A typical calculation of the profitability of a beauty salon is made using the formula:
Posted: Tue Jan 21, 2025 10:52 am
Expenses/turnovers * 100
The standard formula for calculating the profit margin of a business entity:
Profit / turnover * 100 ≥ 20%
The reality of business in the service sector is that a decrease in the enterprise's profitability to a level of less than 20% over a long period of time makes it unprofitable.
Let's look at a specific example physician database of what the payback indicator affects. When drawing up a business plan, we will take into account the rate of return and the total investment volume. Let's say we are ready to invest 5 million rubles in opening a beauty salon for a period of up to 2 years.
In this case, the planned volume of monthly profit of the enterprise should be: 5,000,000 / 24 months = 208,333 thousand rubles. Monthly revenue with a profitability rate of 20% will be: 208,333 * 100% / 20% = 1,041,665 rubles, and the ratio of initial investments (5 million rubles) to the monthly gross revenue of the salon (~ 1 million rubles) will be approximately 5: 1.
But here it is necessary to take into account both the seasonality of the services provided and the length of the studio's work on the market. Thus, in the first months after opening, zero or even negative profitability of the establishment is considered the norm, and the demand for some types of services can fluctuate significantly during the year. More or less reliable data on the financial condition of the enterprise can be obtained only after a year of its work with regular and comprehensive monitoring of all indicators.
The lack of control over personnel and, as a consequence, theft behind the back of the salon manager directly impacts the decrease or absence of profits in the company.
Working under an outdated brand, lack of customer loyalty programs, and low employee motivation usually also do not lead to sustainable development and increased business profitability.
If a salon owner ignores the above factors for a long period of time, it may adversely affect the company’s reputation and lead to its bankruptcy.
Is it possible that the project's payback period is all right, but its profitability is below 20%? If the financial plan was initially drawn up according to all the rules, then this is impossible in principle. Making a profit is an integral part of any business.
Whatever the cash flow generated by a beauty studio, you should first of all look at the profitability and payback indicators in order to influence in time the factors that prevent the business from developing or make it unprofitable.
The standard formula for calculating the profit margin of a business entity:
Profit / turnover * 100 ≥ 20%
The reality of business in the service sector is that a decrease in the enterprise's profitability to a level of less than 20% over a long period of time makes it unprofitable.
Let's look at a specific example physician database of what the payback indicator affects. When drawing up a business plan, we will take into account the rate of return and the total investment volume. Let's say we are ready to invest 5 million rubles in opening a beauty salon for a period of up to 2 years.
In this case, the planned volume of monthly profit of the enterprise should be: 5,000,000 / 24 months = 208,333 thousand rubles. Monthly revenue with a profitability rate of 20% will be: 208,333 * 100% / 20% = 1,041,665 rubles, and the ratio of initial investments (5 million rubles) to the monthly gross revenue of the salon (~ 1 million rubles) will be approximately 5: 1.
But here it is necessary to take into account both the seasonality of the services provided and the length of the studio's work on the market. Thus, in the first months after opening, zero or even negative profitability of the establishment is considered the norm, and the demand for some types of services can fluctuate significantly during the year. More or less reliable data on the financial condition of the enterprise can be obtained only after a year of its work with regular and comprehensive monitoring of all indicators.
The lack of control over personnel and, as a consequence, theft behind the back of the salon manager directly impacts the decrease or absence of profits in the company.
Working under an outdated brand, lack of customer loyalty programs, and low employee motivation usually also do not lead to sustainable development and increased business profitability.
If a salon owner ignores the above factors for a long period of time, it may adversely affect the company’s reputation and lead to its bankruptcy.
Is it possible that the project's payback period is all right, but its profitability is below 20%? If the financial plan was initially drawn up according to all the rules, then this is impossible in principle. Making a profit is an integral part of any business.
Whatever the cash flow generated by a beauty studio, you should first of all look at the profitability and payback indicators in order to influence in time the factors that prevent the business from developing or make it unprofitable.