Is it feasible to open a Nail and Beauty Bar in Brookfield, Middlesbrough?
Is it feasible to open a Nail and Beauty Bar in Brookfield, Middlesbrough?
Introduction
The aim of this investigation is to explore the feasibility of opening a competitively priced Nail & Beauty Parlour aimed at a wide range of consumers of varying lifestyles and age groups.
A suitable location has been selected in the town of Brookfield, Middlesbrough. Throughout the course of the investigation, various methods of Primary and Secondary research were adopted in order to evaluate whether the business was feasible.
The proposed location is approximately 100 square meters in size and will cost £27000pa to rent, with rates of roughly £14 000.
All required materials could be purchased from 'Sally´s Beauty Warehouse´ in Thorpthewles, a village approximately 15 minutes away from Brookfield by car. They offer bulk purchasing of all products related to hair and beauty at a discounted price and have a reputation for selling high quality products.
The business will be called 'Brookfields Beauty Bar´. It will have a contemporary design, in order to appear trendy and upmarket.
METHODOLOGY
Secondary Research Objectives
Objective 1
Discover if the chosen location will generate sufficient custom, by assessing the competition in surrounding areas and conducting a SWOT analysis of Middlesbrough.
This may be investigated by comparing the services offered by competitors to those of your own and conducting a foot count of the number of clients served at particular hours on particular days.
Objective 2
To discover the average number of women aged 15-65 residing, studying or working in Middlesbrough.
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 business including factors such as staffing costs and cost of materials required.
Objective 5
Investigate the cost of advertising the new business.
This may include method of above and below the line promotion and research into local radio, newspaper and leaflet drops must be considered.
Objective 6
Discover any relevant legislation that must be taken into consideration with regards to employment. It is essential that such legislation is followed as failure to comply could result in the following:
Ø Prohibition notices
Ø Public disclosure
Ø Bad publicity - acting as a deterrent for potential clients
Ø Increased insurance premiums
Ø Claims for compensation
It is the duty of the employer to assess any possible risks, implement the necessary control measures and maintain sufficient records.
Primary Research Objectives
Objective 1 - To determine the likely demand for nail treatment.
Objective 2 - To determine the additional beauty treatments demanded by 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 what level stocks would need to be held.
Objective 4 - To determine how many days a week and at which times the Bar will attract the most customers, to enable opening times to be planned around the optimum demand times.
Primary Research Method
After researching various methods of research and considering the time limitation in which it must be compiled, it has been decided that a survey is to be conducted in Middlesbrough using a random stratified quota selection method of sampling of 100 women within specific age groups which will be recorded in a tally chart format.
Various Methods of Sampling
Random Sample
Random sampling involves selecting respondents to ensure that everyone in the population has an equal chance of being interviewed. Achieving a totally unbiased sample requires careful thought.
Research companies use the following methods:
Ø Pick names at random from the electoral register, e.g. every 100th name.
Ø Send the interviewer to the address given on the register
Ø If person is out, visit twice more before giving up (to maximize chances of catching those who lead very busy lives and are rarely home.
The method is very effective, but slow and costly.
Quota Sample
Quota sampling involves selecting interviewees in proportion the consumer 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 the street as long as they achieve the correct the quota and they can interview as when and where they want.
This is the most commonly used method of sampling because it is relatively cheap and effective.
Stratified Sample
Stratified sampling involves only interviewing those with a key characteristic 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 on factors such as social class and region.
Cluster Sample
Cluster sampling is the process of sampling within a specified area only. E.g. in a selected seaside resort (for swimwear). This is not a common form of sampling.
The two main concerns in sampling are how to choose the right people for the interview and how many to interview. The four main methods of sampling have been researched and this may be found in the appendix. The given information will also contribute to calculation of costs in Objective 4 of the secondary research.
Questionnaire and Results of Consumer Survey
AGE:
...
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Cluster Sample
Cluster sampling is the process of sampling within a specified area only. E.g. in a selected seaside resort (for swimwear). This is not a common form of sampling.
The two main concerns in sampling are how to choose the right people for the interview and how many to interview. The four main methods of sampling have been researched and this may be found in the appendix. The given information will also contribute to calculation of costs in Objective 4 of the secondary research.
Questionnaire and Results of Consumer Survey
AGE:
5-20 41-45
21-25 46-50
26-30 51-55
31-35 56-60
36-40 61-65
WHY ARE YOU CURRENTLY IN mIDDLESBROUGH?
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?
Acklam Thornaby
Stockton Hemlington
Other
WHAT TREATMENT DO YOU/WOULD YOU CONSIDER HAVING?
. Accrylic Nail Extensions
2. Manicure
3. Pedicure
. 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+
.
