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Cranium Filament Reductions

Executive Summary

Opportunity

Problem

First impressions are everything. A really good haircut is key to making a good impression. Not everyone can afford to spend a few hundred dollars and a few hours to get a good haircut. A lot of families have budget constraints. They need a place to go to get this stuff done. 

Solution

Cranium Filament Reductions will stand out by providing superior customer attention. This is particularly important in the "quick salon" space that Cranium operates in because margins are a bit lower and the goal of a quick salon is to crank through customers.

Market

The hair styling industry is highly fragmented with national chains such as Regis Corporation, which operates diverse franchises catering to all the market segments, and also including thousands of "mom and pop" salons that are very restricted in scope and services. This makes for a highly competitive market that has low barriers to entry and exit. In addition, the clients of hair styling have significant leverage due to the low switching costs they have. However, most companies have tried to pursue only one general strategy in gaining market share. Cranium believes that it is possible to offer a differentiated service through improved customer service at no greater significant cost if the right employee incentives are provided.

Competition

The buying patterns of men and women are quite different. Typically men are more price or convenience sensitive. Men typically care less about the task of getting their hair cut. For them whatever is easiest works best. Women on the other hand are more caught up in hair styling and tend to bond more with their stylists. Because they bond more, they are much more loyal to their stylist. Once a stylist has earned their trust they are more willing to blindly put their hair in the stylists hands.

Why Us?

Cranium Filament Reductions’ mission is to provide reasonably priced, convenient hair styling. We exist to attract and maintain customers. When we adhere to this maxim, everything else will fall into place. Our services will exceed the expectations of our customers. 

Expectations

Forecast

This is a service business so it doesn’t generate high profitability. It does generate a good way for its people to make a living. 

Financial Highlights by Year

Chart visualizing the data for Financial Highlights by Year

Financing Needed

The financing needed is $105,000. That includes a $45,000 loan, and owner investment (Susan) of $60,000. 

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Opportunity

Problem & Solution

Problem Worth Solving

First impressions are everything. A really good haircut is key to making a good impression. Not everyone can afford to spend a few hundred dollars and a few hours to get a good haircut. A lot of families have budget constraints. They need a place to go to get this stuff done. 

Our Solution

Cranium Filament Reductions is a hair salon that allows the entire family to have their hair needs satisfied in one convenient visit. 

There are many "quick salons" like Cranium, however, many of these salons, such as Cost Cutters, only provide the minimum services, whereas the upscale salons can be inconvenient due to scheduling requirements and cost. The owner of Cranium perceives an unfulfilled customer need for a low-cost salon that provides maximum flexibility and strong customer attention. Using this strategy, Cranium will gain significant market share and create critical long-term relationships with its clients.

Target Market

Market Size & Segments

Cranium Filament Reductions will target each of the three groups separately. The males will be targeted by offering a quick, convenient, service. Because men tend to have shorter hair, they usually require haircuts more often. If they are getting a cut every four weeks and work normal business hours, most barbers are closed when the male customers have free time. Cranium Filament Reductions will cater to males with evening hours, no appointments necessary, and quick turn around times.

Generally females prefer the allure of upscale salons, however, not everyone can afford this luxury. For this reason Cranium Filament Reductions will provide the same quality hair styling, without the expensive price. Cranium will target these customers by emphasizing the sophisticated, ultra-hip styling that Cranium can offer.

Cranium Filament Reductions will also target mothers with children by offering the kids toys to play with while they wait and child-friendly hair stylists. Additionally, children receive a special rate reflecting the fact that children’s hair grows so fast that it can be expensive to keep up with regular cuts, as well as the recognition that it generally takes a lot less time to cut a child’s hair so it should be inherently less expensive.

Competition

Current Alternatives

Cranium Filament Reductions’ competitors include:

  1. Traditional barbers. They rarely serve appointments, it is generally a walk-in service. While barbers are usually willing to provide whatever cut you are interested, they are generally providing straight forward haircuts, typically on the conservative side. The advantages of a barber is they are inexpensive and easy to use. Their disadvantages is often conservative styling capacities, sometimes a long wait as the barber may be an old timer who enjoys to chit chat.
  2. Franchised "quick salons."  An example of this would be Supercuts or Best Cuts. In essence this is a franchised version of Cranium Filament Reductions. The advantage of this style is the store will be the same from location to location and some people like this predictability. 
  3. Independent salons. These shops typically focus on a specific niche and do not serve a wide group of customers. The advantages to these could be an independent salon that fulfills all of your needs. The disadvantage is that because they tend to be more focused, more often than not this type of salon will not offer exactly what customers are looking for.

