One of the most difficult decisions facing salon owners is deciding whether to expand their business. Fortunately, there are several methods of evaluating your existing business that will help to determine whether a salon owners needs to expand and best time to do it.
Making A Decision
While customers stepping over one another in your lobby and scrambling for tanning time is a clear indication that it is time to add more equipment, it is not recommended waiting until the middle of the busy season to physically expand a business.
The mind usually works in the following manner when weighing the pros and cons of business expansion:
The Pros
- More equipment will accommodate more customers.
- More customers will increase sales of lotions and accessories.
- More equipment means I don’t have to turn customers away.
- A bigger salon featuring the latest equipment will discourage competition.
- Based on my demographic research and break-even analysis, the new units will pay for themselves quickly.
The Cons
- We don’t have the room.
- We can’t afford to purchase more equipment.
- We only busy six months of the year, then the equipment hardly is used.
- We’re not sure if now is the time to expand.
When determining whether to expand an existing salon, the first step always should be to conduct a detailed break-even analysis. The following will help salon owners make a determination:
How much it costs to operate your tanning systems per session, with regard to lamp depreciation, electricity and general maintenance.
Your salon’s maximum capacity and how many people you currently must tan each day to cover your fixed expenses.
How to project profitability and income potential on a monthly and annual basis.
When conducted on an existing business, this also will help determine areas of waste and paint a clear picture of income potential. In addition, the break-even analysis can tell a salon owner whether a new location has the potential for profitability and the ability to meet income expectations.
