There is little difference in the term “shop” versus “salon.” Most consumers sense the use of the term “salon” as being more upscale, and not necessarily a larger business than a shop. “Shop” is simply casual. So for the purpose of discussion here unless otherwise noted, we mean the same thing whether we use the term “shop” or “salon.” If your interest is a pet spa this is your section too. The term “pet spa” has been around for some time but its use is on the increase in upscale areas. These businesses promote specialty services from hydrotherapy to “blueberry facials.” Some spa owners using Floor Plan Concepts for Pet Groomers by Grooming Business in a Box® have created environments with 90% reductions in noise from dryers, clipper vacs and vacuums. You walk-in and hear soft music playing instead. Now doesn’t that alone say “spa?”
Salons, shops and spas, as we use the terms here, are in “commercial locations.” They do not qualify as a home-based business, and of course they are not mobile operations although some may also operate a mobile divsion or provide pickup and delivery.
Salons, shops and spa typically have 1 or more employees. Now that is perhaps the most common delineation between home and mobile groomers and owners of salons and shops. There are some home and mobile operations with employees, but the percentage of employers is dramatically higher among salon and shop owners. If you don’t want employees, you are not as likely to have a salon or shop, but there are exceptions for small one person shops usually in 200 to 300 square foot “nooks.”
Most commercial salons and shops are in a leased space. Some pet groomers acquire the funds enabling them to buy their business building which can be a terrific financial move when done correctly and eliminate the rent expense. Some commercial salons and shops are leased from a large kennel or pet store operation equipped with grooming departments.
The cash demand required to open a grooming business is typically the greatest for commercial salons and shops. Keep in mind that even the largest pet grooming salon was once a small one. Most groomers have to borrow money through a business plan and bank loan to open a salon or shop. Today the shoestring startup cost is typically $25,000 for a commercial center, and more often $50,000 to $100,000 especially in more expensive states. The greatest cost factor is “leasehold improvements.” The new location is certain to need some plumbing, electrical, flooring enhancement, carpentry and signage work to prepare for a grooming operation. These “leasehold improvements” typically require half of the money borrowed. PetGroomer.com staff have written over 300 business plans in the last few years, so we speak from substantial experience. In some towns groomers are able to find small standalone buildings, perhaps as little as 200 square feet and get started for much less.
It is always a bit of joy when the new business owner has family and friends that are legally able to do some of the leasehold improvements at a reduced cost. Sometimes the landlords will absorb a portion of the improvements, or reduce the rent to acknowledge the investment in their property. Here is our number one rule. NEVER sign a rent or lease contract no matter how much pressure you are under unless you have clearly, absolutely have a guarantee of cash investment required as stated by your business plan, especially if it is coming from a bank or investor. If you sign a lease or rent contract and don’t get your financing, you are stuck paying the rent your contracted for and that is only one caution.
As part of making the decision to become the owner of a salon, shop or spa you need to know what the business can reasonably expect to earn. Well, how much do you want to earn? Except for the tiniest shops of 200 to 300 square feet, the saying, “The sky is the limit” may apply. Mobile and home groomers usually face a daily limit of the number of pets they serve without adding another mobile unit, or expanding their home operation. You can build a salon or shop to do 10, 20, 50 or more grooming appointments a day. We have clients in all those ranges. We started out as a small shop of about 400 square feet with no clientele. In a few years we were open 7 days-a-week operation grooming around 75 pets a day including “swing-shift” grooming services (a second shift of groomers 5 pm to 9 pm). The most significant restriction to your growth is the composition of the “market area.” Are there enough people and pets in your area to provide you with the number of pets you want to groom? You determine the characteristics of your market area when creating a business plan.
Please realize that there is no “right or wrong” or rules that say you have to grow a large grooming business. It’s your choice. It should be tied to your financial expectations and financial projections. If you want to earn a personal income (your income or “your paycheck” from the business after operating expenses) of $50,000 or more a year (prior taxes) you are going to have to grow a moderate to large salon. We have consultation clients that enjoy $100,000 to $250,000 annual personal incomes (prior taxes) from very large salons earning business income of $500,000 to $1,100,000 a year (what they ring up on the cash register). These figures are grooming services only and could be higher if you factor in additional sources of revenue such as retail goods.
