BUSINESS PLAN SUBMITTED IN PARTIAL FULFILLMENT OF REQUIREMENT FOR THE AWARD OF DEGREE IN BACHELOR OF COMMERCE

                                          EGERTON UNIVERSITY

                                                  (  NJORO  CAMPUS)

DEPARTMENT OF FINANCE, ACCOUNTING  AND  MANAGEMENT SCIENCE

BUSINESS PLAN

BODYWISE HAIR SALON

PO BOX 100 NAKURU

BUSINESS PLAN SUBMITTED IN PARTIAL FULFILLMENT OF REQUIREMENT FOR THE AWARD OF DEGREE IN BACHELOR OF COMMERCE

PRESENTED BY;     OCHIENG’ KENNEDY OTHORO             C12/60090/08

                                     OTIENO GEORGE OUMA                         C12/60009/08

                                     OMONDI CORNEL OTIENO                     C12/60893/07

                                     JONATHAN DANIEL OMOLLO               C12/60040/08

LECTURER;                MR AUKA DANIEL

SUBMITTED ON;                   10^TH APRIL 2012

TABLE OF CONTENT

Cover Page…………………………………………………………………………………1

Table of Content…………………………………………………………………………..2

CHAPTER ONE: EXECUTIVE SUMMARY

• Business Description…………………………………………………………………..4

1.1Market Plan…………………………………………………………………………….4

1.2 Organization and Management Plan…………………………………………………..4

1.3Operation/Production Plan……………………………………………………………..5

1.4Financial Plan…………………………………………………………………………..5

1.5Statement of Purpose…………………………………………………………………….5

CHAPTER TWO: DESCRIPTION OF THE VENTURE

2.0Business Name…………………………………………………………………………6

2.1Business Location and Address………………………………………………………..6

2.2Type of Business……………………………………………………………………….7

2.3Products and Services Offered…………………………………………………………7

2.4Industry Which the Business Operates…………………………………………………7

2.5Justification of the Business……………………………………………………………8

2.6Short and Long Term Goals……………………………………………………………9

2.7Entry and Growth Strategy……………………………………………………………10

CHAPTER THREE: MARKETING PLAN

3.0Customers…………………………………………………………………………….11

3.1Competition…………………………………………………………………………..11

3.2Market Share………………………………………………………………………….13

3.3Pricing Strategy……………………………………………………………………….13

3.4Advertising and Promotion……………………………………………………………13

3.5Sales Strategy………………………………………………………………………….14

3.6Distribution Strategy………………………………………………………………….14

CHAPTER FOUR: ORGANIZATIONAL PLAN AND MANAGEMENT

4.0Organization Chart……………………………………………………………………15

4.1Key Personnel…………………………………………………………………………15

4.2Recruitment, Training and Promotion………………………………………………..20

4.3Remuneration and Incentives…………………………………………………………21

4.4Licenses, Permits and By-laws……………………………………………………….22

4.5Support Services………………………………………………………………………23

CHAPTER FIVE: PRODUCTION AND OPERATION PLAN

5.0Production Facilities and Capacity……………………………………………………24

5.1Production Strategy……………………………………………………………………25

5.2Production Process……………………………………………………………………26

5.3Regulation Affecting Operations……………………………………………………..27

CHAPTER SIX: RISK MANAGEMENT STRATEGIES

6.0How to Analyze and Reduce the Risks………………………………………………29

6.1Future Business Risks…………………………………………………………………29

6.2Counteracts Mechanism………………………………………………………………29

CHAPTER SEVEN: EXIT AND HARVEST STRATEGIES

7.0Captive Company Strategy……………………………………………………………30

CHAPTER EIGTHT: FINANCIAL PLAN

8.0Pre-Operational Cost………………………………………………………………….31

8.1Working Capital………………………………………………………………………31

8.2Profit and Loss Account………………………………………………………………32

8.3Balance Sheet…………………………………………………………………………33

8.4Cashflows……………………………………………………………………………..34

8.5Break-Even-Level…………………………………………………………………….37

8.6Return on Equity………………………………………………………………………37

8.7Break Even Analysis………………………………………………………………….37

8.8Return on Investment…………………………………………………………………37

Appendix I: Premise Layout…………………………………………………………….38

CHAPTER ONE :EXECUTIVE SUMMARY

1.0 BUSINESS DESCRIPTION

“Bodywise Hair Salon” will be the registered name of the business entity. It will be a Partnership located in Nakuru Town, along KANU Avenue. The avenue is very busy street hence the business will be located in a strategic point and it will be for its benefits since many customers will be able to reach and receive their services. The high quality service will be also an added advantage.

