Introduction 0.3% over the years. Katie is also

Introduction

The purpose
of this report is to give Katie advice on the options for the future direction
of her business looking at which of the two options Katie is considering will
be better for starting up her own gentleman’s Baber shop.

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Option 1 –
Katie is looking at different premise in the town centre for the barber shop

Option 2 –
Instead of opening her own business, Katie could rent a chair in one of the
existing saloons in her area.

There are
advantages and disadvantages related with both options. This report includes
the strengths and weakness of these options as well as identifying some
additional threats and opportunities. The current business market and trends
also the competition the business could face in the two different options

Background information

There is a
highly competitive hairdressing and beauty industry in the UK. There is also a
large number of business of hairdressing and beauty in Katie home town with 53
hairdressers with male and female customers also including beauty salons and gentlemen’s
barber shops it comes to a total of 81 business. This is a large about of
stores which means Katie as a self-employed worked may face some difficulties. Revenues
has fallen by 0.3% over the years. Katie is also joining and becoming a part of
this industry however there is a downwards and negative trend in this sector
and it has been predicted that this may continue.

The hairdressing
and beauty industry is every labour intensive as on every £1 invested in
capital the saloon may potential spend on average £19 on labour costs. A regular
salary for a trained stylist is £20 000 a year however a trainee stylist come
up to £10 000 a year. Katie is a self-employees working meaning that if the
business is not attracting any customers and not bringing in revenue this means
the business can’t make a profit meaning that Katie may be unable to pay
herself. The wages should usually be around 40% of the sales revenue.

 

 

 

Market trends

The males hairdresser
have been increasing over the past years 
as they are becoming more confident about all the types of male growing,
this is why there was a bust in the UK hair and beauty industry owner by men.
Most salons in the last year have reported an increase in revenue from male
customers, nice out of ten to be precis this is nearly most of the saloons.  Katie barber shop will be targeting students
and young business professional. There is a increases revenues in this sector
as men may tend to be getting their hair cut more than women and also doing in
more frequently so this suggest that the barber shops may never be empty and
losing out on customers. However if there is a local barber shop people are
used to gin to, a new shop may have no chance of expanding an increasing as
there is already a barber shop in that location that may be attracting all the
customers.

There is a
high demand in shaving and the maintenance of breads and moustaches the average
male hair cut may cost around £12 not including a facial and beauty care now
given in many UK barber shops, however this price is also £4 cheaper than in
2012 the price might of potentially become cheaper as customers will be
visiting the shop more regularly and will want to spend a fair and affordable
amount each time.

Location & financial information

There are 81
hairdressing and beauty business in Katie’s home town. There is also 20
hairdressers and one barber shop within a one mile radius of the proposed
location.  Katie is looking for a premises
in the town centre she wants it to be located in a prime shopping area close to
offices and university campuses this is a great idea as its suitable to the
target market of students and young business professional. It potentially may
be a good place to set up as there may be many people in the town centre
shopping area and may make it easier to attract customers. The location must
also have an ordinary flow of people making it a busy environment. Katie wants
the store to include a nail parlour this may also bring more profit into the business
as a nail artist may want to rent out the space to set up their own business
because of this Katie will be getting extra money.

 The location Katie is looking for should have
an average rent of £15 000 rent a year and a business rate of £2 476 a year.
This may be a suitable price for Katie if she will be able to pay £1250 a month
for rent however if she doesn’t make any revenue the price of £1250 a month
will be nearly too impossible to pay at the rate of where she is just starting
a business.

Financial
data

Katie has a start-up
cost of £54550 just to open her business and get it going this is a very large
sum of money and she may not be able to afford this which means she has to make
a Strategic decision on whether she should take loans out of the makes which
will put her into dept. If she is unable to pay for it. She may want to take
out a Sort term loan and  pay it back in
less than a year so she can be over and done with it or either use Trade credit
– to purchase stock and materials she needs to start up the business. When she
starts up the business she may not need some things straight away and she can
purchase them later on thought out the months to upgrade the store. Such a TV
at the price of £400 this is not an essential part of a barber shop that has
just open because then Katie will have to pay extra onto of that amount of
money for electricity. Katie also doesn’t need to have a website for her
business as it is new and small spending £1000 on a website may be a waste and customer
may not even visite the website. Minus the TV and the website which may
potentially be irrelevant to the business in the beginning would give Katie a start-up
cost of £53150 instead of £54500 this is a £14000 difference.

Project
financial data

According to
the data provided Katie will have the revenue of £102000 coming into the
business from cutting sales and selling hair products, Katie will also have an
outflow of £61476 coming out from wages, rent and other costs exert leaving
Katie with a net cash flow of £40524. This is a healthy amount of the business
and may show potential success for the future if they keep at this rate.

Alternative business option

Katie has
the other option that instead of her opening up her own store she could rent
out a chair in one of the existing sales of 81 in the area. This form of entrepreneurship
is quite common in the hair dressing a beauty industry. In this way Katie may
be working in partnership with a different company this can be a benefit as
they may already have most of the things provides such as a chair and styling
units such as a wash point and a dryer which will stop her from spending £6500
on her start-up costs other than paying for her own equipment, she would have no
other start-up costs or running cost. However she would have a start-up cost
for renting which will be £15550 this is for her hair dressing equipment such
as gowns, cutters and collars, etc. In this option Katie will still be self-employed
however she may need to attract her own customers and this may be difficult as
the shop is not hers and may be advertised in a way she may not approve of.
Katie might find it difficult to make her store well known to people outside as
the shop may already know and people may not know that she has joined.

Katie believes
that by renting the space she could make a revenue of £36000 which is £66000
less than what she would be making if she had her own store. Katie will not
have to pay rent however the owner will hate 50% of the revenues she makes as a
fee which will be £18000 that half of what she’s making which could bring Katie’s
business down.

 

 

 

SWOT analysis of the two options

Option 1 – Katie is looking at
different premise in the town centre for the barber shop

Strengths – Katie
will have her own name and brand and she would be able to attract her own
customers

Weakness –
she is starting the business alone as a self-employed hair dresser and may not
have the suffocation funding to create a large successful store.

Opportunities
– she’s a female hair dresser and there is a large amount of men barbers in the
area and having a female barber may be a change in the local area

Threat –
there is a large amount to barber store in Katie’s home town meaning a lot of
completion suggesting that new may be overshadowed by all the larges business
and may not be able to expand and become well known

Option 2 – Instead of opening her own
business, Katie could rent a chair in one of the existing saloons in her area.

Strength –
there is no rent cost and most of the equipment needed for the hairdresser
maybe already provided and a less amount for the start-up cost in the products
she may need for herself

Weakness –
she is joining another saloon which might make it difficult for her business to
be recognised

Opportunity’s
– customers that also go to the saloon she’s renting a chair in may want to try
out her service and my spared the recommend her of business to friends or
family

Threat – Katie
maybe trusted differently to not being a part of the actual store and may have
to work her way into the store that not her own.

Conclusion

Viewing the two options I can see a huge
different I the both, they both seem like well-planned out options and may both
be suitable for her business and each option will make the business become
successful , however I believe she should chose the first option of looking at
different premise in the two centre for the barber shop. Most business premises
are either purchased outright or leased. Katie need to ensure that the premises
is large enough to accommodate equipment and staff and take into account
relevant legislation covering health and safety. Having her own store could
make her have her own brand and face, she wouldn’t have to listen to anyone’s
shop rules and could make her own she also would have to work with the same
customers that the place she’s renting out gets Katie can get her own different
customers