Business Plan For:

2008

Sarah DutkaComm 447

12/11/20081

Corner OfficeThe Spa for

Men

Table of ContentsThe Executive Summary..............................................................................................................................6

Main Report.............................................................................................................................................7

1.0 Introduction...........................................................................................................................................8

1.1 Industry Overview.............................................................................................................................8

1.2 Mission Statement.............................................................................................................................8

1.3 Goals and Objectives.........................................................................................................................8

2.0 Operations Plan.....................................................................................................................................8

2.1 Site Plan and 5 year development plan.............................................................................................8

2.2 Building and Floor Plan......................................................................................................................9

2.3 Flow of Organization..........................................................................................................................9

2.4 Quality Control Programs................................................................................................................10

2.5 Organizational Tasks........................................................................................................................10

2.5.1 Daily..............................................................................................................................................10

2.5.2 Weekly..........................................................................................................................................10

2.5.3 Monthly........................................................................................................................................11

2.5.4 Yearly............................................................................................................................................11

2.6 Supply Analysis................................................................................................................................11

2.7 Service Providers.............................................................................................................................11

2.8 Technical Processes and Procedures...............................................................................................12

2.9 Capital budget.................................................................................................................................12

2.10 Cost of Sales...................................................................................................................................12

2.11 Operating Expenses.......................................................................................................................13

2.12 Working Capital Planning...............................................................................................................13

2.12.1 Cash............................................................................................................................................13

2.12.2 Inventories..................................................................................................................................13

2.12.3 Accounts Receivable...................................................................................................................14

2.12.4 Accounts Payable........................................................................................................................14

2.12.5 Cash Conversion Cycle................................................................................................................14

3.0 Human Resources Plan..................................................................................................................14

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3.1 Organizational Structure..................................................................................................................14

3.2 Job Descriptions/Qualifications:......................................................................................................15

3.2.1 Operations Director......................................................................................................................15

3.2.2 Receptionist..................................................................................................................................15

3.2.3 Stylists/Barber..............................................................................................................................15

3.2.4 Aestheticians................................................................................................................................16

3.2.5 Massage Therapist........................................................................................................................16

3.3 Recruitment.....................................................................................................................................16

3.4 Training Programs............................................................................................................................17

3.5 Human Resource Strategy...............................................................................................................17

3.6 Labour and Management Costs.......................................................................................................18

3.7 Shareholders’ Agreement................................................................................................................19

4.0 Marketing Strategy........................................................................................................................19

4.1 The Marketing Mix...........................................................................................................................19

4.1.1 Services and Products...................................................................................................................19

4.1.2 Pricing...........................................................................................................................................20

4.1.3 Promotion.....................................................................................................................................21

4.1.4 Place.............................................................................................................................................21

4.2 Segmentation, Targeting, Positioning..............................................................................................22

4.3 Competitive Analysis........................................................................................................................22

4.4 Projections of Revenues and Marketing Expenses..........................................................................22

4.5 Marketing Plan................................................................................................................................23

4.5.1 The Market...................................................................................................................................23

4.5.2 Competition..................................................................................................................................24

4.2.3 Purchasing Patterns of Consumers...............................................................................................25

4.2.4 Target Markets.............................................................................................................................26

4.2.5 Product/Service Features.............................................................................................................27

4.2.6 Sales and Profit Objectives...........................................................................................................27

4.2.7 Channels of Distribution...............................................................................................................27

4.2.8 Select Markets/Product/Service Mix............................................................................................28

4.2.9 Selling and Advertising..................................................................................................................28

5.0 Financial Plan.................................................................................................................................29

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5.1 Capital Requirements:.....................................................................................................................29

5.2 Loan Amortization...........................................................................................................................29

5.3 Summary of Projected Income Statement.......................................................................................29

5.4 Summary of Projected Balance Sheet..............................................................................................30

5.5 Risk Analysis.....................................................................................................................................30

5.5.1 Sensitivity Analysis....................................................................................................................30

5.5.2 Sensitivity Analysis....................................................................................................................30

5.6 Dividend Policy................................................................................................................................31

5.7 Economic Forecasts.........................................................................................................................31

5.8 Ratio Analysis...................................................................................................................................31

5.9 Break-Even Analysis.........................................................................................................................32

5.11 Net Present Value..........................................................................................................................32

5.12 Internal Rate of Return..................................................................................................................32

5.13 External Rate of Return.................................................................................................................32

6.0 Summary.............................................................................................................................................32

Tables

Table 2.1 Initial investments..............................................................................................................12

Table 2.2 Working Capital:.................................................................................................................12

Table 2.3 Cost of Sales.......................................................................................................................13

Table 2.4 Operating Expenses............................................................................................................13

Table 2.5 Cash Conversion Cycle........................................................................................................14

Table 4.1 Competitive Analysis..........................................................................................................22

Table 4.2 Marketing Budget..............................................................................................................23

Table 5.1 Capital Requirements.........................................................................................................29

Table 5.2 Projected Revenues, Net Income, and Cash Flows.............................................................29

Table 5.3 Balance Sheet.....................................................................................................................30

Table 5.4 Critical Variables.................................................................................................................30

Table 5.5 Ratio Analysis.....................................................................................................................31

Figures

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Figure 3.1...........................................................................................................................................14

Appendices................................................................................................................................................33

Appendix A – Corner Office Floor Plan......................................................................................................34

Appendix B – Projected Number of Staff Members...................................................................................35

Appendix C – Service Price List..................................................................................................................37

Appendix D – Competitive Analysis...........................................................................................................38

Appendix E – Target Areas in Saskatoon....................................................................................................39

Appendix F – Marketing Budget................................................................................................................40

Appendix G – Financial Plan – Base Case...................................................................................................41

Appendix H – Financial Plan Worst Case...................................................................................................42

Appendix I – Financial Plan Best Case........................................................................................................43

Appendix J – Financial Plan – Break Even..................................................................................................44

Appendix K – Equipment Costs..................................................................................................................45

Works Cited...............................................................................................................................................46

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The Executive Summary The population of spa/salons in Saskatoon is continually increasing. They are all similar in that their services and amenities cater primarily to women. Spa industry statistics show that by 2010, 35% of spa goers will be men (Yonka, 2008). As a result, many professional skin care lines have developed treatments, products, and packaging targeting the male market.

Corner Office is a spa designed exclusively for men. Spa and salon services, including massage therapy, hand, foot and skin care, hair removal, hair cuts and colours, warm towel shaves, and a steam room, etc. will be services that are offered at Corner Office. It will also retail the professional products that compliment these services, as well as high end men’s accessories, such as watches and sunglasses.

The atmosphere and exclusivity of a men’s only space will create a competitive advantage for Corner Office. It is a place for men to receive spa and salon services in an atmosphere designed specifically for them. Corner Office will also provide its guests with value added amenities, such as a steam room, TV access, daily local and national newspapers and sports and business magazines.

Corner Office will target image conscious men aged 25 – 55 with an above average household income. This man understands and values the importance of taking care of his skin, body, and hair. These men want professional expertise, services, and products that are designed for them and they are willing to pay a higher price for the “gentlemen’s club” experience that Corner Office will offer to them.

The marketing efforts of Corner Office will be very important, as a men’s only spa is a new concept for Saskatoon and will need to achieve a high enough booking rate to stay in operation. Marketing will also build the brand and image of Corner Office, which is also important in successful business.

