Executive Summary
Trend Setters is a full-service beauty salon dedicated to consistently providing high customer satisfaction by rendering excellent service, quality products, and furnishing an enjoyable atmosphere at an acceptable price/value relationship. We will also maintain a friendly, fair, and creative work environment, which respects diversity, ideas, and hard work.
Our Mission: To supply services and products that enhance our clients' physical appearance and mental relaxation.
Our Motto: "The Trend Begins Here!"
The timing is right for starting this new venture. Patiently searching for six months for the perfect location, one was finally found. The demand from the owner's clients, as well as the ambitions of the owner to one day start her own salon, and the procurement of highly professional and qualified beauticians to support the salon, has made this business one of great potential.
Curley Comb, co-owner with Roller Comb, Jr., her husband, has worked in a prestigious, upscale salon in MyTown, Texas for the past two years. Curley has created a large client following through hard work and dedication. Curley, and her talented team of beauticians, has what it takes to make this venture an extremely successful one. We expect our growing reputation to lead to new clients and beauticians to support our anticipated growth.
To achieve our objectives, Trend Setters is seeking additional loan financing. This loan will be paid from the cash flow from the business, and will be collateralized by the assets of the company, and backed by the character, experience, and personal guarantees of the owners.
1.1 Keys to Success
The keys to success in our business are:
Location: providing an easily accessible location for customers.
Environment: providing an environment conducive to giving relaxing and professional service.
Convenience: offering clients a wide range of services in one setting, and extended business hours.
Reputation: reputation of the owner and other "beauticians" as providing superior personal service.
Company Summary
Trend Setters will, upon commencement of operations, sell a wide range of beauty services and products. We will provide quality hair, nail, and skin services, along with top lines of beauty products. What will set Trend Setters apart from the competition is our commitment to providing all of these services in one convenient location.
The salon will be located in a retail strip mall at 1234 Stylish Road, MyTown. The salon will utilize 1,540 square feet. The location is strategically situated on one of the busiest streets in MyTown. It is a high profile area, with easy access from all parts of town.
2.1 Start-up Summary
After spending several months searching for a salon to purchase, the owners decided to start a salon from the ground up. The start-up capital will be used for the design, leasehold improvements, and equipment of the salon.
Leasehold improvements will amount to approximately $32,500, and salon equipment will cost about $27,000. The owner will invest $500 for cash-on-hand at starting date.
| Start-up | |
| Requirements | |
| Start-up Expenses | |
| Rent deposit | $1,817 |
| Other | $0 |
| Total Start-up Expenses | $1,817 |
| Start-up Assets | |
| Cash Required | $500 |
| Other Current Assets | $600 |
| Long-term Assets | $59,500 |
| Total Assets | $60,600 |
| Total Requirements | $62,417 |
| Start-up Funding | |
| Start-up Expenses to Fund | $1,817 |
| Start-up Assets to Fund | $60,600 |
| Total Funding Required | $62,417 |
| Assets | |
| Non-cash Assets from Start-up | $60,100 |
| Cash Requirements from Start-up | $500 |
| Additional Cash Raised | $0 |
| Cash Balance on Starting Date | $500 |
| Total Assets | $60,600 |
| Liabilities and Capital | |
| Liabilities | |
| Current Borrowing | $0 |
| Long-term Liabilities | $61,917 |
| Accounts Payable (Outstanding Bills) | $0 |
| Other Current Liabilities (interest-free) | $0 |
| Total Liabilities | $61,917 |
| Capital | |
| Planned Investment | |
| Owner | $500 |
| Investor | $0 |
| Additional Investment Requirement | $0 |
| Total Planned Investment | $500 |
| Loss at Start-up (Start-up Expenses) | ($1,817) |
| Total Capital | ($1,317) |
| Total Capital and Liabilities | $60,600 |
| Total Funding | $62,417 |
Products and Services
Trend Setters is considered an upscale full-service beauty salon. We will offer a wide range of services that include:
Hair: cuts, relaxers, perms, colors, shampoo, conditioning, curling, reconstructing, weaving, waving.
Nails: manicures, pedicures, polish, sculptured nails.
Skin Care: European facials, body waxing, massage.
Strategy and Implementation Summary
Skill at what we do, good customer service, and creating a pleasant environment for our customers will be important to implementing our business plan.
4.1 Competitive Edge
Trend Setters wants to set itself apart from other beauty salons that may offer only one or two types of services. Having come from such a salon, Curley has realized, from talking with her clients, that they desire all of the services that we are proposing, but they remain frustrated because they must get their hair done at one place, and nails done at another. Although the focus of Trend Setters is hair services, we do wish to offer our clients the convenience of these other services in one location.