The business will deal with offering Salon Services to customers which includes Plaiting, Blow-dry, Hair Setting, Steaming and Chemical application. These will be offered to individuals and institution. The Salon business will also provide services on hire for example door to door services on request by the customers who cannot make it to our premises.

1.1 MARKET PLAN

The location of Bodywise Hair Salon premises will greatly influences marketing of its services due to its strategic position. It is surrounded by many university colleges and offices where ladies work. The business will be better than its competitors within the town because it will provide door to door services to customers and the partners will always see to it that it offers the services in time. Fair and affordable prices will be used to enable at least every level of customers to be served and to attract as many customers as possible.

1.2 ORGANIZATION AND MANAGEMENT PLAN

The business being a partnership in nature, the business activities and management will be handled by the partners mainly according to their levels of qualification. With enough level of knowledge in accounting, finance, human resource management and marketing, the running of the business will be very smooth.

The twenty (20) workers that will be employed will be fully qualified in their field and have experience of at least two (2) years doing the same job or something related. All the workers will have to undergo public relation training in public relations to put them in position to handle customers effectively. For smooth running of the business, supportive services like telephone, postal services, insurance, and banking is intended to be put in place in future. The business will also bear a doctor and a lawyer.

Official working hours for business will be between 7.00a.m to 6.00p.m during weekdays and from 8.00a.m to 5.00p.m during weekends, except on Sundays and public holidays that will be resting days for the workers.

1.3 OPERATION/PRODUCTION PLAN

Since the business is new, it will be operating in a two-roomed premise along KANU Avenue in Nakuru town with further plans to expand the premises as a result stipulated of high number of customers’ turnover.

The services that will be provided such as blow-dry, chemical application, plaiting will be handled by specialists in those specific areas. The specific chemicals and hair oils will be written and compiled by partners and kept in a file for reference purposes.

All services will be provided at an affordable price in order to enable those in need to be satisfied and also to attract as many customers as possible. Proper management of the working capital will also contribute to the fast growth rate of the business.

1.4 FINANCIAL PLAN

Enough capital will be needed for the smooth running of the business. The finance will be mainly obtained from partners’ contributions and youth development fund. Since the aim of the business is profit making, the pricing of the services will depend on production cost, twenty five percent (25%) will be always taken at the bank at the end of every month as retained earnings.  The capital requirement for Body Hairs Salon is estimated to be five hundred thousand Kenyan shillings (ksh.5000000)

1.5 STATEMENT OF PURPOSE

The purpose of this business plan is to attract external financiers to provide the required financial support that will enable for establishment and running of the intended business.

CHAPTER TWO: DESCRIPTION OF THE VENTURE

• BUSINESS NAME

The business will be registered under the name ‘BODYWISE HAIR SALON’, which is derived from its purpose as it offers solution to all hair styles and types. The motto of the business will therefore be “ENTER AND HAVE THE RIGHT SOLUTION FOR YOUR HAIR.”

2.1BUSINESS LOCATION AND ADDRESS

The business will be located in Nakuru Town along KANU Avenue in KANU complex. The partners scanned and found this place suitable for the business since it is central for different girls’ schools, universities colleges such as JKUAT complex, Egerton University (Nakuru Town Campus), Kabarak University and Mt. Kenya University, offices with KANU Avenue. The area is ideal for people within Nakuru municipal market. The area is also well supplied with water and electricity, which are essential in the running of the business. Tukys, Uchumi, and Woolmatt are the neighboring supermarket from where the young solution salons will buys oil, shampoo, soap, chemicals, and towels among others.

The business will operate under this the following address and telephone number

POSTAL ADDRESS:                       BODYWISE HAIR SALON

                                                          P.O BOX 100 NAKURU

TELEPHONE NO:                           0728537648/0738537648

1.2 BUSINESS OWNERSHIP (NATURE OF THE BUSINESS)

BODYWISE HAIR SALON will be a partnership type of business with four partners. The partners will be overall the overall controller and they deal with major activities such as decision making, budgeting and purchasing. The form is preferred as liabilities and cost are shared among the partners, there are various skills brought together, there is relatively quicker decision making, and raising the initial capital is relatively easy compared to sole proprietorship.