Corner Office will place high importance on customer service and treatment protocols so ensure consistent high quality services. All staff members at Corner Office will undergo training and performance evaluations upon hiring. All staff members will also have individual attention from the Operations Director to aid them in achieving their full potential in their career.

Corner Office will require $200,000 in debt and equity to begin operations. The internal rate of return projected for Corner Office is 21%.

With the opening of a spa exclusively for men, Corner Office will be able to capture the male market in the spa/salon industry and gain a competitive advantage.

Corner Office: A premium men’s spa, for the image conscious man. – Look and Feel the Part

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Main Report

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1.0 Introduction

1.1 Industry OverviewThe spa/salon industry is rapidly growing and has become very competitive. The demand resulting from the Baby Boomer Generation for services and products to help them look and feel younger has increased the demand for spas and salons. There are many spa and salons in the city of Saskatoon ranging in all sizes and in quality, all competing for market share.

Currently, the spa industry caters primarily to women. It is just recently that men are utilizing spa services more and more. This is a rapidly growing market for the spa industry and presents a great opportunity. Consumers are placing high importance on their image and are willing to pay premium prices for products and services to aid them in the process. Corner Office: The Spa for Men is going to take advantage of this opportunity in Saskatoon. Corner Office is a men only spa that offers a wide range of spa and salons services in an atmosphere designed exclusively for men.

1.2 Mission Statement“For the image conscious man who understands the importance of professional skin, body, and hair care, delivered to them in an environment designed exclusively for men”. - Look and feel the part.

1.3 Goals and ObjectivesThe goals and objective for Corner Office are:

To gain 3% of the male clientele in Saskatoon within the first 2 years of operations. To maintain a 17% service to retail sales average. To achieve a 40% booking rate in the first year of operations. Have guests utilize both spa and salon services. To be the first spa/salon consumers think of when purchasing gifts for men.

2.0 Operations Plan

2.1 Site Plan and 5 year development planCorner Office will be located in the Urban Centre of the new River Landing development in Saskatoon, Saskatchewan. It is located between 2nd Avenue and 3rd Avenue on 19th street. River Landing’s plan is to become a major destination for both residents and visitors and is offering a mix of vendors, such as retail, restaurants, public gathering, and hotel and residential opportunities (riverlanding.ca). The Federal and Provincial Government and the City of Saskatoon have committed nearly $30 Million in capital funding to reclaim the riverfront (riverlanding.ca).

The Urban Centre will be the best location for Corner Office as downtown Saskatoon has many office buildings and is the hub of the city, and is ideal for our target market. River Landing will also become an

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attraction in the city providing Corner Office with a great deal of exposure. It will also become an attraction as it is located next to a hotel and residential building. River Landing’s location is in a central part of the city, as it is within close proximity to several bridges and easy to get to from all directions; they will also have underground parking to accommodate its visitors.

Even though Corner Office will be in the middle of a busy city and in a new and exciting commercial building with many retailers and offices, Corner Office will provide men a comfortable environment for them to relax. It will be designed to resemble an office when you first walk through the door and as you move further into the building it transforms into a masculine spa environment. As a result, men will feel comfortable entering this environment. As well, by being a part of the new River Landing development the image that Corner Office will convey is one of prestige.

As Corner Office will be a new building, there is no plan for new development in the first 5 years. In the eighth year there are funds allocated in the financial plan for painting and updating décor. The space that is available to Corner Office will not allow for major renovations or expansions. If an expansion is needed to accommodate demand above the current capacity, Corner Office will then open a second location.

2.2 Building and Floor PlanWhen a guest enters the front doors of Corner Office they will first be greeted by the receptionist at the front desk. This area will also display retail with shelving and display units. From the front reception area our guests enter an area that leads them to all of the treatment rooms at Corner Office. This area is open and decorated with a table and a large floral arrangement. To the left, going clockwise, is the lounge area where guests can relax before, after, or in-between their appointments and watch TV, read current newspapers and men’s magazines and enjoy a specialty coffee. Attached to the lounge area is the change room, which includes a complementary steam room, shower, lockers, and washroom. Next to the change room is the manicure and pedicure room that has a large TV and massage chairs for the guests to relax. The next 2 rooms are the massage room and an aesthetic room. The two rooms after the aesthetic room are the laundry room and the office. From the office is the Salon, where there will be two stations and two sinks. The room just outside of the Salon is the second aesthetic room. The aesthetic rooms can accommodate waxing, facials, body treatments, hot towel shaves, etc. See Appendix A for the floor plan.

2.3 Flow of OrganizationThe flow of work at Corner Office will generally be once the guest enters the reception area from the main doors, they will be greeted and checked in and will be taken to the change room or the lounge area or offered the option to browse through the retail. From the change room our guest will relax in the lounge area and will be introduced to their technician and taken to the appropriate room for their service. Once the guest has finished their services and is ready to leave they will change in the change room, if needed, and will be escorted to the reception area where they will pay for their services and retail items and rebook their next visit. This is the general flow that will take place at Corner Office.

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2.4 Quality Control ProgramsCorner Office will not need ISO or HACPP, but will have developed protocols for each service to ensure quality and consistency with each service offered and performed.

2.5 Organizational Tasks

2.5.1 DailyThe operating hours for Corner Office are: Monday – Tuesday 9:30 – 5:30, Wednesday – Friday 9:30 – 9, and Saturday - Sunday 11 – 5. These hours will be adjusted to the operating hours of the River Landing Urban centre when set.

The receptionist will be the first employee to arrive. They are responsible for opening Corner Office, which will include plugging in wax pots, prepping the change room and steam room, putting cash in the till, turning on lights, making coffee, making sure that everything is tidy and ready to go for the day. During this time the staff who start in the morning will start coming in to set up their rooms and ensure that they are ready to go and on time with their first guest. When a guest enters Corner Office they are greeted by the receptionist and if they have an appointment they will be taken back to the change room to change into a robe and lounge pants or to the lounge area depending on the services they are booked for. From the change room the guest will go to the lounge area where he can enjoy a specialty coffee and watch the flat screen TV or read men’s magazines and current newspapers. From the lounge area the aesthetician, therapist, or stylist will welcome their guest and take them to the appropriate room to perform the service. After the service the guest will be taken back to the change room where they can sit in the complimentary steam room and change back into their clothes. From the change room the guest will come up to the front area to shop in the boutique and to pay for their services, products, and rebook their next visit.

Throughout the day the employees will be handling laundry, cleaning each room and their tools between each service, stocking rooms and lockers with linens, restocking shelves, etc. The receptionist will be responsible for answering phones, booking appointments, assisting guests in the boutique, checking guests in, handling cash, customer service, restocking product, ensuring that each guest is comfortable and their needs are met best to our ability, and all else that applies.

At the end of the day the employees will clean their stations and rooms, as well as the change room, laundry room, and front reception area to ensure that everything is ready to go for the next day. Once all of the guests have left the receptionist will cash out and close Corner Office for the day.

The Operations Director will be working as reception, as well as, taking care of day to day things that come up. This may involve ordering, paying bills, answering emails, marketing, human resources, finances, etc.

2.5.2 WeeklyEvery 2 weeks inventory reports will be run for certain product lines to ensure that there is enough product and supplies on hand. Other tasks such as tracking the employee’s individual productivity and performance, book keeping, and reviewing accounts payable will also be looked after. Long term tasks

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such as marketing and financing will be looked over and reviewed as needed to ensure that everything is running smoothly for Corner Office.

