Looking for a personal shopper business plan? You're in the right place.
A styling business sells hours, not stock, and a lender or partner will want to know how many hours there are and who pays for them. How much money do you need before the first season pays? How many clients can one stylist serve in a year? What happens to the plan if bookings come in a fifth short?
In this article we'll walk through a complete sample plan for a personal shopping service in Minneapolis, Minnesota, section by section. We'll cover the executive summary, the SWOT analysis and, in particular, all of the financials.
Here's what you'll take away:
- The executive summary: see how to put a service business on one page, so a reader knows what you sell and what you are asking for
- Pricing and hours: learn how to turn a fee into revenue per hour, so you can tell whether a service is worth offering
- The SWOT analysis: name the risks of a one-person firm, such as a full calendar and a single founder, without putting a reader off
- The start-up budget: find out how much cash a styling firm needs to carry it through its first quiet months
- The marketing plan: see what a new stylist might spend to win about 120 clients, and which channels do the work
- The five-year profit, cash flow and balance sheet: understand how each hire, price and membership decision shows up in the numbers
- The downside case: have an answer ready for the "what if bookings are 20% short?" question, along with the steps the founder takes in response
If you're setting up a styling or shopping service, read this before you write your own. The firm is fictional, so take what fits your market and change the rest.
In this plan
To turn this example into your own personal shopper business plan, use the personal shopper business plan template.
The Short Version
Stone Ridge is a personal styling and shopping service that opens in Northeast Minneapolis on January 1, 2027. It audits closets, takes clients shopping, sells seasonal style memberships and runs wardrobe programs for employers. Founder Karin Voss, a former department-store personal stylist, owns 100% of Stone Ridge Styling, LLC.
The firm needs $90,000: $55,000 of Karin's savings and a $35,000 community-lender term loan. Of that, $61,200 is a cash reserve, $16,000 buys equipment and the studio fit-out, and $12,800 pays for legal work and the launch campaign.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $154,490 | $279,000 | $386,000 |
| Net income after start-up costs | ($34,904) | $13,456 | $32,878 |
| Closing cash | $34,886 | $41,294 | $66,906 |
Year 1 loses money because the calendar fills slowly. January revenue is $4,060 and the firm needs about $14,200 a month to cover its costs, so monthly operating profit does not turn positive until June. The first full profit comes in Year 2, once memberships and corporate programs repeat.
The plan tests itself. If bookings run 20% short in every year, Karin delays all three later hires by six months, cuts marketing and her own pay, keeps the small studio and pays no distributions. Cash stays positive throughout, and the firm stays profitable from Year 2.
How Stone Ridge Works
Legal name: Stone Ridge Styling, LLC, a Minnesota limited liability company. Owner: Karin Voss, 100%. Studio: 600 square feet of leased space in Northeast Minneapolis, with a fitting area and a lookbook table. Open: January 1, 2027. Stage: pre-launch. The lease is in draft, the website design is signed off, to be built and photographed in December, and 14 people who followed Karin's styling posts have asked to be told when she opens.
Four ways the firm earns
| Service | How it is priced | Year 1 share of revenue |
|---|---|---|
| Wardrobe edit: a closet audit in the client's home and a written shopping list | $480 for about 4 hours | 26% |
| Personal shopping day: pulling, fitting and buying with the client | $680 for about 6 hours | 41% |
| Seasonal style membership: four 2.5-hour sessions a year plus messaging | $210 a month | 18% |
| Corporate and relocation programs: group workshops and executive wardrobe builds | $2,200 on average | 13% |
A small fifth line, retail partner commissions, adds 2%. A few independent boutiques and brands pay a referral share on what a client buys, and Karin discloses that in writing in every engagement letter.
Goals for the first two years
- 24 style members by December 2027, from none at launch.
- 9 corporate programs from 6 employers in the first year.
- A second stylist on payroll in month 14, with Karin's own calendar kept under 95% full.
- A profit after tax in 2028, with the loan paid on schedule.
Rules the firm works under
Stylists do not hold stock and do not pay for a client's clothes. A client pays the retailer directly or leaves a card on file, which keeps the firm out of the retail business. Minnesota exempts general clothing from sales tax, according to the Department of Revenue's clothing fact sheet. Whether a styling fee is itself taxable is a separate question, and Karin will put it to the Department and an accountant before opening. The firm budgets no stylist-specific license. State and Minneapolis requirements for a home-visiting service should be confirmed before the first booking.
