23 data to include in the business plan of your tattoo shop business

This article was written by our expert who is surveying the industry and constantly updating the business plan for a tattoo shop business.

Our business plan for a tattoo shop business will help you build a profitable project

Ever wondered what the ideal ink cost percentage should be to keep your tattoo shop thriving?

Or how many appointments need to be booked during a bustling Saturday to meet your revenue goals?

And do you know the perfect artist-to-client ratio for a successful tattoo studio?

These aren’t just nice-to-know numbers; they’re the metrics that can make or break your business.

If you’re putting together a business plan, investors and banks will scrutinize these figures to gauge your strategy and potential for success.

In this article, we’ll cover 23 essential data points every tattoo shop business plan needs to demonstrate you're prepared and ready to succeed.

Tattoo artists should aim to keep supply costs below 10% of total revenue to maintain profitability

Tattoo artists should aim to keep supply costs below 10% of total revenue to maintain profitability because it ensures that a larger portion of their earnings can cover other essential expenses and contribute to their income.

In a tattoo shop, there are numerous costs beyond supplies, such as rent, utilities, and marketing, which can quickly add up. By keeping supply costs low, artists can better manage these other expenses and still have room for profit margins.

However, this percentage can vary depending on the complexity and size of the tattoos being done.

For instance, larger or more intricate designs may require more expensive supplies, potentially increasing the percentage of revenue spent on materials. In such cases, artists might need to adjust their pricing strategy to ensure they still meet their profitability goals.

Artist commission rates typically range from 40-60% of the service price, depending on experience and reputation

Artist commission rates in tattoo shops typically range from 40-60% of the service price because they reflect the balance between the artist's skill and the shop's overhead costs.

For artists with more experience and reputation, the commission rate tends to be higher, as their work can attract more clients and justify a premium price. Conversely, less experienced artists might accept a lower commission rate to gain exposure and build their portfolio.

The shop itself incurs various expenses, such as rent, utilities, and supplies, which are covered by the remaining percentage of the service price.

In some cases, artists may negotiate a higher commission if they bring their own clients or have a unique style that draws in business. Additionally, shops in high-demand areas might offer lower commissions due to increased competition, while those in less competitive markets might offer higher rates to attract talented artists.

High turnover rates in tattoo shops can reach 50%, so budget for recruitment and training

High turnover rates in tattoo shops can reach 50%, so it's crucial to budget for recruitment and training.

This high turnover can be attributed to several factors, such as the transient nature of the industry and the individualistic career paths of tattoo artists. Many artists prefer to work as freelancers or move between shops to find the best fit for their style and clientele.

Additionally, the tattoo industry is highly competitive, and artists often leave for better opportunities or to start their own businesses.

However, turnover rates can vary depending on specific circumstances, such as the location of the shop and the reputation of the business. Shops in high-demand areas or those with a strong brand may experience lower turnover, as artists are more likely to stay for the stability and exposure these shops provide.

Approximately 50% of tattoo shops close within the first three years, often due to cash flow issues

Approximately 50% of tattoo shops close within the first three years, often due to cash flow issues, because managing a tattoo business requires more than just artistic talent.

Many tattoo artists underestimate the importance of financial management and business acumen, leading to poor budgeting and unexpected expenses. Additionally, the initial costs for equipment, rent, and licenses can be substantial, and without a steady stream of clients, these expenses can quickly become overwhelming.

Moreover, the tattoo industry is highly competitive, and new shops often struggle to build a loyal customer base, which is crucial for sustained revenue.

However, the success rate can vary depending on factors such as location, marketing strategies, and the artist's reputation. Shops in high-traffic areas or those with a strong online presence may find it easier to attract clients and maintain a healthy cash flow.

Shops should aim to break even within 12 months to be considered viable

In the tattoo shop business, aiming to break even within 12 months is crucial because it indicates that the shop is generating enough revenue to cover its initial investment and operating costs, which is a key marker of financial viability.

Breaking even within this timeframe helps ensure that the business can sustain itself without relying on external funding or incurring debt, which is important for long-term success. Additionally, achieving this milestone can boost the owner's confidence and attract potential investors or partners who see the shop as a promising venture.

However, the timeline to break even can vary depending on factors such as location, competition, and the shop's reputation.

For instance, a tattoo shop in a high-traffic urban area might reach this goal faster due to a larger customer base, while a shop in a smaller town might take longer due to limited clientele. Furthermore, a shop with a well-known artist might attract more customers quickly, whereas a new artist might need more time to build a loyal following.

