Man3147 | Business Plan | Assessment Answers

Write a report on quality services.

Style n’ smile is a beauty salon that provides all the salon services by satisfying its customer through quality services, friendly environment in lower prices. In addition to this, it will also establish a fair, friendly, as well as innovative environment by keeping in mind the ideas, hard work and diversity.

The mission of the salon is to supply those products and services that will help in relaxing the mind of customer’s as well physical appearance at the same time. Besides this, the motive of salon is to provide the trending services. After taking the time of six month, salon is able to find the good location. After finding this, it is right time to start the new venture. The dream of owner to start the salon in future by serving as high profession has h the dream true by opening this salon.

Mohamed, who is co-owner with Ahmed worked in a well-known and renowned salon which is on larger scale in Dubai, UAE. Due to working for last two year, Mohamed has good contact with various clients. It is also known for the dedication and hard work. Mohamed as well as hard working team of beauticians has made the venture successful. In future, the salon is expecting the growth by connecting with new clients as well as by getting the support of beauticians. Therefore, in order to achieve this objective, salon is going the seek the loan for financing. Further, the loan will be paid through cash flows of the business backed by the experience, characters as well as guarantees.

Key of success

The reasons of success of business is as follows-

1. Environment- ensuring the customers great service with relaxing  and positive environment at salon. It also ensures the professional service to its customers.
2. Location- Salon is located at the easy accessible location for the customers.
3. Reputation- Due to its best services by the staff and reputation of owner, it is achieving great success.
4. Wide variety of products and services- Offering the customers wide range of services in affordable prices.

Company

Style n’ Smiles offers the wide range of products as well as services related to beauty. It also provides the nail and skin services, improvement in hair quality besides proving the best beauty products. Style n’ smile believes that its commitment in providing wider range of services at best location is the reason that keeps it apart from the competitors. The salon will be located in Dubai mall which will include the 1,540 square feet of space. It has chosen the best location in the Dubai which is one of the busiest mall. In addition to this, it is accessible across almost part of town.

Start-up

After the research of too many months for purchasing of salon, owner decided to initiate the idea of salon in ground. For this, start-up capital will be used in improving the condition, purchasing the equipment of salon as well as for design. The leasehold improvement was estimated approximately AED119, 06000, and the cost for equipment will cost approximately AED99, 360. In addition, the owner will also invest the cash of AED840 at starting.

Start-up Expenses
Rent deposit	AED 6,687
Other	AED 0
TOTAL START-UP EXPENSES	AED 6,687
Start-up Assets
Cash Required	AED 1,840
Other Current Assets	AED 2,208
Long-term Assets	AED 218,960
TOTAL ASSETS	AED 223,008
Total Requirements	AED 229,695

 

START-UP FUNDING
Start-up Expenses to Fund	AED 6,687
Start-up Assets to Fund	AED 223,008
TOTAL FUNDING REQUIRED	AED 229,695
Assets
Non-cash Assets from Start-up	AED 221,168
Cash Requirements from Start-up	AED 1,840
Additional Cash Raised	AED 0
Cash Balance on Starting Date	AED 1,840
TOTAL ASSETS	AED 223,008
Liabilities and Capital
Liabilities
Current Borrowing	AED 0
Long-term Liabilities	AED 227,854
Accounts Payable (Outstanding Bills)	AED 0
Other Current Liabilities (interest-free)	AED 0
TOTAL LIABILITIES	AED 227,854
Capital
Planned Investment
Owner	AED 1,840
Investor	AED 0
Additional Investment Requirement	AED 0
TOTAL PLANNED INVESTMENT	AED 1,840
Loss at Start-up (Start-up Expenses)	(AED 6,687)
TOTAL CAPITAL	(AED 4,846)
TOTAL CAPITAL AND LIABILITIES	AED 223,008
Total Funding	AED 229,695

Products and Services

Style n’ smiles offers the wide arrange of products and services that includes the:

• Hair- In this, it will provide the cutting, colors, perms, shampoo, relaxer, conditioning, reconstructing, curling as well as waving.
• Nails-in this, it includes polish, pedicure, manicures and sculptured mails.
• Skin care- it includes the Body waxing, European facials as well as massage.

Strategy and implementation

Innovative services, better customer service and friendly environment at salon is necessary for implementing the business plan.