Dressing the Twin Cities
Where the work comes from
This section is qualitative, and the figures elsewhere in the plan are the firm's own. Minneapolis has a long cold season, an employer base that the plan expects to be large enough to source corporate work, and independent boutiques that welcome outside stylists. That produces three recurring moments when people hand wardrobe decisions to someone else: a new job or promotion, a life change such as a move or a milestone event, and the start of each season, when the coat and boot question returns.
Who else a client could use
| Alternative | What it offers | Why a client picks it | How Stone Ridge differs by design |
|---|---|---|---|
| Department-store styling appointments | A stylist inside one retailer, often at no fee to the shopper | No cost to the shopper | Picks from many stores, and shows a client what to keep from the closet they own |
| Online styling and clothing-box services | A questionnaire and mailed selections | Convenience, no appointment | A person who has seen the closet and the body in the room |
| Independent image consultants | Color analysis, style coaching and consultation | Specialist depth | Buys and fits as well as advises |
| Alterations tailors who offer informal advice | Fitting expertise | Trusted, local, cheap | Full wardrobe planning, with the tailor kept as a partner |
| Doing it alone | Free | No fee | Saves the hours, and the returns |
The table describes what each category offers and how this firm positions itself. It is not a ranking, and no provider is named because the plan does not quote competitor prices.
SWOT
| Strengths | Weaknesses |
|---|---|
| Eight years of department-store styling and a base of repeat clients | One stylist: when Karin is booked or ill, revenue stops |
| Four service lines at different price points | No corporate sales experience |
| Memberships bring repeat revenue | Year 1 loses money and draws on the reserve |
| Opportunities | Threats |
|---|---|
| Employers that want a wardrobe benefit for relocating or promoted staff | Free in-store styling from large retailers |
| Referrals from tailors, realtors and event planners | Discretionary spending falling in a downturn |
| Memberships growing as clients rebook each season | A new stylist leaving with a client list |
Who Books a Stylist
The professional in a transition
A 30- to 50-year-old who has started a job with a new dress code, been promoted, or returned to work after leave. She or he has money but not time, and has noticed that the wardrobe no longer matches the role. This client is the main buyer of closet edits.
The seasonal rebooker
A repeat client who wants someone to plan the next season and take care of the shopping. This is the person a membership is designed for, and Karin expects about a quarter of members to leave each year.
The event buyer
Someone shopping for a wedding, a gala or a milestone. These clients book a single shopping day and may not return, but they refer.
The employer
A human-resources or leadership contact who wants a workshop for a team or a wardrobe build for a relocating executive. Corporate programs are the smallest of the four service lines in Year 1 and the one with room to grow.
What each one asks for
Honest opinions about what suits them, a firm budget kept, and no pressure to buy from a particular store.
From Inquiry to Booking
The path
A free 20-minute call, a written scope and fee within a day, a 50% deposit, and the booking. The coordinator schedules and invoices from month 5. Karin takes every discovery call in Year 1.
Year 1 funnel
About 300 inquiries produce about 120 individual clients at a 40% booking rate, plus 6 corporate accounts.
Pricing logic
Fees are set per service, not by the hour, so a client can budget. The hourly equivalents are about $120 for a closet edit, $113 for a shopping day, $157 for a membership and $220 for a corporate program. A client who books a closet edit is offered a shopping day at the end of the session, and Karin expects many to take it.
Membership
Four seasonal sessions, in February, May, August and November, each 2.5 hours, with messaging between them. A member pays $210 a month by card. Karin expects to lose about a quarter of members a year, mostly to moves and budget changes.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Members at year end | 24 | 46 | 56 | 64 | 72 |
Finding the First 120 Clients
Marketing spend and what it buys
The Year 1 budget is $25,000: $9,000 of launch spend paid from the start-up capital and $16,000 of running costs. That is 16% of Year 1 revenue and falls to 8% in Year 3 and 7.5% in Year 5 as referrals and memberships take over. Spread over about 126 new clients (120 individuals and 6 corporate accounts), Year 1 costs about $198 each.