2.
3.
4.
5.
6.
Legs
Arms
Underarms
Bikini line
Other
7.
Head
Face
Back
Body
ON WHAT DAY WOULD YOU PREFER TO VISIT A NAIL & BEAUTY PARLOUR AND AT WHAT TIME?
09.00-12.00 12.00-18.00 18.00-21.00
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
SECONDARY RESEARCH RESULTS
Objective 1
It was discovered that there is another Beauty Salon in Acklam which is very close to Brookfield as well as a number of hairdressers, which provide the manicuring service. Their prices however, are substantially higher than any that the Brookfield Beauty bar is aiming to charge. This alone will enable it to compete effectively.
Below are 2 comparative lists between the planned features of the Nail & Beauty Bar and the competitors in Acklam:
Services exclusive to Brookfield Beauty Bar:
Ø Threading - a more accurate method of hair removal that is a specialized skill originating in India. Creates a better shape of eyebrow and is a relatively speedy method of treatment. Very cheap to perform as it simply requires a small length of thread and some talcum powder.
Ø American style nail art (airbrushing) creates intricate patterns on ones nail in varying colours and styles. A hugely fashionable feature with teenagers and adults alike. It is likely that once a client comes for a specific treatment such as airbrushing, they can be convinced to return for other treatment relating to the nails such as nail extensions.
Ø All services provided by the competition will be provided at a lower price by the Nail & Beauty Bar hence attracting a large proportion of the extensive teenage population that study in the surrounding area.
Services provided by competitors:
Ø Hair cuts and colours
Ø Electrolysis
Ø Facials and skin treatments
A foot count was collected outside the Beauty Salon of the competitor and outside the Nail Salon of the greatest nail treatment competitor, which is in Hemlington. Each was observed for a period of one hour, three times throughout the day on a Wednesday and Saturday. The results are as follows:
TIME/DAY NUMBER OF PEOPLE IN
HEMLINGTON
09.00 -10.00Wednesday 6 2
Saturday 11 2
2.00-13.0 Wednesday 19 4
Saturday 30 5
6.00-17.00 Wednesday 25 2
Saturday 30 3
S.W.O.T Analysis of Brookfield and Location of Premises.
Strengths:
Ø Wealthy area in which disposable incomes are high
Ø Situates 2 secondary schools with a high % of girls from which the students also have relatively high disposable incomes. Also surrounded by numerous mixed schools providing a large number of clientele during the week.
Ø Premises surrounded by bus stops from various routes, hence enabling easy access to the Bar. Plenty of car parking spaces available.
Weaknesses:
Ø Is not a large retailing town such as Stockton, and therefore most people who will know of its existence will be those who are frequently in Middlesbrough , unless a large budget is set aside for advertising. Also due to this, people may prefer to go to Stockton as they can see a movie and do some shopping while they are there.
Ø Limited parking space available
Opportunity:
Ø There is an opportunity to completely dominate the market of Middlesbrough and the small surrounding towns as the main service provided is modern, fashionable and the closest replicating service is in Stockton. On top of which it will be the most competitively price though this may require the adoption of penetration pricing until customer loyalty is established.
Ø If market domination is established there is and opportunity to expand the range of services to include new and radical skin treatments.
Threats:
Ø The main threat comes from current competitors who may also aim to slash prices, if this is the case, the Brookfield Beauty Bar may have to rely on their product differentiation and customer relations alone to help them survive.
Objectives 2 & 3
In order to discover how many women reside in the area of Middlesbrough and what their disposable income is, information was extracted from a demographic study and can be seen in following pages.
The women working in the town centre were counted and amounted to roughly 65.
Whilst the disposable income of these working women does not amount to a significant amount, the disposable income of the girls studying in the area is unusually high due to many coming from wealthy backgrounds who receive money from their families instead of or, as well as earning their own.
The total resident population of women aged 16-59 in Brookfield, amounts to roughly 5205 according to the 2003 census, the proportion of which are economically 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 around £14000.
Decoration Cost: The actual layout of the shop currently is suitable, with a large open plan main area in which the nail treatment may be performed. There are also two back rooms available for additional treatment. The main decorative feature will be the mirrored walls to enable the bar to appear larger than it is. Additional decorative features are the aquarium and lava lamps. The total costs amount to about £2000.
First time customer bonus: In order build good customer relations, an offer of a complementary glass of wine with all treatment above £5 will be available in the opening week of the Bar. £200 has been set-aside for this.
Equipment and Furniture cost: As calculated from the prices collected at Sally´s Hair and Beauty World. Total cost amounts to approximately £1853.98.