2.5.3 MonthlyAt the beginning or end of each month, the Operations Director will run inventory reports for the remainder of the product lines and order the supplies and products needed. Month end reports will also be run to track and analyze performance, bills will also be paid and the end of each month. Marketing efforts will also be analysed for that month and the future months and altered as needed. The marketing for future months will be determined and continuously worked on through out the year.

Employee performance reviews will be done every 3 months, and after a year of employment every 6 months. This is important to ensure that each employee is aware of their performance at Corner Office and learn what areas they exceed in and need to work on. Performance reviews will also be used as a tool when determining wage increases for each employee. This is also an opportunity for each employee to express any concerns or ideas in the operations of Corner Office.

2.5.4 YearlyAt the end of each year annual reports will be run and analyzed to determine the overall performance and future path for Corner Office. Depending on profits, received feedback, etc. changes will be considered for the next year. Inventory also will be counted at the end of each year.

After all of the financial analysis has been done, the Operations Director will do a competitive analysis on prices and will determine appropriate price changes depending on various factors. This will also involve updating the brochure and website. A marketing plan for the next year will also be developed. Once the operations director has decided what all needs to be done for Corner Office, a budget for the upcoming year will be developed and will determine how much can be spent on each area of the business and what needs to be cut and what will be taken on by Corner Office.

2.6 Supply AnalysisSuppliers for Corner Office will consist of Beauty Supply Group (BSG) for hair care (Paul Mitchell & American Crew), Sopar Cosmetics for skin care (Guinot), Continental Cosmetics for foot care (Gehwol), and trade shows in Vancouver, Toronto, or Las Vegas for Boutique items. BSG and Sopar will supply Corner Office with professional and retail skin care and hair care. Other suppliers, such as Can-West, will supply other aesthetic equipment and supplies, such as nail files, wax, muslin, etc. Additional training for staff members is provided by the suppliers.

Administrative supplies, such as paper, pens, printer ink, scissors, will be purchased from a stationary store in the city. Other miscellaneous supplies will be purchased from the appropriate local store, such as Costco. Once Corner Office has established several locations a supplier will be contacted to deliver supplies to each location, due to economies of scale.

2.7 Service Providers Corner Office Staff will include:

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1 Operations Director 1 Receptionist 1.5 Registered Massage Therapists 2 Stylists 2.5 Aestheticians

These numbers are for the start up of Corner Office and will increase as the demand for the services increases. See appendix B for projected future number of staff members.

Corner Office will do its own book keeping and will have an accountant do the year end. Other services that will be out sourced are electrical, plumping, computer technical issues, etc.

2.8 Technical Processes and Procedures Corner Office will hire qualified aestheticians, massage therapists, and stylists/barbers who are trained in their field to perform the necessary services. Additional training, such as hot towel shaves, and product knowledge will be provided by the trainers from our suppliers.

2.9 Capital budget The maximum capacity of Corner Office is a 100% booking rate. For the financial plan, it was assumed that in the first year the booking rate will be 40% and increase on a yearly basis and be at 71% in the 10 th

year, this is a conservative projection for the industry. The capital costs below are based on the furniture, fixtures, equipment, and leasehold improvements illustrated in the floor plan (Appendix A).

Table 2.1 Initial investmentsFurniture, fixtures, & Equipment $59,180Computers $5,400Leasehold Improvements $100,000Total Capital Budget $164,580

See appendix G, schedule 5 for a detailed list of investments and costs in the financial plan. Inventories of retail items will be required, for which 30 days of credit will be provided by suppliers. The proposed levels of working capital are as follows:

Table 2.2 Working Capital:Cash $3,707Inventory on hand $8,569Accounts Payable ($5,730)Total Working Capital $6,546

2.10 Cost of Sales Expected Costs of Sales for retail goods in year one is as follows (for a total sales of $59,000):

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Table 2.3 Cost of SalesBeginning Finished Goods Inventory $0+ Purchases $34,753= Cost of Goods Available for Sale $34,753- Ending Finished Goods Inventory $8,569= Cost of Sales $26,184

2.11 Operating ExpensesThe expected operating expenses in the first year are as follows:

Table 2.4 Operating Expenses

Lease $60,000Lease Occupancy Cost $20,000Salaries & Wages $207,528Employee Benefits $27,323Insurance $3,000Bank Charges $600Software $300Capital Cost Allowance $13,618Telephone, Internet $3,600Marketing $29,200Education & Training $1,500Legal & Accounting $1,500Janitorial $6,000General Supplies $5,000Repair & Maintenance $1,000Office Supplies $1,000Interest on Long Term Debt $4,950

Total $386,119

2.12 Working Capital Planning

2.12.1 CashCorner Office will have a revolving line of credit of $8,000. This amount will ensure that there is enough cash in the checking account to pay all of the bills at the beginning or end of each month. It will also ensure that if anything unplanned were to happen there would be enough cash in the account to solve the issue, for example if the toilet needed to be replaced or a treatment bed needed to be replaced suddenly.

2.12.2 InventoriesInventory will be ordered biweekly or monthly, depending on the supplier. Corner Office will order biweekly from suppliers in Saskatoon and monthly from other suppliers. This will lessen the volumes of

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inventory that needs to be stored and reduce the amount of storage space needed. For the first year volumes of inventory will be an estimate and as days go by, Corner Office will be able to better predict how much needs to be ordered with each order. As a general rule of thumb, the amount of a product ordered will be the amount sold in that month. For many products, their usage is approximately 1 - 3 months.

2.12.3 Accounts ReceivableCorner Office will not have any accounts receivable, all service and/or product will be paid for when it is consumed or purchased by the customer.

2.12.4 Accounts PayableThe average number of days to pay suppliers is 30 days in the spa industry.

2.12.5 Cash Conversion CycleThe following is the cash conversion cycle for Corner Office:

Table 2.5 Cash Conversion Cycle

Average Days Inventory 90Average Collection Period 0Average Days Payables (30)Cash Conversion Cycle 60

3.0 Human Resources Plan

3.1 Organizational StructureThe staff at Corner Office will consist of an Operations Director, Receptionists, Massage Therapists, Aestheticians, and stylists. The Operations Director will be responsible for running the company, ensuring that Corner Office has what it needs to be a successful business. The receptionist will be the person who is responsible for handling smaller issues and assisting the Operations Director in making sure that the front end of Corner Office is run efficiently and effectively; the receptionist is the person that the technicians will go to when the Operations Director is not available. The following is the organizational chart for Corner Office.

Figure 3.1

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Operations

DirectorRecept

ionistStylist

sAestheticians

Massage

Therapist

3.2 Job Descriptions/Qualifications:

3.2.1 Operations Director The Operations Director must have previous experience in the spa/salon industry, as well as experience in successfully managing a business, financing, accounting, marketing, and human resource management. They must also have a fun, outgoing personality, work well with others, and have experience with customer service. This is a very important role in Corner Office as this person is responsible for running the business and ensuring that all aspects of the business flow smoothly and is successful.

The Operations Director is responsible for ensuring that the business has the resources, staff, equipment, etc to carry on business on a daily basis. They will do all of the ordering, hiring, firing, marketing, human resources, book keeping, working at the front desk, and all else that applies.

