How to create a financial forecast for a tattoo parlour?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your tattoo parlour.
Putting together a tattoo parlour 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 tattoo parlour.
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 tattoo parlour?
In order to prosper, your business needs to have visibility on what lies ahead and the right financial resources to grow. This is where having a financial forecast for your tattoo parlour becomes handy.
Creating a tattoo parlour financial forecast forces you to take stock of where your business stands and where you want it to go.
Once you have clarity on the destination, you will need to draw up a plan to get there and assess what it means in terms of future profitability and cash flows for your tattoo parlour.
Having this clear plan in place will give you the confidence needed to move forward with your business’s development.
Having an up-to-date financial forecast for a tattoo parlour is also useful if your trading environment worsens, as the forecast enables you to adjust to your new market conditions and anticipate any potential cash shortfall.
Finally, your tattoo parlour's financial projections will also help you secure financing, as banks and investors alike will want to see accurate projections before agreeing to finance your business.
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 tattoo parlour financial forecast?
A tattoo parlour's financial forecast is only as good as the inputs used to build it.
If you are creating (or updating) the forecast of an existing tattoo parlour, then you mostly need your accounting information, key historical operating non-financial data, and your team’s input on what to expect for the coming years.
If you are building financial projections for a tattoo parlour startup, you will need to have done your research and have a clear picture of your competitive environment and go-to-market strategy so that you can forecast sales accurately.
For a new venture, you will also need a precise list of the resources needed to keep the tattoo parlour running on a day-to-day basis and a list of the equipment and expenditures required to start the business (more on that later).
Let's now take a closer look at the elements that make up your tattoo parlour's financial forecast.
The sales forecast for a tattoo parlour
The sales forecast, also called topline projection, is normally where you will start when building your tattoo parlour 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 tattoo parlours), and consider the elements below:
- Trends in Popular Tattoo Designs: As a tattoo parlour owner, you know that trends in tattoo designs can greatly impact the average price of your services. If a certain design or style becomes popular, you may be able to charge a higher price for it, leading to an increase in average price per transaction. On the other hand, if a previously popular design falls out of fashion, you may have to lower your prices or offer discounts to attract customers.
- Seasonal Demand: Certain times of the year may see an increase or decrease in demand for tattoos. For example, summer months may see an increase in customers wanting to get tattoos to show off at the beach, while the holiday season may see a decrease in demand as people prioritize gift shopping over getting inked. This fluctuation in demand can directly impact the number of monthly transactions at your tattoo parlour.
- Competition in the Area: The presence of other tattoo parlours in your area can also affect your business's average price and number of monthly transactions. If there are many competitors offering similar services at lower prices, you may have to adjust your prices to stay competitive. On the other hand, if there are limited options for customers in the area, you may be able to charge higher prices and attract more monthly transactions.
- Economic Conditions: The overall state of the economy can also have an impact on the average price and number of monthly transactions at your tattoo parlour. During an economic downturn, customers may be less willing to spend money on luxury items like tattoos, leading to a decrease in both the average price and number of transactions. In contrast, during a strong economy, customers may have more disposable income and be more willing to pay higher prices for tattoos, leading to an increase in both metrics.
- Changes in Technology: As technology advances, it can also affect the average price and number of monthly transactions at your tattoo parlour. For example, the introduction of new tattooing techniques or equipment may allow you to offer more intricate and detailed designs, leading to an increase in the average price. Additionally, advancements in social media and online marketing can help attract more customers and increase the number of monthly transactions at your tattoo parlour.
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 tattoo parlour
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your tattoo parlour on a daily basis.
Expenses normally vary based on how much revenue you anticipate (which is why, from experience, it is always better to start your forecast with the topline projection), and where your business is based.
Operating expenses for a tattoo parlour will include some of the following items:
- Staff costs: This includes wages and salaries for tattoo artists, receptionists, and other employees.
- Rent: You will need a space to operate your tattoo parlour, which comes at a cost.
- Utilities: This includes electricity, water, and gas for your parlour.
- Supplies: You will need various supplies such as tattoo ink, needles, gloves, and other equipment to operate your parlour.
- Advertising and marketing: In order to attract customers, you will need to invest in advertising and marketing efforts.
- Accountancy fees: You may need to hire an accountant to help manage your financial records and taxes.
- Insurance costs: It's important to have insurance to protect your business in case of any accidents or legal issues.
- Software licenses: You may need to purchase software licenses for booking appointments, managing inventory, and other business operations.
- Banking fees: You will incur fees for processing credit card payments and other banking services.
- Cleaning and maintenance: Keeping your parlour clean and well-maintained is essential for creating a positive customer experience.
- Taxes: You will need to pay various taxes, including income tax, sales tax, and property tax.
- Legal fees: In case of any legal issues, you may need to hire a lawyer, which can be costly.
- Training and education: It's important to invest in ongoing training and education for yourself and your employees to stay updated on the latest tattoo techniques and safety protocols.
- Office supplies: You will need basic office supplies such as paper, printer ink, and pens to run your business.
- Professional memberships: You may need to pay for memberships in professional organizations to network and stay informed about industry developments.
This list will need to be tailored to the specificities of your tattoo parlour, but should offer a good starting point for your budget.
What investments are needed to start or grow a tattoo parlour?
Once you have an idea of how much sales you could achieve and what it will cost to run your tattoo parlour, it is time to look into the equipment required to launch or expand the activity.