Staffing costs: it has been decided to have the Bar open for a total of 48 hours a week at times varying to suit the majority of clientele. 10 nail technicians and 2 beauticians are required. 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 past legislation that protected employees from hazardous conditions.
Race Relations Act 1970 - aims to protect individuals against discrimination on the grounds of race, colour, nationality or ethnic origin.
Equal Pay Act 1970 - states that women performing a similar job to men should be treated equally in every way. This includes pay, work conditions 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 13 weeks of commencement of employment.
TOTAL COSTS
FIXED COSTS
£
Rent 27 000
Business Rate 14 000
Maintenance 2 000
Insurance 1 000
Equipment & Furniture 1 854
Staff Cost 144 000
Bonus 200
Heating & Lighting 5 500
Decoration 2 000
Advertising 10 000
Total Fixed Costs 207 554
PRIMARY RESEARCH - ANALYSIS OF THE CONSUMER SURVEY
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, it can also be assumed that this will be compensated for by the rather high disposable incomes of the school and college girls. A discount for pensioners and students with NUS card may be considered once the business is well established in the community.
The main competitor in the nail service, is in Hemlington. As Brookfield is about 2miles from Hemlington it is quite close however it does give customers who have difficulty getting there a new opportunity and hopefully develop the custom those living in the area that previously visited the Hemlington store.
It is also evident from the survey conducted, that demand for the treatment offered is not consistent throughout the day, everyday. It is therefore not profitable to remain open from 09.00 - 17.00 every day 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 should be tried provisionally:
Monday - 09.00 - 12.00
Tuesday - 09.00 - 18.00
Wednesday - 12.00 - 21.00
Thursday - 12.00 - 21.00
Friday - 09.00 - 21.00
Saturday - 09.00 - 18.00
Sunday - Closed
A graph to show what potential demand is for the services offered
A Graph to show what potential clients are willing to pay for specific treatment
A graph to show how many times on average the
Women interviewed, visit a Beauty Parlour.
Profit and Loss
This is a forecasted profit and loss that will follow the principle of prudence and understate the forecasted sales, from the estimated 66 of 100 people (see survey) to 20% of the population of women in Middlesbrough spending an average of £20 a week, therefore £240 a year.
FORECASTED PROFIT AND LOSS ACCOUNT FOR THE 'BROOKFIELDS BEAUTY BAR' FOR ONE YEAR
£ £
Sales Revenue 249 840.00
Cost of Goods Sold 3 537.05
Gross Profit 246 302.95
(Expenses)
Rent 27 000.00
Maintenance 2 000.00
Insurance 1 000.00
Wages 144 000.00
Rates 14 000.00
Decoration 2 000.00
Opening 200.00
Advertising 10 000.00
Lighting & Heating 5 500.00
Equipment & Furniture 1 854.00
Depreciation 25% 463.50
208 017.50
Net Profit 38 285.45
The following profit and loss calculates an estimated sales turnover, based on 66% of the population of women in Middlesbrough using the service. This is an optimistic view estimating the probable maximum profit that can be achieved.
FORECASTED PROFIT AND LOSS ACCOUNT FOR THE 'BROOKFIELD BEAUTY BAR' FOR ONE YEAR
£ £
Sales Revenue 824 472.00
Cost of Goods Sold 3 537.05
Gross Profit 820 934.95
(Expenses)
Rent 27 000.00
Maintenance 2 000.00
Insurance 1 000.00
Wages 144 000.00
Rates 14 000.00
Decoration 2 000.00
Opening 200.00
Advertising 10 000.00
Lighting & Heating 5 500.00
Equipment & Furniture 1 854.00
Depreciation 25% 463.50
208 017.50
Net Profit 612 917.45
This profit and loss assumes that the sales turnover will be generated by an average of the previous assumptions - 40% of the population of women in Middlesbrough. This takes into account both the optimistic and pessimistic forecasts for profit and loss, and also considers the fact that not all the potential clients are residents in Brookfield.