Between 1990 and 2005 nearly every business plan we wrote for new grooming salons and shops included a specialty retail department (retail not generally found in corporate pet stores or event Mom and Pop pet stores) and sometimes a bakery, and about 20% of the time they also offered self-service pet wash tubs in addition to full-service grooming. Having multiple sources of revenue is very important to ensure that your business income is adequate to pay for leased space, bank loans and interest and other operating expenses. What this means is that YOU MUST LEARN HOW TO PROJECT INCOME AND OPERATING EXPENSES BEFORE YOU OPEN A GROOMING BUSINESS, OR BUY AN EXISTING ONE. The most professional financial software for groomers is included in Grooming Business in a Box® releases, such as Pet Grooming Business Plan Helper.
If you are looking for your business to provide for retirement, you probably need to build the largest business possible with a clientele that comes in often, and site it in a commercial location with a good, long lease. Make sure you have a very professional sign, and that your operation is conducive to selling, meaning that the buyer knows they can come in and take over and run the business in the same way as you. The more “systematized” you are, with a well-documented business history, the more likely you can encourage a higher appraised value, and more buyer confidence.
A good example of the starting basis of your “system” is the book, From Problems to Profits: The Madson Management System for Pet Grooming Businesses. Much like a business plan it address objectives, client relations, personnel, finance, marketing for several years in advance. Have you written down your personal and business objectives yet? Do you have a business plan? If not, there are resources to assist you. We are reminded of the saying, “If we fail to plan, we plan to fail.” You must discover and record your clear objectives in order to properly choose between a home, van or commercial business, and not endure the limitations of lifestyle preferences or money limitations where they exist.
If you are going to seek bank or investor funds for a new business or expansion, you can be a business plan will be required. It’s no small task but perhaps the most important task to protect your investment in your business.
Chart generated by Pet Grooming Business Plan Helper & Sampler, a Grooming Business in a Box® product.
Copyright 2007 Find A Groomer Inc. All rights reserved
Business plan financials require you to project your business sales income for 3 to 5 years in advance from the day you open for business (see graph above). Then you project the operating expenses and deduct them from your projected sales income thereby giving you an estimate of what net operating income you can expect to earn from your business (see graph below). Going into business in the dark without knowing what you can expect to earn in sales and personal income is an unacceptable risks to banks or investors, and for good reason.
Chart generated by Pet Grooming Business Plan Helper & Sampler, a Grooming Business in a Box® product.
Copyright 2007 Find A Groomer Inc. All rights reserved
How much do you need to invest? That’s another question that must be answered with financial planning, and details as to how every penny will be spent or held in reserve. Some salons and shops are simple to build out while others plan to be large and add a retail pet products department and perhaps other revenue services.
The graph below shows the start-up funding required for a well-equipped salon in a commercial building requiring little renovation. The groomer starts small but plans to grow to employ several groomers. It also has a modest retail department. The owner projects requirements as $46,000 in “start-up assets” and $4,000 for start-up expenses. Every business owner learns basic financial terms and you definitely need to know the difference between an “asset” and “expense.” In accounting and tax reporting your assets and expenses are handled quite differently. Suffice to say that assets for a salon is major equipment like high-end grooming tables, tubs and dryers. In this example there is also inventory and furniture. If you use the services of plumbers, electricians and other contractors they might be considered leasehold asset improvements. You must get asset vs. expense determinations from a reliable certified public accountant to avoid problems with tax agencies. Certainly the start-up expenses are easier to understand. They have a short lifetime and include grooming supplies, small tools and equipment, advertising, stationery, licenses, fees to name just a few.
Chart generated by Pet Grooming Business Plan Helper & Sampler, a Grooming Business in a Box® product.
Copyright 2007 Find A Groomer Inc. All rights reserved
Refer to the chart above again. We know that the groomer needed $50,000 to cover the purchases of assets and expenses, and some of that asset amount may be cash reserved because you run a new a business at a loss for several months until the clientele and demand increases. The chart tells us that the groomer plans to seek a loan (light yellow) of $32,000 and her investment of her own money (light blue) will be $18,000.
Remember if you need a loan or investor they are going to want to know exactly how much of an investment you need and how much you are personally putting up of your own money. Don’t proceed without knowing the numbers, and have them well-documented. You are certain to be asked for that documentation. If you don’t have it you will be perceived as being naive about the conduct required to start-up a business. It’s okay to be naive now, but start learning more today.