Profit margins on aftercare products can be 50-70%, making retail sales a crucial revenue stream

Profit margins on aftercare products can be 50-70%, making retail sales a crucial revenue stream for tattoo shops.

These products, such as specialized lotions and healing balms, are essential for proper tattoo care, which means customers are often willing to pay a premium for them. Tattoo shops can purchase these products in bulk at a lower cost, allowing them to mark up the price significantly when selling to clients.

Additionally, offering aftercare products in-house provides a convenient option for customers who trust the tattoo artist's recommendations.

However, the profitability of these sales can vary depending on factors like location and clientele. In areas with higher competition or a more budget-conscious customer base, shops might need to adjust their pricing strategy to remain competitive while still maintaining a healthy profit margin.

Prime cost (artist commissions and supplies) should stay below 70% of revenue for financial health

In a tattoo shop business, keeping the prime cost—which includes artist commissions and supplies—below 70% of revenue is crucial for maintaining financial health.

When prime costs exceed this threshold, it can squeeze the profit margins, leaving less room for covering other essential expenses like rent, utilities, and marketing. This can lead to cash flow issues, making it difficult to invest in growth or handle unexpected expenses.

However, the ideal percentage can vary depending on factors like the shop's location, the experience level of the artists, and the type of tattoos offered.

For instance, a shop in a high-rent area might need to keep prime costs even lower to maintain profitability. Conversely, a shop with highly skilled artists who command higher prices might afford a slightly higher prime cost percentage while still remaining profitable.

Shops should reserve 1-2% of revenue annually for equipment maintenance and replacement

Shops should reserve 1-2% of revenue annually for equipment maintenance and replacement because it ensures the longevity and reliability of essential tools.

In a tattoo shop, equipment like tattoo machines, power supplies, and sterilization units are crucial for daily operations. Regular maintenance helps prevent unexpected breakdowns, which can disrupt business and lead to lost revenue.

Setting aside a small percentage of revenue allows for planned replacements and upgrades, keeping the shop competitive and up-to-date with industry standards.

However, the exact percentage might vary depending on the shop's size and the volume of clients. A larger shop with more artists might need to allocate a bit more due to the increased wear and tear on equipment.

A successful tattoo shop should aim for at least 1.5 appointments per artist per day during peak times

A successful tattoo shop should aim for at least 1.5 appointments per artist per day during peak times to ensure both profitability and artist engagement.

This target helps maintain a steady flow of work, which is crucial for keeping artists motivated and ensuring they have a consistent income. Additionally, it allows the shop to cover its operational costs, such as rent and supplies, while still making a profit.

However, this number can vary depending on factors like the complexity of the tattoos and the experience level of the artists.

For instance, more intricate designs may require longer sessions, reducing the number of appointments an artist can handle in a day. Conversely, during off-peak times or in areas with less demand, shops might need to adjust their expectations to maintain flexibility and adapt to the market conditions.

Inventory turnover for inks and needles should occur every 30-45 days to ensure quality and safety

Inventory turnover for inks and needles in a tattoo shop should occur every 30-45 days to maintain optimal quality and ensure safety for clients.

Regular turnover helps prevent the use of expired or degraded inks, which can lead to infections or allergic reactions. Additionally, fresh needles are crucial to avoid cross-contamination and ensure a sterile environment.

However, the turnover rate can vary depending on the volume of business and the specific types of services offered.

For instance, a high-traffic shop might need to replace supplies more frequently to keep up with demand, while a smaller shop might have a slightly longer turnover period. Ultimately, the goal is to align inventory practices with the shop's operational needs and client safety standards.

It's common for tattoo shops to lose 2-4% of revenue due to theft or inventory shrinkage

It's common for tattoo shops to lose 2-4% of revenue due to theft or inventory shrinkage because of the unique nature of their business operations.

Many tattoo shops deal with small, high-value items like inks, needles, and equipment, which are easy targets for theft. Additionally, the open and creative environment of tattoo shops can sometimes lead to less stringent inventory controls, making it easier for items to go missing.

Employee theft can also be a factor, as staff may have easy access to inventory and cash.

However, the extent of revenue loss can vary depending on factors such as the size of the shop and the effectiveness of their security measures. Shops with robust inventory management and surveillance systems may experience less shrinkage, while smaller or less organized shops might see higher losses.

Rent should not exceed 10-15% of total revenue to avoid financial strain

In the tattoo shop business, it's crucial that rent doesn't exceed 10-15% of total revenue to prevent financial strain.

When rent takes up too much of your revenue, it leaves less room for other essential expenses like supplies and staff salaries. This can lead to a situation where the business struggles to maintain quality or even stay afloat.