2.3 TYPE OF BUSINESS

The Bodywise Hair Salon will be a service type of business. It will offer salon services to high school students, college and university students and ladies from neighbourhood community. The services offered will depend with the existing technology and customers’ expectation at that time and will improve as technology improves and customers’ expectation changes.

2.4 PRODUCTS AND SERVICES OFFERED

The business will mainly deal with offering salon services to students, office ladies and other ladies on demand. It will also offer  market for hairpiece, pony-tail, weaves and ornaments such as bangles, necklaces, earrings, rings and wrist watches, chemicals and food hail oils.

Its main services will includes plaiting, weaving, blow-dry, wash and set, and chemical application, blow-out among others. A price list will be availed and their prices will depend on with the particular style and the chemical or oil used for the services. A 20% discount will be available for new visiting customers and this will contribute to encourage them to visit the salon once again. Nail will be applied for free be applied for free to all customers who receive our services. There will also be compensation of work whenever one backfires.

In addition to this, soft music, magazines and novels will be offered to customer as they wait to be served. Make-ups like different brands of powder will be availed and regular customers will be allowed to receive the services on credit on request.

2.5 INDUSTY WHICH THE BUSINESS WILL OPERATE UNDER

The Bodywise Hair Salon falls under service provision industry. There are approximately fifty (50) salons within Nakuru Town, which fall among small, medium and big-sized, those use modern technology. BODYWISE HAIR SALON will falls among the medium sized that use modern technology in its operation.

The industry is currently experiencing a very rapid growth in the country this is due to the fact many people have realized the need for beauty and smartness. According statistical on beauty and modeling by Morison (1999), reveals that people total population of people has increased from 4000 in 1998 to 7000 in 1999. There is therefore high demand for the services and on the other hand competition is also very stiff although the business is differentiating its services and using the current technology to cope up with the stiff competition.

People are becoming westernized (Morison1999) people are becoming more westernized and there is still hope is for much more demand and establishment of more salon s in Nakuru Town and Kenya as a whole. The population is to boom especially now that the technology is changing. This will create more jobs opportunities which is a contribution to national growth development.

The salon business boom mostly during festive seasons such as Christmas, new-year, weddings among other parties. Nowadays the sale increment also shoots when schools, colleges and universities resumes in session. The trends and prospects of technology is also improving as modern equipment are being introduced and they replace the old machines like blow-drier, heater, steamer, rolling machines and drying machines. There are also new types of hair styles and hair treatment.

2.6 JUSTIFICATION OF THE BUSINESS

 According to survey carried out by the partners, there are only fifteen (15) modern salons within Nakuru Town. The rest are old salons that operate by use of old technology. According to 2010 census, the total population of people staying in Nakuru Town is 100000 of which 75000 are women. According to statistical data on beauty and modeling by Morison (1999), reveals that around 15000 ladies require their hair attended to, therefore the demand for this service is very high.

Since the salon will be situated close to the market than its competitors, there will be less transportation cost of material and market needed the business. This will enable the business to charge a little low charge, which is an advantage and will result to winning many customers. The business being near to the consumers will be also an advantage to the business. Most of the customers will make it by themselves to the premises to receive their services without spending an extra cost for transport. Those who stay far and those with special requests will be served at their homes or working places as it will be organized between the customers and the salonist

Nakuru Town is well supplied with treated clean water, electricity, high security and well tarmacked roads all that will contribute to smooth running of the business.

2.7 SHORT TERM AND LONG TERM GOALS

For any business there must be satisfaction, for without satisfaction there is no prosperity. BODYWISE HAIR SALON shall be established mainly to give required and satisfactory salon services to its customers. The business aims at maximizing its profit by offering quality services at affordable prices. It also aims to provide incentives and motivation to its employees through training and development, payable holiday schemes, compensations schemes in case of injury during working hours and medical schemes.

The business shall be expected to achieve stability and steady growth through their hard work and co-operation. Branches shall be established if the first salon succeeds to increase sales by 20%. The business also intends to open training center in which it will train its workers and works from other salons. The business aims at attracting as much as customers as possible through thorough advertising in mass media, poster, social media such as facebook, twitter, billboards, provision of discount to customers, creating good relationship with the general public and provision of door to door services.

The business aims to sponsor at least two students to high school after its well established to promote education in our society. It will also be fully involved in preservation of the environment for example through marketing cleaning and sporting activities through sponsoring tournaments.