| Channel | Year 1 spend | What it is meant to do |
|---|---|---|
| Website, brand and photography (launch) | $6,500 | A booking page, before-and-after photos with client permission, a plain price list |
| Launch evening and first-season campaign (launch) | $2,500 | A spring-wardrobe event for the 14 people on the waiting list and their friends |
| Instagram and short video | $4,800 | Closet edits and fitting-room clips; about 30 clients |
| Local search and Google Business Profile | $3,600 | "Personal stylist Minneapolis" and "wardrobe consultant near me"; about 22 clients |
| Referral partner program | $2,100 | Tailors, realtors, event planners and wedding venues, with a thank-you for each booking; about 38 clients |
| Workshops and boutique events | $2,600 | Evenings hosted with independent boutiques; about 18 clients |
| Employer outreach | $1,600 | HR and leadership contacts approached on LinkedIn; about 12 individual clients, plus the corporate accounts |
| Email and member communication | $1,300 | A seasonal newsletter and renewal notes that prompt referrals |
Marketing milestones
- January 2027: studio open, first bookings from the waiting list.
- April 2027: the first four members, and the first referral from a tailor.
- May 2027: first corporate program, followed by a second booking from the same employer in September.
- December 2027: 24 members and $5,040 of monthly membership revenue.
Inside a Styling Week
The studio
600 square feet in Northeast Minneapolis at $24 a square foot a year ($14,400 in Year 1), with racks, a fitting area and a table for lookbooks. It moves to about 800 square feet in Year 4. Home visits use the car, so mileage and parking are budgeted at $5,200 in Year 1.
How a shopping day runs
Karin pulls pieces from 3 to 5 stores in the two days before, sends the client a short plan, and meets the client for three hours of fitting. Afterward she writes the outfit combinations into a lookbook and sends it within two days. A day is about six hours of her time for $680.
Hours are the limit
Karin has about 1,250 hours a year for client work, about 104 a month, and each later stylist about 1,150. Year 1 needs about 1,160 hours, or 93% of her capacity, but the fall peak needs 140 to 150 hours in October and November. A contract stylist at about $65 an hour covers the overflow ($7,500, about 115 hours). The associate arrives in month 14 and the senior stylist in month 30. A wardrobe assistant joins in month 52 to take returns and garment prep, worth about 300 stylist hours a year. By Year 5 the three stylists are booked about 91% before that help and about 84% after.
Client data
Measurements, closet photos and home addresses are personal. The firm keeps them in a client-management tool, asks for written consent before using any photo in marketing, and writes retention and privacy terms into the engagement letter.
Insurance
General liability, professional liability, cyber and hired-and-non-owned auto cover, budgeted at $3,600 in Year 1, plus disability cover on Karin.
Partners
Two alterations tailors, a dry cleaner who handles pressing, and four independent boutiques that pay referral commissions.
Karin and the Team
Karin Voss, founder and lead stylist
Karin spent eight years as a personal stylist at a Twin Cities department store, after three years in visual merchandising. She built a base of about 60 repeat clients there. Her contract bars her from soliciting the store's clients, a lawyer has reviewed the terms, and the plan counts none of those clients in its Year 1 numbers; any who find her on their own are a bonus. All 120 Year 1 clients are credited to the channels in the marketing table. Her $55,000 is eight years of savings.
Where the team is thin
Karin has never sold to employers, never hired and never kept books. The cover is a studio coordinator in month 5, an outside accountant, a fixed weekly outreach schedule and a rule not to promise a corporate client anything she cannot deliver.
If Karin is out
Revenue stops when she is away, so the firm carries disability cover on her. The associate stylist, hired in month 14, can take over her clients, and the engagement letters let the firm reassign a stylist.
The lender
Karin owns 100% of Stone Ridge Styling, LLC, which elects to be taxed as a corporation so she can be paid through payroll. She gives the lender a personal guarantee, and the loan is secured on the studio equipment; her home is not pledged. The loan requires quarterly accounts and a minimum net worth of $10,000, tested at year end. The studio lease runs three years with a personal guarantee from Karin.
The Numbers Behind Stone Ridge
One five-year model sits behind every table here: month by month for 2027, then a full year at a time. The inputs come first so a reader can trace any figure back to a price, a volume or an hours count.
