The typical tanning salon today offers nine UV-tanning systems, one spray-tan system and one spa service. Over the course of the year, the average salon of this size will generate more than 20,000 individual customer sessions – about 50 per day.
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For a business this size, the typical insurance premium is about $2,500 or $225 per system per year.* This covers things like professional liability, property (including glass, HVAC and tenant improvements), business interruption, general liability and employee theft.
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Accordingly, if the typical 11-system facility set-aside just 13¢ per session for insurance coverage, they should have enough money to easily cover their annual insurance premium ($2,500/20,000 = $.125).
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While no one enjoys paying bills, budgeting for expenses is a must. The same math used to estimate cost of insurance can be applied to every expense associated with operating your business.
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Examples:
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- Rent for the 11-system salon is $2,500 per month/$30,000 per year.
This salon would need to set aside $1.50 per session to cover rent. ($30,000/20,000 =$1.50). - Labor averages $3,000 per month/$36,000 per year.
This salon would need to set-aside $1.80 per session for labor.
($36,000/20,000 = $1.80)
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And for each tanning session utilized, salons must allocate funds to cover the cost of lamps and electricity. While this cost varies with the size and features of each tanning unit, a good rule of thumb is $.50-.75 per session for base units, $.75-1.00 per session for mid-range units; $1-2 for the highest-level equipment.
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Caffeine Coverage
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If you spend $5 per day on lattes or high-octane cappuccino from the gourmet coffee shop next door, you would need to allocate about 9¢ per session to satisfy your caffeine addiction (360 days x $5 = $1,800/20,000 = 9¢).
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And if your cell phone bill averages $200/month/$2,400 per year; you would need to allocate 12¢ from the revenue generated per session to cover this cost.
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By now, I’m sure you see where this budgeting exercise is headed. As business owners, we must be aware of the true costs of day-to-day operations and prioritize our financial resources, accordingly. Yes, I may have over-simplified this to illustrate; but my point is that these basic math principals hold true for every business model.
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The same math used to estimate cost of insurance can be applied to
every expense associated with operating your business.
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Profit Center Contributions
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We also realize that profits from the sale of lotions and accessories, upgrades, etc., can contribute significantly to the bottom line and help off-set these expenses. For example, if you sell one bottle of lotion per day at a $20 profit, this would generate enough revenue to pay for your business insurance, lattes and cell phones for the entire year!
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Every time you sell a session, a package, an EFT or lotion, you should have an educated estimate of the cost of each service or product – and your gross profit on each item sold.
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Free Business Analysis & Equipment Operating Cost Calculator
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To help you to better understand the costs associated with operating your business, as well as the profit contribution from all services offered and products sold, we are offering you an in-depth business analysis, absolutely FREE!
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We will also include an easy-to-use Excel program that auto-calculates the cost to operate every system in your facility, including UV and spray-tan systems, wellness pods, etc. The analysis can be conducted on businesses of all sizes and can also be used to help with cost estimates for a new business, or if you are buying or selling an existing business.
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There is no obligation to purchase anything – to get the process started, simply write to jennyb@uiprograms.com.
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*NOTE: Info provided for comparison only. Actual costs, etc., will vary.
