My Business Evaluation - will my beauty parlour succeed?

Evaluation

Introduction

The evaluation of a business is a crucial stage in ensuring that a business will be successful because all the strengths and weaknesses of a business can be uncovered at this point. The business strengths can then be used to the businesses advantage therefore competitors can be eliminated. The weaknesses of a business can then be overcome to make the business stronger and help the business compete with competitors.

Will My Business Be A Success?

According to the research I conducted about the area I chose to locate my business in, my business will be a success, I was informed of this because the area which I chose to locate my business is heavily populated with Asian people and as my business is aimed at Asian women, this is a big benefit to my business. The area is also surrounded by many students, students are the most likely candidate to visit my business therefore this also benefits my business. My business will be located in a highly populated area because it is near the centre of Leeds this will attract a lot of passing trade and make my business more popular with the local population. I discovered that the customers in my target market would like toilet facilities and parking facilities available to them, I chose a location which provided toilet facilities within the building and had parking area next to the building of my business, this means that customers could choose my business over that of my competitors because I have the facilities they require whereas my competitor may not. However my research has also informed me that there are many competitors in the same area therefore if my customers are unhappy with my business they will not have to travel far to find a new beauty salon, I have the very high risk of losing a lot of customers quickly if I make a mistake because my customers will not have difficulty in visiting a new salon as it will be nearby. To prevent my customers from transferring to a nearby salon belonging to my competitor I have created a unique selling point within my business, my business specialises in Asian beauty techniques, no other beauty salons provide this type of specialisation in Leeds therefore people are more likely to visit my beauty salon because of this.

I chose to hire four members of staff to work in my business because according to my competitor interview, this is the number of staff needed for a small business. I will hire three fulltime staff and one Saturday employee, I will also be working alongside my staff every day. I think that this is the right number of staff for my business and will help make my business a success because Asian Beauty is expected to attract 320 customers a month, this is 80 customers per week and as my business is open five days a week, this is 16 customers per day. My business will be open eight hours a day therefore it is expected that two customers will visit my beauty salon every hour, this is good because there will be four people, including myself, who will be able to help and treat these customers. On Saturdays I expect more customers to visit my salon therefore I will have an extra employee working on these days who will also treat customers. However it is unlikely that two customers will visit my business per hour, it is more likely that no customers will visit my business for two hours then all at once five or six customers will arrive, therefore I have decided that my business will ask customers to make appointments to prevent customers from having to wait. If a customer shows up without an appointment we will ask them to make an appointment for a later time if my salon is booked up or if there is a gap in the appointment book we will allow the customer to be treated.

According to the research I conducted about my finances my business will be a success, this is shown because the Net Profit Margin which I expect my business to reach informs me that my business will have a very good performance rate. At 29% this is very high and as my business will be earning a Net Profit of £22,562.12 in the first year it will become exceptionally successful. In the first year most businesses aspire to break even and often they do not reach this point and make a loss, however my business is expected to exceed my break even point drastically and the profit I expect to make is notably large. The break even point of my business is to reach 232 customers per month, this will be very easy for my business because according to my research my business will receive 320 customers per month and even if my business does not meet these expectations due to bad circumstances I can still make a profit because the number of customers I am expected to attract is significantly higher than the number of customers I need to attract. The expected sales revenue of my business is remarkably higher than the costs of my business therefore it is very likely that my business will stay in surplus unless a disaster occurs to prevent my business from making a profit. However due to the current economic recession people are not as willing to spend money on luxuries such as visiting beauty salons. Although the recession may make people feel more reluctant to visit my salon, my questionnaire results informed me that a lot more people are willing to spend money on visiting beauty salons than not. I have taken extra precautions to ensure that the customers visit my beauty salon instead of my competitors by providing the unique selling point in my business of offering special Asian treatments. I also calculated the prices of my products and services to ensure that my customers did not think the prices were too high.

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I believe that my business will be successful because I have met all the location requirements my customers would like within my business whilst also choosing a location which is heavily populated with my target market, I have also hired enough staff to be able to treat my customers without hiring too many therefore I am not wasting money on unwanted staff and developing the appointment system will prevent my customers from becoming agitated as they will not have to wait in queue. My financial documents inform me that my business will be successful because I have estimated that I will make a large profit, my cash flow forecast is very good, the net profit margin and return on capital employed which I calculated are very high compared to other similar businesses and my break even point is extremely low. Although we are currently in an economic recession I believe that customers will visit my business because I have low prices and unique services therefore I am hoping that my business will be able to grow through the years.

