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The Feasibility of Opening a Nail and Beauty Parlour in Louth

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The Feasibility of Opening a Nail and Beauty Parlour in Louth


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 suburban town of Louth,
Lincolnshire, directly opposite the bus station, with many bus stops
in the vicinity. 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…square feet in size and will
cost £27 000pa to rent, with rates of roughly £14 000.

All required materials could be purchased from 'Sally's Beauty
Warehouse´ in Grimsby, a town approximately 35 minutes away from Louth
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 'Lincs Nail & 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 Louth.
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 Louth.

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 be followed as failure to comply could result in the
following:

It is the duty of the employer to assess any possible risks, implement
the necessary control measures and maintain sufficient records.

* Prohibition notices

* Public disclosure

* Bad publicity-acting as a deterrent for potential customers

* Increased insurance premiums

* Claims for compensation



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 Louth 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
============================================

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 LINCOLNSHIRE?

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?

Louth Grimsby
Horncastle Holton-le-Clay

Caistor Other

WHAT TREATMENT DO YOU/WOULD YOU CONSIDER HAVING?

1. Accrylic Nail Extensions

2. Manicure

3. Pedicure

4. 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+


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



Results of Questionnaire
========================

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By doing these charts I can make some clear conclusions from my
results. It appears that it is very feasible that my business can go
ahead and be profitable.
====================================================================



SECONDARY RESEARCH RESULTS
==========================



Objective 1
===========

It was discovered that there is another Beauty Salon in Louth as well
as a number of hairdressers, which provide the manicuring service.
Their prices however, are substantially higher than any that the Lincs
Nail& 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 Louth:

Services exclusive to Lincs Nail & Beauty Bar:


o 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.


o 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.


o 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 Louth competitors:


o Hair cuts and colours


o Electrolysis


o Facials and skin treatments

A foot count was collected outside the Beauty Salon of the Louth
competitor and outside the Nail Salon of the greatest nail treatment
competitor, which is in Grimsby. 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
Louth / Grimsby

09.00 -10.00 Wednesday 6 /2
Saturday 11 /2

12.00-13.00 Wednesday 19 /4
Saturday 30 /5

16.00-17.00 Wednesday 25 /2
Saturday 30 /3


S.W.O.T Analysis of Louth and Location of Premises.

Strengths:


o Wealthy area in which disposable incomes are high


o Situates two all girls private schools 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.


o Premises directly opposite a bus station and surrounded by bus stops
from various routes, hence enabling easy access to the Bar. Plenty of
car parking spaces available.


o The premises have many large windows and an open plan, located
directly in the centre of the town, providing much opportunity to
entice custom via interior design.

Weaknesses:

o Is not a large retailing town such as Grimsby, and therefore most
people who will know of its existence will be those who frequently
visit Louth, unless a large budget is set aside for advertising. Also
due to this, people may prefer to go to Grimsby as they can see a
movie and do some shopping while they are there.


o Limited parking space available

Opportunity:


There is an opportunity to completely dominate the market of Louth and
the small surrounding towns as the main service provided is modern,
fashionable and the closest replicating service is in Horncastle. 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.
If market domination is established there is and opportunity to expand
the range of services to include new and radical skin treatments and
bring the big town salon treatments to the suburbs.

Threats:
The main threat comes from current competitors who may also aim to
slash prices, if this is the case, the Lincs Nail & Beauty Bar may
have to rely on their product differentiation and customer relations
alone to help them survive.

See Maps located in the appendix.

Objectives 2 & 3

In order to discover how many women reside in the area or Louth 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 Louth, 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 Louth, 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
===========

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


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

2 00

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 favoured 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 Grimsby. As Louth
is a significant distance away from Grimsby - some 12 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 Grimsby 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



Profit and Loss
===============

This is a forecasted profit and loss that will follow the principle of
caution and understate the forecasted sales, from the estimated 66 of
100 people (see survey) to 20% of the population of women in

Louth spending an average of £20 a week, therefore £240 a year.

FORECASTED PROFIT AND LOSS ACCOUNT FOR THE 'LINCS NAIL & BEAUTY BAR
FOR ONE

YEAR AT 20%

£ £

Sales Revenue

249,840

Cost of Goods Sold

3,537

Gross Profit

246,303

(Expenses)

Rent

27,000

Maintenance

2,000

Insurance

1,000

Wages

144,000

Rates

14,000

Decoration

2,000

Opening of store

200

Advertising

10,000

Lighting & Heating

5,500

Equipment & Furniture

1,854

Depreciation 25%

464

Interest

208,018

Net Profit

38,285

The following profit and loss calculates an estimated sales turnover,
based on 66% of the population of women in Louth using the service.
This is an optimistic view estimating the probable maximum profit that
can be achieved.


FORECASTED PROFIT AND LOSS ACCOUNT FOR THE 'LINCS NAIL & BEAUTY BAR
FOR ONE YEAR



AT 66%
======

£ £

Sales Revenue

824,472

Cost of Goods Sold

3,537

Gross Profit

820,935

(Expenses)

Rent

27,000

Maintenance

2,000

Insurance

1,000

Wages

144,000

Rates

14,000

Decoration

2,000

Opening of store

200

Advertising

10,000

Lighting & Heating

5,500

Equipment & Furniture

1,854

Depreciation 25%

464

Interest

208,018

Net Profit

612,917


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 Louth. 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 Louth.



FORECASTED PROFIT AND LOSS ACCOUNT FOR THE 'LINCS NAIL & BEAUTY BAR
FOR ONE YEAR
===================================================================



AT 40%
======

£ £

Sales Revenue

499,680

Cost of Goods Sold

3,537

Gross Profit

496,143

(Expenses)

Rent

27,000

Maintenance

2,000

Insurance

1,000

Wages

144,000

Rates

14,000

Decoration

2,000

Opening of store

200

Advertising

10,000

Lighting & Heating

5,500

Equipment & Furniture

1,854

Depreciation 25%

464

Interest

208,018

Net Profit

288,125


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 Louth 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 Louth is not a well-known town, 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 Lincs 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 Louth
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 Louth.

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 Lincs 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 is 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 Grimsby,
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 Louth, 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 Louth 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 'Lincs Nail & Beauty Bar´ a reality!


APPENDIX

A Map of the Proposed Location for the 'Lincs Nail & Beauty Bar´.



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:
Pick names at random from the electoral register, e.g. every 100th
name.
Send the interviewer to the address given on the register
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.

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