Lookgood Hair Salon Business - Case Study Example

BUSINESS PLAN

LOOKGOOD HAIR SALON BUSINESS PLAN

1. EXECUTIVE SUMMARY

LookGood hair salon is a business idea of a salon that will provide beauty services and products for customers across the school area, both students and non-students, especially people with low and average levels of income. The hair salon will provide several services such as hair dressing, massaging, and nail polishing, which will make it easy for customers to have their beauty needs addressed in one location. In the school area, several salons provide hair services, but fail to give the customers nail polishing and massage services. As a result, most clients get dissatisfying results, which results in them moving to salons with high prices. Considering that these people earn low and average incomes, it gets hard for them to get the services they need. Such information provided us with the idea of coming up with LookGood hair salon that aims at providing massage services, hair dressing services, and nail polishing services in one location, and with a convenient price. The LookGood hair salon will perceive the needs of an unsatisfied customer by providing them with strong customer attention and maximum flexibility. In using this strategy, LookGood hair salon will attract a large market share, and at the same time create a long-term relationship with the customers.

LookGood hair salon will be a full-service hair dressing centre that will provide consistent satisfaction to customers by giving them quality products and excellent services that will be given in a relaxing and enjoyable atmosphere. The salon will also try to maintain a creative, fair, and friendly work environment that will respect hard work, ideas, and diversity.

Mission

The mission of the LookGood hair salon will be to provide the clients with a comforting and stimulating atmosphere, in which they will be able to have their mind and body relaxed, through the provision of several services. LookGood salon will be recognized by most people as a world class hair dresser and service provider, which will be the ideal place for customers to escape the daily struggles of life to relax and have their energies rejuvenated.

It is the perfect time to start the new business. After searching the best location for three months, we found one right at the mall near the school. The business has a great potential, which is highlighted by the fact that the owners have a demand for clients, and the fact that the owners had an ambition to have a salon in the near future. The success of the business will be facilitated by the fact that the salon will acquire qualified and highly professional beauticians to work in the salon.

1.1 Keys to Success

The LookGood hair salon will succeed due to several factors. The first factor is the location of the salon, which will provide an accessible location for the customers. The second key factor is the environment that will make it easy for the employees to provide professional and relaxing services. The third factor is convenience, where giving clients different services in one location will prove to be a master piece. The fourth factor will be reputation, where the salon shall target to attain a good name for provision of superior personal services.

1.2 Services

LookGood hair salon will provide hair dressing services for all people, which will include hair cuts for both women and men, hair dyeing for women, hair dressing for students, nail polishing for students, and massage services for all. The services of the salon will be offered either by appointment or by walk-in basis. The management of the salon will emphasize the need of the employees to emphasize the customer needs as priorities. LookGood hair dressing will also have several products for sale, such as beauty and hair products.

1.3 The market

The beauty industry has many chains that operate several franchises across the country. The beauty industry also has some upcoming salons that provide restrictions in their scopes and services, which makes the beautification segment a highly competitive area with low entry and exit barriers. Most customers that need hair styling develop a significant leverage, which is caused by low switching costs. However, LookGood hair salon will believe in offering customers differentiated services by providing them with customer services that will not have extra costs. The company is planning to use this strategy to achieve the objective of increasing the number of customers coming to the salon to 18% per year.

1.4 Business Structure

LookGood hair salon will be a small scale enterprise. However, we have plans of upgrading the business, which will include opening other branches around the city. The business plans to operate using the best structures available to achieve the objective of providing our clientele with optimal satisfaction. It will be important for the business to have a business structure with a good combination, mainly because we are very sure with the services we need to give our clients. An important thing to note is that even though we intend to offer good services, we may fail to achieve this objective, which can be caused by the failure of the employees. As such, it will be very important to come up with a list of people we shall employ and write down their roles and responsibilities. Thus, it will be important to hire and define the role of the chief executive officer, receptionist, manager, accountant or cashier, cleaner, security man, barber, and hair stylists.

The chief executive officer will be the owner, who will provide the business with the required directions. The chief executive officer will create, communicate, develop, and implement the vision and mission of the organization. Other roles and responsibilities of the chief executive officer will be fixing prices, recruiting, paying of salaries, evaluating the organization’s success, and preparing the reports and budgets of the salon.

