the feasibility of opening a nail and beauty parlour in louth

7/28/2019 The Feasibility of Opening a Nail and Beauty Parlour in Louth

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The Feasibility of Opening a Nail and Beauty Parlour in Louth

Introduction============

The aim of this investigation is to explore the feasibility of openinga competitively priced Nail & Beauty Parlour aimed at a wide range ofconsumers of varying lifestyles and age groups.

A suitable location has been selected in the suburban town of Louth,Lincolnshire, directly opposite the bus station, with many bus stopsin the vicinity. Throughout the course of the investigation, variousmethods of Primary and Secondary research were adopted in order toevaluate whether the business was feasible.

The proposed location is approximatelysquare feet in size and will

cost 27 000pa to rent, with rates of roughly 14 000.

All required materials could be purchased from 'Sally's BeautyWarehouse in Grimsby, a town approximately 35 minutes away from Louthby car. They offer bulk purchasing of all products related to hair andbeauty at a discounted price and have a reputation for selling highquality products.

The business will be called 'LincsNail& Beauty Bar. It will have acontemporary design, in order to appear trendy and upmarket.

METHODOLOGY===========

Secondary Research Objectives

Objective 1

Discoverif the chosen location will generate sufficient custom, byassessing the competition in surrounding areas and conducting a SWOTanalysis of Louth.

This may be investigated by comparing the services offered bycompetitors to those of your own and conducting a foot count of thenumber of clients served at particular hours on particular days.

Objective 2

To discover the average number of women aged 15-65 residing, studyingor working in Louth.
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Objective 3

To determine the disposable incomes of women in these age groups.The information for the above two objectives, may be discovered from

demographic information obtained from the local library.

Objective 4

To determine the fixed and variable costs of running the businessincluding factors such as staffing costs and cost of materialsrequired.

Objective 5

Investigate the cost of advertising the new business.This may include method of above and below the line promotion andresearch into local radio, newspaper and leaflet drops must beconsidered.

Objective 6

Discover any relevant legislation that must be taken intoconsideration with regards to employment. It is essential that suchlegislation be followed as failure to comply could result in the

following:

It is the duty of the employer to assess any possible risks, implementthe necessary control measures and maintain sufficient records.

* Prohibition notices

* Public disclosure

* Bad publicity-acting as a deterrent for potential customers

* Increased insurance premiums

* Claims for compensation

Primary Research Objectives===========================


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Objective 1 - To determine the likely demand for nail treatment.

Objective 2 - To determine the additional beauty treatments demandedby the majority.

Objective 3 - To determine the prices that clients are willing to pay

for various treatments and how

regularly they will demand the treatment in order to determine to whatlevel stocks would need to be

held.

Objective 4 - To determine how many days a week and at which times theBar will attract the most

custom, to enable opening times to be planned around the optimum

demand times.

Primary Research Method=======================

After researching various methods of research and considering the timelimitation in which it must be compiled, it has been decided that asurvey is to be conducted in Louth using a random stratified quotaselection method of sampling of 100 women within specific age groupswhich will be recorded in a tally chart format (see appendix).

The two main concerns in sampling are how to choose the right peoplefor the interview and how many to interview. The four main methods ofsampling have been researched and this may be found in the appendix.The given information will also contribute to calculation of costs inObjective 4 of the secondary research.

Questionnaire and Results of Consumer Survey============================================

AGE:

15-20 41-45

21-25 46-50

26-30 51-55


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31-35 56-60

36-40 61-65

WHY ARE YOU CURRENTLY IN LINCOLNSHIRE?

Residing here Studying here

Working here Visiting

DO YOU/WOULD YOU CONSIDER HAVING NAIL AND/OR BEAUTY TREATMENT?

Yes No

IF SO, WHERE DO YOU CURRENTLY HAVE IT DONE?

Louth GrimsbyHorncastle Holton-le-Clay

Caistor Other

WHAT TREATMENT DO YOU/WOULD YOU CONSIDER HAVING?

1. Accrylic Nail Extensions

2. Manicure

3. Pedicure

4. Nail Art (airbrushing)

5. Threading (eyebrow, upper lip etc.)

6. Waxing (legs, arms, underarms etc)

7. Massage

HOW MUCH WOULD YOU BE WILLING TO PAY FOR THE ABOVE TREATMENTS?

5-10 10-20 20-30 30-40 40+

ON WHAT DAY WOULD YOU PREFER TO VISIT A NAIL &BEAUTY PARLOURAND ATWHAT TIME?

