Business Plan- Hairl Salon

8/3/2019 Business Plan- Hairl Salon

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Cranium Filament Reductions

Hair Salon Business PlanCranium Filament Reductions is a hair salon offering value-priced services for the entirfamily. There are many "quick salons" like Cranium, but many of these provide onlyminimal services, whereas the upscale salons can be inconvenient due to schedulingrequirements and cost. We will address a market need for low-cost salons with customeservice.

Hair Salon Business PlanCranium Filament Reductions

Executive SummaryIntroductionCranium Filament Reductions is a hair salon that allows the entire family to have their hair nee

satisfied in one convenient visit.There are many "quick salons" like Cranium, however, many of these salons, such as CostCutters, only provide the minimum services, whereas the upscale salons can be inconvenient duto scheduling requirements and cost. The owner of Cranium perceives an unfulfilled customer

d f l l h id i fl ibili d i i
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The Market

The hair styling industry is highly fragmented with national chains such as Regis Corporation,

which operates diverse franchises catering to all the market segments, and also includingthousands of "mom and pop" salons that are very restricted in scope and services. This makes fa highly competitive market that has low barriers to entry and exit. In addition, the clients of hastyling have significant leverage due to the low switching costs they have. However, mostcompanies have tried to pursue only one general strategy in gaining market share. Craniumbelieves that it is possible to offer a differentiated service through improved customer service ano greater significant cost if the right employee incentives are provided.

With this strategy in mind, the company's goal is to increase the number of clients served by at

least 20% per year.

Cranium Filament Reductions will target three different market segments:

Men will typically make up 70-75% of the clientele.

Females who cannot afford an upscale salon.

Young mothers with children.
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3. To develop a sustainable start-up business, contributing to increasedemployment of community residents.

Company SummaryCranium Filament Reductions, soon to be located in Shaker Hts., OH, will offer reasonablypriced, convenient hair styling. Cranium Filament Reductions will accept walk-ins as well asappointments for the entire family. Cranium Filament Reductions will grow its market sharebased on superior customer attention. Cranium Filament Reductions is a family hair salon, alsoknown as a "quick hair salon."

2.1 Company OwnershipCranium Filament Reductions is an Oregon corporation owned entirely by Susan Sever.

2.2 Start-up Summary

Cranium Filament Reductions will incur the following start-up costs:

Computer with point of sale terminal.

Computer with printer for back office.

Five cutting stations, each station requires a barber chair, cabinet, largemirror, blow dryer, curling iron, electric razor, several pairs of scissors, spraybottle, two sided mirror, and assorted combs and brushes.

Desk for reception area


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Start-up Funding

Start-up Expenses to Fund 1 100
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Long-term Liabilities 45,000

Accounts Payable (Outstanding

Bills) 0

Other Current Liabilities

(interest-free)0

Total Liabilities 45,000

Capital

Planned Investment

Susan 60,000

Investor 2 0

Other 0

Additional Investment

Requirement0

Total Planned Investment 60,000


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Stationery etc. 100

Other 0

Total Start-up Expenses 1,100

Start-up Assets

Cash Required

96,58

0

Other Current Assets 0

Long-term Assets 7,320

Total Assets103,9

00

Total Requirements105,0

00


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Females who cannot afford an upscale salon. Women tend to favor afemale specific upscale salon if they can afford it. There is not often a

difference in quality of an upscale salon relative to a family hair salon otherthan a upscale salon will tend to pamper you more, only acceptsappointments, and the facility is generally a bit plusher. Someone who isfiscally responsible as opposed to someone who likes opulence will favor afamily style salon.

Young mothers with children. Most young children are notoriously difficuwhen it comes to getting haircuts. A family style salon is a more laid-back

place that allows the children to play while they are waiting and then willwork with the parents in calming the kids nerves when they are ready fortheir shearing.
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4.2 Target Market Segment Strategy

Cranium Filament Reductions will target each of the three groups separately. The males will be

targeted by offering a quick, convenient, service. Because men tend to have shorter hair,they usually require haircuts more often. If they are getting a cut every four weeks and worknormal business hours, most barbers are closed when the male customers have free time.Cranium Filament Reductions will cater to males with evening hours, no appointmentsnecessary, and quick turn around times.

