Whether you’re about to kickstart your barbershop venture or in the process of shaping a business plan, the burning question is likely how to write a barbershop financial plan without the fuss of lengthy formulas.
In the world of funding and seeking potential business partners, the financial plan will lead the way. Neglecting this pivotal aspect is simply not an option.
Do you feel like you need a hand in crafting the financial section of your business plan? Well, guess what? We’ve got your back.
What is a Barber Shop Financial Plan?
A barbershop’s financial plan reflects the current monetary position of a business and outlines its long-term financial goals, objectives, and strategies to achieve the desired outcomes.
It is the last but the most important part of a barbershop business plan that can convince investors to invest in your business.
A financial plan has key financial reports like income statements, break-even analyses, balance sheets, investment plans, and pricing strategies.
These statements help readers assess the revenue potential, risks, and rewards that a particular barbershop can make.
Instead of paragraphs, the financial section of a business plan is presented best with figures, diagrams, graphs, and charts.
Finally, here you are with the guide for your financial plan:
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How to Prepare a Barber Shop Financial Plan?
1. Identify Your Funding Requirements
Before starting a barbershop, you need to know the funds you require. For that, you will have to consider the startup costs of your barbershop. These expenses include renting a space, buying equipment, getting licenses, and everything else.
Another thing to keep in mind is the working capital. It is the money you will need for daily operations.
Firstly, your financial plan should outline these costs to understand the requirements of the money for your business.
Apart from these expenses, it is a great idea to calculate the operating expenses for the starting few months to keep your barbershop business going smoothly.
Once you know the amount you require for your business, it will help you decide whether you want a bank loan, a loan from known ones, or savings.
2. Determine Your Funding Strategy
Not everyone has a pile of money ready to start a business. Sometimes, people have to ask for help from potential lenders to get the money they need to start their barber shops.
Here are a few funding sources you can consider for your barber shop:
- Lendings from friends and family
- Bank loans
- SBA loans
- Real Estate loans
Before you seek credit from banks and investors, evaluate different funding sources, their costs, and benefits to pick the most desirable ones.
3. Select a Business & Financial Planning Software
We don’t mean to scare you off, but starting and running a barbershop will swamp you with responsibilities. Unless you plan to run around like a headless chicken, a planning tool can support you in making different financial plans and reports.
If you are struggling to create a financial plan for the barbershop, you need a planning and forecasting tool right away.
Too many options to confuse you? Consider a tool that is easy to use, offers a range of functions, and allows seamless integration of Excel data.
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4. Pre-Assumptions & Market Analysis
To build a base for all your financial statements’ projections you need to understand your target audience, know your historical data (if any), and current market trends. Here are some other things you need to keep in mind:
Keep your pricing strategy ready. Keep the track of different services you provide along with the prices. Remember your pricing will be crucial to set the tone of your business.
Sales forecasts help determine whether your barbershop can thrive. Break your forecast into daily, weekly, monthly, quarterly, and yearly figures.
These are the day-to-day expenses that keep your barbershop running smoothly. To project these accurately, gather precise estimates from your suppliers and account for various costs like payroll, rent, and other monthly expenses.
5. Prepare Financial Projections
Figures speak their own language to investors. One look at the key reports and they will get to know the financial health of your business which will be the deciding point for them.
Let’s check these key financial statements:
Cash flow statement
Cash flow statements will help investors know the liquidity of your barbershop and how much time it will keep your business running smoothly.
For the net cash flow, you need to consider sales numbers, cost of goods sold, and other expenses like rent & salaries.
The balance sheet of a barbershop is the summary of the money your business owes to others, the money invested in it, and everything about other assets and liabilities.
In your own business plan, focus more on this part, as it will help your reader understand how your business’s money is organized.
The income statement, also known as the profit and loss statement, offers insight into a barbershop’s profitability, long-term financial goals, and business growth over the next 3-5 years.
You need the cost of goods sold and revenue projections to have a gross profit for your business.
Further, deduct the operating expenses and EBITDA to calculate the operations net income of your barbershop business. This is what interests investors the most.
Profit is the ultimate goal for any business in the salon industry, so how do you get to know when you will start making profits?
It is where break-even analysis comes into the picture to help you determine how much sales volume is essential to reach the point where costs are equal to revenue.
It can take years to reach break-even if there are loans to settle. However, you can still keep your business profitable with an appropriate understanding of fixed costs.
6. Test Assumptions
Your whole financial plan is built on predictions. Even if you’ve planned every detail carefully, unexpected challenges can still arise.
During this stage, it’s crucial to think about various “what-if” situations. Imagine different scenarios, where things go well, and others where they don’t.
For example, think about what happens if your barbershop’s sales drop when the weather gets extremely cold or if the cost of your services increases unexpectedly due to a rise in other costs. These are extreme examples. You should also consider the in-between possibilities and adjust your financial projections accordingly.
To implement this kind of analysis, you can test your projected numbers with real data from similar barbershops. Look at the financial reports of companies that are similar to what you’re planning.
7. Monitor & Update Your Plan
Creating a financial plan is only the beginning. To make it work, you need to follow and alter it as required.
Remember, your financial plan is based on assumptions and market analysis. Real-world conditions can impact your barbershop differently than you expected.
That’s why it’s crucial to monitor your business’s financial performance regularly. Compare the numbers in your financial plan with the actual numbers, and take note of any differences.
If you find that some metrics are significantly different from what you predicted, try to understand why. Once you identify the reasons, take action to correct the situation and update your plans accordingly.
Now that you have all the information to create a solid barbershop financial plan, it’s time to start making projections and doing the necessary calculations.
Keep in mind that your plan should be flexible and adaptable to changing circumstances. It is not only a financial plan, but the whole barbershop business plan should be flexible.
Download Free Barber Shop Financial Plan Example
Creating a financial plan from scratch can get overwhelming. After all, Excel sheets are tiring and endlessly long. Worry not. Download this free barbershop financial plan example prepared using Upmetrics to help you get started.
It includes all the key components of a business’s financial projections, including the balance sheet, cash flow statement, P&L or income statement, and break-even statement, simplifying barbershop financial planning.
Start Preparing Your Barber Shop Financial Plan
And that’s a wrap – we’ve discussed the fundamental aspects of financial planning for your barbershop.
Now, if the idea of crafting a financial plan seems a bit daunting, there’s no need to fret. We’re here to assist you.
With Upmetrics’ financial planning tool, the process becomes a breeze. You simply enter your financial predictions, and we take care of the rest.
Thus, it is time you write your business plan with accurate financial projections without any fuss.