Executive Summary
Business planning is instrumental in laying a sustainable business foundation in the dynamic trade environment. Thus, any proposed business needs to be modeled on comprehensive planning that captures the detailed ideas and implementation channel. The primary elements that should be integrated into the plan include analysis of the business environment, financial planning, marketing, advertising, competition analysis, human resource management, and financial projections among others. The plan should merge competition analysis with the general business environment to create an ideal functional venture.
The proposed business plan for the Ocean Beauty Center examines the prerequisite requirements and potential sustainability strategies in the dynamic beauty industry. The proposed location for the business is Manhattan, New York. The targeted customers are female clients in need of beauty services. The business will be known for offering outstanding customer services, competitive prices, and a healthy environment for the employees. The business will be in the form of a partnership consisting of three owners. Since the business intends to offer customized beauty services, the effects of potential competition would be minimal. The initial capital requirement was estimated at $10,000. From the financial projections, the business is expected to breakeven after the end of the first six months of operation.
Introduction
The proposed Ocean Beauty Center will be a full-service shop for clients in need of beauty products. As such, the business will strive to provide extraordinary services in line with the needs of each segment of customers. To achieve this, the business will utilize the proficiency of its employees to provide a pleasant and relaxed environment for clients (Subramanyam 8). Through quality service delivery chatter, the proposed Ocean Beauty Center will integrate apposite prices and uniqueness as branding strategies. Among the services that will be associated with the Ocean, Beauty Center include skincare, pedicure, manicure, full body massage, facial care, and hair care. These services will be stratified further to create different brands within each service charter. For instance, services such as haircuts, relaxers, weaving, conditioning, shampoo, and curling will be created from the hair care product. The nail service will include polish, pedicures, and manicures. On the other hand, skin care services will generate products such as body waxing, facials, and massage.
As part of service charter customization, the Ocean Beauty Center will use Moroccan beauty products. Under each service a customer has opted for, the business will offer a discount in the form of another free service. For instance, pedicure, manicure, and skincare services will be accompanied by free back massage, Moroccan snacks, and Moroccan tea or coffee. The mission of the proposed Ocean Beauty Center is to attract and retain clients through high quality and convenient services beyond customer expectations. The location of the business will be in Manhattan, New York. This location is ideal because it is easily accessible. As part of the quality service charter, the business will hire specialized, well-experienced, and professional staff to offer extraordinary and exclusive procedures as requested by clients (Goodman 5). The Ocean Beauty Center intends to create a service charter that does not exist among competitors. For instance, facial care will include colored eyebrows. Moreover, promotional activities will integrate loyalty rewards that customers can redeem for free service.
Organization Structure
Irrespective of the size and scope of operations, organizations in the dynamic business environment should have a relevant organizational vision and goal statements. Since the proposed Ocean Beauty Center will operate in the dynamic and sensitive beauty sector, the organizational structure will integrate the scientific management approach. This management model functions on a systematic hierarchal order of control through a chain of command in decision making (Elder and Aradhna 45). The directors, who are owners of the business, will be at the apex of the management pyramid. The scientific management approach proposed will have clear systems for security, employee motivation, remuneration, progress tracking, and corporate social responsibility (Barringer and Ireland 22). These systems are known to improve employee retention and performance.
As part of the organizational structure, the Ocean Beauty Center’s management will be angled on innovation, flexibility, and creativity as a leadership philosophy for systematic performance tracking. This leadership philosophy functions on confidentiality, responsibility, and competence in labor and process management (Kotler and Keller 19). The approach encourages practical and consultative approaches in solving challenges facing an organization and monitoring the successes of each strategy in play. Moreover, the philosophy is very loud on motivation and rewarding creativity and performance within the present optimal standards.
