Expansion Issues

Of equal importance, it can be used to help determine whether an existing business needs to expand and can handle the cost of expansion. Based on studies of more than 3,000 salons nationwide, the average successful salon operates at approximately 52.5 percent of maximum capacity or two to three times the break-even point. The average salon has approximately 1,979 customers in its database (71.1 percent female and 28.9 percent male). The average salon has nine tanning systems or one unit per 220 customers and occupies approximately 1,300 square feet of space.

After conducting a detailed break-even analysis on your salon, the results should then be measured against a demographic profile of your target market. That is, a study of the community to determine how many potential customers live in your target area and the age groups they comprise.

In addition to providing vital information regarding opportunities for business expansion, understanding the population of the market with regard to sex, age and ethnic background also can help salon owners determine the best advertising mediums, dÈcor and location for a salon.

For example, if demographic research shows that you have a high concentration of Caucasian females between the ages of 30 and 39 in your target market, you would then advertise your business via ad mediums that target this group.

Since Caucasian females between the ages of 18 and 49 represent the largest group of tanners (67.2 percent), anyone looking to open or expand a commercial tanning business would want the local population to have a substantial number of people that fit in this category.

Research also indicates that on the average, a representation equal to approximately 10 percent of the Caucasian population will tan at sometime during the year. In areas where tanning is well established and effectively marketed, studies show that this figure may be as high as 20 percent.

Logically, the next step would be to multiply the total population for each age category by 10 percent to 20 percent. This will provide you a good estimate of the number of potential customers in the salon’s immediate area.

For example, if the demographic study of your target market shows the total population of potential customers to be 50,000, you would multiply this figure by 10 percent to 20 percent to reveal the estimated number of potential customers for a target area (i.e. 50,000 x 10 percent = 5,000; 50,000 x 15 percent = 7,500; 50, 000 x 20 percent = 10,000).

As stated earlier, the average successful tanning salon utilizes one tanning unit per 220 customers. Therefore, an area with 5,000 potential customers could support approximately 23 tanning units, (5,000 divided by 220 = 23). An area where is well established and effectively marketed may support up to 45 units (10,000 divided by 220 = 450).