Part 1: Business idea
My business idea is a starting barbershop. The name of this barbershop will be JD Barbershop. It will be serving males across all ages. It will be open from 1000hrs to 2100hrs on weekdays and 0800hrs to 2000hrs on weekends.
The layout of this essay will be characterized by several sections based on each question. For question one, the first section will concentrate on the business idea. The other section will have details on Michael Porter’s Competitive Forces. For question two, the first part will be based on the type of the business model and outline the one that will be adopted by the business. The other section will contain information on the main features of the business model. An explanation of risks will follow. The next section will be a forecast of financial statements. Question three will involve an explanation of the resonating focus model and development of a sales pitch.
For JD Barbershop, the Michael Porter’s Competitive Forces will impact majorly on the performance and the entire outlook of the business (Porter, 2008). The services for this business are hair cutting and gentlemen therapeutic services. Customers at this barbershop will enjoy a wide range of services for instance hair and scalp treatments, colour blending, moustache and beard trimming, eyebrow shaping, nail grooming, pedicure services, laser hair removal and deep tissue massage.
The customers will be males across all ages since their service needs will be similar (Anderson, et al., 2006). However, for school children, their services are expected to be limited to haircuts. This is expected to be characteristic of many children even though some children will request for additional services. For males aged above 25 years, their services will be beyond the hair cutting services. These individuals will require grooming services such as pedicure and laser hair removal. In addition, some of the stylish customers will require hair styling in line with the fashion trends. For old customers, especially those above 50, massaging services may be their most preferable, in addition to the haircut services. Therefore, JD Barbershop has been set to cater for all these needs.
The competitors for this business are two barbershops located at a nearby mall. However, one of them is unisex hence it does not offer specialized services. The other barber shop is limited to shaving services only. As a result, JD Barbershop has a competitive advantage over these two competitors. The potential revenue will be based on the charges per person which will be collected from the operations of this business. Given the varied tastes of the different customers, the charges will have to be matched with the complexity of their services. For schoolchildren, their charges will be $ 5 for each shave. For those needing other grooming services, an extra fee of $ 2 will be charged. A shave for a young adult will cost $ 8. Any grooming services will call for an addition of $ 4. However, additional fees will be charged depending on the service complexity as well as the time it will take.
Our business expects an average of 120 schoolchildren and 180 adults per month. There is an assumption that 30% of all customers will require additional grooming services whereas the rest will require shaving only. The expected revenue per week from adults will be (0.70 * 180 * $ 8) + (0.30 * 180 * $12) = $ 1,656. The expected revenue per week from schoolchildren will be (0.70 * 120 * $ 5) + (0.30 * 120 * $ 7) = $ 672. Therefore, the potential monthly revenue from these sources is $ 1,656 + $ 672 = $ 2,328.
The potential costs for this barber shop will comprise of both the fixed and variable costs. The fixed costs will involve a rent of $ 400 per month and a business license of an equivalent of $ 45 per month. The variable costs will include total monthly salaries of $ 1050 and utility bills of $ 120 per month. Therefore, the expected total costs per month will be $ 400 + $ 45 + $ 1,050 + $ 120 = $ 1,615. The potential profits are $ 2,328 - $ 1,615 = $ 713.
With regard to the Michael Porter’s Competitive Forces, JD Barbershop is an industry with relatively low competitive rivalry. This is because there are only two barbershops, which are located, in the mall. These barbershops are the ones in the area of interest for JD Barbershop. There are other service outlets which are located in estates, in residential areas, but they aren’t competitors owing to their different clientele. However, the threat of new entrants is quite high due to the low competitiveness (Porter, 2008). JD Barbershop will have to offer high quality services to all the male clients in order to gain customer loyalty. In such a case, it will retain customers despite the entry of new participants due to its loyalty, which will have, been acquired by consistency in offering quality services.
All the cosmetics requirements may be obtained from other suppliers at competitive prices due to the uniformity of these products. The threat of substitute products is low since the male customers must require the barber services. In fact, for some of these customers such as those in white collar jobs, a shave is mandatory in their profession. From Michael Porter’s Competitive Forces, JD Barbershop stands a high chance of succeeding if the operational plans are executed successfully (Porter, 2008).
Part 2: Business model
A business model defines the nature of conducting a business and how a business receives funds from those activities (Rosenthal, 2012). The 16 types of business models vary depending on the asset type that is sold and the rights that are exchanged. Their source is determined by the four basic business models. The nature of individuals determines the four classes and the resultant business models. These individuals fall into four major groups which include creators, distributors, landlords and brokers. There are different roles for these groups, and it is these differences in roles that create the business models.
