cash flow

[JustTans23]

Okay so I know this is a shot in the dark, but I figure if anyone knows the answer to this...its one of you guys Does anyone know if there is a loan of some sort that you will only have to pay 8 months out of the year? I'm having major cash flow issues, I just bought the salon back in December so obviously everything was good until about now when its become slow. I got the money to buy the salon from a bunch of different places so every month I am paying X amount of dollars towards credit cards, family, the old owner..etc. I was hoping to consolidate all this into one loan but due to promotional interest rates on the credit cards that would end up making my payments higher unless I get either a 10 year loan (which I dont want to do) or a 3% interest rate (which seems virutally impossible). Since I haven't owned the business for a year, lines of credit and such are pretty much out of the question. Its an existing business that I have worked at for 4 years and ave improved gross income and clientelle since I took it over so I know in the busy season I will have no problem, its just getting through these slow months thats the problem. Which I'm sure all of you understand. Anyway the only way I can see it being worth my monthly payments going up and/or having a higher interest rate is if I dont have to worry about paying it for the slowest 4 months of the year. Does anyone know anything that will help me?
Oh and if it helps at all, I'm in Massachusetts, you know, the state that is most likely going to have minimum wage up to $10/hour within a year probably...lol.

[EliteMike]

Welcome to JASON as others will tell you. I'm in the same boat as you really. One thing I was able to do was defer payment on my main loan and only pay interest. If you have a credit union you belong to, maybe they can give you a loan that has low interest. Get a real job again. As others will tell you, if its hard now, its going to get worse in the new few months.

Goodluck, and hang in there

[Glowtanning530]

November and October is when I am starting to rethink my career path. Those are my worst months on record.

[maggietan]

I think we would all like 8 month loan payments.......................................... ..

[Tanning Queen]

SOrry but you are pretty much S.O.L.

If you make it thru the slow season, try and put as much money away as possible during the season to avoid this in the future. Pretty much everyone here will tell you the same. THey save during the season and use that to make up the short fall during the slow season. But I am sure you knew about how the seasons are since you worked there for 4 years.

Good luck

[JustTans23]

thanks lol, like i said i knew it was a shot in the dark...but i figured it was worth sounding somewhat like a moron if it meant someone out there knew something or had sort of tips. I'll definitly be able to put money away next busy season, tried to this season but with all the start up expenses its wasn't easy and i exhausted those funds lol. I know everyone is pretty much in the same situation I am, so I dont mean to sound like I feel like im the only one with this prob or anything. My loan is pretty much through the old owner and we are pretty close, I got her to agree to me paying her 1/2 of the monthly payment until it gets busy again that helps out big time.

[RonnieT.]

There is a great one I used...Save for 8 months so you have some left for the 4 months you really need it...Interest Free, even grows in the right account...

Sorry I'm a smarta$$ today...

[sparky]

o%, 1.9%, or st worst 3.99% credit card applications you get in the mail.

cuts your interest rate to almost nil, pay it back in the bizy.

18-24 months with that game, got everything paid off,

0% loan for 2 years

[Stephen Underhill]

Originally Posted by JustTans23

Okay so I know this is a shot in the dark, but I figure if anyone knows the answer to this...its one of you guys Does anyone know if there is a loan of some sort that you will only have to pay 8 months out of the year? I'm having major cash flow issues, I just bought the salon back in December so obviously everything was good until about now when its become slow. I got the money to buy the salon from a bunch of different places so every month I am paying X amount of dollars towards credit cards, family, the old owner..etc. I was hoping to consolidate all this into one loan but due to promotional interest rates on the credit cards that would end up making my payments higher unless I get either a 10 year loan (which I dont want to do) or a 3% interest rate (which seems virutally impossible). Since I haven't owned the business for a year, lines of credit and such are pretty much out of the question. Its an existing business that I have worked at for 4 years and ave improved gross income and clientèle since I took it over so I know in the busy season I will have no problem, its just getting through these slow months thats the problem. Which I'm sure all of you understand. Anyway the only way I can see it being worth my monthly payments going up and/or having a higher interest rate is if I dont have to worry about paying it for the slowest 4 months of the year. Does anyone know anything that will help me?
Oh and if it helps at all, I'm in Massachusetts, you know, the state that is most likely going to have minimum wage up to $10/hour within a year probably...lol.

This is the reason for having a properly structured salon that is built around EFT memberships. If you grow your EFT memberships during the busy season you will be able to pay your bills during the slow season. I can only assume your salon sells session packages and is not structured to encourage the sale of long term memberships. This will always create a problem during slower months. The solution is not a different kind of financing, the solution is to restructure your salon packaging and pricing.

