Tanning Salon Financial Model
5-Year Financial Model for a Tanning Salon
This very extensive 5 Year Tanning Salon Model involves detailed revenue projections, cost structures, capital expenditures, and financing needs. This model provides a thorough understanding of the financial viability, profitability, and cash flow position of your salon.
YOU GET 2 Versions In 1 ZIP FILE. So you can decide which one is best for you.
Version 1: 5-Year, 3-Statement financial model, with 5 standard PAYG revenue streams
Version 2: Sell your services under tiered 12-month subscriptions that increase in price as SLAs (Service Level Agreements) and monthly treatment hours/services increase.
Plus 13 Inputs for PAYG Services.
For tracking revenue from single sessions, maybe if you sell salon-branded clothing, oils, accessories, etc, in your own tanning store.
Both versions are completely editable.
Income Statement (Profit & Loss)
This statement shows profitability over a period (monthly for the first year, then annually).
Revenue
Tanning Services Revenue: (Number of Sessions * Effective Price per Session). This should be broken down by membership, walk-in, and packages.
Retail Product Revenue: (Units Sold * Price). Lotions are high-margin and critical for profitability.
Other Revenue: Fees (e.g., cancellation fees, tanning certification fees).
Total Revenue = Sum of all revenue streams.
Cost of Goods Sold (COGS)
Cost of Retail Products: (Units Sold * Wholesale Cost per Unit).
Total Gross Profit = Total Revenue – Total COGS
Gross Profit Margin = Gross Profit / Total Revenue (Aim for 60%+)
Operating Expenses (OPEX)
Rent
Salaries & Wages (including payroll taxes)
Utilities (Electricity, water, gas)
Marketing & Advertising
Insurance
Repairs & Maintenance (bulb replacement, bed servicing)
Credit Card Processing Fees
Software Subscriptions
Professional Fees (Legal, Accounting)
Miscellaneous Expenses
Depreciation & Amortization: (Non-cash expense from CAPEX)
Total Operating Expenses = Sum of all OPEX
EBITDA = Earnings Before Interest, Taxes, Depreciation, and Amortization (Gross Profit – Total OPEX before D&A). A key metric for operational cash flow.
Operating Profit (EBIT) = EBITDA – Depreciation & Amortization
Interest Expense (on any outstanding loans)
Profit Before Tax = EBIT – Interest Expense
Income Tax Expense (Based on applicable corporate tax rate)
Net Income = Profit Before Tax – Income Tax Expense (The “bottom line”)
Tanning Salon Cash Flow Statement
This explains how cash moves in and out of the business. Profit ≠ Cash.
Cash Flow from Operating Activities:
Start with Net Income
Add back non-cash expenses (Depreciation)
Adjust for changes in Working Capital:
Increase in Inventory (e.g., buying more lotion): Subtract
Increase in Prepaid Expenses: Subtract
Increase in Accounts Payable (e.g., buying inventory on credit): Add
Cash Flow from Investing Activities:
Subtract Capital Expenditures (Cash used to buy new tanning beds or equipment). This is a cash outflow.
Cash Flow from Financing Activities:
Proceeds from a business loan or line of credit: Add
Owner’s equity investment: Add
Loan principal repayments: Subtract
Dividends or owner draws: Subtract
Net Change in Cash = (CF from Operations + CF from Investing + CF from Financing)
Ending Cash Balance = Beginning Cash Balance + Net Change in Cash
Tanning Salon Balance Sheet
A snapshot of the business’s financial position at a specific point in time (e.g., end of the month). It must follow the formula: Assets = Liabilities + Equity
Assets (What the Business Owns)
Current Assets:
Cash (from the Cash Flow Statement)
Inventory (tanning lotions, accessories)
Prepaid Expenses (e.g., insurance paid for the year)
Non-Current (Fixed) Assets:
Tanning Beds & Equipment (at purchase cost)
Furniture & Fixtures
Less: Accumulated Depreciation (total depreciation taken to date)
Net Fixed Assets = Total Fixed Assets – Accumulated Depreciation
Total Assets = Current Assets + Net Fixed Assets
Liabilities (What the Business Owes)
Current Liabilities:
Accounts Payable (money owed to suppliers)
Short-Term Debt (portion of loan due within a year)
Deferred Revenue (cash received for unused tanning packages)
Long-Term Liabilities:
Long-Term Debt (remaining balance of a business loan)
Total Liabilities = Current Liabilities + Long-Term Liabilities
Owner’s Equity (Net Worth)
Owner’s Equity Investment (initial capital)
Retained Earnings (Cumulative Net Income – Cumulative Dividends/Draws)
Total Equity = Investment + Retained Earnings
Key Assumptions & Drivers For The Tanning Salon
Revenue Drivers:
Pricing: Hourly rate for walk-ins, monthly membership fees, package prices (e.g., 10 sessions for $X).