Background of Owners
The strength of a business relies on its form, commitment of the owners, and clear contract on engagement. The proposed Ocean Beauty Center assumes the partnership form. This legal structure of a business involves the association of two or more individuals who act as the owners of a venture (Subramanyam 11). Under a partnership structure, there is no distinctive difference between the business and the owners. Before starting the business, there must be a clear legal agreement defining the decision-making approach, profit sharing, dispute resolution, future limitation in the expansion of ownership, and dissolving the business. In the dynamic business environment, the above factors must be outlined to minimize conflicts between the partners. Also, it is important to draw capital contribution and time allocation in running the business for a smooth flow of activities. About the Ocean Beauty Center, the partnership will consist of three owners. The owners are friends with an equal share of capital contribution and management (Goodman 45).
The three owners are the directors of the business (see fig. 1). The first owner is Mr. Abdi Abdalla, who is an expert in business administration. Mr. Abdi has a bachelor’s degree in commerce and has four years of working experience. About the Ocean Beauty Center, he will be the supply chain director. The second owner is Mrs. Zarika Hassan, who is an expert in marketing and holds a marketing diploma certificate. Mrs. Zarika has seven years of experience as a market for different organizations she worked with before. The last owner is Mr. Ahmed Hussein, who is an expert in operations management. Mr. Ahmed has worked in several beauty ventures across the Middle East in the last five years in different capacities. The business will also hire a supervisor to directly manage the employees on behalf of the directors. The business will adopt the inverted triangle management model to ensure that there is a flow in different activities. The inverted triangle model allocates more responsibility of daily running the venture to the supervisor, who reports to the directors and manage the other employees. The directors will simply be limited to the provision of leadership and strategy setting.
1Marketing
The proposed Ocean Beauty Center will integrate different marketing strategies as part of strategic product positioning in the sensitive beauty sector. Among the notable approaches to marketing the services of the venture include place, product, promotion, and pricing strategies. These marketing mixes will be implemented via social and traditional media (Kotler and Keller 34). The business primary focus will be on excellence in service delivery to a different segment of clients. Specifically, the marketing strategies will be programmed to appeal to the women within the high-end, middle, and low-end economic classes. The specific objectives of the proposed marketing strategy are;
- To ensure sales increase by 40% by the end of the first financial year.
- To ensure an increase in the sales margin by 25% at the end of the first financial year.
- To ensure the enhancement of the Ocean Beauty Center presence within the business location by 45% at the end of the first financial year.
Specifically, the distribution and pricing strategies will be anchored on fulfilling the above objectives. Therefore, social media will be the primary medium for brand awareness.
The proposed Ocean Beauty Center will specialize in a series of beauty products for the women population. As such, the business will strive to utilize its innovative and expertise capacities to advance sales and proactive business development. For instance, the Ocean Beauty Center might offer auxiliary services to complement its primary products in satisfying customer demand for convenience, quality, and value for money (Scarborough 26). The business will concentrate on product differentiation, which is significant in the presence of competition as it strives to penetrate the new market.
The products will be differentiated based on pricing, augmented value, and place. This means that the service charter will be tailored to give additional value beyond customer expectations in a convenient place. To reduce the impact of competition, the proposed Ocean Beauty Center will integrate affordable services within the target market. For instance, through innovative product presentation, a series of supplement services may be created to offer various choices to clients (Scarborough 56). The extreme competition within the beauty sector necessitates the business to enhance product differentiation in terms of design, affordability, quality conformance, style, and timeliness. The product positioning strategies will ensure an increased market presence for the Ocean Beauty Center.
Since the proposed Ocean Beauty Center is likely to face stiff competition from established businesses within the beauty sector, there is the need to integrate a unique pricing differentiation strategy. In addition to a variety of services, the business should encourage positive product intake by placing suitable and right price tags for each service charter. This is necessary for the Ocean Beauty Center to realize profits and sustain operates in this dynamic market. Reflectively, appropriate product pricing is instrumental in the marketing mix since it determines revenues and product development (Bolman and Deal 87). As expected, value addition and quality assurance often attract a high price tag. In the case of the proposed business, the management will strive to ensure that value addition activities do not attract high costs. The prices for different products of the business will be differentiated into middle and high for the middle class and high-class clients, respectively. The high-quality services at affordable prices will enable the business to outperform potential competitors. As business commences, the Ocean Beauty Center will target customers within the high income and middle-income brackets. Depending on the number of competitors and their impact, the business will widen its scope to strategically capture the low-income clients (Griffin and Moorhead 31). The objectives of the proposed pricing strategy are;
- To attract and retain clients within the high, middle, and low-income brackets.