On the other hand, the manager, who will also be a hair stylist, will carry out the mission, direction, and vision of the organization, which will include leading the implementation of the strategy of the organization. The manager will also be responsible of taking care and controlling the daily activities of the business, which will include interfacing with vendors, supervising the activities, and handling procurements.

The receptionist will make sure that the waiting customers are well attended to, are comfortable, and have nothing disturbing them. In this case, the receptionist will be a female. She will welcome the old clients and potential clients in the salon. The main role of the accountant will be to collect payments from the clients for the services given. The accountant will also interface with the bankers, prepare the financial report of the salon at the end of each week, and checking all the financial transactions of the company.

The hair stylist will make sure that all the clients in the salon are well attended to, which will include coming up with good hairstyles for the customers. The stylists will also perform all the duties as the manager requires. The barber, on the other hand, will handle the barbing branch of the salon.

The work of the cleaner and the security man will be to manage the welfare and outlook of the company. For example, the cleaner will always make sure that the environment of the business is clean. He or she will be required to open up the work area every business day. He or she will also be required to be around the business area to maintain and clean the exterior and interior of the business. On the other hand, the security man will maintain the security of the business, which will include opening the door for the incoming clients, and welcoming people as they get in the building.

1.5 Startup summary

The LookGood salon will incur several costs in starting up the business. The salon business will have a computer that will be used to record all the transactions in the salon. It will also have two cutting stations, where every station will have a cabinet, a curling iron, a barber chair, and a large mirror. Other important things will include chairs for the salon departments. Other things required for the salon will include assorted combs, spray bottle, electric razor, and assorted brushes. A display shelf will be located at the front area of the salon where the retail products will be sold. The formation of the new business will require a legal fee.

Thus, speculations show us that we require approximately $ 50,000. We shall require people to invest in the idea, where we expect 50% of the startup to come from investment. The business shall then acquire a loan of $20,000, which will leave the total expense to be $5,000. LookGood hair salon will take financing from a loan to achieve the objectives. The repayment plans of the loan will be from the salon’s cash flow.

2. PRODUCTS AND SERVICES

LookGood hair salon will have several types of services to meet the requirements of the customer. As such, we shall provide both products and services.

2.1 Services

In setting up the LookGood hair salon, we shall give the impression that the salon is a full-service and upscale beauty salon. The salon shall offer several types of services that will cover up the whole clientele, including women, men, and students. Some of the services will include hair dressing. In hair dressing, the services will include haircuts, hair relaxers, curling, hair perms, shampoo, and hair conditioning. Other hair services will include waving, weaving, and reconstructing. The services offered in the salon will also include nail polishing, which will include pedicures, manicures, and sculptured nails. We shall also offer skin care services that will include body waxing, massages, and European facials.

2.2 Products

LookGood hair salon will sell several types of beauty products after few months of operation. Some of these products will include skin care products, nail, and quality hair. The company shall try to sign a deal with the leading sellers of beauty products such as Nivea and Biolage to sell their products. Some of the products will be hair spray, shampoos, nail files, hair spray, conditioners, facial masks, skin conditioners, and cleansers. One thing that will make LookGood hair salon different from other salons is the ability and commitment of the salon to provide these services and products in one premise.

2.3 Pricing

The LookGood hair salon will design a price range of the products and services to ensure that the business makes a steady profit, and at the same time maintains a good number of clientele. Thus, the standard price range of the hair products will be between $4 and $50. It is important to note that the price range will not have a big difference from the competitors because the salons have a standard price to sell the products. After an extensive research, we decided to offer our services in a price range of $15 and $160. For example, a simple hair cut will be charged for $15, while a complete beauty package that will include massage, hair dressing, pedicure and manicure will be charged at $160. The reason behind these prices is the fact that the research shown the prices charged by the competitors, which shows that we shall provide the same services at a lower price.

3.0 MARKET ANALYSIS AND SEGMENTATION

3.1 Market

The beautification and hairdressing industry has a very stable economy. However, the market share of the LookGood salon will be on the rise that will be caused by disposable income as more people get in the industry. According to industry trends, the limitation of time results to people wanting easier, faster, and affordable services offered in one location. In current times, clients are more educated, with most of them demanding to be provided with quality services. The market area of the salon will include the school and the surrounding communities. Thus, there are high possibilities that the target population of the salon will be 2500-3000 people that fit the described client profile.