2.8 ENTRY AND GROWTH STRATEGY

BODYWISE HAIR SALON expects to enter the market with a great advantage over others. After studying the competitors, BODYWISE HAIR SALON concluded that it will provide services with the latest technology, discounts of 20% to customers visiting at their premises for the first time and provide door to door services to customers on request.

The business will also have great expansion opportunities since it will have links with other big international salons which will assist in its publicity. The management and leadership will also be at best as it will be carried out by young graduates with different skills in business management. This will also enable the business to achieve its goals as the partners will have all their time and energies to dedicate to the business as this will be there source of income.

At the start of the business, posters and social cites will be used for advertisement to the surrounding communities. After sometimes the business will be advertised by use of mass media, newspapers, magazines and newsletters. The partners wish to start the business with three driers, four steamers and five blow driers. This will be used for around three months when more machines will brought in. All this will be modern machines and will be handled by qualified personnel. The growth opportunities will be usually festivities like Christmas, new-year and weddings. When this is achieved there will be establishment of three more branches within Nakuru Town to increase by the end of second year of operations.

CHAPTER THREE: MARKETING PLAN

• CUSTOMERS

The aim of starting a business is to get customers who can purchase the products or services. These people who purchase these the services or products constitute the business market.

The BODYWISE HAIR SALON targets a group of customers who includes students from learning institutions such colleges, high schools and universities and ladies working within Nakuru Town. The business will also serve domestic customers who are mostly the resident who stay near the salon. The business will be located along the highway to enable the salonist serve travelers who will visit the salon during their journey.

The potential customers of BODYWISE HAIR SALON will be of different age, religion, occupation, education level and income level. They will therefore need different services at different period of time. The partners will ensure that each and every person receives the right service at the right time, quality and at affordable cost as the motto of the business is to satisfy customer expectation.

The frequency of the customers visiting the will mainly depend on the satisfaction of quality of service they receive from the business, the kind of hair style the customer bears and their level of income. Otherwise most of the customers will approximately visit the salon twice a month that at an interval of every two weeks. The population of people in need of salon services will tend to very high during festive seasons.

3.1 COMPETITION

The BODYWISE HAIR SALON is likely to face stiff competition from three (3) salons namely; Eurega, Georgia, and Victory hair salons. These salons have greater advantage over Bodywise Hair Salon because they have been in existence there before and therefore they have loyal customers, some have good returns and are well established in terms of capital.

Bodywise Hair Salon plans to provide services with the latest technology, discount of 20% to customers visiting the premises for the first time and provide door to door services on request. The business also intends to allow credit agreement mainly with loyal customers. It will also organize compensation of work whenever one backfires. The business plans to differentiate its services from other in the same industry. They will also provide free services for example nail varnishing among others.

The business also aims to provide incentives and motivation to employees through training & development, payable holiday’s schemes, compensation schemes in case of injury during working hours, employees insurance and medical schemes.

3.2 MARKET SHARE

There is a need to capture a large market share for any business. To achieve this B.H.S will strive to offer its services faster compared to its competitors, use the latest technology, offer after sales services to all customers like free nail vanish application, offer discount to the new customers and use market penetration strategy where the business will set lower prices below its competitors. The business also tends to use overall cost leadership strategy by being the lowest cost producer in its industry to attract more customers. This will be possible as the business will possess several cost advantages such as efficiency in operations, superior technology, low overhead costs and preferential access to factors of production. The business will focus in the niche in the market where nobody is interested in such body massage and male hair care.

The partners intends to understand their customers, set true customers’ requirements  and put in place appropriate process to meet customers’ expectations. This will be done through getting customers’ views and acting on the views appropriately.

3.3 PRICING STRATEGY

The business tends to use market penetration strategy where it will deliberately set low prices for its services and products to attract as many customers as possible, maximize sales and also to keep distance the competitors. This will happen as the business will be entering the new market and industry. Once the business has achieved the desired level of market share, it will gradually increase its prices to maximize profit.

3.4 ADVERTISING AND PROMOTION

A starting business requires a lot of exposure in order to be recognized by customers. Although there are many salons already existing in the market today, B.H.S will carry out business promotions such as after sales services to all customers in form nail varnishing for free, discounts to loyal customers and door to door services. The business also will be involved in sponsoring sporting activities, education and preservation of the environment to improve its reputation or public image.

Poster will be placed at strategic locations displaying the photo of the premise, services offered and the working hours. There will also be two signboards placed strategically. The business will open a website where it will receive customers’ expectations and requirements and upon them appropriately. It will also have a twitter and facebook accounts where it will directly promote its services and receive the customers complaints and act upon them.