- To make at least a 5% net profit margin at the end of the first financial year.
The above objectives will be implemented to promote strategic price discrimination to appeal to different client segments. The pricing approach is designed to increase the Ocean Beauty Center’s competitive advantage and widen customer catchment. Thus, the proposed pricing strategy will increase the profit margins and market share for the business.
Offering services and products in convenient locations and time facilitates the creation of a sustainable place strategy in any business environment (Cavusgil et al. 28). Specifically, clients should be in a position to access different products and services at their convenience. About the Ocean Beauty Center, its location within the busy business district will improve on customer accessibility of the salon. Through a strategic business-to-client contact model, the salon will have an easier time in contacting and managing client relationships. For instance, direct and proactive interaction with clients would ensure that products are tailored to meet their needs as well as the general market expectations. The proposed location was accepted because of convenience, affordable rent, and high human traffic (Kotler and Keller 45). However, the Ocean Beauty Center is flexible to expand to other locations on a need basis.
Market Research Analysis
Market research is critical in establishing the appropriate pricing, customer segmentation, client needs, and sustainable business strategy. Before implementing the proposed Ocean Beauty Center, market research was carried out through a primary survey. The survey was conducted through direct interviews as discussed in the next section.
The Survey
(Your Part)
Sales Forecasting
From the survey findings, the proposed Ocean Beauty Center is likely to penetrate the young adult and middle age customer segments. Apparently, the majority of potential clients endorsed the proposed service charter and business approach in the multifaceted Manhattan business environment. Therefore, the business will target these clients to enter, penetrate, and expand into the New York market. The results indicated that most clients are willing to spend an average of $20 for services within the beauty sector. The business will stick to the average price for standard service and a slightly higher price tag for customized services. Through ‘good, better, best’ pricing strategy, the Ocean Beauty Center price tag will be from $20 to $35. Due to high human traffic around the proposed location of the salon, the Ocean Beauty Center is likely to benefit from high customer turnover.
Potential Customers
The proposed Ocean Beauty Center will target mostly young and middle-aged women between 20 and 50 years. The customers are segmented into the young adult, middle-aged adults. The young adult segment consists of women between the age of 20 and 30 years while the middle-aged adults consist of females within the age bracket of 31 and 50 years and beyond. Several past studies indicate that the females within New York represent 62% of the general population. Specifically, women within the age of 20 to 50 years represent 72% of the population of females in New York. This means that any product targeting the young adult and middle age population brackets would easily penetrate this populous market. The proposed Ocean Beauty Center will also target clients within the middle income and high-income brackets. These economic classes tend to consume beauty products and services frequently (Shihab 12). For instance, most persons with middle income and above would need at least three sessions of hair care within a month. Thus, the proposed Ocean Beauty Center will strive to reach these customer segments.
Advertising
Since the proposed business will operate in a dynamic and sensitive environment, several promotional undertakings. The primary aim of these promotional strategies is to facilitate active brand intake and recognition (Cavusgil et al. 28). About the Ocean Beauty Center, several promotional strategies will be employed to reach the target market and promote product awareness. Some of the techniques to form part of the promotional strategies include public relations, media advertising, sales promotion, and personal selling. The business intends to utilize different advertising techniques to create responsiveness among the clients on different products and services in play. Specifically, the business will use the print, digital, audiovisual, and social media to reach out to customers (Kotler and Keller 18). Depending on the targeted market, each advertisement message will be customized and relayed inappropriate media. For instance, to reach out to the clients within the age bracket of 20 to 30 years, social media platforms such as Facebook, Twitter, and Instagram would be ideal since they are easily accessible (Griffin and Moorhead 31). Moreover, the business will employ innovative promotion through beauty magazines.