09.00-12.00 12.00-18.00 18.00-21.00
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Monday

Tuesday

Wednesday

Thursday

Friday

Saturday

HOW OFTEN DO/WOULD YOU VISIT A BEAUTY PARLOUR?

Twice Weekly

Weekly

Fortnightly

Monthly

Every other month

Special Occasions

Other

Results of Questionnaire========================

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By doing these charts I can make some clear conclusions from myresults. It appears that it is very feasible that my business can goahead and be profitable.

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SECONDARY RESEARCH RESULTS==========================

Objective 1===========

It was discovered that there is another Beauty Salon in Louth as wellas a number of hairdressers, which provide the manicuring service.Their prices however, are substantially higher than any that the LincsNail& Beauty bar is aiming to charge. This alone will enable it tocompete effectively.

Below are 2 comparative lists between the planned features of the Nail& Beauty Bar and the competitors in Louth:

Services exclusive to Lincs Nail & Beauty Bar:

o Threading - a more accurate method of hair removal that is aspecialized skill originating in India. Creates a better shape ofeyebrow and is a relatively speedy method of treatment. Very cheap toperform as it simply requires a small length of thread and some talcumpowder.

o American style nail art (airbrushing) creates intricate patterns on


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ones nail in varying colours and styles. A hugely fashionable featurewith teenagers and adults alike. It is likely that once a client comesfor a specific treatment such as airbrushing, they can be convinced toreturn for other treatment relating to the nails such as nailextensions.

o All services provided by the competition will be provided at a lowerprice by the Nail & Beauty Bar hence attracting a large proportion ofthe extensive teenage population that study in the surrounding area.

Services provided by Louth competitors:

o Hair cuts and colours

o Electrolysis

o Facials and skin treatments

A foot count was collected outside the Beauty Salon of the Louthcompetitor and outside the Nail Salon of the greatest nail treatmentcompetitor, which is in Grimsby. Each was observed for a period of onehour, three times throughout the day on a Wednesday and Saturday. Theresults are as follows:

TIME/DAY NUMBER OF PEOPLE IN

Louth / Grimsby

09.00 -10.00 Wednesday 6 /2Saturday 11 /2

12.00-13.00 Wednesday 19 /4Saturday 30 /5

16.00-17.00 Wednesday 25 /2Saturday 30 /3

S.W.O.T Analysis of Louth and Location of Premises.

Strengths:

o Wealthy area in which disposable incomes are high


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o Situates two all girls private schools from which the students alsohave relatively high disposable incomes. Also surrounded by numerousmixed schools providing a large number of clientele during the week.

o Premises directly opposite a bus station and surrounded by bus stops

from various routes, hence enabling easy access to the Bar. Plenty ofcar parking spaces available.

o The premises have many large windows and an open plan, locateddirectly in the centre of the town, providing much opportunity toentice custom via interior design.

Weaknesses:

o Is not a large retailing town such as Grimsby, and therefore most

people who will know of its existence will be those who frequentlyvisit Louth, unless a large budget is set aside for advertising. Alsodue to this, people may prefer to go to Grimsby as they can see amovie and do some shopping while they are there.

o Limited parking space available

Opportunity:

There is an opportunity to completely dominate the market of Louth and

the small surrounding towns as the main service provided is modern,fashionable and the closest replicating service is in Horncastle. Ontop of which it will be the most competitively price though this mayrequire the adoption of penetration pricing until customer loyalty isestablished.If market domination is established there is and opportunity to expandthe range of services to include new and radical skin treatments andbring the big town salon treatments to the suburbs.

Threats:The main threat comes from current competitors who may also aim to

slash prices, if this is the case, the Lincs Nail & Beauty Bar mayhave to rely on their product differentiation and customer relationsalone to help them survive.

See Maps located in the appendix.

Objectives 2 & 3

In order to discover how many women reside in the area or Louth and


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what their disposable income is, information was extracted from ademographic study and can be seen in following pages.

There are two private all girls schools in Louth, each holdingapproximately 1000 girls aged 12-18 years old.

The women working in the town centre were counted and amounted toroughly 65.Whilst the disposable income of these working women does not amount toa significant amount, the disposable income of the girls studying inthe area is unusually high due to many coming from wealthy backgroundswho receive money from their families instead of or, as well asearning their own.

The total resident population of women aged 16-59 in Louth, amounts toroughly 5205 according to the 1991 census, the proportion of which areeconomically active as follows, according to the 1981 census:

Full time employees - 38.59%Part time employees - 16.5%Self employed - 5.82%

Objective 4===========

Rent: Twenty Seven thousand pounds per annum, of which approximately

6750 must be paid within the first 3 months.