Competitive edge

In order to set the salon apart from other salons who only offers some of the products and services, it has decided to offer the wider range of products and services. Due to the experience of Mohamed in other salon, it interpreted that clients remain frustrated due to availing of one service from other and other service from another. They have to go to one salon for nail and other salon for hair. Therefore, Style n’ smiles has decided to offer all the services at one place so that customer feel delighted.

There are several other salons like our salon but they are situated in high income areas of Dubai. We are not aiming to compete with those. The desire is only to offer those services to customers who cannot afford to avail those luxury service. For fulfilling’s this aim, our environment of salon will be so much relaxing. In addition to this, soft drinks will be offered to the clients. Televisions will also be there in the salon in the waiting area.

 

Marketing strategy

Style n’ smiles salon marketing mix is too simple. It is just satisfying the customers by using best marketing tools. It is simple whenever any client will leave the business by satisfaction, it will definitely recommend it to everyone by our quality. Most of the clients are the referrals from our current clients.

There is no such advertising campaign. We have done lot of research and it is founded that word of mouth is the best method to so publicity of the business. However, we will offer some special offers in a week. In addition, we will also give the discount to those clients who will approach clients. A lottery system is also planned in which we will offer a trip. For getting lottery, client will offer a client and we will put a card in a box in the name of each client person will bring. In this way, there will be more chances of lottery if they will bring more clients.

Sales forecasting

The charts and tables that are presented below will show our projected sales. We are expecting to increase the flow of income in the upcoming three years due to its quality services. Some revenues are also expected in the second year. We do not list any direct cost for services. As the service cost are already tracked in the regular monthly expenses.

SALES FORECAST
	YEAR 1	YEAR 2	YEAR 3
Sales
Owner	AED 182,528	AED 209,907	AED 241,761
Stylist #1	AED 182,528	AED 209,907	AED 241,761
Barber #1	AED 61,824	AED 71,097	AED 81,762
Stylist #2	AED 83,904	AED 94,288	AED 108,431
Stylist #3	AED 0	AED 80,960	AED 88,320
Nails and massage	AED 66,240	AED 73,600	AED 80,960
Product sales	AED 35,328	AED 36,800	AED 40,480
TOTAL SALES	AED 612,352	AED 776,560	AED 883,108
Direct Cost of Sales	Year 1	Year 2	Year 3
Product Costs	AED 15,897	AED 15,824	AED 16,192
Other	AED 0	AED 0	AED 0
Subtotal Direct Cost of Sales	AED 15,897	AED 15,824	AED 16,192

Milestones

Charts and tables of milestones show the specific detail regarding all the program activities that will take place in the whole year. Each activity has its starting date, manager, ending date as well as allocated budget. After the completion of the activity, proper check will be done regarding the completion of work.

MILESTONES
Milestone	Start Date	End Date	Budget	Manager	Department
Sample Milestones	1/4/2018	1/4/2018	AED 0	AHMED	Department
Finish Business Plan	8/20/2018	9/19/2018	AED 368	MONA	Boss
Acquire Financing	8/30/2018	10/19/2018	AED 736	ZAHRAA	Legumes
Ah HA! Event	9/9/2019	9/14/2018	AED 220	MARYAIM	Bosses
Ah Merde Alors! Event	10/9/2018	10/14/2018	AED 920	MARYA	Marketer
Grande Opening	10/19/2018	10/24/2018	AED 1840	MOHAMED	Nobs
Marketing Program Starts	9/19/2018	10/14/2018	AED 3680	GAWAHER	Marketers
Plan vs. Actual Review	2/14/2019	2/21/2019	AED 0	VALLERY	Planner
First Break-even Month	6/18/2019	7/18/2019	AED 0	ALLAN	Sales
Hire Employees	5/17/2019	6/16/2019	AED 552	ASHRAF	HRM
Upgrade Business Plan Pro	8/5/2019	8/7/2019	AED 368	AMONA	Bossies
Totals			AED 8,685

Management

Style n’ Smiles salon will be managed and systematized in very innovative as well as creative way in order to maximize the customer’s satisfaction. In addition, it uses innovative fashion to creative such working climate which also economically satisfy the employees.

Training is also an important element in the salon. Various training programs are conducted to improve the skills of employees on regular basis. When the business grows, company will offer the various benefits and packages of vacations and health for each one.