3.5 SALES TACTICS

BODYWISE HAIR SALON will employ the direct selling method to its customers. This will be an advantage since both the partners and customers will meet face to face and have this will promote direct customer contact. This will enable the partners to have direct feedback from customers.

The customers will be allowed to air out their views and on the other hand the salonists will be in a position to advice the customers on how to take care of their hair and its maintenance. By the end of it the entire customer will come out satisfied while the owner will have identified their weaknesses and how to adjust them for the benefit of the business.

Salesmen will also be sent out hear what, when, where and how the customers want to be served. After sales services like free hair bands will also be offered to the customers.

3.6 DISTRIBUTION STRATEGY

The B.H.S customers will be expected to move to and from the salon by their own means. This will not be a problem to all of them as the largest population stays within the town and therefore need no transport to reach the premise. 0n the other hand those who are forced to travel by vehicles will not pay a lot. This is because the roads are good and this will reduce the travelling costs.

The business will provide door to door services to those who are not in position to reach the premise yet they are in need of the services. Institutions like schools and colleges, arrangements shall be made so that some workers visit the institutions during the weekend to offer the salon services.

CHAPTER FOUR: ORGANIZATIONAL PLAN AND MANAGEMENT

4.0 ORGANIZATION CHART

4.1 KEY PERSONNEL

1. MANAGERS

At the start of the business, B.H.S will be managed by the partners according to their areas of specialization and qualifications. The management will be easier due to basic knowledge attained by the partners from obtaining degree in Bachelor of Commerce and also are holders of CPA.K

QUALIFICATIONS OF MANAGERS

There will be none other than their basic qualification and specialization in business management.

DUTIES AND RESPONSIBILITIES

• They are for all decision making.
• They are the overall supervisors.
• They hire and sack employees.
• They co-ordinate all the activities in the firm.
• They set the goals, objectives, mission, vision and business strategies.
• They delegates responsibilities to employees.
• They solve business disputes
• They controls in-flow and out-flow of money in the business

2. ACCOUNTANT

At the beginning of the business, one of the partners will work as an accountant until need arises to employ an external accountant.

QUALIFICATIONS

• Must be a CPA K holder or a holder of degree of commerce (accounting option)
• At least one year experience.

DUTIES AND RESPONSIBILITIES

• Maintains all the account books(ledgers) in the business
• Prepares trial balance for the business
• Prepares balance sheet of the business to show financial operation of the business.
• Prepares trading, profit and loss accounts to shows the profitability and financial performance of the business
• Prepares cash flows to show the cash inflows and outflows.

3. FINANCIAL CONTROLLER

Financial controller will be one of the partners

QUALIFICATIONS

• Must be a CPA K holder or a holder of degree of commerce (finance option)
• At least one year experience

DUTIES AND RESPONSIBITILIES

• Prepares financial loan for the business
• Prepares payrolls of employees
• Advises management about financial opportunities

4 INTERNAL AUDITOR

Internal auditor will also be one of the partners.

QUALIFICATIONS

• Must be a CPA K holder or degree of commerce holder (accounting option)
• At least one year experience

DUTIES AND RESPONSIBILTIES

• Evaluation of financial statements and advice management to set sound risk management systems and internal control system.

5 MARKETING MANAGER

Marketing manager will also be one of the partners.

QUALIFICATIONS

• A degree holder in bachelor of commerce (marketing option)
• At least one year experience

DUTIES AND RESPONSIBILITIES

• Carry out marketing activities such as promotion, pricing, advertising on behalf the business

6 CHEMICAL SPECIALISTS

The business will employ four chemical specialists at the beginning of the business with an intention to increase this number in future.

QUALIFICATIONS

• At least a certificate in hair dressing from recognized hair dressing school in Kenya.
• Three months experience on the job from bigger salons.

DUTIES AND RESPONSIBILITIES

• Wash customer hair
• Apply right chemical for the right purpose
• Wash out chemicals and set the hair depending on customers’ style.
• Give customers advice how to maintain the treatment.
• Budget for chemicals needed in the salon

7. PLAITERS

The business will start with at least five plaiters with an intention to increase the number as the business expands.

QUALIFICATIONS

• At least a certificate in hair dressing from a recognized hair dressing school in Kenya
• At least two months experience in plaiting.