FORECASTED PROFIT AND LOSS ACCOUNT FOR THE 'BROOKFIELD BEAUTY BAR FOR ONE YEAR
£ £
Sales Revenue 499 680.00
Cost of Goods Sold 3 537.05
Gross Profit 496 142.95
(Expenses)
Rent 27 000.00
Maintenance 2 000.00
Insurance 1 000.00
Wages 144 000.00
Rates 14 000.00
Decoration 2 000.00
Opening 200.00
Advertising 10 000.00
Lighting & Heating 5 500.00
Equipment & Furniture 1 854.00
Depreciation 25% 463.50
208 017.50
Net Profit 288 125.45
Flow Chart
Such a diagram shows how long it will take to actively start up the business and enables easier planning of the opening activities and waste 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
Redecorate the premises Maximum 3 weeks
Set up equipment and Furniture 1 day
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 initial investment of approximately £83000 is required (assuming that the wages and rent is paid for the first quarter only). The owner of the business has inherited £10000 from her grandmother. She has the option to raise the rest of the funds required by either taking out a loan at the bank, or selling shares in the business to family and friends. At present, interest rates at the bank are relatively low, meaning that the owner will be paying less interest on the money borrowed, which proves to be more profitable to the business and improves cash flow. However, there is no interest payable to shareholders as such, which is beneficial to a business starting up, as it reduces the risk of increasing debts before a profit is shown. Shareholders, however, are owed dividends and in the long run, the business may be paying out more in this way, than if they had taken a loan, on top of which, entering into a business relationship with friends and family may strain relations through disputes about the business.
There are many benefits to opening the Bar in Brookfield 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, or better standard for approximately £20-35 a visit. As the forecasted profit and loss accounts show, even at this price, costs can be covered comfortably and if the Bar generates a strong customer following, prices may be raised at Christmas and peak holiday seasons for example.
Product - the services being offered are well differentiated in its market of beauty treatment, as it offers specialist services such as nail art and threading, which are continuously increasing in popularity with women of all ages. There is also the option to expand into ear piercing or men´s treatment, once the Bar is well established. Research has shown that the huge surge in demand for nail art and extensions is not believed to be a fad. Similar behaviour was experienced in America nearly a decade ago, and popularity for nail bars there has only strengthened. It is now perceived to women to be as essential to women as a hair cut within their grooming routine.
Advertising - advertising is an essential factor in the prosperity of the business. Due to the fact that Brookfield is not very well-known, the Bar requires much publicity to attract the custom of those in surrounding areas. £10 000 will therefore be spent on advertising. £4000 on the local newspaper, £5000 on TFM and £1000 on distribution of flyers to surrounding areas.
Methodology
I believe that the majority of the research conducted was as accurate as possible.However I believe that the questionnaire conducted in Middlesbrough produced inaccurate results as it is unreasonable to say that over 60% of women would be willing to have such beauty treatment. I believe that this anomaly arose due to only 100 people being questioned. If I had more time to compile my research, I would interview a greater amount and range of people for example, devise a specialized questionnaire for students alone as they make up a large proportion of the daytime population of Middlesbrough.
It must also be taken into consideration however, that regardless of the amount of research conducted, there may be many unforeseeable circumstances 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 consideration any anomalous data as well as examples of such businesses success in the U.K. and abroad, I believe that there is a great chance of success in for the Brookfield Beauty Bar. Research shows that there is already substantial demand for the services offered and continuation of this would enable the Bar to expand further and possibly open another branch elsewhere.
From the graphs compiled it is evident that the average amount one is willing to spend on treatment per visit is £20 and the average disposal income of the locals residents can more than comfortably accommodate this.
Suitably trained staff are the most important factor in establishing a successful business, especially in a service-orientated business such as the Bar. Finding qualified staff does not appear to be a problem as there is a hair and beauty course at Middlesbrough college which attracts many students every year. Due to the fact that they have specialist skills, they must 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 excellent communication skills and build up a strong relationship with the clients in order to deter them from going elsewhere.
The business may have been even more profitable if set up on Portrack Lane, as that attracts many people due to the large shopping facilities. There is however much more competition in that area and lower disposable incomes amongst the residents.
SUMMARY
Chance of Success
After studying the various forecasted profit and loss accounts, it is evident that the business has the potential to be extremely profitable, if all other factors run accordingly.
The supplier has come highly recommended by various beauticians within surrounding areas as having almost 100% reliability and due to the fact that it is so close to Brookfield, delivery costs are avoided as a member of staff could easily collect the material required. The only foreseeable problem in this area is external. A change in exchange rates may increase the price of supplies, as they are all imported.
Advertising will also play an important role in the establishment to the business and advertising in the local paper and on the local radio, will make many residents aware of the presence of the Bar. Flyers will reinforce this within the minds of the residents.
The décor of the Bar is such to attract the attention of all passing by. 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 the option to redo the project, the main area I would correct would be that of the questionnaires. I would take a much larger sample, of perhaps 400 and even investigate the demand for beauty treatment by men. From the project I have compiled however, not taking into consideration external factors, the idea of opening a Nail & Beauty Bar in Brookfield is definitely feasible. The forecasted profits are extraordinary mainly due to the low costs incurred and if such a simple idea could generate such large sales turnover, it may not be a bad idea to make the idea of the Brookfield Beauty Bar´ a reality!