Business Rates: The average business rates would come to around14000.

Decoration Cost: The actual layout of the shop currently is suitable,with a large open plan main area in which the nail treatment may beperformed. There are also two back rooms available for additionaltreatment. The main decorative feature will be the mirrored walls toenable the bar to appear larger than it is. Additional decorativefeatures are the aquarium and lava lamps. The total costs amount to

about 2000.

First time customer bonus: In order build good customer relations, anoffer of a complementary glass of wine with all treatment above 5will be available in the opening week of the Bar. 200 has beenset-aside for this.

Equipment and Furniture cost: As calculated from the prices collectedat Sally's Hair and Beauty World (see Appendix). Total cost amounts to


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approximately 1853.98.

Staffing costs: it has been decided to have the Bar open for a totalof 48 hours a week at times varying to suit the majority of clientele(see Primary research). 10 nail technicians and 2 beauticians arerequired. They will be paid 5/hour. Assuming that the Bar will be

open 50 weeks a year, costs amount to 144000 per annum.

Objective 6

Health & Safety Legislation

Health & Safety at Work Act 1974 - brings together all pastlegislation that protected employees from hazardous conditions.

Race Relations Act 1970 - aims to protect individuals against

discrimination on the grounds of race, colour, nationality or ethnicorigin.

Equal Pay Act 1970 - states that women performing a similar job to menshould be treated equally in every way. This includes pay, workconditions and also opportunity for promotion and recognition.Employment Protection Act 1975 & 1978 - (original act amended in 1978)requires employers to provide employees with a contract within 13weeks of commencement of employment.

TOTAL COSTS

FIXED COSTS

Rent

27 000

Business Rate

14 000

Maintenance

2 000

Insurance

1 000


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Equipment & Furniture

1 854

Staff Cost

144 000

Bonus

2 00

Heating & Lighting

5 500

Decoration

2 000

Advertising

10 000

Total Fixed Costs

207 554

PRIMARY RESEARCH - ANALYSIS OF THE CONSUMER SURVEY==================================================

It was evident during the collection of the primary researchinformation that there was an extremely large, non-resident populationof 15-18 year olds, due to the two girls only private schools in thearea. There were also a large number of females shopping in the towndue to the many residential homes.

Whilst it can be assumed that the high proportion of pensioners in the

area may not have sufficient disposable income to spend in the Bar, itcan also be assumed that this will be compensated for by the ratherhigh disposable incomes of the school girls. A discount for pensionersand students with NUS card may be considered once the business is wellestablished in the community.

Pie chart to show the current outlets favoured by the consumersinterviewed


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It is evident from the chart and the foot count performed previously,that the main competitor in the nail service, is in Grimsby. As Louthis a significant distance away from Grimsby - some 12 miles, the Barwill be opening the door for a whole new range of customers andhopefully develop the custom those living in the area that previouslyvisited the Grimsby store.

It is also evident from the survey conducted, that demand for thetreatment offered is not consistent throughout the day, everyday. Itis therefore not profitable to remain open from 09.00 - 17.00 everyday if it would prove beneficial to the business to be open from 12.00- 21.00 on particular days throughout the week.

The feedback compiled suggests that the following opening times shouldbe tried provisionally:

Monday - 09.00 - 12.00Tuesday - 09.00 - 18.00Wednesday - 12.00 - 21.00Thursday - 12.00 - 21.00Friday - 09.00 - 21.00Saturday - 09.00 - 18.00Sunday - Closed

Profit and Loss===============

This is a forecasted profit and loss that will follow the principle ofcaution and understate the forecasted sales, from the estimated 66 of100 people (see survey) to 20% of the population of women in

Louth spending an average of 20 a week, therefore 240 a year.

FORECASTED PROFIT AND LOSS ACCOUNT FOR THE 'LINCS NAIL & BEAUTY BARFOR ONE

YEAR AT 20%

Sales Revenue

249,840

Cost of Goods Sold


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3,537

Gross Profit

246,303

(Expenses)

Rent

27,000

Maintenance

2,000

Insurance

1,000

Wages

144,000

Rates

14,000

Decoration

2,000

Opening of store

200

Advertising

10,000

Lighting & Heating

5,500


1,854

Depreciation 25%


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464

Interest

208,018

Net Profit

38,285

The following profit and loss calculates an estimated sales turnover,based on 66% of the population of women in Louth using the service.This is an optimistic view estimating the probable maximum profit thatcan be achieved.

