Beauty salons are opened in cities all over the United States every year. Many do not have written business plans, but instead open with the entrepreneur’s saved cash, credit lines, and help from family and friends. However, to raise your chances of long-term success and to launch in the first place, a business plan is a must-have for most beauty salon entrepreneurs. Here are three reasons to write a business plan for your beauty salon:
Raising investment capital for your beauty salon means sharing ownership in the company in exchange for the cash you need to startup and get the business running. The important upside of raising cash through investment (or equity) capital is that it generally comes without strings attached in the form of specific payments you have to make, or interest that will be owed to the funders on a regular basis. You may never have to pay a cent back to the investors. However, if you achieve a net profit and wish to receive your portion as additional compensation, you will owe investors their portion as well. And if you do sell the company or close down, investors will be entitled to their share at that time. In any event, professional investors won’t be able to easily understand the entirety of your salon’s concept without a business plan.
Proof to Lenders
For a business with less upside potential than others, like a small beauty salon, raising money through loans may be the way to go. Lenders will want to see your business plan to be convinced that you will expect steady cash flow and, therefore, be able to make regular repayments of the loan principal and interest. The advantage to the entrepreneur is that he or she still owns the entire company and will reap all of the benefits after the loan is repaid when and if the business is sold.
Trying the Numbers
Creating a business plan presents an opportunity for you to try out the numbers, specifically the ongoing costs and revenues that you can project from the business, to see if they will create a worthwhile business for you. Not only must the business become profitable after some time in order to make sense, but that profit must allow you enough compensation to make up for the extreme added risk you take on from being a small business owner. Everyone will have a different concept of what that compensation should be and creating financial projections is the best way to decide for yourself.