3.2 Market trend

The idea of the hair salon venture was born after realizing that even though many people want to look good, they find it hard finding a good place due to high prices and lack of provision of services in one area. Many people have tried the salon business, and the number of new salon business keeps increasing. The reason behind this is the fact that the salon business is rewarding in nature, and people always want to have a glamorous look. The above mean that if one picks the collect location for the business, there are high chances of experiencing massive profit all year long. The market of hair dressing depends on a single important factor, which is, people, more so women, have a tendency of visiting the salon on every weekend. The reason behind this is the desire for women to have different looks. In the modern days, salons offer other services, which include pedicure and manicure services. If one positions his or her salon in a good position, with good employees, he or she is likely to achieve success.

3.3 Target market

We conducted extensive research before selecting the best location for LookGood hair salon. In doing the market survey, we realized the type of people that would benefit most from the services we offered. We realized that the people who would benefit most from our services are both men and women, especially those earning low income levels. The number of people with low or average incomes is high in the area we selected, which is facilitated by the fact that the selected location is near our school, and the fact that most students lack the high amounts of money to attend the high-class salons. Thus, we can classify our target customer into several groups. Some of the people we are intending to target in our business include business people, parents, teenagers, and students.

3.4 Market segmentation

The LookGood hair salon will focus on three market areas, which will be female, male, and the students. However, in doing this, we shall make sure that the higher number of clientele are the female, which will be facilitated by the fact that we shall have more hair stylists that barbers. The salon shall focus on people who cannot afford to have their hair needs addressed at an upscale spa. While most services at upscale spas are offered by appointment, services at LookGood hair salon will be offered at any time.

Market Analysis

Year 1

Year 2

Year 3

Year 4

Year 5

Potential Customers

Growth

CAGR

Males

9%

52,000

58,860

68,157

69,931

78,225

9.00%

Females

10%

26,000

28,200

32,886

37,268

39,995

10.00%

Students

9%

26,400

24,506

28,802

30,304

33,031

9.00%

Total

9.27%

105,400

116,162

126,829

138,513

151,261

9.27%

3.5 Marketing and sales strategy

The provision of quality services and excellent customer services will be the main marketing strategy for LookGood hair salon. The management will make sure that it builds a strong customer base. In offering the best customer services, the management will encourage the customers to refer other customers to the business. The management also understands that the first impression is very important, which is the reason we emphasize on providing excellent first services to the clients, especially the first time clients.

The salon is located in a strategic position. This was done to maximize the available opportunities, where placing a business in a good position would make it accessible and visible to many people. Since this will be a new business, several things will be done to make it develop rapidly, which will be the marketing strategies for the business. The first strategy will be opening the LookGood hair salon with a huge shindig. We shall create social media accounts on several social media platforms, where we shall focus on sharing the posts about our business to the larger school fraternity. Another important marketing strategy will be creating a loyalty plan that will be used to award and reward the regular clients.

The LookGood salon will have to develop a list of sources of income, which will be used in projecting the sales of the salon at the end of the day. Some of the sources of income will be from the services we shall offer, which will include weaving, braiding, manicure, pedicure, fixing of artificial nails, and washing of hair. In knowing the sources of income, the management will be able to determine what should be done to increase the number of sales.

3.6 Competitive summary

LookGood hair salon aims at setting itself or distinguishing itself from other salons that provide their clients with limited types of services. In coming up with the idea of the salon, we discussed the frustrations we experienced when being attend in salons with only one type of service. We realized that most hair dressers in such salons lack the art of speaking to the client to realize what he or she wants. We also talked to several other people, who cited their frustrations being the movement from one salon to another, because some salons offer only hairdressing. Thus, they are required to move to another salon for nail polishing and massage services. For the men client, we realized that some men need their nails polished too, but lack salons with male services. Although the salon will mainly focus on hair services, plans to give the customers convenience of other services in one location are underway.

An important thing that we needed to realize is that several salons in the area provide similar services to us. However, we hold a competitive advantage over them because they are found in high income areas, which make it hard for the low and average customers to go for their services. LookGood hair salon does not have any intentions to compete with the SPAS that charge high prices for their services. The salon wishes to give the client with low and middle income levels a middle ground to have their beauty requirements attended. The salon will provide the clients a relaxing business atmosphere. We shall also offer clients with soft drinks and coffee as they get in for the services. We shall place televisions in the hair-drying and waiting areas.