There are a number of salons like ours, but they are mainly in the very high income parts of MyTown and surrounding areas. We do not intend to compete with these so called "Day Spas." We wish to offer a middle ground for those clients who can't quite afford those high-end luxury salons.
Our business atmosphere will be a relaxing one where clients can kick back and be pampered. Soft drinks will be offered to clients as they enter for service. Televisions will be located in the waiting and hair-drying area area.
4.2 Marketing Strategy
Our marketing strategy is a simple one: satisfied clients are our best marketing tool. When a client leaves our business with a new look, he or she is broadcasting our name and quality to the public. Most of our clients will be referrals from existing clients.
No major advertising campaigns are anticipated. Our research has shown that word of mouth is the best advertising for this type of business. We will, however, run specials throughout the week. We will also ask clients for referrals, and reward them with discounted or free services depending on the number of clients they bring. We will also offer discounts to the new clients who have been referred. There are plans for a lottery that will offer a free trip to, say, Cancun. A client would simply refer new clients to us, and we will place a card in a box for each client he or she brings. The more they bring, the more chances they have of winning the trip.
4.3 Sales Forecast
The following table and charts show our projected sales. We expect income to increase steadily over the next three years, as the reputation of the salon, its stylists and services become apparent to the general public. Second year revenues also anticipate the addition of one new stylist.
Note that we list no direct cost of sales here for services, only for products, since our service costs are more accurately tracked as regular monthly expenses for supplies in the Profit and Loss table.
| Sales Forecast | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | |||
| Owner | $49,600 | $57,040 | $65,696 |
| Stylist #1 | $49,600 | $57,040 | $65,596 |
| Barber #1 | $16,800 | $19,320 | $22,218 |
| Stylist #2 | $22,800 | $25,622 | $29,465 |
| Stylist #3 | $0 | $22,000 | $24,000 |
| Nails and massage | $18,000 | $20,000 | $22,000 |
| Product sales | $9,600 | $10,000 | $11,000 |
| Total Sales | $166,400 | $211,022 | $239,975 |
| Direct Cost of Sales | Year 1 | Year 2 | Year 3 |
| Product Costs | $4,320 | $4,300 | $4,400 |
| Other | $0 | $0 | $0 |
| Subtotal Direct Cost of Sales | $4,320 | $4,300 | $4,400 |
4.4 Milestones
Sample Milestones topic text.
The milestones table and chart show the specific detail about actual program activities that should be taking place during the year. Each one has its manager, starting date, ending date, and budget. During the year we will be keeping track of implementation against plan, with reports on the timely completion of these activities as planned.
| Milestones | |||||
| Milestone | Start Date | End Date | Budget | Manager | Department |
| Sample Milestones | 1/4/2008 | 1/4/2008 | $0 | ABC | Department |
| Finish Business Plan | 8/20/2010 | 9/19/2010 | $100 | Dude | Boss |
| Acquire Financing | 8/30/2010 | 10/19/2010 | $200 | Dudette | Legumers |
| Ah HA! Event | 9/9/2010 | 9/14/2010 | $60 | Marianne | Bosses |
| Ah Merde Alors! Event | 10/9/2010 | 10/14/2010 | $250 | Marionette | Bouc émissaire |
| Grande Opening | 10/19/2010 | 10/24/2010 | $500 | Gloworm | Nobs |
| Marketing Program Starts | 9/19/2010 | 10/14/2010 | $1,000 | Glower | Marketeers |
| Plan vs. Actual Review | 2/14/2011 | 2/21/2011 | $0 | Galore | Alles |
| First Break-even Month | 6/18/2011 | 7/18/2011 | $0 | Bouys | Salers |
| Hire Employees | 5/17/2011 | 6/16/2011 | $150 | Gulls | HRM |
| Upgrade Business Plan Pro | 8/5/2011 | 8/7/2011 | $100 | Brass | Bossies |
| Totals | $2,360 | ||||
Management Summary
Trend Setters will be organized and managed in a creative and innovative fashion to generate very high levels of customer satisfaction, and to create a working climate conducive to a high degree of personal development and economic satisfaction for employees.
Training classes to help improve employee product knowledge and skills will be conducted on a regular basis. As the business grows, the company will consider offering an employee benefit package to include health and vacation benefits for everyone.
5.1 Personnel Plan
The personnel plan calls for a receptionist who will greet customers and receive payments for services and products. There will be five hair stylists, one barber, one nail technician, one facialist, and a massage therapist. Everyone but the receptionist will be contract workers, and will be paid a sliding commission scale based on the amount of revenue created. Future plans include the hiring of a shampoo technician as the business expands.