Keeping rent within this range ensures that the shop can invest in marketing and customer experience, which are vital for growth.

However, this percentage can vary depending on factors like location and shop size. For instance, a shop in a high-traffic area might justify a higher rent percentage due to increased customer flow, while a smaller shop in a less busy area should aim for the lower end of the range to maintain profitability.

Upselling aftercare products can increase average ticket size by 15-25%

Upselling aftercare products in a tattoo shop can boost the average ticket size by 15-25% because these products are essential for maintaining the quality and longevity of a new tattoo.

When customers invest in a tattoo, they are often willing to spend a little extra to ensure it heals properly and looks its best, making them more receptive to purchasing recommended aftercare products. Additionally, tattoo artists can leverage their expertise to suggest specific products that cater to the unique needs of each tattoo, such as moisturizers or antibacterial ointments, which can further encourage sales.

However, the increase in ticket size can vary depending on factors like the size and complexity of the tattoo, as larger or more intricate designs may require more extensive aftercare.

Moreover, the artist's ability to effectively communicate the importance of aftercare and build trust with the client can significantly impact the likelihood of a successful upsell. In some cases, offering a bundle deal on aftercare products can also entice customers to purchase more, thereby increasing the overall ticket size.

The average profit margin for a tattoo shop is 10-15%, with higher margins for custom work and lower for flash designs

The average profit margin for a tattoo shop is typically between 10-15% because of the varying costs and pricing strategies associated with different types of tattoo work.

Custom tattoos often command higher prices due to the unique designs and the time-intensive nature of the work, allowing shops to achieve higher profit margins. In contrast, flash designs, which are pre-made and quicker to execute, tend to have lower profit margins because they are priced more competitively to attract a broader customer base.

Additionally, the skill level and reputation of the tattoo artist can significantly impact pricing and, consequently, profit margins.

For instance, a well-known artist may charge a premium for their work, leading to increased profitability for custom pieces. On the other hand, shops that focus on high-volume, lower-cost flash designs may see reduced margins but benefit from a steady stream of customers.

Average ticket size should grow by at least 5% year-over-year to offset rising costs

In a tattoo shop business, the average ticket size should grow by at least 5% year-over-year to effectively offset rising costs.

As operational expenses such as rent, utilities, and supplies increase, maintaining the same ticket size would mean reduced profit margins. By increasing the average ticket size, a tattoo shop can ensure that it continues to cover these rising costs while still maintaining profitability.

This growth in ticket size can be achieved through strategies like offering premium services or upselling additional products.

However, the necessity for a 5% increase can vary depending on specific factors such as the shop's location and the local economic conditions. In areas with higher cost-of-living increases, a tattoo shop might need to aim for a higher percentage growth to keep up with expenses, while in more stable areas, a smaller increase might suffice.

A tattoo shop should maintain a current ratio (assets to liabilities) of 1.5:1

A tattoo shop should maintain a current ratio of 1.5:1 to ensure it has enough liquidity to cover its short-term obligations.

This ratio indicates that for every dollar of liabilities, the shop has $1.50 in assets, providing a buffer against unexpected expenses. It helps the business manage cash flow effectively, ensuring that it can pay for supplies, rent, and other operational costs without financial strain.

However, this ideal ratio can vary depending on the shop's specific circumstances, such as its size and location.

For instance, a larger shop with more clients might operate comfortably with a slightly lower ratio due to steady revenue. Conversely, a smaller shop in a less busy area might need a higher ratio to safeguard against fluctuating income and ensure stability.

Effective portfolio presentation can boost bookings by 10-20% by highlighting high-skill work

Effective portfolio presentation can significantly boost bookings for a tattoo shop by 10-20% because it showcases the artist's high-skill work and unique style.

When potential clients see a well-curated portfolio, they can better appreciate the quality and creativity of the tattoos, which builds trust and confidence in the artist's abilities. This is especially important in the tattoo industry, where clients are looking for personalized and permanent art on their bodies.

However, the impact of a portfolio can vary depending on the target audience and the specific style of tattoos offered.

For instance, a shop specializing in traditional tattoos might attract a different clientele than one focusing on realistic portraits, and the portfolio should reflect this to effectively draw in the right customers. Ultimately, a well-presented portfolio not only highlights the artist's skills but also aligns with the expectations and desires of potential clients, leading to increased bookings.

A shop should have 1-1.5 square meters of workspace per artist to ensure efficiency

A tattoo shop should allocate about 1-1.5 square meters of workspace per artist to maintain efficiency.

