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A CUT ABOVE BUSINESS PLAN
By: Brent Tournier 11039360
For: Professor Marvin Painter
Class: Commerce 447
Date: December 3, 2010Business Plan
OWNERS
Brent Tournier & Stephanie Muller
Box 1093
1010 8th Street
Rosthern, SK S0K 3R0
(306) 232 5114
I.Table of Contents
I.Table of Contents
II.Executive Summary
III.General Company Description
IV.Products and Services
V.Marketing Plan
VI.Operational Plan
VII.Management and Organization
VIII.Personal Financial Statement
IX.Startup Expenses and Capitalization
X.Financial Plan
XI.Appendices
II.Executive Summary
A Cut Above is a hair salon that will be owned by Brent Tournier and Stephanie Muller. Stephanie will be responsible for the day-to-day operations of the business, while Brent will focus more on the business aspect including the bookkeeping duties. The salon will offer haircuts, styling,colouring, tanning, waxing and gel nails. A Cut Above will hire one additional stylist who will rent a chair at a rate of $500 per month. Any income the stylist generates will be the solely the stylists. In year three, an additional stylist will be hired.
The salon will be located in Carman, Manitoba. Carman is 60 kilometres southwest of Winnipeg, and is home to over 3000 people. The community is located in the heart of a rich agricultural belt, which allows for a high level of disposable income. There are also several small communities within a 20 kilometre radius of Carman. The physical location of the salon is on a very busy street that joins two major highways. There is ideal parking both in the front and the rear of the building.
There are currently two other salons in Carman: Diane’s and Classic Hair Design. Diane’s is a typical rural community salon, as it is located in her house. The salon utilizes a medium pricing point and has a well established reputation, which make up Diane’s competitive advantage. Classic Hair Design is very comparable to Ultracuts. It has a low pricing point but focuses on speed and quantity rather than quality and customer experience.
A Cut Above’s target market will be females. The major primary target will be females aged 24-55, who have a household income of more than $55,000. The other primary target will be females aged 15-23, who are students. A Cut Above will strive to convince their target market that they do not need to travel to Winnipeg for their hair appointments, but rather they can enjoy the elegance of a high end salon at the comfort of a small town price. The secondary target market will be males of all ages. This group will make up the majority of walk-in clients.
A Cut Above will require $70,000 for start-up costs. This will include $55,000 for the building and $15,000 for improvements and equipment. The $70,000 will be financed through $42,000 put forth by Brent and Stephanie, while the other $28,000 will be borrowed from the Royal Bank of Canada. The loan will be amortized over five years at a rate of 3.6%.
The salon has projected to be 50% booked in the first year, 70% in the second, 80% in the third, and 85% in both the fourth and fifth years. At an estimated spending of $50 per client per appointment, the first year will require 2.4 clients per day to break even, while the second needs 2.5, the third 2.7, the fourth 2.6 and the fifth 2.5. The salon will pay dividends of $10,000 (Year 2), $20,000 (Year 3), $25,000 (Year 4) and $30,000 (Year 5). The salon has an internal rate of return of 50.7%.
III.General Company Description
Who we are:
A Cut Above will be a hair salon that specializes in both male and female cuts, colours, and styling. The salon will also offer tanning, waxing and gel nails. The business will be located in Carman, Manitoba which currently has a population of approximately 3000 permanent residents. Carman is located in a rich agriculture belt resulting in numerous residents experiencing a high level of disposable income. The town itself is located 60 kilometres from Winnipeg.
The salon will be co-owned by Brent Tournier and Stephanie Muller. Brent is 23 years old and is a marketing major at the University of Saskatchewan. He currently works for RBC as an account manager and officiates elite levels of hockey throughout Saskatchewan. Stephanie is 22 years old and is currently employed by Hair Style Inn in Saskatoon at the Lawson Heights Mall. She received her journey person’s certificate last year.
Mission Statement:
“We at A Cut Above promise to work with you, our customer, to deliver the experience and satisfaction of a high end salon at the comfort and price of a small town.”
Company Goals and Objectives:
Our short term goals include maintaining an 85 percent booking of clients starting at the beginning of year four. As well, we plan to install a third chair in the salon after year two. Long-term, we are aiming to establish a strong local business and franchising is currently not part of that plan.
Business Philosophy:
It is crucial to the success of our business that we maintain a high level of customer satisfaction. Being that we are situated in a rural community, reputation is very important in relation to business success. If we can promise to provide a 100% satisfaction guarantee, it will help to ensure that our customers are happy time after time.
A Cut Above will target residents of Carman, Manitoba and the surrounding municipality which is home to approximately 3000 residents. The primary target market will be females aged 15-55, as this demographic is more focused on current trends in the hair industry, which is one of A Cut Above’s competitive advantages over the other two salons in Carman.
