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 Barber shop.
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
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.
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.
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
Opportunities – 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.
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.