Sarah Dutka will be the Operations Director of Corner Office. Sarah completed her B.A. in Commerce in December of 2008, majoring in Marketing. She also has over 6 years experience working in the spa/salon industry, starting at the front line as a receptionist and working her way up to the Director of Sales and Marketing in August of 2008. Through these years, Sarah has learned the ins and outs of the industry and has made many connections through networking. Sarah is a prime candidate to be the Operations Director at Corner Office.

3.2.2 ReceptionistThe Receptionist plays an important role at Corner Office. This is the first person that a guest encounters and interacts with when they enter the front doors of Corner Office. They have a lot of responsibilities as they are the hub of the business. This person must be a team player, personable, responsible, outgoing, organized, and able to multi-task. Preferred experience required for this position includes customer service, retail, and cash. It is also important that this person has a passion for the industry, because they need to be enthusiastic about the company, services, and products offered at Corner Office.

All of these requirements that are preferred for the Receptionists all correspond to their responsibilities. The Receptionist is responsible for answering phones, making appointments, working the till, customer service, retail, administrative tasks, opening and closing of Corner Office, and all else that applies.

3.2.3 Stylists/BarberAll stylists and barbers must have a completed stylist/barber course and at least one year work experience as a stylist or barber. Along with previous experience they will also need to have a large male clientele. This is important because Corner Office is a new business and only caters to men. A stylist/barber fresh out of school will not have a clientele and as a new business, Corner Office will not have a steady flow of guests at the beginning to provide the stylists/barbers with new guests. Another course that Corner Office would prefer their stylists/barbers have is in warm towel shaves. This is not a requirement as Corner Office will provide training when needed.

The job description for stylists and barbers is to perform quality men’s hair services. These services include: washing hair, cuts, colours, shaves, and facial hair grooming. They are also responsible for retail,

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laundry, cleaning of the salon and spa areas, ensure that clients are comfortable, and all else that applies.

3.2.4 AestheticiansAll aestheticians must have a completed aesthetic course. It is preferred that they have previous experience as an aesthetician in the industry and a large male clientele, but that is not as important as it is for stylists/barbers. The reason for this is because many guests will see several aestheticians for spa services, but will only see one stylist. It is important that the aestheticians are comfortable performing all spa services on men, as our guests will only be men. Another course that Corner Office would prefer their aestheticians have is in warm towel shaves, but is not a requirement as Corner Office will provide training when needed.

Aestheticians will perform all aesthetic services offered by Corner Office. They will also be responsible for retail, cleaning the spa and salon areas, laundry, ensure that all clients are comfortable, and all else that applies.

3.2.5 Massage TherapistAll massage therapists must be a certified registered massage therapist in Saskatoon. It will be preferred that they also have a course in reflexology and body treatments. Training for body treatments can be provided by Corner Office if they do not have the previous training.

Massage therapists are to perform massage services and body treatments. Along with all other technicians at Corner Office, the massage therapists must be comfortable performing massage services on men. They are also responsible for retail, cleaning the spa and salon areas, laundry, ensure that all clients are comfortable, and all else that applies.

3.3 RecruitmentRecruitment of employees for Corner Office will be more difficult for a men’s only spa compared to a traditional spa because it is a new concept for Saskatoon. This may also work in Corner Office’s favour; potential employees may be excited about the new concept. Methods of recruitment will consist of visiting the different cosmetology and massage therapy schools in Saskatoon and introduce Corner Office to the students and what it offers its employees. Advertising will also be done through facebook, newspapers, online job search sites, and by word of mouth. The excitement of this new concept of spa and the new River Landing Development will also bring interest to inquiring about employment opportunities at Corner Office. Recruitment will also play a role in the marketing plan, which will be discussed in the marketing section.

I would prefer to have an aesthetician who is certified to train other aesthetician and stylists with hot towel shaves. If I am unable to find an aesthetician with these qualifications I will hire a trainer to train the staff in warm towel shaves and select a staff member or myself to take a course to become a trainer for warm towel shaves. As warm towel shaves are not common for Saskatoon and the schools in Saskatoon do not offer the training it will be difficult to find employees with such training. By having a trainer on staff it will make it easier to train new employees and less costly.

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Corner Office will start with 2.5 aestheticians and as the business grows another aesthetician will be hired to meet the demand. The salon will have 2 chairs; therefore, Corner Office will begin with 2 stylists/barbers and as demand increases another part time stylist/barber will be hired. Corner Office will start with 1.5 massage therapists and again as demand grows there will be a total of 2 massage therapists.

Corner Office will begin with 1 receptionist and the Operations Director working on the front desk. As the business becomes busier a part time receptionist will be hired to help out at the front desk and allow the Operations Director time to work on other tasks. See Appendix B for a breakdown of the number of staff for each year.

3.4 Training ProgramsCorner Office will invest in continuous training for its staff members. Professional product lines have trainers available to spas and salons to continuously educate their staff on services and products. To begin, all of the aestheticians will take a course in the skin care lines in treatment protocols as well as courses and information sessions on the product lines that Corner Office offers its guests. After the initial training, Corner Office will invest in skin care training and product knowledge annually to ensure that staff members are using and recommending products and performing services correctly. Corner Office will also invest in product knowledge classes for other product lines, such as hand and foot care.

The stylists/barbers will also have continual training in hair care. To begin, the product line trainer will come in and do a full product knowledge class with the stylists/barbers and introduce them to the colour line. After the initial training, Corner Office will continue to take advantage of the training that the product lines offer to its customers by holding classes in all areas of the salon industry to further educate its stylists/barbers.

Corner Office will also invest in hiring an experienced barber trained to train others in warm towel shaves to train our staff members. This will ensure that each stylist/barber and aesthetician is certified and comfortable in performing warm towel shaves on their guests.

Massage therapists are required to keep updated in their field and continue their education to keep their certification. Corner Office will encourage their therapists to continue their education in their field.

3.5 Human Resource StrategyAs the spa/salon industry generally has high turnover, Corner Office will work with each employee individually and as a team to ensure that everyone is meeting their best potential. The culture that Corner Office will strive to achieve is a welcoming place that its employees want to be a part of. It will be very professional and a place for its employees to take their career seriously, but not uptight and intimidating. The Operations Director will provide individual attention to each staff member on a regular basis, this will provide the employee with support and they will work together on areas that need improvement; thus resulting in accountability and loyalty to each employee.

Corner Office will provide its employees with the tools they need to build their clientele and help the business grow as a whole. Tools such as business cards, internal promotions/incentives, proper

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equipment and products, etc will ensure that each employee can effectively and efficiently bring in new guests and retain their clientele.

The employees’ wage and wage increase will be determined on a preset scale. The compensation program Corner Office will use is called the 365 program; it was developed by Paul Mitchell. The program will be slightly changed to fit the needs of Corner Office. The program works to ensure that each employee is taking care of all of their clients at Corner Office and at home with home care. This program encourages employees to fill their appointment book and build a loyal clientele as well as focusing on retail. This is all aided with weekly tracking for each individual employee so they know where they are in terms of meeting their monthly targets. The individual coaching provided by the Operations Director will help and encourage the staff to increase their numbers. Once their numbers are consistently meeting their targets for a certain time period their wage will increase to the appropriate level. By making each employee accountable, they are more inclined to work to increase their numbers as a group and individually rather than blaming the business and leaving because they believe they will do better somewhere else.

With my previous experience with Human Resources in the spa industry, I have found that this compensation program works very well. Each employee can physically see their performance because quantifiable measures are used. Being able to measure their productivity and sales it gives the employees a clear view of how they are doing and where they need to improve.