Generally females prefer the allure of upscale salons, however, not everyone can afford thisluxury. For this reason Cranium Filament Reductions will provide the same quality hair stylingwithout the expensive price. Cranium will target these customers by emphasizingthe sophisticated, ultra-hip styling that Cranium can offer.

Cranium Filament Reductions will also target mothers with children by offering the kids toys toplay with while they wait and child-friendly hair stylists. Additionally, children receive a speciarate reflecting the fact that children's hair grows so fast that it can be expensive to keep up withregular cuts, as well as the recognition that it generally takes a lot less time to cut a child's hair it should be inherently less expensive.

4.3 Service Business Analysis

The "hair" service industry is fairly diverse. On one end of the spectrum you have the traditionabarber, on the other end you have the fashionable boutique salons. Somewhere in between thereare independent hair stylists, franchise barbers and stylists, and beauty salons.


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tend to bond more with their stylists. Because they bond more, they are much more loyal to thestylist. Once a stylist has earned their trust they are more willing to blindly put their hair in the

stylists hands.

Strategy and Implementation SummaryCranium Filament Reductions will rely on three separate strategies to grow market share. Thefirst is superior customer service. Customers will be blown away with the level of service thatthey receive. They have expectations of average (at best) customer service from a quick salon

based on past experiences.Cranium will also be leveraging its high-traffic store front location in a shopping center to drivepeople into the store. They will benefit from the shopping center association's marketing effortsto bring more people to the center.

Lastly, Cranium Filament Reductions will use financial incentives early on to build a large, loycustomer population.

5.1 Competitive Edge

Cranium Filament Reductions' competitive edge is based on faultless customer service. CraniumFilament Reductions recognizes that the hair cutting/styling market is crowded so it is difficult stand out. Cranium Filament Reductions will stand out by providing superior customer attentionThis is particularly important in the "quick salon" space that Cranium operates in because


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hair care products for employees to encourage usage so they can explain to the customer abouttheir personal experiences. Additionally, Cranium offers a product-based commission structure

for the hair care products where they give away the product to the employee for commissions fselling the items to their customers. These personal testimonials and commission structure willallow Cranium to generate good sales from the retail hair care products.

5.3.1 Sales Forecast

The first month will be used to set up the store and hire and train the employees. The store willbe officially open the second month. Sales for month two through will four will be somewhatslow as Cranium will be building up a customer base. From month four on sales will grow

steadily.
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Sales Forecast

Year 1 Year 2 Year 3

Sales

Males217,11

2

395,45

8

411,54

5

Females 21,711 39,546 41,155

Women with small

children2,171 3,955 4,115

Retail hair care

products36,149 65,844 68,522

Total Sales277,14

3

504,80

2

525,33

7

Direct Cost of Sales Year 1 Year 2 Year 3

Males 26 053 47 455 49 385
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t

Business plan

completion1/1/2001 2/1/2001 0 ABC Marketing

Set up the store front 1/1/2001 2/1/2001 0 ABCDepartmen

t

Revenue exceeding

100,0001/1/2001 7/1/2001 0 ABC

Departmen

t

Profitability 1/1/2001 9/1/2001 0 ABCDepartmen

t

Totals 0

Management SummarySusan Sever received her bachelor's degree from Miami University in Oxford, OH. Whilepursuing her degree Susan worked in the restaurant industry. For the four years during school s

was a server in an upscale restaurant. While this provided very good income, particularly on theweekends, she longed for management experience.

After graduation she sat down with the owner of the restaurant and presented him with a welld t h h h ld b f th t bli h t H i i t h


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Susan36,00

0

40,00

0

44,00

0

Receptionist17,60

0

19,20

0

19,20

0

Part-time hair stylist33,00

0

36,00

0

36,00

0


0

36,00

0

36,00

0


0

36,00

0

36,00

0


0

36,00

0

36,00

0


0

36,00

0

36,00

0


0

36,00

0

36,00

0

Total People 8 8 8


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Other 0 0 0

7.2 Break-even Analysis

The Break-even Analysis indicates what Cranium must achieve in monthly revenue to reach thebreak even point.
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Gross Margin 233,764 425,790 443,111

