Salon Expansion

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.

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 breakeven analysis. The following will you make a determination:

• How much does it cost to operate your tanning systems per session, with regard to lamp depreciation, electricity and general maintenance?
• What is your salon’s maximum capacity and how many people you currently must tan each day to cover your fixed expenses?
• What is the projected 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 breakeven analysis can tell a salon owner whether a new location has the potential for profitability and the ability to meet income expectations.

Of equal importance, it can be used to help determine whether an existing business needs to expand and can handle the cost of expansion.

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.

For example, since Caucasian females between the ages of 18 and 49 represent the largest group of tanners, anyone looking to 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.

After a thorough break-even analysis has been conducted and the population has been researched for your target group, an educated decision can be made how many tanning units your salon can support and if your financial goals are achievable.