Operations and Finance of Young Hair Studio - Business Plan Example

Young Hair Studio Business plan Operations & Finance Zhiliang Han Operations & Finance Space and equipments Young hair studio requires a numberof equipments to facilitate its operations. The following are the list of items required to facilitate a smooth operation. Combs and brushes, Trimming scissors, Hair clippers, Curling iron and comb ($ 920) Hairs straightener, Hot roles and Mixing bowls ($ 1050) Water sprayers- (15 @ $ 50 = $750) Toiletry (soap, shampoo, sanitizers, toilet paper, towels)- ($ 200 per month) Office equipments Cash register- ($ 1000) Furniture (front desk, waiting are chairs, station furniture and customer chairs)-$ 2000 Telephone-(200 per month) (Virgin mobile, 2014) Computer- Owned ($ 1000) Vehicle- owned ($10000) Other equipment Cleaning supply- ($ 200 per month) Surveillances equipment- ($ 550) Uniform- $ 540 (Statistic Canada, 2013) There exist a number of renovations and maintenance to be undertaken; these renovations will be aimed at utilizing on the idle capacity and increase future revenue collections. They include Car maintenance and fueling – ($1200 including $250/month on fuel) Furniture maintenance ($ 450) Warehouse renovation ($ 1000) Working space rehabilitation ($ 800) Floor plan Methods and procedures The customer will be required to seek assistance from the customer care desk. He or she will be briefed of the number of service offered at the salon with available pricing list being outlined. The customer will then be given the liberty of choosing whatever suits his or her preference and budget. The customer will then be issue with a card indicating the person to serve him and at what location. Upon completion, the customer will be asked to visit the register both for payment. Mode of payments may be either cash or credit cards. Upon a completed transaction, the customer will be requested to offer feedback on the service and at the same time offered the opportunity to provide contact information that would be beneficial while offering sales promotions and discounts. The customer service desk will be mandated to collect complaints from customers and forwards them to the management for actions to be taken. The customer contact sheet will be an important element in responding to personal complaints including refunds. A supervisor will be mandated to ensure a smooth operation at the salon with bottlenecks associated with fatigue and limited staff being directed to the management and an action plan drawn within the shortest of time. Below is a sample contact sheet to be used by the business. Young Hair Studio customer contact sheet Name Phone Email Gender Service(s) received Systems Records, invoices, payroll and other paper work will be facilitated by Microsoft Office software installed at computers in the salon. The move will be aimed at reducing the amount of paper used in record keeping. This will also increase accuracy and limit the space used in storing these vital documents. The MS office will be vital in designing and storing the documents. Feedback on these documents will be emailed to the business and payrolls and schedules would be emailed to employees and customer through the office server. A backup program will be designed by the management to prevent data loss. Printing of any document would be limited in an effort to reduce cost. Security software will be installed in the company’s computer to prevent unauthorized access. The cost of the software will be $ 500 and family members will do maintenance of the computer program hence reduced cost. An online portal will be designed to enable payment of services using debit and credit cards. It will also auto generate receipts and invoices to customers and suppliers. The cost of designing the portal will be minimized, as a family member will design the portal. The portal will be accessible to customers and staff members. The customers will also be allowed to pay their services through their mobile wallet. The charges will depend on various service providers. The average rates to customers will be as follows. Monthly charges- $ 9 Transaction charges- $ 1 Available discounts- discount rates may vary to maximum of 5% using the payment models Organization The initial years of operation will see the company employee six employees to cover for the positions of receptionist, floor supervisor and three salon attendants. The sixth member will be the manager and it may be a close family member or I. Manager will be a fulltime employee who will earn a salary of $ 22,000 annually for the first three years. The manager would be entitled to other bonuses depending on the performance of the business. The working hours would range from 48- 54 hours a week. His roles and duties will be; Banking, inventory, promotion, record keeping, and customer response. The receptionist who will also act as an assistant to the manager will be entitled to an annual salary of $ 8000. The services of the position will part time to reduce on cost. He or she will work for 30 hours a week. Her role would be; receiving customer complains, direction customers to specific areas, preparing invoices, developing schedules and preparing payrolls. Floor supervisor will be a permanent employee and would be entitled to an $ 8000 annual salary. He or she would work for 40 hours a week and would be entitle to a pay rise best on