Business Strengths

I think that my business has many strengths such as the location, the unique selling point and my product knowledge on beauty treatments and beauty products etc. However I believe that the biggest strength of my business is the unique selling point which my business is based around and which is provided by my business. The unique selling point of my business is the specialised Asian treatments and products my business will provide. This will attract mostly Asian women to my business and research has shown that the population of Asian women in Leeds is steadily increasing as time goes on, as a result of this my business should attract more and more customers throughout the years, allowing my business to have the opportunity to grow and expand in the future. According to my research there are no other certified beauty salons in Leeds which provide the products and treatments which my business does, therefore more customers will want visit my business in order to have these treatments performed on them and buy the specialised products which my business provides. If my business had been like any other ordinary beauty salon, it would be very likely that customers would choose the businesses of my competitors rather than my beauty salon because my business is new and small whereas those other beauty salons will have been established for a longer period of time. This would have meant that my business would not have been successful or survived. The specialisation of my beauty salon also allows me to increase the prices of all the specialised treatments and products provided by my business because no other businesses in Leeds provide these therefore customers will not be able to find these products or treatments anywhere in Leeds for a cheaper price. This will bring a larger profit to my business allowing me to grow and expand, as my business grows it will become more well known throughout Leeds and customers will be willing to travel from further distances to visit a beauty salon which is specialised in Asian techniques of beauty treatments. I think that the unique selling point provided by my business will help my business to become increasingly successful and to attract many customers to my beauty salon.

Improving My Business

I think that the main weakness of my business is that there are too many competitors around Leeds. Most new businesses struggle in their first year but with the added complication of too many competitors, the survival of my beauty salon becomes extremely difficult. There is a large risk that the customers I do have can change to a new beauty salon with no hassle if my business makes even one small mistake, this is because there are so many other beauty salons which are very nearby that it will make no difference to my customers. Although my business is specialised and therefore will make some customers choose my business over others, if a customer is unhappy with my business for some reason this factor alone will not persuade my customers to remain at my business. If a customer has to wait too long to be served they can become agitated and this may cause them to make the decision to change to a different beauty salon, therefore I have decided to develop a appointment system within my business, this will prevent too many customers from visiting my business at any one time, as a result of this my customers will not have to waste any time waiting to be treated and will remain customers of my beauty salons. A customer may also decide to change beauty salons if my salon does not provide the facilities they want, however I have ensured that my business has all the facilities my customers want, according to my research they mostly wanted toilet and parking facilities, my business provides both these facilities therefore no customers will leave my business for this reason. The staff I have hired are trained to act pleasantly towards the customers therefore my customers should not choose to leave my business due to rude staff. Although there is still a risk that my customers can easily change beauty salons, they are most likely not to do this because I have created solutions to all the problems which may cause my customers to decide to do this and the unique selling point which is provided by my business will also make my customers feel reluctant to change beauty salons.

PEST Analysis

A PEST analysis involves evaluating all the Political, Economical, Social and Technological factors which may affect the success of a business. The political and legal factors are things such as the minimum wage law, employment legislation laws, any government bans, health and safety requirements, pressure groups and government policies. These could affect any business for example, the government banned smoking in public places, and this would affect the cigarette sales and business such as pubs. The economical factors are things such as recessions, unemployment, inflation, interest rates, local economy, government spending and taxes. These could affect any business for example, if interest rates rise people may not be willing to borrow money from bank, and this could affect the sales of cars. The social and environmental factors are things such as trends in society, changes in population, social norms, scarcity of resources, global warming issues and recycling. These could affect any business for example, the trend of healthy eating will make people more conscious of their health and the way they look, and as a result of this more people may visit gyms. The technological factors are things such as the internet and new technology. This could affect any business for example, the internet is a quicker way of reaching a younger audience, if a product designed for older people was only advertised on the internet the correct audience will not be informed about the product therefore the sales will be very low.