The hair industry is a very stable industry and would not be described as a growth industry. Hair stylists enjoy a secure position as information technology has a minor effect on their industry. However,a constant threat is recession.In times of recession, high end salons see their business decrease as people look for ways to save money. Unfortunately one of these ways is getting cheaper haircuts or finding someone to cut their hair for free. However, A Cut Above protects their business by committing two thirds of personal equity to the business, to lower break-even numbers. In Carman, there is a large market of customers currently travelling to Winnipeg for haircuts, so A Cut Above plans to tap into this market and establish their business as a reliable, cost-effective way of getting all the benefits of a city hair cut or style in the comfort of a small town.
A Cut Above will be operated as a Canadian Controlled Private Corporation, because of tax reasons and limited liability. As a small business, A Cut Above will be eligible for the small business tax deduction. Although there are fewer liability risks associated with operating a hair salon, it is still important to ensure our personal assets are secure. Initially, we had considered a partnership but the small business tax credit and liability reasons proved to make a Canadian Controlled Private Corporation the more logical choice.
IV.Products and Services
A Cut Above will offer stylish haircuts that follow current trends in a relaxed atmosphere comparable to that of a medium to high end city salon. The stylists will be responsible for staying up to date on current trends.
Waxing, tanning and gel nails will also be offered. The gel nails and waxing will be booked in the same manner as the haircuts and styles, while the tanning (which will be bought in increments of 100 minutes) will be more of a walk in basis.
A Cut Above will have a competitive advantage as there are currently not any young stylists in the Carman area. Stephanie will be able to bring the valuable experience she has gained from working in a high traffic salon in Saskatoon to A Cut Above. She will be better be able to communicate the wants and needs of females.
The pricing structure is as follows:
V.Marketing Plan
Carman is located in a rich agricultural prairie belt, which provides a high level of disposal income. As such, A Cut Above realizes that there is money to be spent on haircuts and styles, but it is important that proper methods are used to fully capture the intended market share.
Market research
Primary market research was conducted through phone calls to competitors. We inquired about pricing structure as well as hours and offerings. Secondary research was conducted by asking family members and friends who currently reside in Carman. Also, we used internet search tools to gather information about competitors and statistics about Carman and the surrounding area.
Economics
The total market in Carman is more than 3000 people, as there are several small farming communities within 20 kilometres of the town. We are hoping to become a majority market share holder with the bulk of our customers being return customers. There is a strong demand currently in the market but the supply is not strong enough to satisfy the customers, as many people are travelling to Winnipeg for haircuts and style. Our goal will be to capture this market, as well as a significant portion of the other customers who currently visit one of the other two salons in Carman.
There are no major barriers to entry, but the toughest factor that stands in the way of success is ensuring that we properly promote A Cut Above to ensure awareness is raised. If we cannot capture a large market share, we will not succeed. Our target market is as follows:
Customers
Primary / Primary / SecondaryAge: / 24-55 / 15-23 / All
Gender: / Female / Female / Male
Location: / Carman and Area / Carman and Area / Carman and Area
Income Level: / $55,000 + / $0-$40,000 / $40,000 +
Class: / Middle to Upper / Middle to Upper / Middle to Upper
Occupation: / Farmer’s Wives and Professionals / Students / Trades and Professionals
Competition
Diane’s
107 4th Street
Carman, Manitoba
(204) 745 2122
Classic Hair Design
85 5th Ave South East
Carman, Manitoba
(204) 745 2383
Table 1: Competitive Analysis
FACTOR / A Cut Above / Strength / Weakness / Diane’s / Classic Hair Design / Importance to CustomerPrice / Highest / Quality and Experience / Costs more / Medium / Lowest / 5
Quality / Highest / Superior Quality and Latest Trends / Time consuming / Medium / Lowest / 5
Selection / Wide / Extensive Style Knowledge / None / Medium / Narrow / 4
Service / High / Delivering a high quality service and friendly yet classy atmosphere / If too busy, receptionist tasks may get neglected. / High / Medium / 4
Reliability / High / 100% satisfaction guaranteed / Unsatisfied customers cost time and money / Medium / Medium / 4
Expertise / Highest / Journey person’s certificate / None / Medium / Lowest / 4
Company Reputation / Low / New business, so have fresh opportunity / Need to penetrate market / High / Medium / 4
Location / Best / High traffic area with lots of parking / None / Medium / Good / 4
Appearance / High / New, stylish salon with modern interior / May give impression of expensive pricing / Lowest / Medium / 3
Advertising / High / Need to mass advertise to penetrate market / Competition has leg up as they are already established / Medium / Medium / 4
*Note: Rating in column titled “importance to customer” is rated from 1-5, with 5 being the highest
A Cut Above will have a competitive advantage through its appearance of a high end salon with stylists who are journey persons and familiar with popular trends in the industry. Our 100% satisfaction guarantee will allow customers to feel safe and build trust in their new stylist. Although our pricing point will be higher, the experience and satisfaction will ensure the benefits outweigh the cost.
Strategy
We will need to utilize mass marketing to ensure that we raise full awareness of A Cut Above. This will be done through newspaper ads, flyers, signage, website and word of mouth advertising.