The creator plays the role of buying several components from suppliers and then assembling them to create a product that is sold eventually. This business model is common to manufacturing firms. The distributor buys a certain product and sells the same product to another individual. The landlord has the role of selling the right to use an asset for a specific period. However, this right does not involve ownership of such an asset. A broker has a role of joining the buyer and also the seller of a product (Kaplan & Norton, 2004). His return is a commission from the buyer, seller or both parties. This business model is characteristic of real estate deals and stock brokerage.
The four major types of assets are four. They include physical assets, intangible assets, financial assets and human assets. Based on the 16 types of business models, JD Barbershop will adopt the business model of a contractor. This is because it will be selling those services that are provided by people. Its actual area is that of personal care whereby payment will have to be in the form of a fee for the personal care services given. In this case, JD Barbershop will require complementing physical assets and tools such as shaving machines and leather seats.
The main features of this business model are shaped by major components of these business elements. The first component is the value proposition. This proposition is as follows -customers should visit JD Barbershop because they will obtain world class haircut and grooming services in a therapeutic atmosphere. The second element is the revenue model. This model details how the barbershop will earn money. The primary activities will be haircuts and grooming services such as scalp treatments and nail services. These activities are the basis for determination of revenue for this business as it was discussed earlier. However, there is another activity that this barbershop will be executing. This will be training services for those individuals who wish to become attendants in such a shop. These individuals will be trained on all lines of our service provision. A fee will have to be charged for this service hence adding onto the revenue of JD Barbershop.
The third element is the market opportunity. This section has details on the intended market space and its size. The market space for this barbershop is the downtown area of our location. This entails all the residents of the nearby estates and students from a college located 300 metres from the location of this barbershop. The size of the market is around 300 adult males and 500 school boys. The competitive environment comprises of information on other competitors in this market. The businesses that offer competition to this barbershop are the two barbershops that are located at the mall. Their aspect of competitiveness comes in the sense that they have a chance of serving the shoppers at the mall. Another element in the business model is the competitive advantage.
JD Barbershop brings several special advantages to the marketplace. The first is that the range of services at this barbershop is wide. It offers a full set of haircutting and grooming services. The second advantage is the ambience of the business itself. The downtown location serves as a suitable location for customers since congestion and noise are minimal as compared to the mall. In addition, the floor design allows for some private and comfortable space for customers in contrast to the mall where floor space is small owing to the small nature of the rooms in that area.
Market strategy is another element that JD Barbershop has to address in the business model. This will be a major determiner of the success of this business. The first issue is an emphasis on the name of the business and the unique services at JD Barbershop. This will be done through pamphlets offered to customers and business cards in order to improve on the identity. In addition, this business will build customer and corporate relationships by offering quality and exceptional service. Customers will be requested to rate all the services and make their opinions. For corporate relationships, efforts will be directed towards event organizers especially those who organize weddings. A full package for grooming will be offered to men at a lower price than the one charged on a normal basis. Through these efforts, this business will improve its loyalty to customers and hence its market share.
As far as organizational development is concerned, this business will have three levels in the hierarchy. The manager will be at the top. Attendants will be below the manager while the cleaner will be the lowest in the hierarchy. With regard to the management team, managerial skills will be required across all levels since each individual will be responsible for several tasks. However, the manager will be required to make some strategic decisions and influence the other members to work towards the vision of this business. The experience required will be a college degree in business management or any related field. In addition, two years experience in a similar position will be necessary.
Part 3: Resonating focus model
This model comprises of all the favorable points of difference. It has a gold standard which recognizes that managers responsible for purchasing decisions are confronted with increasing levels of responsibility, and they face time pressure (Rosenthal, 2012). These managers search for suppliers who are aware of their critical issues. This combination delivers a captivating customer value proposition that is captivating and simple. Based on this model, there will be a pinpointing of two differences from competitors and a similarity to these competitors. The basis for these points is the value to customers. The similarity is that JD Barbershop offers haircutting services like the other competitors. The first difference from competitors is that JD Barbershop will offer a full package of grooming services, unlike the competitors. The other difference is that this barbershop is located at a silent, uncongested downtown area which will allow for comfort in contrast to the competitors.
JD Barbershop has come up with a world class barbershop for men. Our business recognizes that as a customer, there are a need full grooming services in an upscale environment. With this knowledge, our business provides a full package of grooming services on a full week basis. The main issue is that as a customer there is the option of choosing normal hair cut services or the full package which comes at an affordable price. As a customer, you will enjoy all the grooming services in a comfortable environment.
Anderson, J. C., Narus, J. C. & Rossum, W. V., 2006. Customer Value Propositions in Business Markets. Harvard Business Review, II(3), pp. 54-57.
Kaplan, R. S. & Norton, D. P., 2004. Strategy Maps: Converting Intangible Assets into Tangible Outcomes. Boston: Harvard Business School Press.
Porter, E. M., 2008. Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: The Free Press.
Rosenthal, B., 2012. Resonating Focus. The New York Times, IV(2), pp. 98-105.