1.0 Executive Summary
The purpose of this business plan is to secure a $1,000,000 mortgage for the development of a salon suites business based in Alexandria, Virginia. Suite & Strand Alexandria LLC (“the Company”) was founded by Matthew Deutsch. Full scale revenue generating operations are expected to commence in the fourth quarter of this year. The Company will generate substantial revenue from the ongoing rental of salon suites to stylists, nail stylists/technicians, and other esthetically focused professionals within the greater Washington DC market.
Operations
As noted above, the primary revenue center for the business will come from the ongoing leasing of luxury salon suites at the Company’s facilities in Alexandria. The Company will typically generate $300 to $500 per week per rental. The location will have 10 spaces available for rent among beauty focused professionals.
It should be noted that one of the suites will be reserved specifically for the operations of Matthew Deutsch who is an experienced hair stylist and hair care professional. This aspect of operations will produce substantial profits that will further contribute to the economic stability of Suite & Strand Alexandria.
The third section of this document will further discuss the operations of the business.
The Financing
As noted above, the company is currently seeking $1,000,000 as a mortgage to acquire a property that can have the ten luxury salon suites. The entirety of this capital will be used for this purpose. This salon suites business plan assumes that the company will receive a 25-year loan carrying a 7.5% interest rate.
Matthew Deutsch will contribute $200,000 towards the venture which will be principally used for furniture, fixtures, equipment, as well as for working capital purposes.
The Future
The Company intends to develop and implement high impact marketing campaigns that will make Suite & Strand Alexandria a widely respected salon facility in the Alexandria area. The Company will conduct extensive direct outreach with hair stylists, nail stylists, and beauty professionals in this market in order to have them consistently use the facility for their respective business operations.
Market Overview
Revenue Forecasts
2.0 The Financing
2.1 Funds Required
The funds sought in this document will be allocated as follows:
2.2 Management and Investor Equity
Matthew Deutsch retains a 100% ownership interest in Suite & Strand Alexandria LLC.
2.3 Exit Strategies
In the event that it is economically viable to do so, Management will coordinate with a qualified real estate broker to have asked the business to a third-party. However, this event is not expected to occur for a significant period of time given that Matthew Deutsch intends to operate his own hair styling business with the facility while concurrently generating substantial streams of passive revenue from the ongoing rental of the facility. Based on the historical profitability of similar businesses, the company could have valuation of $1.6 million by the fifth of operation.
3.0 Operations
Suite & Strand Alexandria is being developed with luxury in mind. The ten suites that will be featured within the facility will each have their own door and clients will be able to appropriately brand their respective sublease area. They will also be free to decorate the inside of their suite to match their respective corporate branding.
The Company will produce highly recurring streams of revenue from these operations. In order to provide a substantial degree of flexibility for clients, the Company will provide leases on a weekly basis although a two-month commitment will be required. Given the substantial population density of Alexandria and the greater Washington DC metropolitan area market – it is fully expected that the Company will be able to quickly reach 100% occupancy.
These operations will be complemented by Mr. Deutsch‘s existing hair styling business. He will directly render services to his clients from this location. This will further contribute to the economic stability of the business given that this aspect of operations will produce $10,000 to $15,000 revenue per month.
To a more modest extent, the Company will generate revenue from a collaborative marketing program, which will be optional among tenants. This will include featuring exterior signage on the exterior of the location.
4.0 Overview of the Organization
4.1 Registered Name
Suite & Strand Alexandria LLC. The business is registered as a limited liability company in the Commonwealth of Virginia.
4.2 Commencement of Operations
Revenue generating operations will commence in the third quarter of this year.
4.3 Mission Statement
To provide exceptional spaces for beauty professionals to render their services.
4.4 Vision Statement
To become the preeminent salon suite facility within the greater Washington metropolitan area.
4.5 Organizational Objectives
• Properly onboard beauty professionals that will rent space from the Company at the onset of operations.
• Launch an expansive online marketing campaign that will conduct direct outreach with beauty professionals while informing the general public of the Company’s location.
• Remained within the letter of law regarding all services rendered including tenancy regulations.
• Potentially develop additional locations within the greater Washington DC area given the substantial size of this market.
• Properly implement a collaborative marketing campaign with the Company’s tenants as a secondary means of generating revenue.
• Properly maintain the building so that it remains as a luxury base facility featuring modern amenities for beauty professionals, and their respective clients.
• Engage in social media-based marketing activities in order to create awareness prior to launch the facilities.