The proposed Ocean Beauty Center will also utilize several corporate social responsibility activities to appeal to different customer segments and build a strong loyal client base. The activities will be modeled around public relations and reputation building. For instance, sponsoring an annual event with a positive impact on society will make the Ocean Beauty Center visible (Goodman 46). Therefore, the business should consider sponsoring an annual sports day to promote healthy living and give back to society. During such an event, the business will benefit from free airtime and space for displaying different products and services (Bolman and Deal 89). As part of customer relationship management, the Ocean Beauty Center should create special loyalty promotion programs such as redeemable service points, periodic discounts, and customized service charter for group coupon (Griffin and Moorhead 41). The advertisement strategies should be angled on awareness and customer loyalty as building blocks for sustainable business.
Competition
Batavia Beauty Center
The Batavia Beauty Center is currently the market leader in the Manhattan beauty sector. The business controls thirteen percent of the market share. As part of its competitive advantage strategy, the business has more than seven salons offering many services to different categories of clients. Since the company has been in the market for more than a decade, it has well-developed distribution channels and advertisement programs. Moreover, the business has built a strong trademark in service delivery through its customer satisfaction philosophy.
New Millennium Beauty Salon
The New Millennium Beauty Salon is the second in controlling the Manhattan beauty sector. The company has more than six salons spread across the major regions within the city. Despite having been in operation for less than five years, the New Millennium Beauty Salon has experienced rapid growth through its low-price strategy. At present, the business is one of the most preferred salons by customers, who are interested in the international accolades for quality (Goodman 44). Due to the high number of customer turnover, the New Millennium Beauty Salon has experienced steady growth in revenue resulting in augmented growth levels.
The findings of competitor analysis indicate that proper planning and proactive business management are ideal elements of survival and success in the beauty industry. The Ocean Beauty Center may not attract many customers if proper planning is neglected. However, the business has been strategic in customer segmentation and product customization to create a distinct competitive advantage. The ideal location of the Ocean Beauty Center will ensure that it reaches out to many clients since human traffic in this region is very high (Kotler and Keller 22). Moreover, the central location makes it more convenient for clients to access the salon at any given time. Since the proposed business will use shampoos and additives from Morocco, the cost of importation and price fluctuations may negatively affect the profit margin. However, the Ocean Beauty Center will strive to develop a close working relationship with an international supplier to minimize potential drawbacks.
Pricing
The proposed Ocean Beauty Center will adapt the ‘good, better, best’ as a primary pricing strategy to appeal to different market segments. Basically, the ‘good, better, best’ is a pricing strategy in which the price tag of a service or product multiplies by a factor following adjustment in the content or packaging (Griffin and Moorhead 37). For instance, it would be prudent to create products that are unique to the middle-income clients and make adjustments to appeal to high-income customers (Kotler and Keller 45). This strategy will be applied alongside pricing discounts for every bundle of service or products sold at the time of market entry. As a result, the Ocean Beauty Center will be in a position to attract and retain the young adult and middle age customer segments through optimizing products sold at a discount (Bolman and Deal 84).
The standard beauty service within the salon will be priced as ‘better’ while customized service as ‘best’. On average, the standard service will retail for $35 but will be sold for $20 as the ‘better’ price. Moreover, customized service will retail for $50 but will be sold to customers at $35 as the ‘best’ price. Although the proposed prices are slightly higher than the current average market price, customers will get a pricing discount accompanied by free services such as Sauna and tea (Goodman 45). The prices set at $20 and $35 for different service standards will allow clients to choose the most preferred service bundle. Specifically, this pricing strategy will serve the interest of middle income and high-income clients. The superior service quality will enable the Ocean Beauty Center to survive stiff completion from established businesses with similar or lower service prices (Bolman and Deal 87). Since the proposed retail prices are 40% above the cost of production, the business is expected to expand with ease as streams of profit will be realized within six months.