Gross Margin % 84.35% 84.35% 84.35%

Expenses

Payroll 251,600 275,200 279,200

Sales and Marketing and Other

Expenses1,442 0 0

Depreciation 1,464 1,464 1,464

Leased Equipment 0 0 0

Utilities 1,200 1,200 1,200

Insurance 1,500 1,500 1,500

Rent 24,000 24,000 24,000

Payroll Taxes 37,740 41,280 41,880


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Pro Forma Cash Flow


Cash Received
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Expenditures Year 1 Year 2 Year 3

Expenditures from Operations

Cash Spending 251,600 275,200 279,200

Bill Payments 101,816 172,090 181,489

Subtotal Spent on Operations 353,416 447,290 460,689

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out 0 0 0

Principal Repayment of Current

Borrowing0 0 0

Other Liabilities Principal

Repayment0 0 0

Long-term Liabilities Principal

Repayment0 0 0

Purchase Other Current Assets 0 0 0


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Cash 20,307 77,820142,46

7

Other Current Assets 0 0 0

Total Current Assets 20,307 77,820142,46

7

Long-term Assets

Long-term Assets 7,320 7,320 7,320

Accumulated

Depreciation1,464 2,928 4,392

Total Long-term

Assets5,856 4,392 2,928

Total Assets 26,163 82,212145,39

5

Liabilities and Capital Year 1 Year 2 Year 3


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2)

Total Liabilities and

Capital

26,163 82,212145,39

5

Net Worth(30,78

2)22,870 85,427

7.6 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on theStandard Industrial Classification (SIC) code 7231, Beauty Shops, are shown for comparison.

Ratio Analysis

Year 1 Year 2 Year 3Industry

Profile

Sales Growth 0.00% 82.14% 4.07% 7.50%
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Advertising Expenses 0.52% #VALUE! #VALUE! 2.50%

Profit Before Interest and Taxes -30.74% 16.07% 17.87% 3.20%

Main Ratios

Current 1.70 5.43 9.52 1.79

Quick 1.70 5.43 9.52 1.34

Total Debt to Total Assets 217.65% 72.18% 41.25% 58.70%

Pre-tax Return on Net Worth 291.35% 335.13% 104.61% 5.20%

Pre-tax Return on Assets -342.78% 93.23% 61.46% 12.50%

Additional Ratios Year 1 Year 2 Year 3

Net Profit Margin -32.36% 10.63% 11.91% n.a

Return on Equity 0.00% 234.59% 73.23% n.a


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Acid Test 1.70 5.43 9.52 n.a

Sales/Net Worth 0.00 22.07 6.15 n.a

Dividend Payout 0.00 0.00 0.00 n.a


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Appendix

Sales Forecast

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11

Sales

Males 0% 0 5,484 6,254 8,547 16,455 18,545 21,545 23,555 26,874 28,745 29,854 31,254

Females 0% 0 548 625 855 1,646 1,855 2,155 2,356 2,687 2,875 2,985 3,125

Women with smallchildren

0% 0 55 63 85 165 185 215 236 269 287 299 313

Retail hair careproducts

0% 0 913 1,041 1,423 2,740 3,088 3,587 3,922 4,475 4,786 4,971 5,204

Total Sales 0 7,000 7,983 10,910 21,005 23,673 27,502 30,068 34,305 36,693 38,109 39,896

Direct Cost of Sales Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11

Males 0 658 750 1,026 1,975 2,225 2,585 2,827 3,225 3,449 3,582 3,750

Females 0 66 75 103 197 223 259 283 322 345 358 375

Women with smallchildren

0 7 8 10 20 22 26 28 32 34 36 38

Retail hair careproducts

0 365 417 569 1,096 1,235 1,435 1,569 1,790 1,914 1,988 2,082

Subtotal Direct Costof Sales

0 1,096 1,250 1,708 3,288 3,705 4,305 4,706 5,369 5,743 5,965 6,245


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Personnel Plan

Month 1 Month 2 Month 3 Month4

Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11Month 12

Susan 0% 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000

Receptionist 0% 0 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600

Part-time hair stylist 0% 0 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000






Total People 1 8 8 8 8 8 8 8 8 8 8 8

Total Payroll 3,000 22,600 22,60022,600

22,600 22,600 22,600 22,600 22,600 22,600 22,600 22,600


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General Assumptions

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Plan Month 1 2 3 4 5 6 7 8 9 10 11 12