The buying patterns of men and women are quite different. Typically men are more price or convenience sensitive. Men typically care less about the task of getting their hair cut. For them whatever is easiest works best. Women on the other hand are more caught up in hair styling and tend to bond more with their stylists. Because they bond more, they are much more loyal to their stylist. Once a stylist has earned their trust they are more willing to blindly put their hair in the stylists hands.

Our Advantages

Cranium Filament Reductions’ competitive edge is based on faultless customer service. Cranium Filament Reductions recognizes that the hair cutting/styling market is crowded so it is difficult to stand out. Cranium Filament Reductions will stand out by providing superior customer attention. This is particularly important in the "quick salon" space that Cranium operates in because margins are a bit lower and the goal of a quick salon is to crank through customers.

Cranium will invest time and money into training to ensure that clients receive the best experience possible making it easier to turn them into long-term customers. By providing superior customer service, Cranium will be able to effectively compete against and outlast larger chains and independent stores.

Keys to Success

Keys to Success

Our keys to success are: 

  1. To create a service-based company whose goal is to exceed customer’s expectations.
  2. To increase the number of clients served by at least 20% per year through superior performance and word-of-mouth referrals.
  3. To develop a sustainable start-up business, contributing to increased employment of community residents.
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Execution

Marketing & Sales

Marketing Plan

Cranium Filament Reductions will be located in a shopping center in Shaker Hts., OH. While the cost of the lease per foot is higher than in other business areas, the shopping center provides the best exposure. Additionally, the shopping center association is responsible for marketing the center’s common area which will help draw a lot of traffic to the shopping center.

Cranium Filament Reductions will market themselves as a hair salon that serves everyone, men, women, and children. This will be done through flyers to be sent out with the local newspaper. Cranium will also have an in-store promotion for the first few months to lure new people in. Lastly, Cranium will offer a discount for a few months to people that refer new customers.  

We intend to be active in social media, with consistent presence, offering tips on style plus information on local events and issues, occasionally humor, social media presence that helps people get to know us, like us, and trust us. 

Sales Plan

Cranium Filament Reductions’ sales strategy will be based on extremely professional interactions with the customer. Typically the "quick salons" concentrate on being quick and inexpensive, often at the expense of customer service. Anytime that a prospective customer is speaking with someone at Cranium’s the employee will have an opportunity to impress the customer. Employee training will emphasize seizing these opportunities.

Cranium Filament Reductions will also have the opportunity to increase sales of their retail hair care products every time they have a customer in the chair. Cranium offers deep discounts on the hair care products for employees to encourage usage so they can explain to the customer about their personal experiences. Additionally, Cranium offers a product-based commission structure for the hair care products where they give away the product to the employee for commissions for selling the items to their customers. These personal testimonials and commission structure will allow Cranium to generate good sales from the retail hair care products.

Operations

Location and Equipment

This will be a store front with 1500 square feet. There will be: a waiting area with magazines and a display with hair products, a reception desk, 3 hair dressing chairs, 3 washing stations towards the back of the store, one computer and one cash machine. This will be a small space but will have everything that one expects when going into a hair cutting space. 

Milestones & Metrics

Milestones Table

Milestone Due Date Who’s Responsible
Progress review and tracking
May 16, 2020 Management
Progress review and tracking
Sept 12, 2020 Management
Set up Store Front
Dec 12, 2020

Key Metrics

Our key metrics are:

  1. The # of customers in a day 
  2. The # of customers in a month 
  3. Walk-ins vs clients who called to make a appointment ahead 
  4. The # of products that are sold to clients or walk-ins every month 
  5. The money brought in on the most popular stylist vs the least popular stylist 
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Company

Overview

Ownership & Structure

Cranium Filament Reductions is an Oregon corporation owned entirely by Susan Sever and is located in Shaker Hts., Oregon.

Ms. Sever will be handling all hiring and training, purchasing, and retail sales. She will also hire a receptionist to manage all of the appointments as well as the people who walk in and be responsible for the point of sale transactions. Cranium will also be hiring six part-time hair stylists who will operate on a hourly/commission basis. 

Ms. Sever will be using a partial commission basis to create incentives for superior customer attention. The more her stylists attend to the customer’s needs, the more money they will make off commissions. Cranium will invest time and money into training to ensure that clients receive the best experience possible making it easier to turn them into long-term customers. 

Team

Management Team

Susan Sever received her bachelor’s degree from Miami University in Oxford, OH. While pursuing her degree Susan worked in the restaurant industry. For the four years during school she was a server in an upscale restaurant. While this provided very good income, particularly on the weekends, she longed for management experience.

After graduation she sat down with the owner of the restaurant and presented him with a well reasoned case as to why she should be manager of the establishment. Her main points were her intimate knowledge of the industry and the restaurant, her superior communication skills with the customers and her colleagues, and her ambition to succeed. The owner was surprised by the well-reasoned arguments, enthusiasm, and ambition to take on more work that he promoted her to manager on the spot.