3.6 Labour and Management CostsStylists will be paid 50% commission on their services and 5% commission on retail. If their commission does not add up to or exceed minimum wage, they will be paid minimum wage for that pay period; they are paid out which ever is more.

Aestheticians are paid an hourly wage. Each employee’s wage is determined at the time of hire and is based on experience and other factors, such as their current clientele that they will potentially bring to Corner Office. Once their starting wage has been determined on the pre set system, each aesthetician will have targets in booking rate, request rate, and care factor to meet and will be tracked weekly. Once the aesthetician has met or exceeded these targets consistently for four-four week periods they will then move up to the next pay level.

Massage therapists are also paid an hourly wage and have targets to meet in order to move up to the next pay level. Like aestheticians, a massage therapists’ starting wage will be determined by experience and other factors, such as their current clientele they will potentially bring to Corner Office. They also have a booking and request rate target to meet and when these targets are met consistently for a four-four week period they will then move to the next pay level. Massage therapists do not have a care factor target because they do not have retail products in their department at Corner Office to sell.

If an employee were to consistently not meet their targets after a pay increase for a three four week period they will receive a warning and if they continue to be under their targets for another Three-four week periods they will go down to the appropriate pay level.

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Receptionists will be paid an hourly wage that starts at $10.00 an hour. For every 3 month period in the first year of employment the receptionist will receive a $0.50 increase, adding up to $12.00 an hour after 1 year. This increase will only be awarded upon a satisfactory review at each quarter. After one year they receptionist’s wage will be determined upon their yearly review and will be dependant on factors, such as taken on responsibilities.

All technicians and receptionists will have different incentive programs throughout the year based on individual and team performance. These incentives will reinforce motivation and incentive for retail and services, which in turn will also benefit Corner Office.

The Operations Director has many different responsibilities and does not have a set work schedule; she will work as much as is needed to ensure that the business runs smoothly and successfully and that all of the administrative tasks are completed. For these reasons the Operations Director will be paid a salary.

3.7 Shareholders’ AgreementThe Operations Director will hold 100% of the shares for Corner Office and it will be a private corporation.

4.0 Marketing Strategy

4.1 The Marketing Mix

4.1.1 Services and ProductsCorner Office sells spa and salon services, professional products for men, and high end men’s accessories. The services consist of hand, foot, and skin care, hot towel shaves, tinting, hair removal, massage therapy, hair cut and colour services, facial hair grooming, and a steam room. These services and products are designed for men. Each service will provide the customer relaxation, education on the service and products and why and how they will benefit from it. See appendix C for a list of all services offered by Corner Office.

The following is a description of some of the services that Corner Office will provide:

Hand Care: The guest’s nails are shaped and buffed, cuticles are trimmed, and hands are moisturized and massaged.

Foot Care: This includes grooming on the bottom of the feet and heels and callous is removed. The nails are shaped, buffed and cuticles are trimmed; the feet are also moisturized and massaged.

Corner Office will offer both these basic services, as well as deluxe “CEO” versions as well, which will include moisturizing paraffin wax or mask, and an exfoliating scrub. This terminology is consistent with the name and image of Corner Office.

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Skin care: There are several different skin care treatments for the facial area that target different concerns that the guest will have. Examples of different skin care treatments are hydrating, acne, firming, lifting, and rejuvenation.

Hot Towel Shaves: A professional facial shave using hot towels, shave cream, and healing and moisturizing products to finish.

Tinting: Tinting brows, lashes, and facial hair to a desired tint colour.

Hair Removal: Hot wax will be used to remove hair from desired areas of the body.

Massage Therapy: This can be utilized by guests for therapeutic and relaxation purposes. Our massage therapist will be registered; therefore, covered by insurance.

Steam Room: This will be a complementary service for all guests. Corner Office will also offer passes where guests can come in and just utilize the steam room.

Salon: The salon at Corner Office will be a full service salon. Hair cuts, colours, highlights, facial hair grooming and tinting, and scalp treatments will be offered.

Corner Office is selling the experience of relaxation and complete body care. The atmosphere will be designed to have a “gentlemen’s club” feel. They will be greeted by a receptionist who will call him by name and will make notes for each of his visits for recommending products and men’s accessories. An example would be, “Hello Mr. Jones. How was your meeting last week? We got in the sunglasses that I was telling you about during your last visit, I put aside a pair for you that I thought you might like.” This special treatment is to make men feel comfortable and cared for, they will also have the luxury of the steam room, specialty coffees, daily newspapers, men’s magazines, and TV access during hand and foot care services, hair services, and while they relax in the men’s lounge area.

Corresponding products to maintain skin, hand, foot, and hair care at home will also be available to purchase at Corner Office. As well, high end lines of men’s accessories, such as watches, ties, and sunglasses will also be available for purchase. This range of available services and products are to cater to the men who prefer to not shop in multiple stores, but to do all of their shopping at one location. Corner Office will allow their guests to have their services, purchase their home care, and pick up a new pair of sunglasses all in one visit. Gift certificates for a traditional spa that can be purchased for their wife or girlfriend will be offered, through cross promotion, which will be discussed later on.

4.1.2 PricingThe spa/salon industry is competitive; however, in Saskatoon there is no direct competition for Corner Office as it is the only men only spa. There are many indirect competitors for Corner Office; these include all other spa/salons in Saskatoon, while their biggest competitor for products is department stores and pharmacies. The pricing at Corner Office will be slightly above the average competitive price. This is due to the prestigious image and complementary services provided with each service, such as the steam room, current newspapers and men’s magazines, specialty coffee, and TV access. The premium prices reflect the higher quality and specialized service. Because men in Saskatoon currently do not have

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this level of service available to them at any other spa/salon in Saskatoon, our target market will be willing to pay these prices for their services. Appendix D shows the prices that competitors charge for their services.

The prices for products at Corner Office will be based on the cost-plus strategy. For the different line of products that Corner Office will carry, the percentage that the wholesale price is increased for the retail price will depend on the product line. The reason for this is that consideration on how much a guest will pay for a certain product will be taken into account; some lines will allow for a higher margin than others. Once the product lines are chosen, the margins will be set for each line ensuring consistency in pricing. The higher margins in some product lines will indirectly balance out the lower margins of the other product lines.

Discounts will not be given on services at Corner Office, the only time that prices will change will be when the service has changed; the price will then reflect what their service consisted of. Factors for these changes would include time and product usage. Products will only be discounted when they are being cleared out. This will give Corner Office the image of prestige and status.

The prices at Corner Office will generally remain the same. They will increase with the increases of wages, product prices, inflation, etc. Increases will be evaluated on an annual basis to ensure that Corner Office will be able to cover its expenses and generate a profit.

4.1.3 PromotionCorner Office’s positioning strategy is “Look and Feel the Part”. The services and products that Corner Office provides its guests will provide them the image and status of being a successful and important person. The “gentlemen’s club” ambiance that Corner Office will provide and the level of quality of products and services will be consisted with the wants and needs of the guests who visit Corner Office.

When people hear the name Corner Office the image of prestige, status and great service will be associated with it. This will be the spa/salon for men to frequent when they are preparing for a big event, presentation, occasion, or for regular maintenance to sustain their image.