Capacity & Utilization: Number of tanning beds/booths, estimated sessions per day per bed, operating days per month.
Customer Growth: Estimated number of new members per month, customer churn rate (cancellation rate).
Ancillary Sales: Assumed sales per customer for lotions, goggles, accessories, etc.
Cost Drivers:
Fixed Costs (Operating Expenses):
Rent ($/month)
Salaries & Wages (Manager, front desk staff)
Utilities (Electricity is a major cost for tanning salons)
Marketing & Advertising budget
Insurance (Liability is crucial)
Software (Point of Sale, booking system)
Miscellaneous (Accounting, supplies)
Variable Costs:
Cost of Goods Sold (COGS) for retail products (typically 40-60% of retail price)
Credit card processing fees (2-3% of revenue)
Maintenance & bulb replacement costs (per session or per month)
Capital Expenditures (CAPEX):
Cost to purchase tanning beds (including installation).
Furniture, fixtures, and equipment (FF&E) for the lobby, reception, etc.
Depreciation schedule for assets (e.g., straight-line over 5-7 years).
Funding & Capital Structure:
Loan amount (if applicable), interest rate, and term.
Owner investment (equity).
Key Performance Indicators (KPIs) & Outputs For The Tanning Salon
The model should automatically calculate and track these metrics:
Monthly Recurring Revenue (MRR): From membership subscriptions.
Customer Acquisition Cost (CAC): Total Marketing Spend / New Customers Acquired.
Lifetime Value (LTV): (Average Revenue per Customer per Month * Gross Margin %) / Monthly Churn Rate.
Break-Even Analysis: The point where Total Revenue = Total Expenses (both fixed and variable).
Debt Service Coverage Ratio (DSCR): Net Operating Income / Total Debt Service. (Crucial for banks; must be >1.25x typically).
Projected Valuation Metrics: Using rules of thumb for the industry (e.g., 3-4x SDE (Seller’s Discretionary Earnings) or 5-6x EBITDA).
6-Tier Subscription Model Ideas for Your Tanning Salon
Bronze Glow (The Starter Salon Tier)
Target Audience: The occasional tanner, someone new to tanning, or a customer who just wants to maintain a slight glow for a special event now and then.
Monthly Price: $19.99 – $29.99
Core Features:
1 Standard Tanning Session per month (e.g., Low-Pressure Beds or low-level UV).
10% Discount on any additional tanning sessions or lotions purchased during the month.
1 Complimentary Tanning Lotion Sample (single-use packet) with each visit.
Basic email reminders for appointment bookings.
No long-term contract required (month-to-month flexibility).
Perks & Exclusivity:
Welcome Offer: A one-time 20% off a premium lotion purchase upon sign-up.
Birthday Bonus: A free upgrade to a high-pressure bed during your birthday month.
Sun Kissed (The Salon Enthusiast Tier)
Target Audience: The regular tanner who visits 1-2 times a week and is serious about building and maintaining a base tan.
Monthly Price: $49.99 – $69.99
Core Features:
4 Tanning Sessions per month (can be used in Standard or High-Pressure Beds).
20% Discount on all additional sessions, premium lotions, and skincare.
1 Complimentary Tanning Booster or Accelerator (1 oz bottle) every quarter.
Unlimited Booking Access via the salon’s app.
Priority Support for quick questions via text message.
Perks & Exclusivity:
“Bring a Friend” Pass: One free guest pass per quarter to introduce a friend.