FORECASTED PROFIT AND LOSS ACCOUNT FOR THE 'LINCS NAIL & BEAUTY BARFOR ONE YEAR

AT 66%======

Sales Revenue

824,472

Cost of Goods Sold

3,537

Gross Profit

820,935

(Expenses)

Rent

27,000

Maintenance

2,000


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Insurance

1,000

Wages

144,000

Rates

14,000

Decoration

2,000

Opening of store

200

Advertising

10,000

Lighting & Heating

5,500


1,854

Depreciation 25%

464

Interest

208,018

Net Profit

612,917

This profit and loss assumes that the sales turnover will be generatedby an average of the previous assumptions - 40% of the population ofwomen in Louth. This takes into account both the optimistic andpessimistic forecasts for profit and loss, and also considers the fact


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that not all the potential clients are residents in Louth.

FORECASTED PROFIT AND LOSS ACCOUNT FOR THE 'LINCS NAIL & BEAUTY BARFOR ONE YEAR

===================================================================

AT 40%======

Sales Revenue

499,680

Cost of Goods Sold

3,537

Gross Profit

496,143

(Expenses)

Rent

27,000

Maintenance

2,000

Insurance

1,000

Wages

144,000

Rates

14,000


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Decoration

2,000

Opening of store

200

Advertising

10,000

Lighting & Heating

5,500


1,854

Depreciation 25%

464

Interest

208,018

Net Profit

288,125

Flow Chart

Such a diagram shows how long it will take to actively start up thebusiness and enables easier planning of the opening activities andwaste less time, therefore operating expense.

Identify and decide on Approximately 2 weeks

Suitable premises

Raise sufficient funds Approximately 20 days

Planning Permission Approximately 85 days


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Redecorate the premises Maximum 3 weeks

Set up equipment and 1 dayFurniture

Advertising Approximately 20 days

Open the Shop Approximately 6 months

Analysis of the Research========================

In order to start the business, it has been calculated that an initialinvestment of approximately 83000 is required (assuming that thewages and rent is paid for the first quarter only). The owner of thebusiness has inherited 10000 from her grandmother. She has the optionto raise the rest of the funds required by either taking out a loan atthe bank, or selling shares in the business to family and friends. Atpresent, interest rates at the bank are relatively low, meaning thatthe owner will be paying less interest on the money borrowed, whichproves to be more profitable to the business and improves cash flow.However, there is no interest payable to shareholders as such, whichis beneficial to a business starting up, as it reduces the risk ofincreasing debts before a profit is shown. Shareholders, however, are

owed dividends and in the long run, the business may be paying outmore in this way, than if they had taken a loan, on top of which,entering into a business relationship with friends and family maystrain relations through disputes about the business.

There are many benefits to opening the Bar in Louth such as:

Lack of competition - there is a lack of similar services provided in,or in directly surrounding areas.

Competitive Pricing - those that do provide some of the services

available at the Bar, do so at a substantially higher fee, on average,30-50 a visit, whilst the Bar aim to provide service of the same, orbetter standard for approximately 20-35 a visit. As the forecastedprofit and loss accounts show, even at this price, costs can becovered comfortably and if the Bar generates a strong customerfollowing, prices may be raised at Christmas and peak holiday seasonsfor example.

Product - the services being offered are well differentiated in its


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market of beauty treatment, as it offers specialist services such asnail art and threading, which are continuously increasing inpopularity with women of all ages. There is also the option to expandinto ear piercing or men's treatment, once the Bar is wellestablished. Research has show that the huge surge in demand for nailart and extensions is not believed to be a fad. Similar behaviour was

experienced in America nearly a decade ago, and popularity for nailbars there has only strengthened. It is now perceived to women to beas essential to women as a hair cut within their grooming routine.

Advertising - advertising is an essential factor in the prosperity ofthe business. Due to the fact that Louth is not a well-known town, theBar requires much publicity to attract the custom of those insurrounding areas. 10 000 will therefore be spent on advertising.4000 on the local newspaper, 5000 on Lincs FM and 1000 ondistribution of flyers to surrounding areas.

Methodology===========

I believe that the majority of the research conducted was as accurateas possible. The demographic information taken from the most recentCensus was produced in 1991 and it can be assumed that the maindifference in recent data would be an increase in population as morehouses and flats have been built in the area. Comparison between the1981 and 1991 Census also shows a huge increase in the size of thepopulation. I also believe that the questionnaire conducted in Louth

produced inaccurate results as it is unreasonable to say that over 60%of women would be willing to have such beauty treatment. I believethat this anomaly arose due to only 100 people being questioned. If Ihad more time to compile my research, I would interview a greateramount and range of people for example, devise a specialisedquestionnaire for students alone as they make up a large proportion ofthe daytime population of Louth.