This space allows each artist to have enough room for their equipment and to move comfortably, which is crucial for maintaining high-quality work. Additionally, it helps in minimizing distractions and potential accidents, ensuring a safe environment for both artists and clients.

However, the exact space requirement can vary depending on the specific needs of the shop.

For instance, a shop that specializes in large-scale tattoos might need more space per artist to accommodate larger equipment and canvases. Conversely, a shop focusing on smaller, intricate designs might manage with slightly less space, as the equipment and movement required are generally more compact.

Health inspection scores can directly impact client trust and should stay above 90%

Health inspection scores are crucial for a tattoo shop because they directly influence client trust and confidence in the shop's safety and hygiene standards.

When a tattoo shop maintains a score above 90%, it signals to clients that the shop adheres to high cleanliness standards and follows proper procedures to prevent infections. This is particularly important in the tattoo industry, where the risk of bloodborne pathogens and other health concerns is higher due to the nature of the work.

Clients are more likely to choose a shop with a high health inspection score because it reassures them that their health and safety are prioritized.

However, the impact of health inspection scores can vary depending on the shop's location and clientele. In areas with a more health-conscious population, a score below 90% might deter potential clients, while in other areas, clients might be less aware or concerned about these scores, though it's always better to maintain high standards for long-term reputation.

Shops in urban areas often allocate 2-4% of revenue for online booking platforms and fees

Shops in urban areas, like tattoo businesses, often allocate 2-4% of their revenue for online booking platforms and fees because these platforms are crucial for attracting and managing a steady stream of clients.

In bustling cities, the competition among tattoo shops is fierce, and having a strong online presence can make a significant difference in visibility. By investing in online booking systems, tattoo shops can offer convenience and accessibility to potential clients, which is essential in a fast-paced urban environment.

However, the percentage of revenue allocated can vary depending on the shop's size, location, and clientele.

For instance, a well-established shop with a loyal customer base might spend less on these platforms, while a newer shop trying to build its reputation might invest more. Additionally, shops located in high-traffic areas might rely less on online bookings compared to those in less visible locations, where online presence becomes a critical factor for attracting clients.

Digital marketing should take up about 5-7% of revenue, especially for new or growing shops

Allocating about 5-7% of revenue to digital marketing is crucial for tattoo shops, especially those that are new or looking to grow, because it helps them establish a strong online presence and attract more clients.

For a tattoo shop, investing in digital marketing allows them to showcase their artists' work, which is essential for building trust and credibility with potential clients. This budget range is generally recommended because it provides enough resources to effectively utilize platforms like social media, search engines, and online advertising without overextending the shop's finances.

However, the exact percentage can vary depending on factors such as the shop's location, competition, and target audience.

For instance, a shop in a highly competitive urban area might need to spend more to stand out, while a shop in a smaller town might achieve the same results with less. Additionally, if a shop is targeting a niche market or specific demographic, they might need to adjust their strategy and budget to focus on platforms where their audience is most active.

Seasonal promotions or flash events can increase bookings by up to 30% by attracting new clients

Seasonal promotions or flash events can boost bookings by up to 30% for tattoo shops because they create a sense of urgency and exclusivity.

These events often attract new clients who might be curious about getting a tattoo but need a little push to make the decision. By offering limited-time discounts or special designs, tattoo shops can tap into the excitement of a deal, encouraging people to book appointments they might have otherwise postponed.

Additionally, these promotions can help tattoo shops stand out in a competitive market, drawing attention away from other local artists.

However, the effectiveness of these promotions can vary depending on factors like the shop's location and reputation. In areas with a high concentration of tattoo shops, a well-timed promotion can make a significant difference, while in less competitive areas, the impact might be less pronounced.

Establishing a supply cost variance below 3% month-to-month is a sign of strong management and control.

Establishing a supply cost variance below 3% month-to-month in a tattoo shop is a sign of strong management and control because it indicates that the business is effectively managing its resources and maintaining consistent operational costs.

In a tattoo shop, supplies like ink, needles, and gloves are essential, and their costs can fluctuate due to factors like supplier pricing or demand changes. By keeping the variance below 3%, the shop demonstrates that it has a robust inventory management system and is able to predict and control expenses effectively.

This level of control is crucial because it allows the shop to maintain stable pricing for its services, which is important for customer trust and satisfaction.

However, the acceptable variance can vary depending on specific cases, such as a shop experiencing a sudden increase in demand or changes in supplier costs. In such scenarios, a slightly higher variance might be acceptable temporarily, but consistently keeping it low is a sign of long-term financial health and operational efficiency.