the salon’s performance. Each three junior employees would be under him and his duties would be to. Supervise services, ensure customers comfort, direct customers, maintain service equipment and recommend for dismissal or employment for additional staff. The three junior employees will be entitled to weekly wages and would work in shifts depending on the number of customers. Each would be required to work for 36 hours a week. The total money allocated to these employees would be $ 18000 annually. They would ensure the business is cleaned and maintain, offer the customers required services and would maintain the equipments. The manager will ensure salaries are dispatched with a specified period. Young Hair Studio Position Working Hours Pay per hour ($) Total ($) Manager 50 440 22000 Receptionist 30 267 8000 Floor supervisor 40 200 8000 3 employees 36 500 18000 Regulation Young Hair Studio will require a permit and license to operate under the current regulations. Permits would include the Musicians’ Rights organization Canada, which is an annual fee of $ 150 (copyright board Canada, 2014). The other license would be from Ontario government which charges of $ 800 for an operational license (Canada Business Ontario, 2013). The business would require a liability insurance which is mandatory in Ontario, the cost would be best on personal evaluation which will see the business remitting an annual premium of $ 9600. Finance Owner’s investments The available cash and assets are as follows; Cash at hand- 29000 Family and other donations- 10000 Amount from angel ventures- 5000 Total = 44000 Assets Computer- Owned ($ 1000) Vehicle- owned ($10000) Cost to be incurred before start up Furniture- $2000 Telephone installation and initial month subscription- $ 1000 Renovation and rehabilitation costs- $ 3450 Internet expenses and computer expenses- $1500 License and regulation expenses- $ 950 Insurance expense- $ 1000 Site expense- $ 2375 Borrowed cash Young studio will take a $ 20000 loan from the bank to enable it cover administrative and operational coat. The repayment rate would be 4% payable within the first three years of the business operation. Sales income by month The business is projection $ on sales within the first year of operations. The sales would be best on three products, which are haircuts, perm, and hair design. The trend would be subject to seasons with the initial month registering high figures due to increased promotional strategies. (Appendix) Cash budget The accounts indicate a deficit. Meaning the first year of the company’s operation exceeded the set budget meaning the moment needs to source other funds running into the second year. The effect is considering normal keeping in mind the cost incurred while starting up the business (Fabozzi & Peterson, 2000). The second year will see the business reduce its cost and increase its revenue (Appendix) Income statement The business would be considered profitable during the third year of its operations. The earnings before income ant tax indicate a profit of 45,898 during the third year of operation. (Appendix) Balance sheet The balance sheet will indicate less assets compared to current laities. Hence, need to adjust the assets available for the business operation. Ratio/ trend analysis Focusing on the profit margin it indicates a lower profit margin in that a -57% is visible at the second year of the plans operation with the third year indicating a 14% profit margin indicating a 14% profit a dollar invested into the business. Current ratio indicates a negative projection across the three years hence needs to be done to increase the current ration to 1:2 scenarios. The debt-servicing ratio indicates the business would generate less revenue to cater for its debts (Tracy, 2012). Breakeven The business will break even in the fourth years as at 252471. Now the business will be operating below the breakeven point pending adjustments. Conclusion Young hair studio has a great potential to overcome the initial challenges and become a profitable business within four years of its operation. The initial administration cost would prove to a major problem while offering services. The location of the business is ideal and the much needed sacrifice needs to but measures needs to undertaken to reduce on cost and increase on revenue. Upon the completion of the loans, the company should focus on harmonizing salaries and perform profit plague back for a specified period. Reference Canada Business Network. (2014). Registering your business. Retrieved from http://www.canadabusiness.ca/eng/page/2730/ Canada Business Ontario, 2013. Taxation guide. Retrieved from http://www.cbo-eco.ca/en/index.cfm/managing/taxes/taxation-guide/#Municipal Copyright Board Canada. (2014). Copyright collective societies. Retrieved from http://www.cb-cda.gc.ca/societies-societes/index-e.html Fabozzi, F.J. & Peterson, P.P. (2000).Analysis of Financial Statements. Pennsylvania: John Wiley & Sons Statistic Canada. (2013). Machinery and Equipment Price Index, second quarter 2014. Retrieved from http://www.statcan.gc.ca/daily-quotidien/140821/dq140821c-eng.htm Tracy, A.