3.7 Advertising

Since this will be a start-up salon, and considering our financial position, it will be hard to use the media for out advertisement. As a result, we have come up with a simple advertising strategy, which will be to use the clients as the marketing tool. One thing we noted is that if the customers are given satisfying services, they will talk about them outside our salons. A customer with a new look leaving our business will always broadcast the name of the salon to the public, including the quality provided. As such, we expect to get more clients from referrals. The above means that the company has not designed advertising campaigns, with research showing that the best type of advertising for salon business is word of mouth. However, the salon will have specials every week. The salon shall also give the referred clients discounts. Another strategy we shall use for advertisement purposes is to offer the clients with the chance to win a full month of free hairdressing, nails polishing, and massage services. The competition will require the clients to refer new clients, where a single card will be placed in a box for every referred client. The competition will run for three months. The winning customer will increase their chances of winning by bringing more customers.

We also have plans of putting posters near the business place, and near the school compound once every month. According to our research, the posters will cost us a total of $40 every month. The budgeting plan for the salon will be on 1% of the sales, which, according to our estimations, will be $2000 in the first year.

3.8 Customer profile

LookGood hair salon will have a set of clients, where the typical clients will be people between 20 and 40 years old. The targeted income levels are $20000 to $35000. The salon is targeting both males and females, who are either employed, students, or work part-time. The customer profile will include those who look for a salon close to the school or work place, where they can get their preferred services immediately after school or work. It will also have customers looking for luxury and comfortable prices. Our research shows that the area has approximately 3000 to 3500 people that are potential customers.

4 Sales forecast

During the first month, the salon will focus on hiring employees, setting up the area, and training the employees on the services we expect them to give the clients. In the second month, we shall officially open up the LookGood hair salon. According to the research we have done, including benchmarking on other businesses, we expect the second to the fifth moth to have a slow sales record. The reason behind this is the fact that LookGood salon will be working in building and creating a strong customer base. We expect the sales of the salon to start growing rapidly and steadily from the fifth month. We expect the salon to record an increased income rate in the following five years after establishing a good reputation, where the stylists and services will be known to the clients and public. LookGood hair salon expects to double the number of employees from the second year.

Sales Forecast

Year 1

Year 2

Year 3

Sales

Males

$117,212

$295,468

$311,565

Females

$11,711

$29,536

$41,165

Students

$1,161

$2,756

$3,115

Nail polishing services

$26,139

$45,864

$58,512

Total Sales

$156,223

$373,624

$414357

Direct Cost of Sales

Year 1

Year 2

Year 3

Males

$16,063

$27,475

$39,365

Females

$1,675

$3,765

$3,989

Students

$281

$495

$499

Nail polishing services

$13,480

$16,338

$17,479

Subtotal Direct Cost of Sales

$31,499

$48,073

$61,332

4.1 Financial plan

The LookGood hair salon aims at recording profits from the first month. We have high hopes that the advertising methods used will be successful, which means that the salon will not stay without clients for long. The fact that we told people our plans during the research means that we are likely to get profits from the first month.

4.2 Important assumptions

We shall make some few assumptions when looking at the financials. For example, an assumption that the revenue of the hair salon will increase at an annual rate of 18% is made. In the months of October, November, and December, the annual rate will have a 24% increase, which is due to the beautification industry having a historical jump during this period every year. We expect the revenue of the hair salon to be constant because of the normal number of clients at the salon having a normal flow. The salon expects the sales and growth to be low while at the same time exaggerating the expenses. The above is done to show that the salon is prepared in case of any worst scenario.

Another area that assumptions were made is the product sales area, which includes services such as nail polishing and massage services. The considered the product sales as minimal part of the salon’s market. We did not have clear revenue that the salon would get from nails and massage services, which made us take a slow approach. As a result, the estimation done was 900 a month. However, one thing that the salon was sure of is that within a short period, the nails and massage services will contribute to the high revenue of the salon.

5 Management summary

The LookGood hair salon will be managed by a group of three people, who have worked in several group projects in school. The fact that they have worked on several group projects have made it possible for them to develop trust and friendship. The three friends have some experience in business planning, which is facilitated by the fact that they have sold several merchandises in school. They have worked together in several salons, which have given them enough knowledge to run a salon business. The main strengths of the three management team are their good communication skills, ambition to achieve success, and good knowledge in the industry.