Accounting
Table 1: Cost of doing business. (Source: Self-generated).
The proposed Ocean Beauty Center is expected to serve three thousand clients within the first year of operations. Since the average service charge will be $20, the business is likely to collect $60,000 within 12 months as revenue.
Expected revenue= Number of customers * cost of each beauty service
=3,000*20
=$60, 000
The Ocean Beauty Center
Table 2: 12-Month Income Statement. (Source: Self-generated).
The Ocean Beauty Center
Table 3: Balance Sheet. (Source: Self-generated).
As of 30th December 2018
Ocean Beauty Center
Table 4: Statement of changes in equity. (Source: Self-generated).
As of 31 December 2018
Return on investment = (Gains – Investment costs)/ Investment costs
Return on investment for the business
Gains $16, 000
Investment cost $10, 000
Gains – Investment costs $4,000
Therefore, return on investment is 4,000/12,000 = 37.5%
The calculations above indicate that the Ocean Beauty Center may breakeven within six months if all other factors are held constant. Through proactive financial planning, the business has to make correct forecasts of costs, profits, and manage assets related to the daily operation of the venture (Kotler and Keller 17). Strategic financial planning for the Ocean Beauty Center will facilitate correct and sustainable pricing for different products and services. Therefore, the proposed business should be modeled around available funds for investment to correctly draw loss sharing and risk matrices.
Finance
Business financing is an integral part of transforming a plan into reality. In the dynamic business environment, there are several challenges that start-ups face in trying to access capital for investment (Bolman and Deal 81). This sector reviews different financing alternatives at the disposal of the Ocean Beauty Center as a partnership legal business form. The section highlights the costs associated with each source of business financing.
Sources of capital
The primary internal sources of finance for the Ocean Beauty Center include personal sources from each partner in the form of share capital and retained profits (Goodman 5). Since this is a new start-up, the Ocean Beauty Center will benefit from shared profits in potential future expansion needs. On the other hand, retained profits generated by the business may be used to finance further expansion, especially when the business can generate consistent revenues. Thus, the most appropriate internal source of finance at the disposal of the business is to share capital contributed by the three partners (Cavusgil et al. 29). Through this source of capital, the three partners will be in a position to control full profits.
The Ocean Beauty Center has several alternatives for external funding such as bank loans, pulling onboard external investors, and business angels. The bank loan alternative involves acquiring funds that have a fixed repayment plan from a bank. Depending on the duration and amount borrowed, bank loans attract different interest rates. Specifically, the Ocean Beauty Center may access bank loans that are repayable over a prolonged period such as two years (Goodman 40). The bank loans, owners of the Ocean Beauty Center may opt for a bank overdraft that is repayable within six months. This is necessary because bank overdrafts are flexible and may be used to sort fluctuations in the cash flow of the business (Cavusgil et al. 22). Besides, bank overdrafts may become a lifeline during low business season characterized by unpredictable cash flow.
Since the owners of the business intend to expand into other regions of New York, share capital from outside investors is important in financing future extension plans. Among the notable investors include friends, family, and associates, who will invest their capital in exchange for shares in the Ocean Beauty Center (Kotler and Keller 12). Allocation of shares will be done based on contribution against the total capital required for expansion.
The estimated business costs will determine the most cost-effective financing option for the Ocean Beauty Center. This means that planning for the finances of the company is meant to improve internal funds and cash flows. Since the proposed business will operate in a sensitive and highly competitive environment, the partners will consider bank overdraft to supplement share capital contributed by each owner (Cavusgil et al. 33). Reflectively, the bank overdraft alternative will give the Ocean Beauty Center leverage in the event of temporary cash flow challenges and inaccurate forecasting. The flexibility of different bank overdrafts will ensure that financial expenditure planning is not interrupted by downward swings in revenue generation.