It must also be taken into consideration however, that regardless ofthe amount of research conducted, there may be many unforeseeablecircumstances that could affect the profitability of the business,

external factors such as a downturn in the economy.

Conclusions===========

After conducting all relevant research and taking into considerationany anomalous data as well as examples of such businesses success in


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the U.K. and abroad, I believe that there is a great chance of successin for the Lincs Nail & Beauty Bar. Research shows that there isalready substantial demand for the services offered and continuationof this would enable the Bar to expand further and possibly openanother branch elsewhere, or even consider the idea of openingconcession branches within well established stores such as Fenwick or

Selfridges.

From the graphs compiled it is evident that the average amount one iswilling to spend on treatment per visit is 20 and the averagedisposal income of the locals residents can more than comfortablyaccommodate this.

Suitably trained staff is the most important factor in establishing asuccessful business, especially in a service-orientated business suchas the Bar. Due to the fact that they have specialist skills, theymust be paid above the minimum wage and though they incur the highest

cost within the business, this compensated by low costs of materials.Along with the skills they have learnt, they must have excellentcommunication skills and build up a strong relationship with theclients in order to deter them from going elsewhere.

The business may have been even more profitable if set up in Grimsby,a town that attracts many people due to the large shopping centre.There is however much more competition in that area and lowerdisposable incomes amongst the residents.

SUMMARY=======

Chance of Success

After studying the various forecasted profit and loss accounts, it isevident that the business has the potential to be extremelyprofitable, if all other factors run accordingly.

The supplier has come highly recommended by various beauticians withinsurrounding areas as having almost 100% reliability and due to the

fact that it is so close to Louth, delivery costs are avoided as amember of staff could easily collect the material required. The onlyforeseeable problem in this area is external. A change in exchangerates may increase the price of supplies, as they are all imported.

Advertising will also play an important role in the establishment tothe business and advertising in the local paper and on the localradio, will make many residents aware of the presence of the Bar.Flyers will reinforce this within the minds of the residents. Excess


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advertising is not required as the location of the Bar is such that itis clearly viewed by many as its location is optimal, directly in thecentre of town.

The dcor of the Bar is such to attract the attention of all passingby. The aquarium and lava lamps create a funky yet relaxing atmosphere

and will compliment its modern, spacious design.

Evaluation.

The main restriction I experienced was that of time. If I had theoption to redo the project, the main area I would correct would bethat of the questionnaires. I would take a much larger sample, ofperhaps 400 and even investigate the demand for beauty treatment bymen. From the project I have compiled however, not taking intoconsideration external factors, the idea of opening a Nail & BeautyBar in Louth is definitely feasible. The forecasted profits are

extraordinary mainly due to the low costs incurred and if such asimple idea could generate such large sales turnover, it may not be abad idea to make the idea of the 'Lincs Nail & Beauty Bar a reality!

APPENDIX

A Map of the Proposed Location for the 'Lincs Nail & Beauty Bar.

Various Methods of Sampling

===========================

Random Sample=============

* Random sampling involves selecting respondents to ensure thateveryone in the population has an equal chance of beinginterviewed. Achieving a totally unbiased sample requires carefulthought.

* Research companies use the following methods:Pick names at random from the electoral register, e.g. every 100thname.Send the interviewer to the address given on the registerIf person is out, visit twice more before giving up (to maximizechances of catching those who lead very busy lives and are rarelyhome.


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* The method is very effective, but slow and costly.

Quota Sample

Quota sampling involves selecting interviewees in proportion theconsumer profile within the target market, for example, in the case of

the Bar, equal numbers of women within the specified age groups.This method enables interviewers to question anyone who walks down thestreet as long as they achieve the correct the quota and they caninterview as when and where they want.This is the most commonly used method of sampling because it isrelatively cheap and effective.

Stratified Sample

Stratified sampling involves only interviewing those with a keycharacteristic required for the sample e.g. only women interviewed

with respect to the Bar. Within this section of the population,individuals can be found at random, or by setting quotas based onfactors such as social class and region.

Cluster Sample

Cluster sampling is the process of sampling within a specified areaonly. E.g. in a selected seaside resort (for swimwear). This is not acommon form of sampling.

the feasibility of opening a nail and beauty parlour in louth

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