Early Access to new lotion launches and product lines.
Golden Glow (The Premium Salon Maintenance Tier)
Target Audience: The dedicated tanner who wants premium beds, the best lotions, and a consistent, dark tan year-round.
Monthly Price: $89.99 – $119.99
Core Features:
Unlimited Tanning in all UV Beds (Standard, High-Pressure, and possibly entry-level Vertical Tanners).
25% Discount on all retail products, including apparel and accessories.
1 Full-Size (8-10 oz) Premium Tanning Lotion of your choice every 60 days (a significant value add).
Monthly “Tingle Tuesday” or “Hydro Wednesday” Pass: One free session in a specialty bed (e.g., a tingle or hydration bed) per month.
Dedicated Lotion Locker to store your personal bottles at the salon.
Perks & Exclusivity:
Monthly Raffle Entry: Automatic entry into a monthly draw for prizes like free months, spa packages, or high-end skincare.
Skip the Line: Priority booking that bumps you to the top of the waitlist.
Radiant Bronze (The Hybrid & Salon Spray Tan Tier)
Target Audience: The savvy tanner who alternates between UV and spray tans for versatility, or the customer who prefers a sunless option but wants occasional UV access.
Monthly Price: $129.99 – $159.99
Core Features:
4 UV Sessions in any bed (including premium levels).
2 Custom Spray Tan Sessions per month (e.g., VersaSpa, Mystic HD).
30% Discount on all retail products and additional sessions.
“Bronze Bar” Access: Unlimited use of pre-tan prep products (skin scrubs, barrier creams) and post-tan enhancers (extenders, moisturizers) in the spray tan room.
Annual Skin Consultation with a tanning expert to perfect your routine.
Perks & Exclusivity:
Guaranteed Booking: Reserve your favorite spray tan booth 7 days in advance.
“Glow On The Go” Kit: A travel-sized set of premium prep and maintaince products after 3 months of membership.
Platinum Glow (The VIP All-Access Salon Tier)
Target Audience: The ultimate tanning connoisseur who demands the best of everything and uses the salon as a core part of their lifestyle and self-care routine.
Monthly Price: $199.99 – $249.99
Core Features:
UNLIMITED ACCESS to ALL tanning methods: every UV bed (including the newest/highest-level beds) and unlimited spray tans.
40% Discount on everything in the salon (retail, additional services like red light therapy).
2 Full-Size Premium Lotions of your choice every month.
2 Guest Passes per month to treat a friend.
Concierge Booking: Text your dedicated salon manager to book, change, or ask anything.
Perks & Exclusivity:
First Dibs on New Technology: Be the first to try new beds, spray formulas, and treatments before the general public.
Annual Membership Gift: A luxurious branded robe or high-end skincare gift set.
Ultimate Sun Goddess (The Corporate/Ultimate Luxury Salon Tier)
Target Audience: The individual or small group (e.g., bridal party, influencers, corporate clients) for whom money is no object and expect white-glove, personalized service.
Monthly Price: $399.99+ (Custom Pricing Available)
Core Features:
Absolutely Unlimited Everything: UV, Spray Tan, Red Light Therapy, and any other tanning-adjacent service the salon offers.
50% Discount on all retail (effectively at-cost, a huge perk).
Monthly “Lotion of the Month” Club: Receive the newest, most expensive lotion each month without having to purchase it.
“Goddess” Guest Privileges: 4 Guest Passes per month.
Private Tanning Sessions: Ability to book the entire salon for a private session after hours for you and your guests (limited to one per year).
Perks & Exclusivity:
At-Home Consultation: A tanning expert will come to your home to advise on your home tanning setup or skincare regimen.
“Goddess” Status: Your name (or chosen name) on a dedicated plaque in the salon. The entire staff will know you by name and your preferences.
Partner Perks: Exclusive discounts at partnered businesses (e.g., nail salons, spas, gyms).
Final Notes on the Financial Model
This 5 Year Tanning Salon Financial Model must focus on balancing capital expenditures with steady revenue growth from diversified PAYG and subscription-based services. By optimizing operational costs and efficiency and maximizing high-margin services, the model ensures sustainable profitability and cash flow stability.
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