How to create a financial forecast for a nail bar?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your nail bar.
Putting together a nail bar financial forecast may sound complex, but don’t worry, with the right tool, it’s easier than it looks, and The Business Plan Shop is here to guide you.
In this practical guide, we'll cover everything you need to know about building financial projections for your nail bar.
We will start by looking at why they are key, what information is needed, what a forecast looks like once completed, and what solutions you can use to create yours.
Let's dive in!
Why create and maintain a financial forecast for a nail bar?
The financial projections for your nail bar act as a financial blueprint to guide its growth with confidence and ensure its long-term financial viability.
To create them, you will need to look at your business in detail - from sales to operating costs and investments - to assess how much profit it can generate in the years to come and what will be the associated cash flows.
During challenging market conditions, maintaining an up-to-date financial forecast enables early detection of potential financial shortfalls, allowing for timely adjustments or securing financing before facing a cash crisis.
Your nail bar's financial forecast will also prove invaluable when seeking financing. Banks and investors will undoubtedly request a thorough examination of your financial figures, making precision and presentation essential.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
What information is used as input to build a nail bar financial forecast?
A nail bar's financial forecast needs to be built on the right foundation: your assumptions.
The data required to create your assumptions will depend on whether you are a new or existing nail bar.
If you are creating (or updating) the forecast of an existing nail bar, then your main inputs will be historical accounting data and operating metrics, and your team’s view on what to expect for the next three to five years.
If you are building financial projections for a new nail bar startup, you will need to rely on market research to form your go-to-market strategy and derive your sales forecast.
For a new venture, you will also need an itemised list of resources needed for the nail bar to operate, along with a list of equipment required to launch the venture (more on that below).
Now that you understand what is needed, let’s have a look at what elements will make up your nail bar's financial forecast.
The sales forecast for a nail bar
The sales forecast, also called topline projection, is normally where you will start when building your nail bar financial forecast.
Creating a coherent sales projection boils down to estimating two key drivers:
- The average price
- The number of monthly transactions
To do this, you will need to rely on historical data (for an existing business), market research data (for both new and existing nail bars), and consider the elements below:
- Seasonal trends: As a nail bar owner, you may notice that certain times of the year see an increase in customers and sales, while others may be slower. For example, during the summer months, more people may be interested in getting their nails done for special occasions like weddings and vacations, resulting in a higher average price per transaction and more monthly transactions.
- Location: The location of your nail bar can greatly impact your average price and number of monthly transactions. For instance, if your nail bar is located in a busy shopping center or near a university, you may attract more customers and be able to charge higher prices for your services.
- Competition: The presence of other nail bars in your area can also affect your business's performance. If you have a lot of competition, you may need to lower your prices to stay competitive, resulting in a lower average price per transaction. On the other hand, if you are the only nail bar in the area, you may be able to charge higher prices and see an increase in monthly transactions.
- Economic conditions: Economic factors such as inflation, unemployment rates, and consumer spending can also impact your nail bar's sales forecast. During times of economic downturn, people may have less disposable income to spend on luxury services like getting their nails done, resulting in a decrease in average price and monthly transactions. On the other hand, during periods of economic growth, you may see an increase in both metrics.
- Customer demographics: The demographics of your target customers can also affect your average price and number of monthly transactions. For example, if your nail bar caters to a high-end clientele, you may be able to charge higher prices and see fewer monthly transactions. However, if your target customers are budget-conscious, you may need to lower your prices to attract more business, resulting in a higher number of monthly transactions but a lower average price per transaction.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
The operating expenses for a nail bar
The next step is to estimate the costs you’ll have to incur to operate your nail bar.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your nail bar's operating expenses should normally include the following items:
- Rent: This includes the monthly rental cost for your nail bar's physical space.
- Utilities: This includes electricity, water, and gas bills for your nail bar.
- Staff wages: This is the cost of paying your employees, including nail technicians, receptionists, and cleaners.
- Accountancy fees: You may need to hire an accountant to help with tax filings and financial statements.
- Insurance: This includes both liability insurance and workers' compensation insurance.
- Supplies: This includes all the products and materials needed for nail services, such as polish, acrylics, and nail files.