[JustTans23]

Yes, you are right stephen, the previous owner did not have EFT memberships at all. I am in the process of working on getting them up and running right now, just have to get the pricing worked out and the contract down and get my girls familiar with it so they can sell..should be able to get started by the end of next week. I'm excited, I hope it works out.

[DarkStar]

Speak to a credible loans broker about the type of loan you are seeking, I know that here in Australia there are loans that were primarily designed for the farming industry which allowed for no payments during their slow seasons.

These loans are not common knowledge but available to any one that asks.

So Ask!!

[Papa]

I thought I saw a deal like this in a trade mag, email, or a postcard from a bed co. I believe it is a partnership between a bed co and a leasing co. USUALLY, it is a financing gimmick. They charge you MORE during season to be able to charge you less in the slow time- AND I am sure tack on a little for the service. My eyebrows always go up when I see deals like this. Any time a finance deal is "tailored" to the client, I get the gut feel they are also making out better on the deal. Read the fine print and calculate the total of all payments for each type of financing for an eye-opener.

[Papa]

P.S. Operating capital is what you should be using to finance your slow times. Whether thats cash from your personal assets or extra from your busy time, or a line of credit.

If you are asking a manufacturer or lease co to smooth out your seasonal business, it would lead me to think (if I were a lender) that you are short on operating capital. That would lead me to assume that you would be a risker investment (IMO).

Call around and ask. Most manufacturers have contacts at leasing companies and have suggestions for leasing options. Run the numbers.

If it is a high ROI peice of equipment, it may be worth the premium. If it doesn't turn out to be, you may be royally screwed if you are trying to shoehorn a piece into your budget through financing tricks.

[sunsally]

Leasing is not the same as loans. Leasing is backed by collateral (your equipment) and isn't used for operating capital. Regulatory distinctions between the two.

There ARE legitimate financing or leasing options that allow you to do smaller (or skipped) payments during slower seasons with larger ones during busy. But with anything - if it SOUNDS TOO GOOD TO BE TRUE - it is. You don't get something for nothing. If you were only going to pay 8 months out of 12 each year, you should expect those 8 months would be significantly higher than if you were spreading it out. For example - if your payments WOULD have been $2,000 per month for 12 months, would at a minimum go up to $3,000 per month for the 8 months. But yes - there would probably ALSO be a slightly higher rate charged for that more "risky" (and less sellable) type transaction for the lease company and the fact that it amortizes differently.

The bottom line, unfortunately, is it sounds like you got in over your head. If you bought the business originally through owner financing, family and credit cards that tells me - you didn't have the capital you needed to go into business at this time. You needed to know, before you bought it, exactly how much you would need in slow and in busy and make sure it would pay the bills in both - or that it would pay enough in busy you could set it aside for slow. You needed to add EFT when you had folks in the salon still - not now that it is dead and you are struggling.

Given that, and being in business less than a year - it's unlikely anybody is going to even consider loaning you more money. Cut your expenses DRASTICALLY - now. If you have to work the salon every hour it is open yourself to save a few bucks - do that. If you have cable or other luxuries - cancel today. Cut all eating out, entertainment and other. Raise the AC temp in the salon a few degrees, even more at night, and do the same at your home. Cut back on driving and save gas money. Live like a MISER for the next 6 months --and then do it for the NEXT 6 months too during the busy season so you aren't at this point NEXT year too!

The number one cause of failure for any business, and certainly tanning salons, is undercapitalization. Taking out more loans doesn't change anything. You have to take a serious look at your costs and cut them IMMEDIATELY. And at the same time, do everything in your power (inexpensively) to boost your revenues. Signs in your window, passing out cards every chance you get, co-marketing with a strip mall business that compliments yours,...

Don't wait a day. Don't wait for your EFT plan to be perfect. Start selling it and fine tune on the fly. Don't depend on "your girls" to sell them - YOU sell them! See how many tan extenders you can sell this week. Then work on selling facial lotions the next week. Don't delay - make EVERY DAY a sales contest, and see if you can top the day before!

And when that works, come back and share, because you certainly aren't the first, or only, one in this boat!