5.0 Market and Industry Analysis
5.1 External Environmental Analysis
This section of analysis will document the current economic climate, the salon suites in industry, and the target market as a hole.
At this time, the current economic climate in the United States is moderate. As a result of continually changing trade policies, a moderate degree of volatility has been introduced to the market. However, the Federal Reserve is taking inappropriate measures to ensure inflation for maids in check will also fostering new economic opportunity
However, a challenging business climate will only have a modern impact on the Company’s ability to generate revenue. Most importantly, the Company is going to generate highly recurring forms of revenue from the ongoing lease fees that are charged to beauty professional tenants. Second, Matthew Deutsch tends to operate his own proprietary hair styling business within this facility, which will further generate enough profit to ensure that the mortgage is paid on a monthly basis.
5.2 Industry Analysis
As of this year, there are approximately 5,000 companies that own and operate one or more facilities specific for salon suites. This industry generates $600 million of revenue and employees 10,000 people.
The segment of the beauty industry has undergone substantial growth over the past 15 years. As many professionals, especially hair stylists, have extensive client basis that they have developed over a period of time, there is an immense demand among these professionals for quick access to luxury facilities where they can render their services.
As it relates to the beauty industry as a whole, this industry generates $90 billion a year among one million businesses. The industry employees 1.2 million people. The industry is expected to grow at a compounded annual growth rate of 3.5% in the coming years. This is a mature industry.
5.3 Customer Profile
The following demographic profile will be used during the course of marketing operations:
• Is a licensed beauty professional that provides hair styling, nail services, or related esthetician services.
• Will spend $300 to $500 per week.
• Lives within 15 miles of the Suite & Strand Alexandria location in Alexandra
5.4 Competitive Analysis
This business plan has been developed for sample purposes only. If this has been an actual engagement for a client seeking a salon suites business plan then a full competitive analysis regarding all companies operating in a similar capacity would have been conducted. This would have further extended to include a discussion regarding the ways in which this salon suite business would differentiate themselves from other competitors in the market.
6.0 Key Strategic Issues
6.1 Sustainable Operations
Suite & Strand Alexandria will have sustainable operations as a result of the following:
• Recurring streams of revenue from the ongoing tenant leases will produce significant profits for the business.
• Immense demand for access to a number of beauty professionals in one easy to reach Location in Alexandria.
• The business will be able to reach 100% capacity quickly given the number of beauty professionals in this market.
• Substantial income from collaborative marketing agreements with the Company’s tenants.
• The operations of business are highly stable and additional facilities can be developed within the greater Washington DC area as needed.
6.2 Basis of Growth
The Company will expand via the following methods:
• Continue to onboard a number of professionals that will use the Company’s salon suites on an ongoing basis.
• Potential acquisition of companies that operate in a similar capacity by taking over their salon suite business.
• Continued to increase operations of Matthew Deutsch’s proprietary hair styling operations, which will further contribute to the economic stability of the business as this is an established enterprise.
• Yearly increases in rental rates in order to account for inflation.
7.0 Marketing Plan
7.1 Marketing Objectives
• Conduct extensive direct outreach with beauty professionals, and the greater Washington DC Metropolitan area.
• Maintain an online presence of the general public can quickly find the location when they search for specific types of beauty services.
• Maintain relationships with cosmetology schools that have recent graduates are seeking to establish their own book of business and will use Suite & Strand Alexandria‘s salon suites for their operations.
7.2 Revenue Forecasts
7.3 Revenue Assumptions
Year 1
• First year revenue will reach $465,000.
• Gross profits will reach $437,000.
Year 2
• Revenue will reach $502,000.
• Total income will increase by 8%.
Years 3-5
• By the fifth year of operation, total revenue will reach $633,000.
• Gross profits will reach $594,000.
• At this time, Management may develop subsequent locations.
7.4 Marketing Strategies
The Company will use a number of marketing strategies in order to create awareness of the salon suites business in Alexandria. Once the capital of his business plan has been secured, the Company will conduct extensive direct outreach with beauty professionals that operate within Alexandria and the greater Washington DC metropolitan area. This will include the distribution of brochures and printed materials that showcase the plan layout of the salon suite as well as the anticipated weekly cost. By conducting these operations during the renovation period, the business will be able to quickly onboard beauty professionals that will use the facility from the onset of operation.
To complement these direct outreach initiatives, the business will maintain an expensive online presence that showcases the luxury salon suites. This website will be specifically developed for the Alexandria and greater Washington DC Metropolitan area market. All tenants at the facility will each receive their own subpage on the platform to showcase their services to the general public. This will further contribute to the Company’s search engine authorization campaigns.