For a tattoo parlour, capital expenditures and initial working capital items could include:
- Tattoo Machines and Equipment: This includes the cost of purchasing tattoo machines, needles, ink, and other equipment necessary for tattooing. You may also need to budget for regular maintenance and replacement of equipment.
- Furniture and Fixtures: This includes the cost of purchasing furniture and fixtures for your tattoo parlour, such as chairs, tables, lighting, and décor. It is important to create a comfortable and visually appealing space for your clients.
- Inventory: You will need to budget for the cost of purchasing and stocking tattoo supplies, such as gloves, ointments, and aftercare products. It is important to have a well-stocked inventory to meet the needs of your clients.
- Software and Technology: In today's digital age, it is important to have the right software and technology to run your tattoo parlour efficiently. This may include purchasing a booking and scheduling system, point-of-sale software, and other tools to help manage your business.
- Security System: As a tattoo parlour owner, it is your responsibility to ensure the safety of your clients and your business. This may include investing in a security system, such as cameras, alarms, and secure locks, to protect your premises and assets.
Again, this list will need to be adjusted according to the specificities of your tattoo parlour.
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 tattoo parlour
The next step in the creation of your financial forecast for your tattoo parlour 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 tattoo parlour?
Now let's have a look at the main output tables of your tattoo parlour's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your tattoo parlour is likely to be in the years to come.
For your tattoo parlour to be financially viable, your projected P&L should ideally show:
- Sales growing above inflation (the higher the better)
- Profit margins which are stable or expanding (the higher the better)
- A net profit at the end of each financial year (the higher the better)
This is for established tattoo parlours, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your tattoo parlour's forecasted balance sheet enables you to assess your financial structure and working capital requirements.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business owns and uses to produce cash flows. It includes resources such as cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. It includes items such as accounts payable (money owed to suppliers), taxes due and loans.
- Equity: is the combination of what has been invested by the business owners and the cumulative profits and losses generated by the business to date (which are called retained earnings). Equity is a proxy for the value of the owner's stake in the business.
The cash flow projection
The cash flow forecast of your tattoo parlour will show how much cash the business is expected to generate or consume over the next three to five years.
There are multiple ways of presenting a cash flow forecast but from experience, it is better to organise it by nature in order to clearly show these elements:
- Operating cash flow: how much cash is generated by the tattoo parlour's operations
- Investing cash flow: what is the business investing to expand or maintain its equipment
- Financing cash flow: is the business raising additional funds or repaying financiers (debt repayment, dividends)
Your cash flow forecast is the most important element of your overall financial projection and that’s where you should focus your attention to ensure that your tattoo parlour is adequately funded.
Note: if you are preparing a financial forecast in order to try to secure funding, you will need to include both a yearly and monthly cash flow forecast in your tattoo parlour's financial plan.
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 tattoo parlour's financial projections?
Building a tattoo parlour financial forecast is not difficult provided that you use the right tool for the job. Let’s see what options are available below.
Using online financial forecasting software to build your tattoo parlour's projections
The modern and easiest way is to use an online financial forecasting tool 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 projection software for free by signing up here.
Calling in a financial consultant or chartered accountant
Outsourcing the creation of your tattoo parlour financial forecast is another possible solution.
This will cost more than using software as you can expect as your price will have to cover the accountant’s time, software cost, and profit margin.
Price can vary greatly based on the complexity of your business. For a small business, from experience, a simple three-year financial forecast (including a balance sheet, income statement, and cash flow statement) will start at around £700 or $1,000.
Bear in mind that this is for forecasts produced at a single point in time, updating or tracking your forecast against actuals will cost extra.
If you decide to outsource your forecasting:
- Make sure the professional has direct experience in your industry and is able to challenge your assumptions constructively.
- Steer away from consultants using sectorial ratios to build their client’s financial forecasts (these projections are worthless for a small business).
Why not use a spreadsheet such as Excel or Google Sheets to build your tattoo parlour's financial forecast?
Creating an accurate and error-free tattoo parlour financial forecast on Excel (or any spreadsheet) is very technical and requires both a strong grasp of accounting principles and solid skills in financial modelling.
Most entrepreneurs lack the expertise required to create an accurate financial forecast using spreadsheet software like Excel or Google Sheets. As a result, it is unlikely anyone will trust your numbers.
The second reason is that it is inefficient. Building forecasts on spreadsheets was the only option in the 1990s and early 2000s, nowadays technology has advanced and software can do it much faster and much more accurately.
This is why professional forecasters all use software. With the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and updating your forecast as the year progresses is manual, tedious, error-prone, and time-consuming. Whereas financial forecasting software like The Business Plan Shop is built 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 forecast templates for inspiration
The Business Plan Shop has dozens of financial forecast examples available.
Our templates contain both a financial forecast and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Our templates are a great source of inspiration, whether you just want to see what a complete business plan looks like, or are looking for concrete examples of how you should model financial elements in your own forecast.
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your tattoo parlour.
- Tracking actuals vs. forecast and having an up-to-date financial forecast is key to maintaining visibility on your future cash flows.
- Using financial forecasting software is the modern way of creating and maintaining financial projections.
We hope that this guide helped you gain a clearer perspective on the steps needed to create the financial forecast for a tattoo parlour. Don't hesitate to contact us if you 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
- Financial forecast example
- Financial forecast for a business idea
- How to project sales for a business?
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Founder & CEO at The Business Plan Shop Ltd