Current InterestRate

10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%

Long-termInterest Rate

10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%

Tax Rate 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00%

Other 0 0 0 0 0 0 0 0 0 0 0 0


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Pro Forma Profit and Loss

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9Month

10Month

11Month 12

Sales 0 7,000 7,983 10,910 21,005 23,673 27,502 30,068 34,305 36,693 38,109 39,896

Direct Costof Sales

0 1,096 1,250 1,708 3,288 3,705 4,305 4,706 5,369 5,743 5,965 6,245

OtherProductionExpenses

0 0 0 0 0 0 0 0 0 0 0 0

Total Cost ofSales

0 1,096 1,250 1,708 3,288 3,705 4,305 4,706 5,369 5,743 5,965 6,245

Gross Margin 0 5,905 6,734 9,203 17,717 19,967 23,198 25,362 28,935 30,950 32,144 33,651

Gross Margin%

0.00% 84.35% 84.35% 84.35% 84.35% 84.35% 84.35% 84.35% 84.35% 84.35% 84.35% 84.35%


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Expenses

Payroll 3,000 22,600 22,600 22,600 22,600 22,600 22,600 22,600 22,600 22,600 22,600 22,600

Sales andMarketingand OtherExpenses

100 122 122 122 122 122 122 122 122 122 122 122

Depreciation 122 122 122 122 122 122 122 122 122 122 122 122

LeasedEquipment

0% 0 0 0 0 0 0 0 0 0 0 0 0

Utili ties 100 100 100 100 100 100 100 100 100 100 100 100

Insurance 125 125 125 125 125 125 125 125 125 125 125 125

Rent 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000

Payroll Taxes 15% 450 3,390 3,390 3,390 3,390 3,390 3,390 3,390 3,390 3,390 3,390 3,390

Other 0 0 0 0 0 0 0 0 0 0 0 0

TotalOperatingExpenses

5,897 28,459 28,459 28,459 28,459 28,459 28,459 28,459 28,459 28,459 28,459 28,459

Profit BeforeInterest andTaxes

(5,897) (22,554) (21,725) (19,256) (10,742) (8,492) (5,261) (3,097) 476 2,491 3,685 5,192

EBITDA (5,775) (22,432) (21,603) (19,134) (10,620) (8,370) (5,139) (2,975) 598 2,613 3,807 5,314

InterestExpense

375 375 375 375 375 375 375 375 375 375 375 375


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TaxesIncurred

0 0 0 0 0 0 0 0 0 0 0 0

Net Profit (6,272) (22,929) (22,100) (19,631) (11,117) (8,867) (5,636) (3,472) 101 2,116 3,310 4,817

NetProfit/Sales

0.00% -327.55% -276.83% -179.94% -52.93% -37.45% -20.49% -11.55% 0.30% 5.77% 8.69% 12.07%

Pro Forma Cash Flow

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9Month

10Month 11Month 12

Cash Received

Cash fromOperations


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Cash Sales 0 7,000 7,983 10,910 21,005 23,673 27,502 30,068 34,305 36,693 38,109 39,896

Subtotal Cashfrom Operations

0 7,000 7,983 10,910 21,005 23,673 27,502 30,068 34,305 36,693 38,109 39,896

Additional CashReceived

Sales Tax, VAT,HST/GSTReceived

0.00% 0 0 0 0 0 0 0 0 0 0 0 0

New CurrentBorrowing

0 0 0 0 0 0 0 0 0 0 0 0

New OtherLiabilities(interest-free)

0 0 0 0 0 0 0 0 0 0 0 0

New Long-termLiabilities

0 0 0 0 0 0 0 0 0 0 0 0

Sales of OtherCurrent Assets

0 0 0 0 0 0 0 0 0 0 0 0

Sales of Long-

term Assets0 0 0 0 0 0 0 0 0 0 0 0

New InvestmentReceived

0 0 0 0 0 0 0 0 0 0 0 0

Subtotal CashReceived

0 7,000 7,983 10,910 21,005 23,673 27,502 30,068 34,305 36,693 38,109 39,896

Expenditures Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9Month

10Month 11Month 12

Expenditures fromOperations


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Cash Spending 3,000 22,600 22,600 22,600 22,600 22,600 22,600 22,600 22,600 22,600 22,600 22,600