In the first year, assumptions are that there will only be three hair stylists, a barber, and part time nail, facial, and massage technician until the business can build a reputation that will attract others to work there.
| Personnel Plan | |||
| Year 1 | Year 2 | Year 3 | |
| Owner (Stylist) | $24,000 | $25,000 | $26,000 |
| Receptionist | $14,400 | $15,120 | $15,876 |
| Shampoo Tech | $8,000 | $12,400 | $13,000 |
| Total People | 3 | 3 | 3 |
| Total Payroll | $46,400 | $52,520 | $54,876 |
Financial Plan
Our goal is to be a profitable business beginning in the first month. The business will not have to wait long for clients to learn about it since the stylists will already have an existing client base.
To assure the start-up funds lender that the owners are financially stable, a personal financial statement is enclosed illustrating other sources of income that include interest and dividend income from investments ($2,840), salary income ($29,658), and commission income ($15,000).
6.1 Important Assumptions
The financials that are enclosed have a number of assumptions:
Revenues will grow at an annual rate of 15%, increasing 20% in November and December due to a historical jump in revenues at this time of year. We anticipate this increase to stay steady throughout the following year to account for the normal flow of new clients coming into the salon. Estimates for sales revenue and growth are intentionally low, while anticipated expenses are exaggerated to the high side to illustrate a worst case scenario.
We did not use cost of goods sold in our calculations of net service sales, but included all related recurring expenses, such as payroll and supplies, in the operating expenses area of the profit and loss table. The only direct costs in the sales forecast are for projected product sales.
Product sales are a minimal part of our market. We are not quite sure how much revenue will be derived from products, so we took a low-ball approach and estimated sales of $800 a month. Also in the sales projections table are services such as nails and massages. We are not quite sure how much revenue these two services will generate. We are certain that in time these services will be a large part of our revenue, but to err on the conservative side, we estimate revenues from these services to be only $1,500 a month for the first year.
| General Assumptions | |||
| Year 1 | Year 2 | Year 3 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 10.00% | 10.00% | 10.00% |
| Long-term Interest Rate | 10.00% | 10.00% | 10.00% |
| Tax Rate | 30.00% | 30.00% | 30.00% |
| Other | 0 | 0 | 0 |
6.2 Projected Cash Flow
We expect to manage cash flow over the next three years simply by the growth of the cash flow of the business. The business will generate more than enough cash flow to cover all of its expenses.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $166,400 | $211,022 | $239,975 |
| Subtotal Cash from Operations | $166,400 | $211,022 | $239,975 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
| New Current Borrowing | $0 | $0 | $0 |
| New Other Liabilities (interest-free) | $0 | $0 | $0 |
| New Long-term Liabilities | $0 | $0 | $0 |
| Sales of Other Current Assets | $0 | $0 | $0 |
| Sales of Long-term Assets | $0 | $0 | $0 |
| New Investment Received | $0 | $0 | $0 |
| Subtotal Cash Received | $166,400 | $211,022 | $239,975 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $46,400 | $52,520 | $54,876 |
| Bill Payments | $99,540 | $128,730 | $147,285 |
| Subtotal Spent on Operations | $145,940 | $181,250 | $202,161 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $0 | $0 | $0 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $12,000 | $12,000 | $12,000 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 |
| Subtotal Cash Spent | $157,940 | $193,250 | $214,161 |
| Net Cash Flow | $8,460 | $17,772 | $25,814 |
| Cash Balance | $8,960 | $26,733 | $52,547 |
6.3 Break-even Analysis
The break-even analysis shows that Trend Setters has a good balance of fixed costs and sufficient sales strength to remain healthy. This calculation is focused on service sales, and excludes costs related to product sales. Our conservative forecast shows the salon just passing the break-even point throughout most of the first year, but we expect actual sales to be higher.
| Break-even Analysis | |
| Monthly Revenue Break-even | $12,995 |
| Assumptions: | |
| Average Percent Variable Cost | 3% |
| Estimated Monthly Fixed Cost | $12,657 |
6.4 Projected Profit and Loss
The following table shows our very conservative profit and loss projections for the next three years. The table includes the payments for all independently contracted stylists and technicians, as well for all regularly occurring supply expenses associated with service sales.