- Marketing and advertising: Promoting your nail bar through various channels, such as social media, print ads, and flyers, incurs costs.
- Software licenses: You may need to purchase software for scheduling appointments, managing inventory, and handling payments.
- Cleaning and maintenance: This includes the cost of janitorial services and any repairs or maintenance needed for your nail bar.
- Training and education: To keep your nail technicians up-to-date with the latest techniques and trends, you may need to invest in training and education programs.
- Banking fees: This includes transaction fees for credit and debit card payments, as well as fees for using a business bank account.
- Taxes: Your nail bar will be subject to various taxes, such as income tax, sales tax, and payroll taxes.
- Renters insurance: If you are leasing your nail bar's space, you may need to purchase renters insurance to protect your business from any damages or losses.
- Professional memberships: Joining professional organizations and associations may incur membership fees.
- Legal fees: If you require legal assistance for contracts or other business matters, you may need to pay for legal services.
This list is not exhaustive by any means, and will need to be tailored to your nail bar's specific circumstances.
What investments are needed to start or grow a nail bar?
Once you have an idea of how much sales you could achieve and what it will cost to run your nail bar, it is time to look into the equipment required to launch or expand the activity.
For a nail bar, capital expenditures and initial working capital items could include:
- Nail Stations: These are essential for your nail bar as they provide a designated area for your technicians to work on clients' nails. You will need to invest in sturdy and comfortable nail stations that can withstand daily use and can accommodate all the necessary tools and products.
- Manicure and Pedicure Chairs: These specialized chairs are designed to provide comfort and support for clients during their manicure and pedicure services. They often come with built-in footrests, adjustable settings, and storage compartments for tools and products.
- UV/LED Nail Lamps: These lamps are used to cure and dry gel and shellac polishes, which are becoming increasingly popular among clients. You will need to invest in high-quality UV/LED nail lamps to ensure efficient and effective services for your clients.
- Nail Polish and Product Display Shelves: As a nail bar, you will have a wide range of nail polishes and products for your clients to choose from. It is important to invest in attractive and functional display shelves to showcase your products and make it easier for clients to browse and select their desired items.
- Reception Desk and Waiting Area Furniture: First impressions are crucial in the beauty industry, and a well-designed reception desk and waiting area can make a significant impact on your clients. Invest in comfortable seating, a modern reception desk, and other furniture or decorations to create a welcoming and professional atmosphere for your nail bar.
Again, this list will need to be adjusted according to the specificities of your nail bar.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
The financing plan of your nail bar
The next step in the creation of your financial forecast for your nail bar is to think about how you might finance your business.
You will have to assess how much capital will come from shareholders (equity) and how much can be secured through banks.
Bank loans will have to be modelled so that you can separate the interest expenses from the repayments of principal, and include all this data in your forecast.
Issuing share capital and obtaining a bank loan are two of the most common ways that entrepreneurs finance their businesses.
What tables compose the financial plan for a nail bar?
Now let's have a look at the main output tables of your nail bar's financial forecast.
The forecasted profit & loss statement
The profit & loss forecast gives you a clear picture of your business’ expected growth over the first three to five years, and whether it’s likely to be profitable or not.
A healthy nail bar's P&L statement should show:
- Sales growing at (minimum) or above (better) inflation
- Stable (minimum) or expanding (better) profit margins
- A healthy level of net profitability
This will of course depend on the stage of your business: numbers for an established nail bar will look different than for a startup.
The projected balance sheet
The projected balance sheet gives an overview of your nail bar's financial structure at the end of the financial year.
It is composed of three categories of items: assets, liabilities and equity:
- Assets: are what the business possesses and uses to produce cash flows. It includes resources such as cash, buildings, equipment, and accounts receivable (money owed by clients).
- Liabilities: are the debts of your nail bar. They include accounts payable (money owed to suppliers), taxes due and bank loans.
- Equity: is the combination of what has been invested by the business owners and the cumulative profits to date (which are called retained earnings). Equity is a proxy for the value of the owner's stake in the business.
The projected cash flow statement
A projected cash flow statement for a nail bar is used to show how much cash the business is generating or consuming.