(2012) Ratio Analysis Fundamentals: How 17 Financial Ratios Can Allow You to Analyze Any Business on the Planet. New York: Ratio analysis. Virgin mobile. (2014). Canada rates. Retrieved from http://www.virginmobile.ca/en/support/canada-long-distance-rates.html?province=ON&geoResult=failed Appendix Young Hair Studio Pro-Forma Balance Sheet             ASSETS Opening 2014 2015 2016 Current Assets         Cash 46,675 (136,858) (216,091) (179,485) Accounts receivable - - - - Inventory - - - - Prepaid expenses 12,275 - - -   Total Current Assets $ 58,950 $ (136,858) $ (216,091) $ (179,485)             Fixed Assets         Deposits 2,700 2,700 2,700 2,700 Land - - - - Building   2,350 2,350 2,350 2,350 Less: Accumulated Amort - Building   (47) (139) (228) Vehicle 10,000 10,000 10,000 10,000 Less: Accumulated Amort - Vehicle - (1,500) (4,050) (5,835) Operating Equipment & Machinery 2,720 2,720 2,720 2,720 Less: Accumulated Amort - Equip - (272) (762) (1,153) Furniture & Fixtures & Electronics 6,950 6,950 6,950 6,950 Less: Accumulated Amort - Furn   (995) (2,636) (3,724)   Total Net Fixed Assets $ 24,720 $ 21,906 $ 17,133 $ 13,780 TOTAL ASSETS $ 83,670 $ (114,952) $ (198,958) $ (165,705)             LIABILITIES   Current Liabilities         Accounts payable - - - - Current portion of long-term debt - 3,529 3,672 3,822   Total Current Liabilities $ - $ 3,529 $ 3,672 $ 3,822             Long-term Liabilities         Loan 20,000 16,472 12,799 8,977 Other long-term liabilities 10,000 10,000 10,000 10,000   Total Long-term Liabilities $ 30,000 $ 26,472 $ 22,799 $ 18,977             SHAREHOLDERS EQUITY                     Initial Investment 53,670 53,670 53,670 53,670 Retained earnings - (198,622) (279,100) (242,174)   Total Shareholders Equity $ 53,670 $ (144,952) $ (225,430) $ (188,504) TOTAL LIABILITIES & EQUITY $ 83,670 $ (114,952) $ (198,958) $ (165,705)       Calculation of Retained Earnings                   Beginning Retained Earnings - - (198,622) (279,100)   Add: Net Income - (198,622) (80,477) 36,925   Less: Dividends - - - -           Ending Retained Earnings   $ - $ (198,622) $ (279,100) $ (242,174)     ©Copyright Effective Business Strategies 2010               Young Hair Studio Initial Cash Requirements ITEMS Amount NOTES Beginning inventory (RETAIL CoGS ONLY !) $0 The amount of inventory needed to open Building     $2,350 ONLY if the company buys a building Land     $0 ONLY if the company buys a building Vehicle     $0 ONLY if the company buys a vehicle Utility Deposits   $200 See Asset worksheet   Telephone & Internet Deposit $2,500 See Asset worksheet   Rent (Last month)   $0 See Asset worksheet   Operating Equip & Machinery $0 See Asset worksheet   Furniture & Fixtures & Electronics $0 See Asset worksheet   Installing Operating E & M   $0 See Asset worksheet   Installing Office F & F   $0 See Asset worksheet   Leasehold improvements   $0 See Asset worksheet   Signs (outdoor, window, vehicle) $0 See Asset worksheet   Website Construction   $0 See Asset worksheet   Leases (Last month vehicle, equip., etc.,) $0 See Asset worksheet   Advertising & Promotion   $0 Advertising & Promotion for opening the business Rent (first month)   $2,375 Amount to be paid before opening   Office Supplies & Expenses & Services $5,920 Paper, pens, ink, cleaning, bookkeeping etc Leases (First month vehicle, equip., etc.,) $0 Amount to be paid before opening   Operating Supplies   $0 Operating supplies (not for resale)   Business Insurance   $200 Bid from insurance agent   Licenses and permits   $950 Check with city or provincial offices Professional fees   $1,540 Include CA, attorney, engineer, etc.   Uniforms     $540 Uniforms for you and employees   Miscellaneous Start up Expenses $750 All other plus "surprises"       TOTAL START-UP COSTS $17,325                             Current Assets $0           Fixed Asset $5,050           Prepaids $12,275   TOTAL START-UP CASH AVAILABLE         Personal Investment   $34,000 To balance sheet as intial investment Family Investment   $10,000 To balance sheet as other Long Term CYBF Loan $ 45,000 Maximum $20,000 Loan Rate (s) 4.00% 9.50% Other Bank Loan   $0 Loan Rate 5.50%   Mortgage     $0 Mortgage Rate 5.50%   TOTAL CASH ON HAND   $64,000       Less: Total Start-up Costs   $17,325 From above     OPENING CASH   $46,675 To Year 1 Cash Budget                               Young Hair Studio Ratio Analysis             Opening 2014 2015 2016           Balance Sheet         Total current assets 58,950 (136,858) (216,091) (179,485) Inventory 0 0 0 0 Total long-term assets 24,720 21,906 17,133 13,780 Total current liabilities 0 3,529 3,672 3,822 Current Portion of LTD 0 3,529 3,672 3,822 Total long-term liabilities 30,000 26,472 22,799 18,977 Total shareholders equity 53,670 (144,952) (225,430) (188,504) Income Statement         Total sales N/A 54,924 142,088 269,966 Gross profit N/A 54,924 142,088 269,966 Total operating expenses N/A 252,471 221,554 224,069 EBIT N/A (197,547) (79,467) 45,898 Total Interest Expense N/A 1,075 1,011 867 Earnings (loss) before taxes N/A (197,547) (79,467) 45,898 Earnings (loss) After Taxes N/A (198,622) (80,477) 36,925 Tax rate N/A 18% 18% 18%           KEY RATIOS         Profitability Ratios Opening 2014 2015 2016 Return on assets N/A N/A N/A N/A Return on Equity N/A N/A N/A N/A Net Profit Margin N/A -362% -57% 14% Gross profit margin N/A 100% 100% 100% Asset turnover ratio N/A N/A N/A N/A Leverage and Liquidity Ratios         Current ratio 0.00 -38.79 -58.84 -46.96 Interest Coverage N/A -183.77 -78.62 52.94 Debt servicing N/A -42.15 -16.19 10.60 Quick or acid test ratio 0.00 -38.79 -58.84 -46.96 Debt to equity ratio 0.56 -0.21 -0.12 -0.12 Read More