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Chapter 3

Business Basics, Chapter 3, Pivot Point Esthetics

TermDefinition
Skills Essential to a successful business owner Recognize trends and technical expertise, Communicate with the public, Accept suggestions and criticism, exert self control, Manage financial operations, Establish and adjust pricing, generate business, set realistic goals.
Business Plan Written document that describes the nature of a business and how it will operate. Central document you and your employees use to make decisions.
Business Plan Essentials Executive summary, origin of company, Goals, Market potential, marketing strategy, 3-5 year financial projection, exit plan.
Executive summary Outlines goals and objectives of the business.
Origin of Company Describes how the company began.
Company Goals List Lists short and long term goals.
Market Potential Describes why your product or service would be in demand by a large market.
Marketing Strategy Describes how you plan to tell the world about your product or services.
3-5 year Financial Projection Summarizes your financial projections.
Exit Plan Defines your strategy in case you decide to close or leave your business.
Basic elements of a Personal Financial Statement Assets, Liabilities and Net Worth.
Assets Comprised of the property a person owns both physical and anything with a cash value.
Physical Asset Houses, cars, jewelry, gold, silver, stamp/coin collections anything that is physical and has a cash value.
Liquid Asset Cash valued items such as Certificates of deposit, IRA's, life insurance policies, savings bonds, stocks/bonds, cash in money markets accounts, checking/savings accounts.
Total Assets Physical and liquid assets combined.
Liabilities Money you owe. Such as outstanding loan/mortgage balances, credit card/charge account bills, student loans.
Total Liabilities Sum of all liabilities.
Net Worth Assets minus Liabilities.
10% of personal net worth Amount most banks will loan.
Types of business ownership Sole Proprietorship, Partnership, Corporation, Franchise.
Sole Proprietorship A business owned by one person who is in complete control of the business.
Partnership A business owned by two or more people. Partners share all costs of opening and operating the business as agreed.
Corporation A business owned by shareholders, or members who share in its profits but are not personally responsible for its debts.
Franchise More of a license for operation than a form of ownership. Operating agreement in which a fee is paid in exchange for the use of a name and other items as agreed (fixtures, promotions, management, etc).
Expert Advice Wisdom of various professionals in areas that you may not be well versed.
Accountant Financial advisor who can explain in greater depth the types of business ownership and their tax benefits and liabilities.
Insurance Agent Provides advice on the types of insurance needed to safely open and operate a business.
Distributor "Middle man" that maintains a contract to sell professional products or equipment. acts as a link between skin care center and manufacturer.
Distrubutor sales consultant Travels within a territory to sell products. Typically the link between the distributor and the salon.
Location Most important factor in opening a skin care business.
Market Need Determining how many other skin care centers and estheticians are in the area is the first step in gauging. What are service offered and what are their prices.
General Space Requirements 120-150 square feet per esthetician.
Operating Capitol Reservoir of cash that you will need to stay ahead of your creditors.
Line of credit Reserve of cash you can draw upon to meet operating expenses if you have a slow month or two.
Rental Agreement/Lease Promise to pay rent and use property in manner agreed upon.
Kinds of rent Fixed, Variable
Fixed rent A set dollar amount paid each month to the lessor.
Variable rent A set dollar amount paid per month plus a percentage of the total monthly income.
Lessee Tenant
Lessor Landlord
Insurance Protection from financial difficulties that can follow the unexpected loss of property, income, health and/or life.
Types of Insurance Malpractice, Property or Premise, Product Liability, Worker's Compensation
Malpractice Insurance Policy that protects skin care center from financial loss resulting from an employee's negligence while performing services.
Property (Premise) Insurance Policy that covers the actual equipment and premise of the skin care center.
Product Liability Insurance Policy that protects the skin care center in event client misuses product sold at the skin care center.
Workers Compensation Required by law, paid directly to the state on a quarterley basis to coven any expense resulting from an injury to an employee.
Income/Revenue All payments received for services performed or products purchased.
Operating expenses All of the expenses involved in the day to day running of the skin care center.
2 types of operating expenses Fixed Costs and Variable Costs
Fixed Costs Costs that do not change from month to month for at least a year.
Variable Costs Costs that can change on a month to month basis.
Profit If income is greater than expenses then the skin care center is operating at a ___________.
Loss If expenses are greater than income then the skin care center is operating at a ___________.
Projection An estimate of what you think you will earn in revenues.
Withholding tax The amount required by law for employers to withhold from earned wages to pay taxes. In the US these include Federal, state and local income taxes as well as Social Security.
Social Security Planned savings/retirement fund for ever worker in the US. Owner must pay federal government matching amount for every dollar the employee pays.
Sales Tax A tax on a sale of merchandise or services. Most states and some local governments charge sales tax on products and some may charge tax on services performed.
Income tax Paid on the profits (earnings) of a business.
5-7 years Keep all records of daily sales and services for:
3 Common ways an employee can be paid Commission, Salary, Salary plus Commission
Commission Structure Based on percentage of the dollar income the individual Esthetician generates by serving clients.
Salary Structure Compensation system that guarantees a set income on a weekly or monthly basis.
Salary plus Commission person receives a certain amount of money on a regular basis (base salary) and provides additional income when the esthetician meets a predetermined benchmark or goal.
Inventory / Stock in Quantity All products purchased by the skin care center owner for use during client services and for retailing.
Categories inventory, or stock in quantity is generally identified Professional stock (Back Bar) and Retail stock
Inventory Control Procedures used in the skin care center to ensure that products are accounted for from the time they are added to the inventory (stock in quantity) until the time they are sold or used.
Advertising Incorporates all activities that attract attention to your skin care center and create a positive impression.
Public Relations Shaping of your public image in ways other than advertising.
Created by: BBLaird