The Political and legal factors which affect my business are minimum wage laws, the employment law and health and safety requirements. According to www.is4profit.com Regulations covering minimum wages and statutory pay apply to almost every business. It is illegal to pay less than the National Minimum Wage so you need to be clear about your responsibilities as an employer if you are going to minimise disruption to your business and prevent disputes arising. Almost all workers aged 18 and over are entitled to the National Minimum Wage for those aged 22 and over it is £5.80, I predict that almost all my staff will be over this age because a requirement of my staff is to have completed a university course associated with beauty. However I may have a worker who is under this age. There is a lower minimum wage of £4.83 for those aged 18 to 21. The minimum wage is enforced by HM Revenue & Customs which have the power to demand records, enter premises and interview employees. It may detect breaches of the minimum wage requirements on your PAYE returns. Failing to keep adequate records, keeping false records, and obstructing an enforcement officer are all separate criminal offences. You could be liable for fines of up to £5,000 for any of these offences. If it is discovered that an employer is not paying the minimum wage, they will have to pay arrears within 14 days and a penalty of a quarter the amount owed in arrears. If the employer misses the 14 day deadline, the penalty will double to half the amount owed. If the employer still fails to pay, they risk prosecution and an additional fine. According to Wikipedia the Employment law protects employees from any mistreatment by their employers. It also guarantees that workers will not be unfairly discriminated against due to race, age, gender etc. when hiring new employees I must make sure that I provide everybody with an equal chance of getting the job, if I do not do this I could be in serious trouble, if I am found to be guilty of discriminating against anyone I will be fined a large amount and my business may not be able to cope with this. The Health and Safety Requirements mean that I will have to ask each customer if they are allergic to anything before performing a treatment to prevent the customers from having a reaction to the products, it also means that the water temperatures have to be regularly checked to prevent customers from being scolded by hot water and there must not be any loose wires left around the premises. My business must also be checked by a health and safety inspector this could use up a lot of time and if the inspector feels my premises is not safe I may have to invest a lot of money to meet all the regulations. If I do not meet these regulations my business has the risk of being closed down or sued by a customer if they are harmed because of this.

The economical factors which are affecting my business are the local economy, the recession and unemployment. Small businesses are finding it increasingly difficult to survive. According to www.upmystreet.com the area which my business is located within has a high population of educated – to degree level – people, my business is looking to hire employees who have a BSc Honours in hair and beauty, the staff I require could be easily found in the local area. The population of couples with children is very low therefore women in this area will be more likely to visit a beauty salon if they do not have any children because they will have free time and as the family income is medium they probably have enough money.

Although we are officially out of the recession people are still being made redundant and therefore people do not have as much money to spend on luxuries visiting a beauty salon. As a result of this I will have to price my products and services cheaper than those of my competitors as this may affect the customers’ decision on which beauty salon to visit. However it will be difficult for my business to have low prices on products and services as the tax has returned 17.5% so my prices will have to be increased to cover these costs, paying tax is a legal requirement and they must be paid. According to www.statistics.gov.uk unemployment is currently the highest it has been for years therefore it should be easier for me to find employees, however a lot of my target market will not have jobs therefore they may be reluctant to spend their money on luxuries such as visiting my beauty salon.

The social and environmental factors which are affecting my business are the healthy eating trend, the fit4life campaign and the changes in population. The healthy eating and fit4life campaign are attracting more customers to my business. As a result of these campaigns more people are conscious of the way they look therefore more people want to visit beauty salons to make themselves look more attractive. The changes in population are also affecting my business because an increasing number of students are settling in the local area of my business, my business is aimed at the age group of 15-35 year olds therefore this benefits my business greatly.

The Asian population in Leeds in 2001

The Asian population in Leeds 2007

According to the graphs above the population of the ethnic minorities aged 16-64 is also increasing in my local area, as a result of this more Asian women will be visiting my business over the next few years allowing my business to have the opportunity to grow and expand in the future, as my business is visited by an increasing number of people, word will spread and my business will gain, hopefully, a good reputation. This will attract even more customers to my business and people will be willing to travel from further distances to visit my business.

The technological factors which are affecting my business are the internet, media and new machinery. Teenagers and young adults are being influenced by television programmes and other similar media entertainment to look good, therefore more and more people want to visit beauty salons to look like their favourite actress etc. The internet can be a benefit to my business but it can also be a disadvantage, it benefits my business because the internet is an easy way to advertise my beauty salon to a wide audience and it is an easier way for customers to get into contact with my business. However the internet also allows people to find all the beauty salons around Leeds quickly and easily therefore a customer may choose my competitor over my beauty salon. The internet also provides unique automated appointment systems, this benefits my business because it saves time allowing my employees to concentrate on their work rather than answering the phone to make appointments, however if my business does not have this automated appointment system, customers may find it too much of a hassle to phone and make an appointment therefore they may switch to a beauty salon which provides this system. Also new machinery is developed every day, there are constantly new beauty products advertised which are proven to enhance beauty in some ways.

L’Oreal advert uses new technology to promote product

Asian Beauty must know about all the new technology because these technological advances will attract customers to my business, people want the most easy, effective, time saving and modern products and services available to them, if I am not informed about these and my business does not provide these my customers may decide to switch to a new beauty salon.

Asian Beauty

Exotic. Colourful. Beautiful.