See Maps located in the appendix.
Objective 2
To discover the average number of women aged 15-65 residing, studying or working in Northwood.
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.
Objectives 2 & 3
In order to discover how many women reside in the area or Northwood and what their disposable income is, information was extracted from a demographic study and can be seen in following pages.
There are two private all girls´ schools in Northwood, each holding approximately 1000 girls aged 12-18 years old.
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 Northwood, amounts to roughly 5205 according to the 1991 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
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 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 (see Appendix). 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 (see Primary research). 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
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.
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.
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 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 time limitation in which it must be compiled, it has been decided that a survey is to be conducted in Northwood 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 (see appendix).
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
Saturday 17th February 4.15pm
Monday 19th February 4.15pm
AGE: 15-20 41-45
21-25 46-50
26-30 51-55
31-35 56-60
36-40 61-65
WHY ARE YOU CURRENTLY IN NORTHWOOD?
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?
Northwood Northwood Hills
Pinner Watford
Harrow Other
WHAT TREATMENT DO YOU/WOULD YOU CONSIDER HAVING?
1. Accrylic Nail Extensions
2. Manicure
3. Pedicure
1. 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+
1.
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
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
It was evident during the collection of the primary research information that there was an extremely large, non-resident population of 15-18 year olds, due to the two girls only private schools in the area. There were also a large number of females shopping in the town due 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, it can also be assumed that this will be compensated for by the rather high disposable incomes of the school girls. A discount for pensioners and students with NUS card may be considered once the business is well established in the community.
Pie chart to show the current outlets favored by the consumers interviewed
It is evident from the chart and the foot count performed previously, that the main competitor in the nail service, is in Harrow. As Northwood is a significant distance away from Harrow - some 7 miles, the Bar will be opening the door for a whole new range of customers and hopefully develop the custom those living in the area that previously visited the Harrow 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 Northwood spending an average of £20 a week, therefore £240 a year.
FORECASTED PROFIT AND LOSS ACCOUNT FOR THE 'NORTHWOOD NAIL & 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 Northwood using the service. This is an optimistic view estimating the probable maximum profit that can be achieved.
FORECASTED PROFIT AND LOSS ACCOUNT FOR THE 'NORTHWOOD NAIL & 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 Northwood. 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 Northwood.
FORECASTED PROFIT AND LOSS ACCOUNT FOR THE 'NORTHWOOD NAIL & 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 1 day
Furniture
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 Northwood 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 show 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 Northwood is not a well-known town, the Bare 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 Herts FM and £1000 on distribution of flyers to surrounding areas.
Methodology
I believe that the majority of the research conducted was as accurate as possible. The demographic information taken from the most recent Census was produced in 1991 and it can be assumed that the main difference in recent data would be an increase in population as more houses and flats have been built in the area. Comparison between the 1981 and 1991 Census also shows a huge increase in the size of the population. I also believe that the questionnaire conducted in Northwood 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 specialised questionnaire for students alone as they make up a large proportion of the daytime population of Northwood.
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 Northwood Nail & 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, or even consider the idea of opening concession branches within well established stores such as Fenwick or Selfridges.
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. 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 in Watford, a town that attracts many people due to the large shopping centre. 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 Northwood, 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. Excess advertising is not required as the location of the Bar is such that it is clearly viewed by many as its location is optimal, directly in the centre of town.
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 Northwood 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 'Northwood Nail & Beauty Bar´ a reality!
APPENDIX
A Map of the Proposed Location for the 'Northwood Nail & Beauty Bar´.
Proposed Location Bus Stop
Train Station School
Investigating
The Feasibility
Of Opening
A Nail & Beauty
Parlour In
Northwood.
Sheena Patel.
Candidate No.
Centre No.
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.
