expert opinions

[sunsally]

Originally Posted by baskinthesuntanning

I do understand we are lucky and started different then most salons; however, I also stated that if we started without any upfront money and had loan payment, we still would have made a profit our first year during the busy season. I also stated that we are owned and operate most of the salon by ourselves which save a lot of $$$ as well, and at the same time also probably make us more money by selling more then most regular employees would end up selling.

This is not an attack. Just using your words as an example. Many owners look at it the same way.

It is critical to understand the difference between "being able to pay the bills that are due" and "breaking even" or "making a profit".

To TRULY look at the numbers -- as a BUSINESS, an "investment" -- you must tally everything in. There is a difference between "cash flow" and profit that is critical.

"Breaking even" SHOULD be defined as -- "The point at which everything used to Open and Operate the business was paid back" - preferably with at LEAST the interest that you WOULD have made off that same money if it was in the bank getting interest instead (if you are considering cash you invested of your own).

In addition - "breaking even" SHOULD be defined as "Including the payroll you would pay an outside employee to work the hours - even if you do them yourself instead and don't pay yourself".

Again - if you were hit by a bus tomorrow, nobody else is going to do it for free. So as a BUSINESS - you have to factor in the "cost" of paying someone -- even if as the OWNER you then choose to take those $$ and re-invest them into the business.

If you do NOT look at it this way -- then you might as well have taken your money and given it to a stranger on the street. And quit your job to work for a charity for free.

Your business PROFITS when everything has been paid back, everyone is paid the "going rate" for their time -- and there is money leftover.

For most salons nowadays - 3-4 years. If they make it that long...

[Glowtanning530]

I have a goal to make it... pray for me

[love sun]

That's exactly what I meant Sunsally...breaking even is when all debts are paid off including the initial cash invested (w/interest) that you put down with your SBA Loan. 3 years would be ideal for me and that includes the cash that I put on the SBA.

[love sun]

Hopefully I will be able to make it through the first three years making all bills and paying SBA and myself back the investment. Thank you for your answers.

[RonnieT.]

Paying for equipment...say - $150k (on the low side)
Paying for salon build out...say - $50k ( on the low side)
Paying basic monthly expenses...say - $5k per month


Doing this here in the Portland area first year....say - Priceless

25k per month before anyone is paid a paycheck....that's pretty good...

I know salons in the area that are in it $600k before opening the first day...doubt they will be here a second year. Wonder what their ROI is...Hmm

RonnieT.

[Brian Oshman]

Sunsally,

Thanks for "un"-summarizing my point.

[sunsally]

Originally Posted by Brian Oshman

Sunsally,

Thanks for "un"-summarizing my point.

Hey -- it's our tag team!!

You give 'em the "one-two punch", straight to the point.

I pour on the words to really DRILL IT HOME!

We should go on the road!

[baskinthesuntanning]

Originally Posted by sunsally

Hey -- it's our tag team!!

You give 'em the "one-two punch", straight to the point.

I pour on the words to really DRILL IT HOME!

We should go on the road!

Hmm, guess I was looking at it in a different way from the start. When Love Sun said "sustain itself"/ "break even" I was thinking he was meaning at what point can I look to pay my bills, and start having money to pay back the loan. Yes, I understand the philosophy of profiting. Trust me, this isn't a new concept to me. This isn't my first rodeo as a business owner.

The definition of a profit is actually: "The positive gain from an investment or business operation AFTER subtracting for all expenses"

While the meaning of breaking even SHOULD be whatever, according to investorwords.com the definition is: "A calculation of the approximate sales volume required to just cover costs, below which production would be unprofitable and above which it would be profitable. Break-even analysis focuses on the relationship between fixed cost, variable cost and profit."


Investorwords.com has both of these and other terms here:
Break even: http://www.investorwords.com/574/bre..._analysis.html

Profit:
http://www.investorwords.com/3880/profit.html

I look at a business in sections. Before you can REPAY the loan back, you must be able to pay your outgoing bills (including all payroll). If you can't pay your monthly bills then forget about paying the loan back. Why look at the long term when you should focus on the short term goals.

If you really were wanting to know how long it would take to pay off the business loan, then why don't you just get a 3-4 year term loan?? Then you would know how long it will take.

Love Sun, how long it takes you to pay the loan back and TRULY OWN the business is up to you. I'd say 3 years would be a great goal! I'd shoot for the same!

Originally Posted by RonnieT.

Paying for equipment...say - $150k (on the low side)
Paying for salon build out...say - $50k ( on the low side)
Paying basic monthly expenses...say - $5k per month


Doing this here in the Portland area first year....say - Priceless

25k per month before anyone is paid a paycheck....that's pretty good...

I know salons in the area that are in it $600k before opening the first day...doubt they will be here a second year. Wonder what their ROI is...Hmm

RonnieT.

RonnieT, what salon do you own? Urban Tan?

[baskinthesuntanning]

Originally Posted by sunsally

Again - if you were hit by a bus tomorrow, nobody else is going to do it for free. So as a BUSINESS - you have to factor in the "cost" of paying someone -- even if as the OWNER you then choose to take those $$ and re-invest them into the business.

If you do NOT look at it this way -- then you might as well have taken your money and given it to a stranger on the street. And quit your job to work for a charity for free.

That is why I pay for insurance and workers comp!