Personnel Plan

It includes the receptionist who will politely handle the customers as well as take the payment of services and products they avail. There will be one barber, five to six stylists for hair, one facialist, one nail technician, and one or two massage therapist. Among all, receptionist work will be to contact the customers and it is something commission based work based on the revenue that salon will get. The future plan is to hire the shampoo technician whenever the business will grow.

In the initial year, assumptions are of a barber, three hair stylist, part time facial, nail and massage technician till the business get a high reputation for attracting others to work in salon.

PERSONNEL PLAN
	YEAR 1	YEAR 2	YEAR 3
Owner (Stylist)	AED 88,320	AED 92,000	AED 95,680
Receptionist	AED 52,992	AED 55,642	AED 58,424
Shampoo Tech	AED 29,440	AED 45,632	AED 47,840
TOTAL PEOPLE	3	3	3
Total Payroll	AED 170,752	AED 193,274	AED 201,944

Financial plan

In the first month, our salon objective is to earn some profit. The important thing is that salon is not required to wait for long since the stylist already has some clients in their list. For assuring the financial stability of owner, financial statement is surrounded which includes the dividend income as well income from investments (AED 10,451), commission income (AED 55,200), and salary (AED 109, 141).

Important assumptions

All the financials enclosed have various assumptions:

Revenue is estimated to increase 15% annually by increment of 20% in November as well as December due to jump in revenue in this year. We are also anticipating the increase to continue grow through the coming years due to increase in the new clients at salon. The estimation for growth and revenue are decided intentionally low whereas estimated expenses are inflated high in order to show the worst case.

We do not use the “cost of goods sold” in doing the calculation of net service sales. However, it will include the frequent expenses like supplies, payroll in the area of operating expenses (profit and loss table).

Sales of product are at minimal in our market. Salon is not sure regarding the money that will be receive from products so we have took estimation of low ball approach by estimating the sales of AED2,944 per month. In the projected sales table, Services reading massage and nail are included. We are also not sure regarding the revenue that this revenue will generate. Therefore, the estimation of revenue from these services are estimated at AED 5,520 per month in the initial 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

Projected cash flow

Our salon is expecting the management of cash flow In the next three by growing the cash flow of business. The salon business will generate the enough cash flow that covers the expenses.

PRO FORMA CASH FLOW
	YEAR 1	YEAR 2	YEAR 3
Cash Received
Cash from Operations
Cash Sales	AED 612,352	AED 776,560	AED 883,108
SUBTOTAL CASH FROM OPERATIONS	AED 612,352	AED 776,560	AED 883,108
Additional Cash Received
Sales Tax, VAT, HST/GST Received	AED 0	AED 0	AED 0
New Current Borrowing	AED 0	AED 0	AED 0
New Other Liabilities (interest-free)	AED 0	AED 0	AED 0
New Long-term Liabilities	AED 0	AED 0	AED 0
Sales of Other Current Assets	AED 0	AED 0	AED 0
Sales of Long-term Assets	AED 0	AED 0	AED 0
New Investment Received	AED 0	AED 0	AED 0
SUBTOTAL CASH RECEIVED	AED 612,352	AED 776,560	AED 883,108
Expenditures	Year 1	Year 2	Year 3
Expenditures from Operations
Cash Spending	AED 170,752	AED 193,273	AED 201,943
Bill Payments	AED 366,307	AED 473,726	AED 542,008
SUBTOTAL SPENT ON OPERATIONS	AED 537,059	AED 667,000	AED 743,952
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out	AED 0	AED 0	AED 0
Principal Repayment of Current Borrowing	AED 0	AED 0	AED 0
Other Liabilities Principal Repayment	AED 0	AED 0	AED 0
Long-term Liabilities Principal Repayment	AED 44,160	AED 44,160	AED 44,160
Purchase Other Current Assets	AED 0	AED 0	AED 0
Purchase Long-term Assets	AED 0	AED 0	AED 0
Dividends	AED 0	AED 0	AED 0
SUBTOTAL CASH SPENT	AED 581,219	AED 711,160	AED 788,112
Net Cash Flow	AED 31,132	AED 65,400	AED 94,995
Cash Balance	AED 32,972	AED 98,377	AED 193,372

Break even analysis

The break-even analysis depicts that Style N’ Smiles has enough balance of fixed costs as well as well good sales in order to grow. This calculation focuses on the service sales as well as excludes cost related to the sales of products. Our salon has forecasted that the salon will pass the breakeven analysis in the initial year but we are expecting the actual sales a bit higher.