4.1.4 PlaceCorner Office will be located in downtown Saskatoon in the Urban Centre of the new River Landing Development on 19th Street, between 2nd and 3rd Avenue. This location will be ideal for Corner Office as it is located within close proximity to many office buildings in Saskatoon. As well, Saskatoon is a smaller city, which makes transportation time not an issue; it takes approximately 25 minutes to drive from one end of the city to the other, compared to 45 minutes in larger cities. Corner Office’s target market has an above average house hold income of $70,000 and higher; the average household income level in Saskatoon is $64,280 (City of Saskatoon).

The areas that have an above average income in Saskatoon are mainly in the East side, and North End. These are the areas that Corner Office will target their marketing to. See Appendix E for a map of the areas in Saskatoon that Corner Office will be targeting.

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4.2 Segmentation, Targeting, Positioning The target market for Corner Office is men, ages 25 – 55, with an above average household income. Our target market will be image conscious males who understand and value the importance of taking care of their skin, body, and hair. These men want professional expertise, services, products, and the experience of a spa/salon designed for them. They are willing to pay a higher price for the “gentlemen’s club” experience that Corner Office will offer to them.

Corner Office will also target women in the same age group and household income market as our targeted men. Women will be a target for gift certificates sales, for men, and purchasing homecare and accessories for men. These women will be the wives and girlfriends of our male target market. Women are usually the first person to introduce the spa industry to males, making marketing to women is just as important as marketing to the male market.

4.3 Competitive Analysis

Table 4.1 Competitive AnalysisName Image Location Prices

Paramount DaySpa Salon & Boutique

A New You Awaits… 2nd Avenue North Competitive

Angles Salon Spa Change the Way You Look and Feel

Midtown Plaza Competitive

SunSera Indulge Yourself 2nd Avenue North Competitive

8th Street Competitive

22nd Street Competitive

Chel Salonspa 8th Street Competitive

Visions Salon & Spa 1st Avenue North

4.4 Projections of Revenues and Marketing ExpensesThe projections of revenues for Corner Office are based on a 40% booking rate in the first year of operations and increasing 5% for the first 3 years and increasing 3% every year thereafter. This increase will continue until Corner Office reaches a booking rate of approximately 80%, which is a good booking rate for the spa industry. For the ten year projection Corner Office will be at a 71% booking rate. These booking rates are an average for the year and are considered to be conservative.

Retail at corner office is projected as a percentage of service sales. Salon retail is projected as 10% of salon service revenue, spa retail is projected as 20% of spa revenues, and boutique retail is projected as 5% of total service revenues.

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To reach and maintain these projected booking rates and retail revenues, the marketing of Corner Office becomes very important. The promotional material and advertising that Corner Office will utilize will consist of brochures, business cards, website, radio, referral/loyalty programs, cross promotional programs, networking, and in-house marketing, incentives and promotions. All of these promotional material and advertising will be done year round except radio. Radio will be utilized in the opening year during the first couple of months to create awareness of Corner Office and will do advertising with radio in June for Father’s Day and November and December for Christmas. It will again be used in year five to promote Corner Office’s five year anniversary.

The following is a chart of the marketing expenses in the first year of operation, 2009.

Table 4.2 Marketing Budget

Advertising:Radio $15,000

Promotion:Cross Promotion $3,000Referral & Loyalty Programs $2,500Staff Incentives $2,000Brochure & Business Cards $2,500Website $2,000Networking $200In-House $2,000

Total $29,200

In the following years, the marketing budget falls to $10,400 due to no radio advertising. All of the other promotional material will remain the same; brochure and website prices will fall as well because they will not be recreated, just updated. The marketing budget in 2013 will increase to $15,400 with the addition of radio for the 5 year anniversary. The budget will then resume to $10,400 for the year. See appendix F for a detailed copy of the marketing budget for the projected 10 years.

4.5 Marketing Plan

4.5.1 The MarketThe information that is available on the target market for Corner Office is demographics, income levels, place of residents, age groups, and gender on the city of Saskatoon website. This information was taken from the 2006 census; this is the most recent information available at this time. Industry specific research is available from the professional Spa/Salon product lines. This information is available to spa/salon owners when they carry their product.

The current recession in the US is showing an effect in larger cities, such as Toronto and Vancouver, but Saskatoon is booming right now. The recession is not something that will dramatically affect the spa/salon industry; spa services are and affordable luxury and will be seen as a substitute to a new car or

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vacation. Spa services are also seen as a necessity to some consumers and skin care, hair care, hand and foot care products will still need to be replenished and therefore will not dramatically affect the retail side of Corner Office.

4.5.2 Competition Corner Office does not have any direct competitors, but does have many indirect competitors and substitutes. Major indirect competitors of Corner Office are spa/salons in Saskatoon, department stores, and drugstores. Department stores and drugstores have the majority of the market share for beauty products for both men and women. Product brands that are sold in department stores and drugstores use massive advertising campaigns to promote their products; where professional lines put more money into product development and innovation rather than advertising campaigns. For this reason it is important for aestheticians and stylists to educate their guests on the benefits of professional skin, body and hair care products.

The strengths of department stores and drugstores have are the brand names known worldwide due to their massive advertising campaigns and in some cases perceived as less expensive products. Their weakness is the lack of staff with expert knowledge to recommend the correct products to consumers. For this reason there are many consumers who are using the wrong products for their hair and skin type.

The strengths of spa/salons and professional products are the expertise behind the recommendation and services and the high quality of the products. At a spa/salon the staff members are trained aestheticians and stylists who are professionally trained in their field and in the product line. This expertise will ensure that each consumer is using the correct products the correct way. The weaknesses of spa/salons are that they generally have smaller advertising budgets and do not have the resources to blanket different advertising mediums to promote their services and products. As well, as stated earlier, professional product lines do not put as much money into advertising as department store brands do. This greatly affects sales of professional product lines, but this is where providing education to consumers through services that the sales of professional products will be sold.

Strengths for Corner Office are that it is designed exclusively for men. It will have a competitive in the spa industry in Saskatoon as it will be the first men only spa. Corner Office’s competitors are designed for women and do not focus on their male clientele. This strength will be paramount in attracting clients to Corner Office. The value added amenities, such as complementary steam room, specialty coffee, men’s magazines and daily newspapers will also add to the strengths of Corner Office.

Weaknesses of Corner Office will be its small marketing budget and small consumer market. The idea of a spa for men is new for Saskatoon and may not be widely accepted right away. The small consumer market exclusivity will make it more difficult for Corner Office to quickly build up its customer base. Once customers visit Corner Office they are more likely to become a loyal guest, due to the atmosphere and men are becoming more comfortable about trying spa services and continuing to have them done. Another weakness that may pose a problem for Corner Office is the word “spa” in “The Spa for Men”. I have received feedback about the word “spa”, and to some it may be associated with “it is something

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that women do”. I have taken this into consideration and decided to leave “spa” in the name and will determine a name change upon seeking further feedback from the male market.

Once Corner Office opens, other competitors may start to increase their service selection exclusively for men. They may make their spa/salon more welcoming to the male market by changing their ambiance and marketing campaigns. This will affect Corner Office by taking away part of their competitive advantage, but Corner Office will still remain the only exclusive male only spa/salon in Saskatoon, until another is opened by Corner Office or a competitor.

If a competitor were to open up a male only spa, Corner Office will need to keep true to its image and objectives and utilize its loyalty base from the beginning to retain their current guests and keep bringing in new guests.