DUTIES AND RESPONSIBILITIES

• Ravel customers’ hair.
• Apply oil on customers’ hair.
• Plait under the customers’ requirements.
• Re-apply oil on scalp
• Advice the customers on how to maintain the hair

8 WEAVER

Only two weavers are expected at the start of the business, but more will be employed as need arises.

QUALIFICATIONS

• At least a certificate in hair dressing from recognized hair dressing school in Kenya
• At least three months experience from big salons

DUTIES AND RESPOSIBILITIES

• Ravel customers hair
• Apply oil on customers hair
• Plait lines depending with the desired style by the customers
• Weave in the weave according to customers’ requirements
• Apply conditioner on the woven weave
• Comb the hair according to the customers’ requirements
• Give customers needed advice on how to maintain the weave

9. BLOWER DRIER

Two specialists will be needed for the start but the number will be increased as the business grows and expands.

QUALIFICATIONS

• Must have a certificate in hair dressing from a recognized hair dressing school in Kenya.
• At least three months experience from big salons

DUTIES AND RESPONSIBILITIES

• Apply on customers’ hair
• Wash and blow dry the customers’ hair
• Apply the right oil for right hair salon
• Ravel customers’ hair

10. SECURITY GUARD (1 POST)

QUALIFICATION

• Have at least a training from a security firm for example G4S

DUTIES AND RESPONSIBILITIES

• Guard the premise
• Direct customers
• Will act as a passenger for sometimes(until a passenger is employed)

4.2 RECRUITMENT, TRAINING AND PROMOTIONS

4.2.1 RECRUITMENT

The partners will draw a job analysis that will determine the activities, skills and qualifications needed for the running of the business. A job description will also be drawn to show duties and responsibilities. This will help to prevent duplications of duties and conflicting of interest.

The job opportunities will be advertised on newspapers, notice boards, business website, facebook and twitters with requirements of each of the particular job. Short listing will be done depending on the qualifications and experience. Interviews will be conducted by the partners (managers) and outsourced qualified people. The people will be employed strictly depending on their qualifications, experience and set standards.

Orientation will be done to the new workers about the use and care of the available machines, their duties and how to handle customers.

4.2.2 TRAINING

Due to fast rate of change in technology, there will be need for training to be conducted to employees so that they can remain relevant to the market requirement and demands.

The on job training will be applicable. Tutors will be invited from the hair dressing school of Kenya Nairobi after every three months to update the workers about the current technology as continue with their duties and the workers are expected to act upon the given advises.

The workers shall also be allowed to attend seminars, exhibitions, shows and competitions concerning their areas of operations to help them increase their levels of understanding and to acquire more skills and knowledge in their work.

4.2.3 PROMOTION

B.H.S will conduct its promotion depending on the merits, qualifications, experience and any other set standards. Other factors will include: level of discipline, punctuality, employee commitment and the duration the employee has rendered his or her services to the business. Internal promotion will be highly encouraged to promote employees’ motivations.

4.3 REMUNERATION AND INCENTIVES

For any business to prosper, employees need to be motivated and well paid. Some of the allowances that will be offered by B.H.S include medical allowance, transport allowance, insurance allowance and education allowance in addition to the basic salary.

B.H.S will also build employees’ morale by provision of overtime payment for any job done past the normal working hours. For any addition hour the employee will receive 1% increment in his monthly salary. Employees will also be given insurance cover against accidents. Protective clothing such as gloves and aprons will also be provided during working hours. All the meals will be provided to the employees during working hours.

                                                                                             TOTAL= Ksh.65000

Each partner will receive ksh.4000 each for being a manager and ksh.2000 each for their area of specialization. They will also share profit and losses at equal ratios.

4.4 LICENCES, PERMITS AND BY-LAWS

4.4.1 LICENCES

BODYWISE HAIR SALON shall obtain and renew all licenses annually.

4.4.2 PERMITS

The partner will obtain the permit from the local authorities that will give some rules and regulations to be followed for the business to be carried out in Nakuru town. The regulations majorly deal with facilities owned by the local authority which includes water supply, land ownership and rental facilities.

4.4.3 BY-LAWS

The business will operate under the partnership deed. It will operate under rules laid down by the local authority that partners will follow to the letter.

TABLE OF LICENCES AND PERMITS   

4.5 SUPPORT SERVICES

For the smooth running of the business, B.H.S will require support services like the Equity Bank-Nakuru Branch from where it will open its account and also borrow money when the need arises.