The business will also maintain profiles among all social media pages which will be launched prior to the grand opening. Numerous images of the companies’ location will be featured as this will contribute to a greater degree of social signaling that will naturally elevate the Company’s website when natural language searches are conducted. Similar to the Company’s website, a full listing of all tenants within the facilities will be featured as well.
For collaborative marketing efforts, the Company will work with its tenants in order to distribute printed advertisements that will be sent to individuals that fall into the demographic user profile discussed in the fifth section of this document. It will further create brand awareness for Suite & Strand Alexandria will also promoting the operations of each tenant. As noted earlier, this is a secondary revenue center for the business.
The Company will also participate in charity programs within Alexandria in order for increased brand name awareness.
8.0 Organizational Plan
8.1 Organizational Hierarchy
8.2 Personnel Costs
9.0 Financial Plan
9.1 Underlying Assumptions
• The business will have a compounded annual growth rate of 8.2% pe annum.
• Suite & Strand Alexandria will acquire a $1,000,000 mortgage carrying a 25-year term and a 7.5% interest rate.
• Matthew Deutsch will invest $200,000.
9.2 Financial Highlights
• Highly recurring income from tenant leases within the salon suites facility.
• Substantial demand in the greater Alexandria area given its proximity to Washington DC.
• Significant income from proprietary hair styling services rendered by the Founder.
9.3 Sensitivity Analysis
The Company’s revenues are only modally impacted by severe economic recession. The Alexandria market as well as the greater Washington DC metropolitan area is extremely population dense as this is the center for government in the United States. The Company will produce highly recurring streams of high margin from its tenant operations, which will further ensure the ongoing probability of business, even during challenging business climate.
9.4 Source of Funds
9.5 Financial Proformas
A) Profit and Loss Statement
B) Common Size Income Statement
C) Cash Flow Analysis
D) Balance Sheet
9.6 Breakeven Analysis
9.7 Business Ratios
Appendix A – SWOT Analysis
Strengths
• Immense demand among professionals for access to luxury salon suites where they can conduct our operations.
• Business will face modest competition within the Alexandria market.
• Matthew Deutsch’s proprietary operations as a hair stylist will further ensure that the Company generate significant revenue of a monthly basis.
• A substantial portion of the capital sought in this document will be used for the acquisition of real estate which reduces can be hypothecated for future growth purposes.
Weaknesses
• Moderately high cost related to facility expenses, given scale and scope of the building.
• General operation complexities given that many tenants will be using the facilities at any given time.
Opportunities
• Development of additional locations within Virginia, Washington DC, or Maryland.
• Continued expansion of collaborative marketing operations, which will have a cascading positive benefit for Suite & Strand Alexandria.
• Continued direct outreach with beauty professionals so that the operations of the company remain at 100% at all times.
Threats
• Changes in the interest rate can cause the capital cost of the business to increase.
• Continually increasing inflation can cause the underlying operating cost of the business to increase.
Appendix B – Critical Risks
Development Risk – Low
Management has sourced the location that will house the operations of Suite & Strand Alexandria. At this time, the Company is seeking a mortgage in order to acquire this facility so that can be renovated to specific for the purposes outlined in this document. The Company has already developed marketing plan.
Financing Risk – Low
The $750,000 sought in this document will be used exclusively for the acquisition of real estate. As noted, the Company will produce numerous high margin revenue streams that will substantially reduce the risk is associated with this venture.
Marketing Risk – Low
The Company will conduct extensive direct outreach with professionals in Alexandria in order on them for them as tenants. This will be complemented by the use of an expansive online driven marketing campaign to create brand awareness for Suite & Strand Alexandria.
Management Risk – Low
Matthew Deutsch is a highly experienced hair care professional that has operated real estate focused ventures in the past. Using the funding in this document, he will be able to quickly bring the operations of the business to profitability.
Valuation Risk – Low
The valuation risk is offset by:
• The real estate owned by the business will substantially appreciate in the coming years.
• High gross margins on all rental fees.
• The income of Suite & Strand Alexandria is highly recurring.
• This is a scalable enterprise.
Exit Risk – Low
If it is economically feasible to do so, the company will coordinate the sale of the facility with a Virginia based real estate brokerage. Based on the anticipated probability of the business, the property could have a value of $1.6 million. The sale of a business is not expected to occur for a significant period of time.