The demand for male spa and salon treatments is increasing as more men are interested and comfortable having spa/salon treatments. Trends that are developing in the industry are anti aging treatments, as the Baby Boomers begin to start showing signs of aging. Signs of aging are something that people of all ages above 20 are concerned about, and they are turning to spa/salon treatments, laser, Boxtox, plastic surgery, etc. Corner Office will cater to these concerns of consumers by offering anti aging treatments and knowledgeable staff that know tricks on how to look younger, for example hair colour and style and firming facial treatments.

As anti aging treatments are very popular, there is a lot of competition from many different businesses who offer different types of anti aging treatments. Corner Office will not have laser treatments available or Botox, due to the requirement of a doctor on staff for the procedures. This is an option that Corner Office could look into in the future if the male demand is high enough and it is feasible for the company.

Spa/salons open up in Saskatoon frequently; there is little barrier to entry. This is something that Corner Office is aware of and why it places such high importance on customer service and high quality services and products to ensure the loyalty of their clients and referrals.

4.2.3 Purchasing Patterns of Consumers The customers of Corner Office will be both men and women. Men will be the customers who consume the services, and both men and women will be purchasing the services through payment and gift cards, as well as retail items at Corner Office. Women will be the main purchaser of gift cards and men will be the main purchaser of services and both men and women will purchase the retail items, products and male accessories.

Men will purchase and consume services approximately every 4 – 6 weeks, as this is the time frame that should be between services; for example, a guest should have a facial every 4 – 6 weeks for maintenance. Skin care, hair care, hand and nail care products need to be replenished at least every 3 months. This however, should be the longest time that a guest should go between the same services. The goal of Corner Office is that each guest revisits more often than 4 – 6 weeks for a variety of services. And after each service purchasing products to ensure they are using the correct products at home to maintain the results of their services.

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Purchases of accessories and professional products will be purchased mainly after services. Men are not considered frequent shoppers and prefer to do all their shopping in one location. Women, however, will visit Corner Office to replenish products for their husband/boyfriend and purchase gifts, such gift cards and accessories. These products and accessories will only be available at Corner Office as professional lines do not sell their products online.

The professional skin and hair care products sold at Corner Office will be products created for men. They will have the attributes that men prefer, such as packaging, scents, texture, etc designed specifically for men. These attributes of the products will satisfy the wants and needs of the male consumer who wants professional skin and hair care. It will be the job of the staff at Corner Office to educate and promote the lines available for retail to influence the decision of the guests at Corner Office.

4.2.4 Target Markets The target market for Corner Office is image conscious men ages 25 – 55, who have an above average household income. The most attractive market for Corner Office is the Generation Y market. Generation Y males are different from Generation X and the Baby Boomers in that they are considered more image conscious and are more comfortable and willing to spend money on spa and salon services and professional products. Corner Office will also focus on the Baby Boomers as they are the largest demographic that also like to spend money on themselves and are starting to become more comfortable and willing to have spa services done.

Generation Y is education oriented, which means that there will be many professional males entering the workforce, as well Generation Y are prone to be narcissistic. This fascination with themselves will make males in this demographic more conscious of their appearance and more prone to spend money on spa and salon services. The target market in the Baby Boomers and Generation Y demographic will offer Corner Office the greatest sales and profit potential with the least risk because of their size and willingness to spend money on themselves.

Corner Office has an advantage over its competitors with the male clientele. This is because Corner Office is designed for males only. The experience, services, and products offered will give Corner Office its competitive advantage over other spa/salons in Saskatoon. With this concept of spa/salon in Saskatoon, I believe that Corner Office will be able to capture 3% of the male market.

The best niche market which will be the “best” for Corner Office will be the homosexual professional male. This market is generally conscious about their personal appearance and image. They are willing to spend money to have the best skin, body, and hair care; they generally will understand the importance of maintaining the results of their services at home with professional products. This niche market will also be important to consider when bringing in men’s accessories, such as sunglasses and watches. This will be the “best” niche market for Corner Office to market to, but the business will have to be careful to not build the image that it is a spa/salon for homosexuals. The image that Corner Office wants is one that all males will feel comfortable coming to.

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4.2.5 Product/Service Features The services at Corner Office will be followed by protocols to ensure quality and consistency. With each service the service provider will document in the guest’s file the service performed, products used, recommendations, and general notes. These notes will create consistency with each visit of that guest, or for reference to any questions or recommendations. The products offered at Corner Office will be men’s product lines, not unisex; this will be consistent with the image of the male only spa/salon.

Each guests’ experience at Corner Office is also very important. The customer service, steam room, reading material, specialty coffee, TVs, etc will set us apart and above from our competition. Most spa/salons are designed for women and have products for women. Product lines can be used for both men and women, but the packaging, scent, and promotional material are designed for women. Men and women purchasing for men will perceive Corner Office as the place for men to go to relax and have spa and salon services done.

The atmosphere at Corner Office will be masculine compared to other spas. When a guest enters Corner Office it will slightly resemble an office. Once the guest enters the salon or spa area it will have more of a spa feel, but will still feel masculine with black leather chairs and dark wood furniture.

Currently the only option that men have for spa and salon services are establishments that are more female focused. Corner Office will give these men the opportunity to have their services done in a place where they feel comfortable and that meets their wants and needs.

4.2.6 Sales and Profit ObjectivesThe objective of Corner Office is to gain 3% of the male clientele in Saskatoon within the first year of operations. Corner Office will reach a 40% booking rate in the first year of operations and be up to a 71% booking rate by its tenth year of operations.

4.2.7 Channels of DistributionCorner Office will be selling to the consumer market. To reach Corner Office’s target market I will need to use distribution methods that will directly tie us to them, such as radio, cross promotion with other businesses that target the same consumers, website/e-newsletters, networking, in-house advertising, etc. Competitors of Corner Office use radio and print most frequently.

The most cost effective channels of distribution will be networking, referral and loyalty programs, website/e-newsletters, and cross promotions. These forms of distribution reach large numbers of people and are less likely to be trapped in “noise” like other types of distribution. They also are easier to target a specific market and have more validity than mass market advertising.

Channels that will reach Corner Office’s target market will include Magic 98.3, News Talk 650, the Corner Office website, referral and loyalty programs, networking clubs, and cross promotions. Brochures will be handed out to guests, placed in businesses in which they cross promote with, handed out when networking, etc. Corner Office will advertise in local business magazines which target the same market. Radio, website, and the brochure will require technical and sales support. Most of the other distribution channels can be done in-house.

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Radio and networking will be important for Corner Office’s grand opening. This will create a hype and interest in the company and have high reach. The brochure and website will be reinforcements for consumers interested in Corner Office; the brochure will be something tangible and both will provide consumers with more information. Referral and loyalty programs will build loyalty and client retention, while incentives for referrals will promote word of mouth. Cross promotions will be an easy way to target consumers that fit into the target market in other places that they and their wives already shop.

4.2.8 Select Markets/Product/Service MixThe goal of Corner Office is to be a small factor in the spa/salon industry, but dominate the professional male segment. The experience at Corner Office will not be easily copied at competitor spa/salons. The service, ambiance, and experience will require a huge commitment and investment to restructure the spa/salon. The barriers to entry are low, therefore; it is easy for a direct competitor to open up in Saskatoon or for an existing spa/salon to redesign itself.

Corner Office plans to form an alliance with Paramount DaySpa Salon & Boutique to cross promote with. This will broaden the reach of consumers that Corner Office reaches to promote their business. Cross promotion with a competitor will benefit both businesses in that the women who visit Paramount can purchase gift cards for their husbands/boyfriends for Corner Office and vice versa. This will bring new clients to both Corner Office and Paramount.