Electricity that will be used to run the business will be obtained from the Kenya Power and Lighting Company. Postal and telephone services will be offered by Posta and Telkom Kenya Limited. The business will also open websites accounts, twitter and facebook accounts which help it in advertising its services.

A business lawyer will be available to handle any legal matters and a part time doctor will be available to treat the employees.

CHAPTER FIVE: PRODUCTION AND OPERATIONAL PLAN

This chapter deals with how the enterprise will run, including its production facilities, production strategy, production process and the regulation affecting these operations.

• PRODUCTION FACILITIES AND CAPACITY

LIST OF FACILITIES AND CAPACITY

The above list will be bought by the partners of the BODYWISE HAIR SALON at the start of the business, but others will be bought later as the business expands. The machines spare parts will be locally assembled by qualified technicians. They will service and maintain the machines monthly. They will also repair them in case of any breakdown. For the spare parts that will not be locally available, the partners will arrange and send the supplier to purchase for them from Nairobi.

The B.H.S premises will be a two-roomed rental house measuring 3 by 5ft with a rental charge of ksh.2400 per month. The premise will be on the ground floor of Vaghela complex on the left side. The room will be well ventilated, with suitable power points and smooth flat surface for the machines. There are plans for renovation of the premises at accost of ksh.10000 before the business is established and this will make the place even more attractive.

The partners will see into it that the premises are comfortable for both customers and the workers. This will include good arrangement of chemicals and oils on a cupboard in     position they will be safe and well displayed.

The premise will bear a decorative carpet on the floor, side mirror all over the room and charts displaying different fashions and hair style postures which will be hanged on the wall. Flower vessels with beautiful flowers will be well arranged in the reception room which will also have comfortable chairs. In addition soft music will be available in the salon.

• PRODUCTION STATEGY

The materials required by B.H.S are mostly chemicals and hair oils which will are highly available in the local supermarkets within Nakuru town. The partners will be purchase all of the necessities of the business and before the business its own vehicles, at axis will be used for transportation at the cost of ksh.200 that may sometimes vary depending on seasons.

The most modern facilities will be provided for the operation of the business. The use of high standard equipment and machines will ensure high quality production which will make the business to stand a better chance of competing with other business in the field.

Punctuality will also be observed closely to ensure that all operations are carried out at the right time. Each and every employee shall be informed of his or her duties in advance so that the work starts the right time.

B.H.S will need labour force of fourteen (14) permanent employees plus four partners who are qualified in their respective areas. The business expects to have ksh.1076500 monthly production, ksh.922000 production expenses with ksh.150000 going to employees’ salaries.

 5.2 PRODUCTION PROCESS

This involves the stages used by B.H.S in giving out its services to its customers. The partners will be in a position to introduce other additional services in the salon as the business expands. Change of technology will also affect the business. The major external factor that will affect the business is inadequate funds in some days of the month, but the business tends to minimize this by offering its services at a considerable low cost to its customer.

BLOW-DRY                                                               WEAVING

Washing hair by use of water                     Unravel customers’ hair and comb it till it

to remove dirt and oil.                                 becomes straight and clean.

Straighten hair by m/c in which                 Apply oil and recomb to make even more

a large comb is inserted till fairly              straighter.

straight.

Apply oil on scalp and the hair                   Plait lines considering the desired style of the

make it soft and ready for the next            customer.

step.

Blow-dry using a small comb till               Weave in the additional hair by use of a

hair is very fine and soft.                            darning needle and thread.

Apply oil and comb as desired.              Apply conditioner on the weave and comb it well.

CHEMICAL APPLICATION                              PLAITING     

Wash hair by use of warm water to                         Unravel customers’ hair.  

remove dirt and oil.

Apply the right chemical for the right                 Apply oil on the scalp and hair generally treatment desired by the customer.                         comb till it is straight and clean.

Set the hair in the steaming cup                            Plait style as desired by customers.

for the required time.

Unset and wash the hair to remove                       Re-apply oil on scalp.

the applied chemical.

Apply the right hair conditioner or                      ROLLING HAIR

oil to both the hair and scalp.                              Apply oil on the skin and scalps.

Comb hair as desired by the customer.               Set rollers on the hair.

Set the head on the steaming cup.

Remove rollers and comb well.

5.3 REGULATIONS AFFECTING OPERATIONS

Like any business, B.H.S will only be set to go after getting all the required documents. This includes a license from Municipal Council of Nakuru at the cost of ksh.3500, permit to be obtained from the registrar of partnership at the cost of ksh.850 both of which are renewed annually.

