Exam (elaborations)
Unit 7 Business Decision Making
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In this document I provide you with a report for Unit 7: Business Decision Making Unit (January 2018).
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Unit 7Introduction
Katie is a self-employed hairdresser. The purpose of this report is to identify weather Katie Should
open her own gentleman’s barber shop or to rent a chair in already existent one.
Opening Barber Shop
SWOT analysis of opening barber shop
One strength of Katie opening her own barber shop is good location. Due to the fact that the
location for her preferred premises includes busy pedestrian flow and is close to the offices and the
university campus. This will result in Katie being able to attract her target audience easier as some
men don’t book the appointments and just walk in. However, it will be hard to promote a new salon
as many people are already loyal to her competitors.
One weakness of Katie opening her own salon is a large competition. Due to the fact that, there are
57 salons that offer male hair treatment in the town and 20 hairdressers and one barber shop within
a mile radius of her chosen location, it will be hard for her to advertise a new barber shop as the
competition is too large. Moreover, some customers have already chosen their preferred salon.
However, it is beneficial for Katie as she will be more competitive.
One opportunity for Katies barber shop is rising demand for male haircuts. Due to the fact that in the
UK men are getting their haircut more frequently and there is more interest in shaving and
maintenance of beards and moustaches, Katie can attract more customers by offering USP services,
such as special haircuts and beard treatments. This will result in increase in customer interest,
leading to the barber shop getting recognition. However, other well-known barber shops can claim
her ideas, and provide the same services. Leading to the competitors having an advantage, because
their customer base has already been established.
One threat for Katie’s new barber shop is large costs of setting up the business. Due to the fact that
Katie is a sole trader and she wants to set up a new business on a very competitive market, the
process of establishment will take a lot of money. Therefore, Katie will have to use some source of
finance, such as taking out a bank loan or a credit. This can lead to her not being able to pay the
credits back, because the market is very competitive, and it will be hard to gain customer base.
However, she can ask her family for financial support. It will be beneficial because I will not have to
pay interest back and will not face any legal consequences, as she will not be involved with any
financial institution.
Financial Forecast of opening a barber shop
Opening a new Barber shop will be very costly, because the total start-up cost is £14,050 and yearly
outflows of £61,476. Due to the fact that Katie is a sole trader, she will have unlimited liability for the
business. Therefore, if the barber shop goes bankrupt, her personal assets will be claimed by the
financial institution that she owns money to. Moreover, annual sales from cutting and styling hair
are 94% of her inflows. This is a disadvantage because as a new barber shop in a town with large
competition, she will have to spend a lot of time promoting her business. Therefore, she might not
achieve £96,000 sales from hair treatment the first year. Leading to her making a loss and not being
able to pay off the debts. However, if Katie will make sales of £102,000, she will be able to cover
costs and make profit.
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