Opening costs and the two sources of money
| Use of funds | Amount |
|---|---|
| Garment racks, steamers, sizing kits, camera, laptops, tablets | $9,500 |
| Fitting room, lighting, mirrors and seating in the studio | $6,500 |
| Entity filing, client agreement and privacy terms | $3,800 |
| Launch: website, photography, first-season campaign | $9,000 |
| Cash reserve for the slow first months | $61,200 |
| Total uses | $90,000 |
| Source of funds | Amount |
|---|---|
| Karin Voss's savings | $55,000 |
| Community lender term loan | $35,000 |
| Total sources | $90,000 |
Karin puts in $55,000 of savings, 61% of the $90,000, and borrows $35,000 from a community lender over five years at 9.75%, interest-only for the first six months, on a personal guarantee. The rate is a planning figure, not a quote. The $61,200 reserve is the largest line because a styling firm earns little in its first four months: Year 1 cash from operations is negative $35,936, and the reserve also covers $3,177 of loan principal and leaves $34,886 at the end of December. The lowest month-end balance in Year 1 is about $18,000. The loan is secured on the studio equipment and Karin's guarantee; her home is not pledged.
Inputs behind the forecast
- Prices: a wardrobe edit is $480 for about four hours (three in the client's home, one to write the shopping list). A personal shopping day is $680 for about six hours (three with the client, three on pulling, fitting notes and follow-up). A seasonal style membership is $210 a month for four 2.5-hour sessions a year plus messaging between them, about 16 hours a year. A corporate program averages $2,200 for about 10 hours. Prices rise 3% a year from 2028.
- Year 1 volume is 85 edits, 93 shopping days, 130 member-months (24 members in December) and 9 corporate programs. That is about 120 individual clients, many of whom book more than once, and 6 corporate accounts. Memberships lose about a quarter of members a year, so 24 members in December means roughly 28 sign-ups.
- Delivery hours cap revenue. Karin has about 1,250 hours a year for client work, a little under 25 a week, because the rest goes to sales, bookkeeping and the studio. That is about 104 a month, and the fall peak overshoots it: October and November need about 140 to 150 hours each, and December about 130. A contract stylist covers the overflow at about $65 an hour, $7,500 in Year 1 (about 115 hours), and the cover line shrinks as employees are added. Associate and senior stylists have about 1,150 each. Year 1 needs about 1,160 hours, 93% of her capacity. Later years need about 1,900, 2,520, 2,950 and 3,230 hours against 2,300, 3,070, 3,550 and 3,550 available, which is 83%, 82%, 83% and 91%. The associate stylist is not at full load at once: for her first four months the plan expects about 60% of her hours, which takes Year 2 to roughly 89% of what is actually available. The engine spreads Years 2 to 5 evenly, so Q4 peaks in those years are covered the same way as in Year 1. The wardrobe assistant adds no stylist hours but takes returns and garment prep off the stylists, worth about 300 hours a year, which brings Year 5 to about 84%.
- Revenue per delivery hour (revenue excluding commissions, divided by those hours) is about $130 in Year 1 and $161 in Year 5. About half of the rise is the 3% yearly price increases (12.6% over four years) and the rest is mix, because memberships and corporate programs earn more per hour than a shopping day. By line, a closet edit earns about $120 an hour, a shopping day about $113, a membership about $157 and a corporate program about $220.
- Retail partner commissions come from a few independent boutiques and brands that pay a referral share on what a client buys. They equal about 2% of the roughly $167,000 clients spend on shopping days in Year 1, at an average of $1,800 a day. The rate rises to roughly 4% by Year 5 as the partner list grows from four boutiques to about a dozen. Karin's contract bars her from soliciting the department store's clients, so no old client is counted in the Year 1 channels. Karin discloses them in writing in every engagement letter. Stylists never pay for a client's clothes: the client pays the retailer directly or leaves a card on file.
- Direct costs are 4% to 7% of each line: card and membership-billing fees, gift bags and garment-care supplies, and venue hire for corporate workshops. Mileage and parking, which rise with shopping days, are a separate operating line. Receivables average 10 days, because edits and shopping days take a 50% deposit and the balance is paid on the day, memberships bill by card, and corporate programs invoice on 30-day terms.
- Payroll adds 27% to wages for payroll taxes, a health-insurance contribution, workers' compensation and a retirement match (15% for the part-time coordinator, who gets no health contribution). Minnesota paid-leave premiums are inside that load and the rate should be confirmed before opening. Wages in the personnel table are 2027 rates, with 3% annual raises charged as a separate line from Year 2.
