EssenceLabs Hair Studio Business Plan — Appendix D: Assumption Register
Every utilisation, pricing, cost, capital and funding assumption behind the model, stated so a funder can test each one independently.
Appendix D: Assumption Register
Jump to section
- Overview & contents
- i. Important Notice
- 1. Executive Summary
- 2. The Business
- 3. Market Analysis
- 4. Service Offering, Pricing and Yield
- 5. Operations
- 6. Marketing and Client Acquisition
- 7. People and Management
- 8. SWOT and Competitive Position
- 9. Financial Plan
- 10. Break-Even and Sensitivity
- 11. Risk Management
- 12. The Funding Proposition
- 13. Implementation Plan
- 14. Key Performance Indicators
- 15. Conclusion
- A. Appendix A: Consolidated Financial Summary
- B. Appendix B: Debt Schedules
- C. Appendix C: Risk Register
- D. Appendix D: Assumption Register
- E. Appendix E: Glossary
- D.1 Capacity and trading
- D.2 Pricing and cost
- D.3 Funding and returns
D.1 Capacity and trading
|
Assumption |
Value |
Basis |
|---|---|---|
|
Stations |
Seven |
Plus three basins and a dedicated colour bar |
|
Trading hours |
56.5 hours a week across seven days |
Seven-day trading is the differentiator against the franchise model |
|
Installed capacity |
20 566 chair-hours a year |
Seven stations at 56.5 hours over 52 weeks |
|
Chair utilisation |
51% in Year 1 rising to 66% in Year 5 |
Limited by stylist hiring rather than by demand |
|
Client visits |
5 135 in Year 1 rising to 11 629 in Year 5 |
At an average of 4.4 visits per active client a year |
|
Average ticket |
R529 rising to R729 |
Escalating at roughly 6% a year; mix as well as list price |
|
Year-5 client base |
2 650 active clients |
6.4% of the 41 700 active salon clients in the catchment |
D.2 Pricing and cost
|
Assumption |
Value |
Basis |
|---|---|---|
|
Price escalation |
Approximately 6% a year |
Clients accept price increases and respond by stretching intervals |
|
Product cost escalation |
7% a year |
Ahead of price; the reason colour-bar discipline matters |
|
Product cost |
14.0% of revenue in Year 1, 13.3% in Year 5 |
Colour and chemical consumables |
|
Retail cost of sales |
56% of retail revenue |
Roughly 44% gross margin on salon-exclusive product |
|
Retail attachment |
13.6% of service revenue in Year 1, 20.6% in Year 5 |
Sold at the basin as the continuation of the service |
|
Stylist commission |
Approximately 35% of service revenue above a threshold |
Aligns the stylist to utilisation |
|
Payroll |
43.4% of revenue in Year 1, 42.5% in Year 5 |
Seven headcount at opening rising to fourteen |
|
Rent and occupancy |
R589k in Year 1 escalating at 7% |
21.7% of Year-1 revenue falling to 9.1% by Year 5 |
|
Depreciation |
R252k a year, straight line |
Fit-out, furniture, technical equipment and systems |
D.3 Funding and returns
|
Assumption |
Value |
Basis |
|---|---|---|
|
Project cost |
R2 722 000 |
R1 708k capital expenditure and R1 014k pre-opening and working capital |
|
Founder equity |
R1 400 000 |
51% of project cost, required by the cash profile |
|
Term loan |
R1 000 000 at 13.50% over seven years |
Twelve-month capital moratorium; prime plus 3.00% |
|
Asset finance |
R322 000 at 15.0% over four years |
Furniture, technical equipment and point of sale |
|
Revolving facility |
R650 000 at prime plus 4% |
Modelled peak draw R500k in Year 4; 23% headroom |
|
Working capital reserve |
R520 000 |
Calculated against the Year-1 loss and the January trough |
|
Corporate income tax |
27% of taxable profit |
Assessed losses carried forward subject to the section 20 limitation |
|
Exit multiple |
4.5 times Year-5 EBITDA |
Tested from 3.0 to 5.5 times in Section 9.7 |
|
Required return |
18% |
The discount rate against which net present value is stated |