For the government policies, the government requires that for any salon shop to be set up, experts from service industry should inspect the area, condition and safety of the machines before the salon can begin to operate.

The tools and machines regulations ensures that the machines are under some treatment or services to ensure that they are safe to be used and that they can work effectively and last long. These include cleaning tools after tools after use, use the right machine and tools for the right purposes, lubricate movable parts and handle with care.

Appliances needed by B.H.S include electrical appliances like blow-drier, a steaming cup, and a drier and electrical water heater among others. Workers are expected to have knowledge about all machines in the premise to avoid accident and loss of property. The premise of the business should be of the required standard, properly ventilated, have flat and smooth surface for the machines to stand still.

CHAPTER SIX: RISK MANAGEMENT STRATEGIES

• HOW TO ANALYZE AND REDUCE THE RISKS

In any business, there must be risks involved. B.H.S expects to face risks such as fire breakdowns due electricity default, employees’ injuries and theft. B.H.S will provide insurance cover for all the employees and to all equipment and the premise. It will also install cctvs and burglary alarms. The business will also install automatic fire extinguisher.

6.1 FUTURE BUSINESS RISKS

Being an election year the business may be faced by political risks. The business will also be subjected to legal risks as it will be subjected to bureaucratic rules and regulations. Due to high rate of inflation which results to increase in interest rates, the business may also be subjected to economic risks.

Last but not least the business may also experience financial risks as its cash flows may not be enough to to pay all the creditors and fulfill  other responsibilities.

6.2 COUNTERACTS MECHANISMS

The business will take political risk covers. This will ensure that the business is compensated in case of destruction as a result of political chaos. It will also retained its profit and plough it back to the business to ensure the business does not experience any financial risks.

CHAPTER SEVEN: EXIT AND HARVEST STRATEGIES

• CAPTIVE COMPANY STRATEGY

This strategy will involve the business giving up some of its independent for exchange for security. It will   be appropriate as the business will be at a weak competitive position that it may not be in a position to engage in a full scale to turn around.  The management will look for “savior” by offering to be captive business to one of its larger customers.

CHAPTER EIGHT: FINANCIAL PLAN

8.0 PRE-OPERATIONAL COST

Table 8.0

8.1 WORKING CAPITAL

Table 8.1

8.2 BODYWISE HAIR SALON PROFORMA

      PROFIT AND LOSS ACCOUNT FOR THE

      NEXT THREE YEARS

8.3 BODYWISE SALON

      BALANCE SHEET FOR THE NEXT THREE YEARS

        8.4 BODYWISE HAIR SALON

         PROJECTED CASHFLOW STATEMENT FOR YEAR ONE 2012

BODYWISE HAIR SALON

         PROJECTED CASHFLOW STATEMENT FOR YEAR TWO 2013

         BODYWISE SALON

         PROJECTED CASHFLOW STATEMENT FOR YEAR THREE 2014

8.5 BREAK EVEN LEVEL

Expenses ×100

Gross profit

1^st year = 307000×100      2^nd year=338000×100          3^rd year=450000 ×100

890000                             1000000                               940000

= 34.49%                            =33.8%                                =47.87

8.6 RETURN ON EQUITY

Net profit after tax×100

Owners’ equity

1^st year=565510 ×100        2^nd year=642140 ×100     3^rd year=475300 ×100

500000                                500000                              500000

            =113.10%                             =128.428%                          =95.06%

8.7 BREAK EVEN ANALYSIS

Gross profit= net sales – cost of goods sold

1^st year= 980000-90000      2^nd year=1180000-180000           3^rd year=1170000-230000

=ksh.890000                         =ksh.100000                                  =ksh.940000

Gross profit margin= gross profit ×100

                                       Sales

1^st year= 890000×100          2^nd year= 1000000×100              3^rd year=940000×100

980000                                   1180000                                     1170000

            =90.8%                                   =84.75%                                      =80.34%   

8.8 RETURN ON INVESTMENT

Net profit after tax+interest × 100

Total investment  

1^st year=  565510+12000 ×100              2^nd year=642140+120000 ×100    

                      300000                                               300000 

            =192.5%                                                  =254.04%              

3^rd year= 475300+120000×100

300000

             =162.43%

APPENDIX I: PREMISE LAYOUT

BLOW DRIER                            WASHING

MACHINE                                   AREA 

DRIER                       ROLLING

MACHINE                MACHINE

PLAITERS

G/M’S OFFICE

RECEPTION OFFICE