BREAK-EVEN ANALYSIS
Monthly Revenue Break-even	AED 47,821
Assumptions:
Average Percent Variable Cost	3%
Estimated Monthly Fixed Cost	AED 46,577

Projected Profit and Loss

The table showed below shows the profit and loss for the coming three years. Therefore, table includes all the payment for contracted stylist independent, supply expenses recurring regularly, as well as expenses of technicians.

 

PRO FORMA PROFIT AND LOSS
	YEAR 1	YEAR 2	YEAR 3
Sales	AED 612,352	AED 776,560	AED 883,108
Direct Cost of Sales	AED 15,897	AED 15,824	AED 16,192
Other Costs of Sales	$0	$0	$0
TOTAL COST OF SALES	AED 15,897	AED 15,824	AED 16,192
Gross Margin	AED 596,454	AED 760,736	AED 866,916
Gross Margin %	97.40%	97.96%	98.17%
Expenses
Payroll	AED 170,752	AED 193,273	AED 201,943
Marketing/Promotion	AED 83,904	AED 88,320	AED 95,680
Depreciation	AED 29,977	AED 29,977	AED 29,977
Rent	AED 83,904	AED 83,904	AED 83,904
Utilities	AED 15,456	AED 15,456	AED 15,456
Insurance	AED 4,416	AED 4,416	AED 4,416
Payroll Taxes	AED 0	AED 0	AED 0
Independently contracted stylists	AED 148,672	AED 202,400	AED 253,920
Supplies	AED 22,080	AED 22,080	AED 22,080
Other	AED 0	AED 0	AED 0
Total Operating Expenses	AED 558,940	AED 639,606	AED 707,156
Profit Before Interest and Taxes	AED 37,513	AED 121,130	AED 159,759
EBITDA	AED 67,491	AED 151,108	AED 189,737
Interest Expense	AED 20,394	AED 16,162	AED 11,746
Taxes Incurred	AED 5,137	AED 31,489	AED 44,402
Net Profit	AED 11,985	AED 73,478	AED 103,610
Net Profit/Sales	1.96%	9.46%	11.73%

Projected Balance Sheet

As shown in the balance sheet, salon is expecting the healthy growth.

PRO FORMA BALANCE SHEET
	YEAR 1	YEAR 2	YEAR 3
Assets
Current Assets
Cash	AED 32,973	AED 98,377	AED 193,372
Other Current Assets	AED 2,208	AED 2,208	AED 2,208
TOTAL CURRENT ASSETS	AED 35,180	AED 100,585	AED 195,580
Long-term Assets
Long-term Assets	AED 218,960	AED 218,960	AED 218,960
Accumulated Depreciation	AED 29,977	AED 59,954	AED 89,931
TOTAL LONG-TERM ASSETS	AED 188,983	AED 159,005	AED 129,028
TOTAL ASSETS	AED 224,163	AED 259,591	AED 324,609
Liabilities and Capital	Year 1	Year 2	Year 3
Current Liabilities
Accounts Payable	AED 33,330	AED 39,438	AED 45,006
Current Borrowing	AED 0	AED 0	AED 0
Other Current Liabilities	AED 0	AED 0	AED 0
SUBTOTAL CURRENT LIABILITIES	AED 33,330	AED 39,438	AED 45,006
Long-term Liabilities	AED 183,694	AED 139,534	AED 95,374
TOTAL LIABILITIES	AED 217,024	AED 178,973	AED 140,380
Paid-in Capital	AED 1840	AED 1840	AED 1840
Retained Earnings	AED 6,689	AED 5,299	AED 78,777
Earnings	AED 11,986	AED 73,478	AED 103,610
TOTAL CAPITAL	AED 7,139	AED 80,617	AED 184,228
TOTAL LIABILITIES AND CAPITAL	AED 224,163	AED 259,591	AED 324,609
Net Worth	AED 7,139	AED 80,618	AED 184,228

Business Ratios

All the business ratios are shown below. Profile ratios of industry based on the SIC that is Standard Industrial Classification in Beauty shops and United Arab Emirates are shown below 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