of money per month on top of that all the while when there are no customers coming through the door. If you open in the off season, you will struggle to stay alive which will take even more money to make it to the first busy season.
It can cost onwards up to 10K a month just to break even before you even start to make a profit and that doesn't count payroll for employees if you decide to work all the shifts at 80 to 100 hours a week.
The season is typically from Jan. to June with Mar. Apr. and May being the best months so you need to stockpile money to cover those expenses in the off season. Now if it is your first year, you better have a fat bank account to pull you through or you are done. Figuring how many hours you are open and calculating your income based on the beds being full from morning until night 24/7/365 is unrealistic. These distributor projections are nonsense. They are designed to show income potential and not actual revenue which will be much lower. Just a sales tool for the bed distys. Pipe dream numbers for naive.
You need deep pockets to open and run a business like this. The industry is getting harder and harder to compete in and the cost of opening a salon continues to grow. Labor and materials continue to increase. If you are going to lease everything and milk every line of credit and put your house on the line are you prepared to live in a box under the bridge if it fails? More salons are failing today in record numbers. The boards are filled with used equipment and salons for sale or liquidation. It never used to be like that.
Think long and hard if you really want to do this. There are other businesses that are more profitable and worth investing in today that don't require as much capitol and still generate nice year round income. Competition has really set in and it makes it tougher to split the pie up among all of the other salons cropping up.
Banks have taken a beating too in the recant past due to saturation and the high failure rate that has blanketed this industry. It will get tougher and tougher to get financing for this too since a lot of financial institutions have gotten burned.
I hope this advice gives you some insight.
Brian Oshman
The Sun Doctor
908-797-0716
Brianoshman@aol.com I'll leave this post here for a while then I'll move it to the gold mine.