Beauty Business Planning and Startup Flashcards

What is a Small Business Administration (SBA) loan?

Answer: A government-backed loan that reduces lender risk and offers favorable terms to small businesses

SBA loans are partially guaranteed by the federal government, reducing the lender's risk and allowing small business owners to qualify for loans with better interest rates and terms.

What is 'working capital' for a beauty salon?

Answer: The funds available to cover day-to-day operating expenses

Working capital is the money available to pay for daily operational needs—such as supplies, payroll, and utilities—while waiting for client revenue to come in.

Which financial document forecasts a beauty salon's expected revenues and expenses before it opens?

Answer: Pro forma income statement

A pro forma income statement is a forward-looking projection of anticipated revenues and expenses, used for planning and to present to lenders before the salon opens.

Why should a beauty salon owner maintain a dedicated business bank account separate from personal accounts?

Answer: It simplifies tax preparation and clearly separates business finances from personal assets

A separate business account makes bookkeeping and tax filing cleaner, and helps demonstrate the legal separation between personal and business finances that protects against liability.

What is a 'soft opening' for a new beauty salon?

Answer: A limited-scale opening with fewer services or clients to test operations before the full launch

A soft opening lets the salon test its systems, identify operational issues, and refine the client experience with a smaller group before the official full-scale grand opening.

What type of insurance is most essential for a beauty salon to protect against client injury claims?

Answer: General liability insurance

General liability insurance protects the salon from financial losses if a client is injured on the premises or claims damage from a service received.

What is the primary goal of a grand opening promotion for a new beauty salon?

Answer: To generate awareness, attract new clients, and build momentum for the business launch

A grand opening promotion creates excitement and community awareness, drives first-time client visits, and establishes the salon's presence in the local market.