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $166,400 | $211,022 | $239,975 |
| Direct Cost of Sales | $4,320 | $4,300 | $4,400 |
| Other Costs of Sales | $0 | $0 | $0 |
| Total Cost of Sales | $4,320 | $4,300 | $4,400 |
| Gross Margin | $162,080 | $206,722 | $235,575 |
| Gross Margin % | 97.40% | 97.96% | 98.17% |
| Expenses | |||
| Payroll | $46,400 | $52,520 | $54,876 |
| Marketing/Promotion | $22,800 | $24,000 | $26,000 |
| Depreciation | $8,146 | $8,146 | $8,146 |
| Rent | $22,740 | $22,740 | $22,740 |
| Utilities | $4,200 | $4,200 | $4,200 |
| Insurance | $1,200 | $1,200 | $1,200 |
| Payroll Taxes | $0 | $0 | $0 |
| Independently contracted stylists | $40,400 | $55,000 | $69,000 |
| Supplies | $6,000 | $6,000 | $6,000 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $151,886 | $173,806 | $192,162 |
| Profit Before Interest and Taxes | $10,194 | $32,916 | $43,413 |
| EBITDA | $18,340 | $41,062 | $51,559 |
| Interest Expense | $5,542 | $4,392 | $3,192 |
| Taxes Incurred | $1,396 | $8,557 | $12,066 |
| Net Profit | $3,257 | $19,967 | $28,155 |
| Net Profit/Sales | 1.96% | 9.46% | 11.73% |
6.5 Projected Balance Sheet
As shown in the balance sheet, we expect a healthy growth in net worth.
| Pro Forma Balance Sheet | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $8,960 | $26,733 | $52,547 |
| Other Current Assets | $600 | $600 | $600 |
| Total Current Assets | $9,560 | $27,333 | $53,147 |
| Long-term Assets | |||
| Long-term Assets | $59,500 | $59,500 | $59,500 |
| Accumulated Depreciation | $8,146 | $16,292 | $24,438 |
| Total Long-term Assets | $51,354 | $43,208 | $35,062 |
| Total Assets | $60,914 | $70,541 | $88,209 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $9,057 | $10,717 | $12,230 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $9,057 | $10,717 | $12,230 |
| Long-term Liabilities | $49,917 | $37,917 | $25,917 |
| Total Liabilities | $58,974 | $48,634 | $38,147 |
| Paid-in Capital | $500 | $500 | $500 |
| Retained Earnings | ($1,817) | $1,440 | $21,407 |
| Earnings | $3,257 | $19,967 | $28,155 |
| Total Capital | $1,940 | $21,907 | $50,062 |
| Total Liabilities and Capital | $60,914 | $70,541 | $88,209 |
| Net Worth | $1,940 | $21,907 | $50,062 |
6.6 Business Ratios
Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) Index code 7231, Beauty Shops, are shown for comparison.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | n.a. | 26.82% | 13.72% | 7.35% |
| Percent of Total Assets | ||||
| Other Current Assets | 0.98% | 0.85% | 0.68% | 50.11% |
| Total Current Assets | 15.69% | 38.75% | 60.25% | 64.74% |
| Long-term Assets | 84.31% | 61.25% | 39.75% | 35.26% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 14.87% | 15.19% | 13.86% | 21.71% |
| Long-term Liabilities | 81.95% | 53.75% | 29.38% | 25.39% |
| Total Liabilities | 96.82% | 68.94% | 43.25% | 47.10% |
| Net Worth | 3.18% | 31.06% | 56.75% | 52.90% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 97.40% | 97.96% | 98.17% | 100.00% |
| Selling, General & Administrative Expenses | 95.45% | 88.50% | 86.43% | 67.01% |
| Advertising Expenses | 4.90% | 3.86% | 3.39% | 2.18% |
| Profit Before Interest and Taxes | 6.13% | 15.60% | 18.09% | 4.59% |
| Main Ratios | ||||
| Current | 1.06 | 2.55 | 4.35 | 1.97 |
| Quick | 1.06 | 2.55 | 4.35 | 1.46 |
| Total Debt to Total Assets | 96.82% | 68.94% | 43.25% | 53.38% |
| Pre-tax Return on Net Worth | 239.86% | 130.21% | 80.34% | 8.92% |
| Pre-tax Return on Assets | 7.64% | 40.44% | 45.60% | 19.14% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 1.96% | 9.46% | 11.73% | n.a |
| Return on Equity | 167.90% | 91.15% | 56.24% | n.a |
| Activity Ratios | ||||
| Accounts Payable Turnover | 11.99 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 28 | 28 | n.a |
| Total Asset Turnover | 2.73 | 2.99 | 2.72 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 30.41 | 2.22 | 0.76 | n.a |
| Current Liab. to Liab. | 0.15 | 0.22 | 0.32 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $503 | $16,616 | $40,917 | n.a |
| Interest Coverage | 1.84 | 7.50 | 13.60 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.37 | 0.33 | 0.37 | n.a |
| Current Debt/Total Assets | 15% | 15% | 14% | n.a |
| Acid Test | 1.06 | 2.55 | 4.35 | n.a |
| Sales/Net Worth | 85.79 | 9.63 | 4.79 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
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