There’s another very common question someone is likely to ask you. Again, don’t venture into business seeking loans or investors without knowing your projected “breakeven point.” Below you will find the breakeven table for the groomer opening a salon business above. These figures were easily generated using Pet Grooming Business Plan Helper and Sampler.
Break-even Analysis (Pet Care Services Only)
Monthly Units of Services to Break-even: 130
Monthly Gross Sales of Services to Break-even $4,222
Assumptions
Estimated Monthly Fixed Cost: $4,222
Estimated Per Unit Variable Cost: $0.00
Year 1 Sales of Services: $45,380
Year 1 Units of Services: 1,394
Average Per Unit of Services Revenue: $32.55
Do you understand the table information? It is okay not to understand, but it is not too hard to figure it out once you know your projected average service fee for grooming services you expect in your business, and what your fixed costs are. Fixed costs can include interest payments on your loans to start-up the business, supplies, rent and utilities, etc. In the example above the new business owner knows her business requires $4,222 a month to meet its fixed costs of operation. Because she knew her average grooming fee would be $32.55 it was easy to divide that number into the fixed costs of $4,222. The result is 130; the groomer must sell 130 grooming services a month to meet the required bills, and that doesn’t include any personal income for her (unless she included a small base salary in the $4,222 amount). You will impress others if you can share your break-even point, and think about this question. Isn’t it easy to count the number of pets you groom or serve as you work through a month? Sure. Knowing that you must achieve 130 units to meet break-even is an easy way to track your progress at any time during the month. You will be better prepared should you not meet your goal, or to celebrate when you exceed your goal and start boosting your profit.
There’s no simpler way to write a professional grooming salon or shop business plan suitable to present to banks than with Pet Grooming Business Plan Helper and Sampler. In fact, one of the sample plans is a complete one-person to staffed grooming business achieved by one of our clients. No one else has ever released similar information and tools customized to the needs of pet groomers.
Talk with Other Grooming Business Owners
We suggest you come to the GroomerTALK Message Board and search the term “salon grooming” and “business plans.” Read previous discussions of salon and shop grooming related topics. You are also most welcome to register on the Message Board and start some discussions, ask for help and make friends with salon groomers and others. Better yet, how about sharing your experiences with grooming in order to help others. That’s what PetGroomer.com is about, opening up lines of communication between groomers that is still so sorely missing from our industry.
Salons & Shops as Part of a Retirement Plan
Unlike most people in the grooming industry we have substantial experience in selling medium to large grooming businesses whose selling price can make a substantial difference in the retirement of their owners. Salon and shop owners need to realize that unless they pay into self-employed “pension plans” or similar investments they will look to the sale of their grooming business to contribute to a more comfortable retirement (or career change). It’s take years of planning before they sell to make the best returns.
If you plan to retire someday, you will want to do so comfortably. Pet grooming business owners can create a business that provides them with such a retirement. The stereotypical image of the average pet grooming business owner is unfortunately not adorned with the vision of selling a business that provides them with such a retirement. Today, more pet grooming business owners are at least participating in some of the few retirement programs offered by leading trade associations, or those of their individual choice.
The size of your client base is directly proportional to the value of your business. So, the more your business is worth, the more you will receive for your retirement. Use management information to build the net worth of your business. The leading source of information to grow the net worth of a pet grooming business today is From Problems to Profits. However, don’t overlook other business management publications and higher education sources, and professional working relationships with a bookkeeper, business attorney, accountant and financial planner. Every home, mobile or commercial salon needs management and professional advisors. Be sure to check out the resources at your local SBA or SBDC.
What you plan NOW affects you many years from now. Just saying to yourself you will think about it later is not wise. Strategize your career in pet grooming with a map of sorts. Create a business plan. You will surely make less mistakes in the years ahead. Today’s industry has far more resources to assist you than ever before, but you must take the time to learn and strategize. Be realistic and grow in stages. You will find new inspiration each time you achieve a goal, and then you go after the next one. Be more than a pet groomer, be a business person that grooms, and you will have a more profitable and satisfying career in pet grooming whether you operate in the home, in a van or a commercial location.