The cash flow forecast is usually organised by nature to show three key metrics:
- The operating cash flow: do the core business activities generate or consume cash?
- The investing cash flow: how much is the business investing in long-term assets (this is usually compared to the level of fixed assets on the balance sheet to assess whether the business is regularly maintaining and renewing its equipment)?
- The financing cash flow: is the business raising new financing or repaying financiers (debt repayment, dividends)?
Cash is king and keeping an eye on future cash flows is imperative for running a successful business. Therefore, you should pay close attention to your nail bar's cash flow forecast.
If you are trying to secure financing, note that it is customary to provide both yearly and monthly cash flow forecasts in a financial plan - so that the reader can analyze seasonal variation and ensure the nail bar is appropriately capitalised.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Which tool should you use to create your nail bar's financial forecast?
Creating your nail bar's financial forecast may sound fairly daunting, but the good news is that there are several ways to go about it.
Using online financial projection software to build your nail bar's forecast
The modern and easiest way to build a forecast is to use professional financial projection software such as the one we offer at The Business Plan Shop.
There are several advantages to using specialised software:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You have access to complete financial forecast templates
- You get a complete financial forecast ready to be sent to your bank or investors
- You can easily track your actual financial performance against your financial forecast, and recalibrate your forecast as the year goes by
- You can create scenarios to stress test your forecast's main assumptions
- You can easily update your forecast as time goes by to maintain visibility on future cash flows
- You have a friendly support team on standby to assist you when you are stuck
- It’s cost-efficient and much cheaper than using an accountant or consultant (see below)
If you are interested in this type of solution, you can try our forecasting software for free by signing up here.
Calling in a financial consultant or chartered accountant
Enlisting the help of a consultant or accountant is also a good way to obtain a professional nail bar financial forecast.
The downside of this solution is its cost. From experience, obtaining a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to cost a minimum of £700 or $1,000.
The indicative cost above, is for a small business, and a forecast is done as a one-shot exercise. Using a consultant or accountant to track your actuals vs. forecast and to keep your financial projections up to date on a monthly or quarterly basis will cost a lot more.
If you opt for this solution, make sure your accountant has in-depth knowledge of your industry, so that they may challenge your figures and offer insights (as opposed to just taking your assumptions at face value to create the forecast).
Why not use a spreadsheet such as Excel or Google Sheets to build your nail bar's financial forecast?
You and your financial partners need numbers you can trust. Unless you have studied finance or accounting, creating a trustworthy and error-free nail bar financial forecast on a spreadsheet is likely to prove challenging.
Financial modelling is very technical by nature and requires a solid grasp of accounting principles to be done without errors. This means that using spreadsheet software like Excel or Google Sheets to create accurate financial forecasts is out of reach for most business owners.
Creating forecasts in Excel is also inefficient nowadays:
- Software has advanced to the point where forecasting can be done much faster and more accurately than manually on a spreadsheet.
- With artificial intelligence, the software is capable of detecting mistakes and helping decision-making.
Spreadsheets are versatile tools but they are not tailor-made for reporting. Importing your nail bar's accounting data in Excel to track actual vs. forecast is incredibly manual and tedious (and so is keeping forecasts up to date). It is much faster to use dedicated financial planning tools like The Business Plan Shop which are built specially for this.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Use our financial projection templates for inspiration
The Business Plan Shop has dozens of financial forecasting templates available.
Our examples contain both the financial forecast, and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own nail bar, looking at our template is always a good way to get ideas on how to model financial items and what to write when creating a business plan to secure funding.
Takeaways
- Having a financial forecast enables you to visualise the expected growth, profitability, and cash generation for your business over the next three to five years.
- Tracking actuals vs. forecast and keeping your financial projections up-to-date is the only way to get a view on what your nail bar future cash flows may look like.
- Using financial forecasting software is the mordern and easy way to create and maintain your forecasts.
This is the end of our guide on how to build the financial forecast for a nail bar, we hope you found it useful. Don't hesitate to contact us if you want to share your feedback or have any questions.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Also on The Business Plan Shop
- Example of financial forecast
- Financial forecast for a business idea
- How to project revenues for a business?
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