Success in business comes from not only having the passion and drive to succeed but from the very basic foundations of proper accounting. Financial forecasting for serious success as an aesthetician is the true first step of any business plan and outlines both personal and business budgets on the high end and low-end forecasts.It also aligns one’s mindset as a business owner with the top-performing services to focus serious marketing energy towards. Financial forecasting is the one true measure of success and is applicable to every single business entity existing today. By performing a valuation of your company as a new business start-up, and then annually based on other variable factors, you will be triumphant in the quest for smart business and financial security for years to come.
FINANCIAL FORECASTING SUCCESS
The key to success in financial forecasting for aestheticians is to fit all monthly business expenses within the spa’slow-end business budget. For the solo aesthetician, this is important, as you are focusing on covering all expenses within one individual’s work performance – yours.
The first and foremost goal of any business, as a start-up, is to formulate the service menu. The menu of services should be analyzed and sourced in different ways, while paying close attention to trending price points by competitors within the area your business is located within. Spa owners should never price their services too high for their market – or too low. By studying the demographics of the area, as well as trending price points and services within the target market, spa owners can formulate a competitive treatment menu that makes sense for its market share.
Next, spa owners must choose their high-end and low-endaverage ticket price. The definition of Average Ticket Prices for this equation are the top two services the practitioners sees themself performing the most on a daily basis. This is not ever the most expensive and the least expensive service on the menu. These are always the top two services the owner sees themselves performing the most every single day. This is worth thinking through for the very purpose of ensuring the financial forecast is correct and realistic.
BUSINESS GOALS
Spa owners will then choose the clients they plan to see per day, as well as the days per week they plan to work. This is very specific to your goals as a business owner and could be longer or shorter weeks, dependent upon personal goals and outcomes. Clients being seen per day should always be realistic to the time of the service being performed, the set up for the service, the breakdown of the treatment room, and checkout of the client. Practitioners must also allocate time for office time and personal breaks throughout the day for the financial forecast to be as accurate as possible.
The financial forecast should always be based on revenue generated from services only, as an aesthetics practitioner. Any additional income generated through product sales, consulting, or tips are wonderful additional revenue streams. For the purposes of the examples listed below, these are forecasts based on service focused spas only. This ensures that the performance of the solo practitioner is tied directly into the income received in both the business and personal categories for consistent revenue stream.
UNDERSTANDING REVENUE
Finally, business owners must understand that revenue must be strategically split between personal and business operations accounts. Business owners should set themselves up as W2 employees of their own company, as this is a major benefit to the practitioner for tax purposes. Companies, such as ADP, are a fantastic option for a payroll service provider and ensures all federal, state, and local taxes are paid without hassle to the business owner. Additionally, the thought process behind the 60/40 split is a strategic one. Business entities typically have more overhead during years one through five and should pull in more revenue to cover these expenses. Any additional revenue left over after expenses are paid should always go into an interest-bearing savings account, such as a money market account or into investments, such as stocks and bonds. By placing additional income into interest-bearing accounts, business owners can save to purchase the equipment at the end of a fiscal year to generate more revenue in the new year, but also to capitalize on tax benefits by allocating the equipment as an asset on the accounting records. Accountants can assist with these expenditures and ensure all business purchases are labeled appropriately for tax purposes.
Spa owners can begin to draw a salary instead of being paid through commission only when there is capital to cover six to 12 months of expenses saved in operations or payroll expense account. Solo practitioners should draw commission during years one through three, in order to ensure the proper designation of income in both the business and personal accounts. The bottom line –always ensure you are paying yourself first. Many business owners do not account for their own personal income when devising a business plan. The financial forecasting listed here showcases the two most important factors of an independently owned company and that is to pay both the owner and the business simultaneously.
Spa Example
High-end forecasting
ATP: $175 Luxury Elite Facial
Clients per day: six
Days worked per week: five
Revenue per week: $5,250 (175 times six clients per day times five days per week)
Revenue per month: $21,000 (5,250 times four weeks).There are generally four weeks per month but not always.
Revenue per year: $252,000 (21,000 times 12 months)
60% Business: $151,200 (252,000 times .60) equals anannual business budget
40% Personal: $100,800 (252,000 times .40) equals anannual personal budget
Monthly business budget equals $12,600 (151,200of12 months)
Low-end forecasting
ATP: $75 Skin Rejuvenation Facial
Clients per day: four
Days worked per week: five
Revenue per week: $1,500 per week (75 times four clients per day times five days per week)
Revenue per Month: $6,000 per month (1,500 times four weeks).There are generally four weeks per month but not always.
Revenue per year: $72,000 (6,000 times 12 months)
60% business: $43,200 (72,000 times .60)
40% personal: $28,800 (72,000 times .40)
Monthly business budget equals $3,600 (43,200 of 12 months)
This is an important figure. Reminder, the goal of your financial forecast is to fit all monthly business expenses in your low-end business budget. Are you able to fit rent, utilities, loans, office supply budget, subscription fees, and more into this figure? Hopefully, the answer is yes.
Aestheticians in today’s market are looking to go solo more and more and with financial forecasting as the forefront of your business plan, you can do this successfully and without fault. It is advised to revisit the spa’s annual forecasting at least twice per year, and then revise the entire plan once annually. By taking service trends into account and potentially changing average ticket prices to look at different avenues of income generation, independent practitioners can tie these figures into their marketing channels and their daily sales goals to ensure financial success for years to come.
Courtney Sykes is the Chief Administrative Officer of Southeastern Esthetics Institute and licensed aesthetics instructor in South Carolina. Sykes also is the creator of Courtney Sykes Molecular Anit-Aging, a clinical skincare line for consumers and professionals. Her passion lies in creating real change in the aesthetics industry, assisting her students to obtain gainful employment, and make a difference in the lives of their clients. Sykes specializes in a science-based approach to skin health and education. Her primary focus is chemical peels, laser treatments, eyelash extensions, micropigmentation, and cosmetic lasers. Her background in medical spa management has led her to nationally-accredit the largest, licensed aesthetics school in South Carolina – Southeastern Esthetics Institute.