- Rent covers a 600-square-foot styling studio in Northeast Minneapolis at $24 a square foot a year, then about 800 square feet from Year 4 at $19,500. The figure is a planning number and local quotes should replace it. The studio holds racks, a fitting area and a table for lookbooks, and clients are seen there for memberships and corporate fittings.
- Stone Ridge Styling, LLC elects to be taxed as a corporation, which lets Karin be paid on W-2 payroll. Tax is charged at the 21% federal corporate rate plus a 9.8% Minnesota rate, with the Year 1 and Year 2 losses carried forward, so no tax is due until Year 3. Dividends are taxed again on Karin's own return. An S corporation election might cost less, and the firm's accountant should advise on it; corporate rates are used because they are the cautious case.
- Owner distributions of $15,000 in Year 4 and $25,000 in Year 5 are paid only from cash the model shows the firm can spare. The loan runs to term rather than being repaid early. The loan agreement requires quarterly accounts and a minimum net worth of $10,000, tested at each year end.
Revenue by service line
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Wardrobe edits (in-home closet audit and shopping list) | $40,800 | $48,000 | $60,000 | $70,000 | $76,000 |
| Personal shopping days | $63,240 | $88,000 | $116,000 | $136,000 | $150,000 |
| Seasonal style memberships | $27,300 | $92,000 | $134,000 | $166,000 | $192,000 |
| Corporate and relocation programs | $19,800 | $44,000 | $66,000 | $86,000 | $100,000 |
| Retail partner commissions | $3,350 | $7,000 | $10,000 | $13,000 | $15,000 |
| Total revenue | $154,490 | $279,000 | $386,000 | $471,000 | $533,000 |
| Growth on prior year | – | 81% | 38% | 22% | 13% |
Shopping days and closet edits earn 67% of Year 1 revenue, because they can be booked in the first week. Memberships are 18% of Year 1 and 36% of Year 5, the line that makes the firm less dependent on new bookings. Corporate programs grow from 13% to 19% of revenue as the HR contacts Karin builds in Year 1 start to rebook. Partner commissions stay under 3%, with the largest employer worth about 4% of Year 1 revenue.
Month by month in Year 1
| Month | Wardrobe edits (in-home closet audit and shopping list) | Personal shopping days | Seasonal style memberships | Corporate and relocation programs | Retail partner commissions | Total revenue | EBITDA |
|---|---|---|---|---|---|---|---|
| Jan 2027 | $1,920 | $2,040 | $0 | $0 | $100 | $4,060 | ($9,696) |
| Feb 2027 | $2,400 | $2,720 | $0 | $0 | $150 | $5,270 | ($8,543) |
| Mar 2027 | $2,880 | $3,400 | $0 | $0 | $200 | $6,480 | ($7,389) |
| Apr 2027 | $3,360 | $4,760 | $840 | $0 | $250 | $9,210 | ($4,788) |
| May 2027 | $3,840 | $5,440 | $1,470 | $2,200 | $300 | $13,250 | ($938) |
| Jun 2027 | $3,840 | $6,120 | $2,100 | $2,200 | $300 | $14,560 | $310 |
| Jul 2027 | $2,880 | $4,080 | $2,520 | $0 | $200 | $9,680 | ($4,340) |
| Aug 2027 | $3,840 | $5,440 | $2,940 | $2,200 | $250 | $14,670 | $415 |
| Sep 2027 | $4,320 | $6,800 | $3,570 | $4,400 | $350 | $19,440 | $4,961 |
| Oct 2027 | $4,320 | $7,480 | $4,200 | $4,400 | $400 | $20,800 | $6,256 |
| Nov 2027 | $3,840 | $8,160 | $4,620 | $2,200 | $450 | $19,270 | $4,799 |
| Dec 2027 | $3,360 | $6,800 | $5,040 | $2,200 | $400 | $17,800 | $3,398 |
January and February are the quietest months and cost the most in relative terms: revenue is $4,060 and $5,270 against costs of about $13,800 a month. Operating profit turns positive in June, falls back in July when clients are away, and stays positive from August to December as fall wardrobes, holiday events and coat season fill the calendar. The lowest month-end cash balance is Aug, at about $18,000, after allowing for the 10 days clients take to pay.