Susan worked as manager for three years, learning all the intricacies of operating a business. These were three rewarding, but long, years. Toward the end, the long hours and work at night took its toll on Susan and she was burned out. When contemplating new opportunities she was brainstorming a  way in which she could combine something she loved with something that she would be the owner of. She loved hair and had the experience of operating a business so after a lot of market research she undertook the task of writing a business plan.  

Personnel Table

2020 2021 2022
Susan $43,200 $44,064 $44,945
Part Time Hair Specialist (3) $129,600 $132,192 $134,835
Receptionist $36,000 $36,720 $37,454
Part Time Hair Specialist (0.67) $89,890
Part time hair specialist (0.67) $36,000 $38,000
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Financial Plan

Forecast

Key Assumptions

Our Key Assumptions: 

– Men would like to have great haircuts and do not mind paying for them 

– Men and women need hair products 

– Our cost for men’s haircuts will be industry standard of 43% and our cost for women’s haircuts, children’s haircuts and products are 27%

– Our friends  and family see the merit of our business and would be happy to give us the cash to run the business. 

Revenue by Month

Chart visualizing the data for Revenue by Month

Expenses by Month

Chart visualizing the data for Expenses by Month

Net Profit (or Loss) by Year

Chart visualizing the data for Net Profit (or Loss) by Year

Financing

Use of Funds

Cranium Filament Reductions will incur the following start-up costs:

  • Computer with point of sale terminal.
  • Computer with printer for back office.
  • Five cutting stations, each station requires a barber chair, cabinet, large mirror, blow dryer, curling iron, electric razor, several pairs of scissors, spray bottle, two sided mirror, and assorted combs and brushes.
  • Desk for reception area.
  • Three couches for the reception area.
  • Display shelf for sale of retail products.
  • Assorted plants.
  • Assorted toys for the children.
  • Legal fees for business formation and generation/review of contracts.

Please note that the following items that are assets to be used for more than a year will be considered a long-term assets and will be depreciated using the straight-line method accepted by G.A.A.P.

Sources of Funds

Susan will be contributing $60,000. The additional $45,000 will come from a business loan. 

Statements

Projected Profit & Loss

2020 2021 2022
Gross Margin $288,129 $388,360 $534,360
Operating Expenses
Salaries & Wages $208,800 $248,976 $345,124
Employee Related Expenses $41,760 $49,795 $69,025
Utilities $1,200 $1,200 $1,200
Rent $24,000 $24,000 $24,000
Insurance $1,500 $1,500 $1,500
Interest Incurred $1,547 $1,425 $1,138
Depreciation and Amortization $1,465 $1,465 $1,465
Gain or Loss from Sale of Assets
Income Taxes $1,178 $9,000 $13,637
Total Expenses $388,019 $481,000 $654,729
Net Profit $6,678 $51,000 $77,271

Projected Balance Sheet

2020 2021 2022
Cash $84,344 $87,260 $99,844
Accounts Receivable $0 $0 $0
Inventory $11,970 $16,470 $16,470
Other Current Assets
Total Current Assets $96,314 $103,731 $116,314
Long-Term Assets $14,650 $14,650 $14,650
Accumulated Depreciation ($1,465) ($2,930) ($4,395)
Total Long-Term Assets $13,185 $11,720 $10,255
Accounts Payable $2,839 $3,739 $3,739
Income Taxes Payable $1,178 $2,254 $3,411
Sales Taxes Payable $0 $0 $0
Short-Term Debt $7,024 $7,310 $7,608
Prepaid Revenue
Total Current Liabilities $11,041 $13,303 $14,758
Long-Term Debt $31,780 $24,470 $16,862
Long-Term Liabilities $31,780 $24,470 $16,862
Paid-In Capital $60,000 $60,000 $60,000
Retained Earnings ($33,322) ($42,322)
Earnings $6,678 $51,000 $77,271

Projected Cash Flow Statement

2020 2021 2022
Net Cash Flow from Operations
Net Profit $6,678 $51,000 $77,271
Depreciation & Amortization $1,465 $1,465 $1,465
Change in Accounts Receivable $0 $0 $0
Change in Inventory ($11,970) ($4,500) $0
Change in Accounts Payable $2,839 $900 $0
Change in Income Tax Payable $1,178 $1,076 $1,157
Change in Sales Tax Payable $0 $0 $0
Change in Prepaid Revenue
Investing & Financing
Assets Purchased or Sold ($14,650)
Investments Received $60,000
Dividends & Distributions ($40,000) ($60,000)
Change in Short-Term Debt $7,024 $286 $298
Change in Long-Term Debt $31,780 ($7,310) ($7,608)
Cash at Beginning of Period $0 $84,344 $87,260
Net Change in Cash $84,344 $2,917 $12,583
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