Before acquiring a bank overdraft, it is important to calculate the payback period as part of cost management strategies to ensure that initial start-up costs are recovered. This option gives an accurate time value of funds used to start a business. About the Ocean Beauty Center, the directors will ensure that the payback period is short (Goodman 6). Specifically, this approach will enable the management to predict the duration it will take for the business to recover initial capital. To calculate the payback period, the initial cost of investment is divided by the annual cash flow as indicated in the calculations below.
Initial investment outlay $10,000
Annual cash flow $7,500
Therefore, the payback period is 10,000/7,500 = 1.6 years at a flat interest rate.
Financial Ratios
The main financial ratios relevant to the proposed business are liquidity, profitability, activity, and solvency. From the balance sheet, income, and change in equity statements (see table 1, 2, 3, and 4), several ratios were generated (see table 5).
Table 5: Solvency, profitability, liquidity, and activity ratios. (Source: Self-generated).
Operational Management
Tax Compliance
Ocean Beauty Center will be registered in New York City in compliance with the local business regulatory laws. The business will be filed as a partnership within the regulation of the business authority. Several compliance requirements must be fulfilled to get the relevant license to run this business in New York. These requirements are part of the trade laws and regulations on compliance (Goodman 7). These forms include form 1065 for declaring income return from the partnership, form 1065 K-1 for declaring deduction, income, and credit share between the partners, form 4562 for declaring depreciation, form 1040 for declaring tax return from individual partner income, schedule E for declaring supplemental loss and income, schedule SE for declaring tax from self-employment and Form 1040-ES for declaring the individual tax estimations (Kotler and Keller 48). As part of tax compliance, the business owners will file their returns in appropriate forms and operate within the current laws and regulations for businesses in the city of New York.
Personnel
At present, the primary owners of the business are the three directors with similar shares. These directors form the management team at the Ocean Beauty Center. Below the directors will be a supervisor, who will coordinate and directly manage the subordinate employees in different sections (Cavusgil et al. 21). The supervisor will directly report to the supply chain director. Under the supervisor will be two marketers, five general attendees, and three specialized attendees (Bolman and Deal 74). The owners will share net profit equally while the other employees will be put on monthly salary and other remuneration packages.
Procedures
The general and specialized employees of the Ocean Beauty Center will be tasked with the responsibility of directly service clients within and without the salon. Since the business has a physical address, all employees will be expected to work within the salon except the marketing team (Kotler and Keller 26). Through a proactive customer relationship management strategy, the proposed Ocean Beauty Center will strive to satisfy the needs of different clients (Goodman 4). For instance, customers will be able to book salon appointments through mobile phones, social media, and the company website (Kotler and Keller 16). The directors will be expected to make very rational and strategic decisions in consultation with each other. Such a decision will determine the profitability, survival, and sustainability of the business amid stiff competition and changing customer preferences.
Conclusion
The success of a business plan depends on market research and the availability of funding sources to ensure that the outcome is sustainable in the short-term and long-term. In the case of the proposed Ocean Beauty Center, the business plan has provided critical analysis of different components of business planning such as marketing, funding, financial forecasting, organization structure, management principles, and product differentiation. Systematic product features and processes have been analyzed about customer needs and competition in the business environment. The business plan has also integrated practical approaches to present brand awareness, knowledge, marketing, and penetration in the dynamic and multifaceted Manhattan beauty sector. Being a flexible business plan, strategic marketing approaches are discussed to guarantee the sustainability of the Ocean Beauty Center and product charter viability.
Moreover, the aspects of comparative advantage, entry strategy and proactive customer segmentation are highlighted. Also, the rationale for selecting the proposed strategic location within the busy Manhattan business district is presented as part of the convenience and maximum market coverage. Since the business targets female clients within the high income and middle-income brackets, the plan has proposed the creation of a healthy and long-term client relationship management as part of its excellence in service charter. The financial forecasting indicates that the Ocean Beauty Center is likely to breakeven within the first six months of operations. With an initial capital outlay of $10,000, the business is expected to experience predictable cash flows with positive profit margins. Specifically, the business will breakeven within six months if other factors are held constant. However, there is a need to exercise precaution to avoid potential losses.
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