Promotion
Newspaper Ads
An ad will be run in the weekly newspaper with a monthly cost of $49.99. The ad will include a catchy picture, our slogan and our address. The ad will be placed in The Valley Leader which is distributed to residents of Carman as well as the surrounding communities.
Flyers
Flyers will be placed in the mailboxes at the post office in Carman. This will be a large form of indirect marketing in an effort to raise awareness. The flyers will include a coupon (30% off first hair cut or style), as well as communicating the services offered and location. The flyers will cost approximately $100 and will be distributed twice during the year.
Signage
A sign will be built and placed outside of the salon on the side walk to gather attention of both pedestrians and vehicles passing by. The sign will display the name of the salon and hours or current promotions. The sign will have a onetime fee of $700.
Website
The website will be built by Brent’s brother-in-law so costs will be minimized. The website will be updated monthly to advertise current specials. There will be a booking slot for appointments where clients can book in their own appointments. The website will then automatically notify Stephanie via email to her Blackberry so she can make the necessary adjustments. We have allocated $600 extra in the first year to build the website and register thedomain name.
Word of Mouth
This will be a major source of advertising as people in small towns are in constant communication with one another. It is crucial that A Cut Above establish themselves as a premier salon and build a strong reputation early so that the success can be communicated and help promote the salon.
Pricing
A Cut Above has set its prices higher than the competition, but lower than city salons. The primary reason is that we want to establish the salon as high class but ensure that it is still cheaper than city salons so that price can be a driving force to get clients in the door.
Sales Forecast
The projected sales forecast is outlined in detail in the financial portion of this business.
VI.Operational Plan
Location
The proposed location is 69 South Main Street in Carman, Manitoba. Carman is located in southern Manitoba, approximately 60 kilometres from Winnipeg. The building is currently for sale at an asking price of $49,000. The building is 1288 square feet in size and features a 16 seat patio located in the rear of the building. The building was previously operated as a restaurant and experienced numerous improvements in 2006. The building also features air conditioning which is very important as the blow dryers and equipment in the salon emit large quantities of heat that could cause an unpleasant experience for the customer.
The location of the salon is very important to ensure success. As the salon will be a new business in Carman, it needs to be in a high traffic area that will spark interest. The proposed location of 69 South Main Street is located on a major highway that runs directly through the centre of Carman. The traffic is steady which makes the location very desirable. Importantly, there is also easy access to the salon. There is parking in front of the building and there is also a large parking lot in the rear of the building. Customers will be able to book appointments via our web page, through walk-ins or by phone.
The initial expected expenses for the improvements are estimated at $4,000. The costs are quite low because they only include materials. Brent’s father is a journeyman carpenter and his brother-in-law is a double journeyman plumber and electrician, which will help minimize the costs of the improvements. Finances will be discussed more in the financial section.
We feel that our proposed hours of operation will allow for the salon to be open during peak hours, while not forcing the salon to operate outside of 40 hours per week. This will be very important because in the early years of its business life, the salon will require more external work while the salon is not open. The scheduled hours of operation are:
Tuesday / 10:00AM-6:00PMWednesday / 10:00AM-6:00PM
Thursday / 11:00AM-9:00PM
Friday / 10:00AM-6:00PM
Saturday / 10:00AM-4:00PM
The building will require some other improvements to ensure full functionality. The following is the proposed layout for A Cut Above:
Personnel
- There will be two employees initially (Stephanie and additional stylist)
- Both stylists will be skilled labourers
- The correct employee will be sought out through newspaper advertisement and word of mouth
- Stephanie will receive 60% commission from her appointments, while additional stylist will receive 100%, but will pay $500 per month for chair rental. Stylist will use product supplied by salon.
- Both Stephanie and additional stylist will be responsible for performing receptionist duties. If business becomes too busy, then receptionist will be hired.
- Additional stylist will be employed in year three to help meet demand
Credit Policies
Accounts Receivable
A Cut Above has decided against issuing credit to our customers. We feel that it will only cause problems and believe that by not issuing credit, sales will not be affected. The salon focuses on the sale of a service rather than solely on products, so consumers are accustomed to paying for a service immediately afterwards.
Accounts Payable
A Cut Above will pay for hair product immediately after purchase is made. The only accounts payable will be for utility bills, which do not offer a discount for paying early. As such, A Cut Above will pay utility bills when received.
VII.Management and Organization
Stephanie will be responsible for managing the day to day business operations. She has been working in the hair industry for four years and received her journey person’s certificate last year. In the unfortunate event of dismemberment or death, A Cut Above will cease operations.
Brent will be responsible for the bookkeeping duties and financial issues. He is set to graduate from the Edwards School of Business in April 2011. He is currently employed by the Royal Bank of Canada as an account manager and has been promised employment upon his graduation. Through Brent’s employee discounts, A Cut Above will have discounted service fees and lending rates.