Who is on payroll
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Founder and lead stylist | $62,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Studio coordinator (part time, 25 hours a week) | $29,000 | Month 5 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Associate stylist | $48,000 | Month 14 | – | 1 | 1 | 1 | 1 |
| Senior stylist | $58,000 | Month 30 | – | – | 1 | 1 | 1 |
| Wardrobe assistant (returns, alterations runs, garment prep) | $40,000 | Month 52 | – | – | – | – | 1 |
| Total payroll incl. on-costs | $100,973 | $167,970 | $216,018 | $246,710 | $284,810 |
Karin works alone until a part-time studio coordinator joins in month 5, taking calls, scheduling, invoicing and client reminders. The associate stylist starts in month 14, once Karin's calendar has stayed above 90% for a season; Karin hands her repeat clients over in groups of five or six. The senior stylist follows in month 30, when the model shows demand of about 2,500 hours against Karin's and the associate's combined 2,400. A wardrobe assistant joins in month 52 to handle returns, alterations runs and garment prep, which frees stylist hours rather than adding them. Karin's $62,000 salary starts in month one and sits in the costs, so each profit line is what remains after she is paid.
Profit and loss
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $154,490 | $279,000 | $386,000 | $471,000 | $533,000 |
| Direct costs (card fees, gift bags, workshop venue hire) | ($7,272) | ($13,133) | ($18,169) | ($22,170) | ($25,089) |
| Gross profit | $147,218 | $265,867 | $367,831 | $448,830 | $507,911 |
| Payroll incl. on-costs | ($100,973) | ($167,970) | ($216,018) | ($246,710) | ($284,810) |
| Rent | ($14,400) | ($14,800) | ($15,200) | ($19,500) | ($20,100) |
| Utilities | ($2,400) | ($2,500) | ($2,600) | ($3,000) | ($3,100) |
| Marketing | ($16,000) | ($22,000) | ($31,000) | ($36,000) | ($40,000) |
| Insurance | ($3,600) | ($4,200) | ($4,900) | ($5,600) | ($6,200) |
| Professional fees | ($3,500) | ($3,500) | ($4,000) | ($4,500) | ($5,000) |
| Software subscriptions | ($5,400) | ($6,600) | ($8,200) | ($9,500) | ($10,400) |
| Mileage, parking and client-trip costs | ($5,200) | ($7,500) | ($10,500) | ($12,500) | ($14,000) |
| Steamers, garment bags, gift tags and client supplies | ($1,800) | ($1,500) | ($2,000) | ($2,000) | ($2,200) |
| Training, trade dues and fashion-week travel | ($1,200) | ($1,800) | ($2,500) | ($3,000) | ($3,200) |
| Equipment replacement and new-hire kit | $0 | ($2,500) | ($3,500) | ($3,000) | ($3,500) |
| Contract stylist cover for peak months | ($7,500) | ($5,000) | ($4,000) | ($3,500) | ($4,000) |
| Bad debt and unrecovered client purchases | ($800) | ($1,500) | ($2,300) | ($2,800) | ($3,200) |
| Annual pay raises (3% a year) | $0 | ($5,039) | ($13,156) | ($22,877) | ($35,746) |
| EBITDA | ($15,555) | $19,458 | $47,956 | $74,343 | $72,455 |
| Depreciation | ($3,200) | ($3,200) | ($3,200) | ($3,200) | ($3,200) |
| Interest | ($3,349) | ($2,803) | ($2,105) | ($1,337) | ($490) |
| Income tax | $0 | $0 | ($9,773) | ($20,064) | ($19,764) |
| Net income before start-up costs | ($22,104) | $13,456 | $32,878 | $49,742 | $49,000 |
| Start-up costs expensed at opening (legal, licensing, launch marketing) | ($12,800) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($34,904) | $13,456 | $32,878 | $49,742 | $49,000 |
Year 1 loses $22,104 before opening costs and $34,904 after them. Year 2 is the first profit, $13,456, with no tax because of the carried-forward loss. EBITDA margin rises from 7.0% to 12.4% in Year 3 and 15.8% in Year 4, because the senior stylist arrives into spare client demand, and eases to 13.6% in Year 5 as the wardrobe assistant joins and accumulated pay raises reach $35,746.