Bill Payments 105 3,285 7,213 7,377 7,872 9,414 9,837 10,430 10,840 11,494 11,863 12,086

Subtotal Spent onOperations

3,105 25,885 29,813 29,977 30,472 32,014 32,437 33,030 33,440 34,094 34,463 34,686

Additional Cash

Spent

Sales Tax, VAT,HST/GST PaidOut

0 0 0 0 0 0 0 0 0 0 0 0

PrincipalRepayment ofCurrentBorrowing

0 0 0 0 0 0 0 0 0 0 0 0

Other LiabilitiesPrincipalRepayment

0 0 0 0 0 0 0 0 0 0 0 0

Long-termLiabilitiesPrincipalRepayment

0 0 0 0 0 0 0 0 0 0 0 0

Purchase OtherCurrent Assets

0 0 0 0 0 0 0 0 0 0 0 0

Purchase Long-term Assets

0 0 0 0 0 0 0 0 0 0 0 0

Dividends 0 0 0 0 0 0 0 0 0 0 0 0

Subtotal CashSpent

3,105 25,885 29,813 29,977 30,472 32,014 32,437 33,030 33,440 34,094 34,463 34,686


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Net Cash Flow (3,105) (18,885) (21,830) (19,067) (9,468) (8,341) (4,935) (2,962) 864 2,599 3,646 5,210

Cash Balance 93,475 74,590 52,760 33,694 24,226 15,885 10,950 7,988 8,852 11,452 15,098 20,307


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Pro Forma Balance Sheet

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 M onth 10 Month 11 Month 12

AssetsStartingBalances

CurrentAssets

Cash 96,580 93,475 74,590 52,760 33,694 24,226 15,885 10,950 7,988 8,852 11,452 15,098 20,307

OtherCurrentAssets

0 0 0 0 0 0 0 0 0 0 0 0 0

TotalCurrentAssets

96,580 93,475 74,590 52,760 33,694 24,226 15,885 10,950 7,988 8,852 11,452 15,098 20,307

Long-termAssets

Long-termAssets 7,320 7,320 7,320 7,320 7,320 7,320 7,320 7,320 7,320 7,320 7,320 7,320 7,320

AccumulatedDepreciation

0 122 244 366 488 610 732 854 976 1,098 1,220 1,342 1,464

Total Long-term Assets

7,320 7,198 7,076 6,954 6,832 6,710 6,588 6,466 6,344 6,222 6,100 5,978 5,856

Total Assets 103,900 100,673 81,666 59,714 40,526 30,936 22,473 17,416 14,332 15,074 17,552 21,076 26,163

Liabilities

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 M onth 10 Month 11 Month 12


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and Capital

CurrentLiabilities

AccountsPayable

0 3,045 6,967 7,116 7,559 9,086 9,490 10,069 10,458 11,099 11,460 11,674 11,945

Current

Borrowing

0 0 0 0 0 0 0 0 0 0 0 0 0

OtherCurrentLiabilities

0 0 0 0 0 0 0 0 0 0 0 0 0

SubtotalCurrentLiabilities

0 3,045 6,967 7,116 7,559 9,086 9,490 10,069 10,458 11,099 11,460 11,674 11,945

Long-termLiabilities

45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000

TotalLiabilities

45,000 48,045 51,967 52,116 52,559 54,086 54,490 55,069 55,458 56,099 56,460 56,674 56,945

Paid-inCapital

60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000

RetainedEarnings

(1,100) (1,100) (1,100) (1,100) (1,100) (1,100) (1,100) (1,100) (1,100) (1,100) (1,100) (1,100) (1,100)

Earnings 0 (6,272) (29,201) (51,302) (70,933)(82,050) (90,917) (96,553) (100,025) (99,924) (97,808) (94,499) (89,682)

Total Capital 58,900 52,628 29,699 7,598 (12,033) (23,150) (32,017) (37,653) (41,125) (41,024) (38,908) (35,599) (30,782)

TotalLiabilitiesand Capital

103,900 100,673 81,666 59,714 40,526 30,936 22,473 17,416 14,332 15,074 17,552 21,076 26,163


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Net Worth 58,900 52,628 29,699 7,598 (12,033) (23,150) (32,017) (3

Documents

Business Plan- Hairl Salon