Good luck

[JustTans23]

n regard to your reply sally, iwhile i appreciate the insight, I am a bit insulted, you seem to think that I dont kno what I am doing or what I was getting myself into, which is completly wrong, I wasn't asking for a miracle, I was just asking if maybe someone knew something that I didn't know about because I haven't been in the business long. I was looking for something to make it easier, not because the way I'm going is impossible, I just didn't know if there was something else out there. I was asking for help, not borderline insulting critisim. I don't appreciate the critism at all, I'm pretty sure everyone would want to get their workers familiar with a brand new program before they started selling it to clients...it would be pointless for my workers not to know how the EFT worked, if someone comes in and asks them about it and they have no clue I lose that sale, its ridiculous that you would imply I dont familiarize my girls with it before I get it out there. And I cant sell something if I dont know what the prices are going to be.
Also, I wasn't saying i want a bank to give me more money, just consolidate everything I have so it can all go into one payment. I'm not an idiot, I know how to market, and I know how to run a business. I was asking for some insight and help from veterans, not insulting critism.

[Brian Oshman]

This graph depicts the average cash flow for the tanning industy. Notice that it has similar characteristics to a heart attack as viewed on an electro cardiogram machine.

[Din]

wow, check out that flatline....kinda depressing. What the hell are we doing in this indutry? Makes you think.

[sunsally]

JstTans23 -

First - I wasn't trying to "insult" you - sorry you took it that way.

My experience on these boards is that for every person that posts something, there are often a dozen others "lurking" that are afraid to ask the same question and so I try to offer up a response that is also "generalized" enough that the other readers can get something out of it. If it is just a very personal response that is only directed towards you and I think only you would find value in, I would use the PM instead. In fact, the very next post by Elite Mike (also new to the biz) said he was in the same position. It's common.

That said - your post said that you had previously worked at the salon for 4 years before buying it - and that you "got the money to buy the salon from a lot of different places", using credit cards, family and the old owner's financing to buy it. I was making the assumption that you may have gone into somewhat undercapitalized -- many, many do.

In addition - the first line in your post was "I'm having major cash flow issues"!!

The "urgency" of my response reflects the fact that we are only in early August --and there are MANY tougher months to come, as well as the cumulative impact of them. For most salons - summer should still be pretty "ok" revenue-wise. September, October and November are the worst for most. Industry statistics show salons earn approximately 11% of their income across those 3 months - yet still put out approximately 20-25% of the year's expenses. JASON accounts for about 25% of the yearly income - and 45-50% of the expenses. That discrepancy in cash flow can literally bankrupt people - and does, every year.

Since you said your credit cards were already at teaser promotional rates, you yourself admitted that you probably already have the best deal you could get. You could try to keep opening new credit cards and transferring the balances -- but that is going to impact your credit score which can come back to haunt you too. And if you already have a bunch with maxed out limits, they may not approve you for new ones anyway.

Also, while it is helpful that the owner is letting you pay half payments now, that means you'll have to be making 1.5 payments later, which will cut into THAT money, which will make less to have left for NEXT season, etc etc. What Elite Mike has done - again, it helps now, but it CAN get you in trouble down the road when the payments start getting even bigger than you originally budgeted - unless you also make other changes.

Again - not trying to be insulting. But also trying to be realistic after working with hundreds of salon owners over years (and being one myself) and suggest you make significant changes TODAY rather than spending even a week or a month looking around and hoping there will be something out there. With maxed out credit cards, less than a year of owning the business and loan liability, anybody that MIGHT give you money now would charge SUCH a ridiculous rate that again, you would be setting yourself up for getting in even more trouble maybe a year from now.

Many, many new salon owners - and new business owners in general -- see the cash coming in during season and can get a little "lax" on TRULY saving it for "a rainy day" - or JASON. We want the place to look good, so we overspend a bit on decorations, make advertising choices that don't always pay off as we thought they would -- and suddenly the expenses are bit high. The main thing you CAN control are the expenses! You can't MAKE people spend money with you, but you can control the business spending. Little changes can add up - and make the difference.

As a veteran, that is my advice. If you take it as "insulting criticism" and ignore it - that is your choice of course. Maybe it will help someone else reading the post who will consider it useful, and maybe even help them save their business.

As I said - you aren't the first, or the only, in this boat. If/when you come up with other, better ideas, please share them because that may help someone else here too.

[Matthew]

“As a veteran, that is my advice.”

What is the definition of a veteran?

Correct me if I am wrong:

90% (or more) of the “veteran” salon owners that POST have fewer than 5-years running a salon.
Of that group MAYBE a handful are running in the black on an annual basis.

Good luck JustTan23, you will need all the gods will give.

[blondjuls]

The average careerspan of a salon owner is so small that I think any with 2+ years of experience had to have done something right...