Cash movements
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($35,936) | $13,244 | $33,146 | $50,613 | $50,502 |
| Equipment and fit-out | ($16,000) | $0 | $0 | $0 | $0 |
| Funding received | $90,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | ($3,177) | ($6,837) | ($7,534) | ($8,302) | ($9,149) |
| Owner distributions | $0 | $0 | $0 | ($15,000) | ($25,000) |
| Net change in cash | $34,886 | $6,408 | $25,612 | $27,311 | $16,353 |
| Closing cash | $34,886 | $41,294 | $66,906 | $94,217 | $110,569 |
Cash rises at every year end, from $34,886 to $110,569. Distributions start in Year 4, when the loan is down to $9,149 and cash is above $94,000.
Balance sheet
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $34,886 | $41,294 | $66,906 | $94,217 | $110,569 |
| Accounts receivable | $4,233 | $7,644 | $10,575 | $12,904 | $14,603 |
| Equipment and fit-out (net) | $12,800 | $9,600 | $6,400 | $3,200 | $0 |
| Total assets | $51,919 | $58,537 | $83,881 | $110,321 | $125,172 |
| Bank loan | $31,823 | $24,986 | $17,452 | $9,149 | $0 |
| Paid-in capital | $55,000 | $55,000 | $55,000 | $55,000 | $55,000 |
| Retained earnings | ($34,904) | ($21,448) | $11,430 | $46,172 | $70,172 |
| Total liabilities and equity | $51,919 | $58,537 | $83,881 | $110,321 | $125,172 |
Hours, margins and break-even
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -10.1% | 7.0% | 12.4% | 15.8% | 13.6% |
| Net margin (before start-up costs) | -14.3% | 4.8% | 8.5% | 10.6% | 9.2% |
| Payroll incl. pay raises as share of revenue | 65% | 62% | 59% | 57% | 60% |
| Revenue per full-time equivalent at year end | $102,993 | $111,600 | $110,286 | $134,571 | $118,444 |
| Average monthly revenue | $12,874 | $23,250 | $32,167 | $39,250 | $44,417 |
| Monthly revenue needed to cover operating costs | $14,234 | $21,548 | $27,973 | $32,749 | $38,080 |
| Debt service cover (EBITDA / interest + principal) | -2.4x | 2.0x | 5.0x | 7.7x | 7.5x |
Year 1 averages $12,874 a month against about $14,200 needed to cover operating costs, so the firm falls short in its first year and passes break-even for the year from Year 2 ($23,250 against $21,548). Debt service cover is negative in Year 1 and 2.0x in Year 2, then 5x or more. Revenue per full-time equivalent stays between $103,000 and $135,000.
Bookings 20% short, every year
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $123,592 | $223,200 | $308,800 | $376,800 | $426,400 |
| Net income before start-up costs | ($32,599) | $12,297 | $27,971 | $5,909 | $18,148 |
| Net income after start-up costs | ($45,399) | $12,297 | $27,971 | $5,909 | $18,148 |
| Closing cash | $25,237 | $31,168 | $52,460 | $51,404 | $62,245 |
This case cuts every revenue line by 20% in every year. The response: the associate stylist starts six months late, in month 20, and the senior stylist in month 36 and the wardrobe assistant in month 58. Marketing is cut by 20%, Karin takes a 20% pay cut, the studio stays at 600 square feet and no distributions are paid. On those terms the firm ends every year with cash in the bank, never below $25,237, and is profitable from Year 2. Year 4 is the thinnest at $5,909, because the senior stylist's first full year lands on lower revenue. Equity ends Year 1 at $9,601, just under the $10,000 net-worth covenant, and Karin would ask the lender for a waiver before the test date. In a shortfall this size she would also defer the senior stylist and the assistant by more than six months if utilization stayed near 67%. Cash grows in the later years partly because no distributions are paid.
Sources
- Minnesota Department of Revenue, Sales Tax Fact Sheet 105, Clothing: clothing is exempt from Minnesota sales and use tax. The full PDF could not be opened for this plan, so confirm the current revision and its exceptions.
- Minnesota Statutes section 290.06, corporate franchise tax: a rate of 9.8% on taxable income. The statute page could not be opened in full, and rates change, so confirm before relying on it. The 21% federal corporate rate is taken from the Internal Revenue Code and should be confirmed with the IRS.
- Service prices, hours and volumes are the plan's own figures. No external source for personal styling fees is quoted.
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