4.2.9 Selling and AdvertisingAdvertising will play an important role in informing consumers who Corner Office is and what it offers. This will require a large advertising campaign for the first year Corner Office is open. This will ensure that Corner Office obtains the reach that it needs to meet its objectives.

To meet our objectives, the staff at Corner Office will need to be able to live up to the level of service Corner Office promises its guests. Training and dedication of employees will be important to ensure the consistency of service. This can be achieved through the culture of Corner Office and incentive programs set up for staff members.

The most effective media for the first few years will be radio to create hype for Corner Office. Once most consumers are aware of Corner Office and what it is, I will focus more on personal marketing through in-house advertising, cross promotions, networking, and referral and loyalty programs.

Corner Office’s advertising program will begin with massive radio advertising and networking when it first opens. Corner Office will also have brochures, business cards, and the website/e-newsletter to give consumers more information and something tangible to act as a reminder. Cross promotions with other businesses will also be done to attract our target market and give them an incentive to visit Corner Office. Once consumers visit Corner Office they will involved in our referral and loyalty programs and in-house advertising. With visits usually between 4 – 6 weeks, knowing when to start promoting in-house for certain events will be easily timed. Staff incentives will also be used to increase the effort put into up selling, rebooking, retail sales, etc. As Corner Office becomes more of an established business donations will be another way to bring new consumers in.

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5.0 Financial Plan5.1 Capital Requirements:

Corner Office requires a total capital investment of two hundred thousand dollars. It is anticipated that the capital requirement will be raised through debt and equity. The capital requirement is prorated as follows;

Table 5.1 Capital Requirements

Debt Financing $60,000Equity Financing $140,000Total Financing $200,000

It is anticipated that the debt requirement will be through the Bank of Nova Scotia and the equity requirement will be met through me and the co-signing of my parents.

5.2 Loan Amortization The loan will be secured with Bank of Nova Scotia. The total of forty thousand dollars will be amortized over ten years, with an average interest rate of 8.25%.

5.3 Summary of Projected Income StatementThe revenues for Corner Office are based on a 40% booking rate with 5% growth in the first 3 years and 3% growth for the following 7 years. Salon retail is projected as 10% of salon service revenue, and spa retail is projected at 20% of spa service revenues, and men`s accessories revenues are projected at 0.5% of total service revenues. These numbers are considered conservative to refrain from over projecting the revenues for Corner Office.

The following is the total revenues, net income, and end retained earnings for the first 5 years projected. See appendix G for the income statement for Corner Office for the 10 years projected.

Table 5.2 Projected Revenues, Net Income, and Cash Flows

Year 2009 2010 2011 2012 2013

Total Revenues

$408,866 $459,658 $510,459 $590,317 $623,603

Net Income ($38,399) ($9,911) $22,082 $27,396 $19,416

Cash Flows $3,707 $10,963 $44,223 $79,792 $103,718

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5.4 Summary of Projected Balance SheetSee appendix G for the complete balance sheet for Corner Office for the 10 years projected.

Table 5.3 Balance Sheet

Year 2009 2010 2011 2012 2013

Total Assets $163,238 $149,610 $167,610 $190,930 $205,193

Total Liabilities $61,637 $57,920 $53,837 $49,761 $44,608

Total Shareholder’s

Equity

$101,601 $91,691 $113,773 $141,169 $160,585

5.5 Risk Analysis

5.5.1 Sensitivity Analysis

Table 5.4 Critical Variables Critical Variables Level of Importance

Number of Customers 1 - Critical

Wages 2 - Important

Interest rates 3 - Minor

Tax rates 3 - Minor

Customers are vitally important for the success of Corner Office. The business cannot survive without consumers purchasing the services and retail offered at Corner Office. It is through customers that Corner Office will generate its revenues.

Wages are deemed important as they comprise a major portion of our operating expense, 51%. The interest rate is deemed minor as the businesses loan is fixed. Tax rates are deemed minor as they are universally applied.

5.5.2 Sensitivity Analysis

Best Case Scenario

In creating the best case scenario sales forecasts, Corner Office begins in year 1 with a 50% booking rate and is to an 85% booking rate in its 10th year. This results in an internal rate of return of 58.3%.

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Worst Case Scenario

The worst case scenario was calculated with a 40% booking rate in every year for 10 years. This results in a negative net income every year. This scenario will result in the bankruptcy of Corner Office; therefore, a negative internal rate of return. This situation would be caused by not having the number of guests required to generate enough revenues to cover expenses. For this reason customers become a critically important factor for Corner Office.

Scenario Analysis

The most important information to take from the scenario analysis is the booking rates required to be successful. If Corner Office cannot book enough guests for services and sell them retail, it will result in bankruptcy. For this reason, the marketing plan and execution for Corner Office is vitally important for the success for the business.

5.6 Dividend PolicyThe financial model for Corner Office does have dividends as part of the model, but none are projected to be paid out. Corner Office does not plan to have outside equity investors; therefore, I have not accounted for paying out dividends in the financial model.

5.7 Economic ForecastsIt is anticipated that the Canadian economic situation will remain stable over the medium to long-term. As such inflation and interest rates are expected to grow at the following rates;

Inflation Rate 2.5% Interest Rate 8.5%

5.8 Ratio Analysis

Table 5.5 Ratio Analysis

Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Liquidity Ratios:Current Ratios 2.14 3.2 7.68 11.14 13.36 17.24 20.54 23.49 28.01 32.97Activity & Operating Ratios:Total Asset Turnover 0.36 0.45 0.44 0.44 0.44 0.40 0.37 0.34 0.30 0.27Leverage RatiosDebt Ratio 37.8% 38.7% 32.1% 26.1% 21.7% 16.6% 12.3% 8.5% 5.3% 2.6%Debt to Equity Ratio 60.7% 63.2% 47.3% 35.2% 27.8% 19.8% 14.1% 9.3% 5.6% 2.7%Profitability RatiosGross Profit Margin 85.0% 83.2% 83.2% 83.2% 83.1% 83.1% 83.0% 83.0% 83.0% 83.0%Net Profit Margin -64.8% -14.9% 29.8% 32.3% 21.6% 38.0% 37.6% 46.3% 53.9% 61.1%Return on Total Assets -23.5% -6.6% 13.2% 14.3% 9.5% 15.2% 14.0% 15.6% 16.3% 16.5%Return on Equity -37.8% -10.8% 19.4% 19.4% 12.1% 18.3% 16.0% 17.1% 17.2% 16.9%

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5.9 Break-Even Analysis

The Break-Even was calculated by finding the booking rate where Corner Office’s net income is zero. The break-even booking rate for Corner Office is approximately a 46% in the first year.

5.11 Net Present ValueBased on existing financial projections the net present value for this undertaking is $8,071.

5.12 Internal Rate of ReturnBased on existing financial projections the internal rate of return for this undertaking is 21%.

5.13 External Rate of ReturnBased on existing financial projections the external rate of return for this undertaking is 5.3%.

6.0 SummaryCorner Office is a spa designed exclusively for men. With its competitive advantage of being the first men’s only spa in Saskatoon, Corner Office will be able to capture a large portion of the male market. This business plan shows that Corner Office is a feasible business and has a lot of potential in the booming Saskatoon economy.

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Appendices

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Appendix A – Corner Office Floor Plan

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Appendix B – Projected Number of Staff Members

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Number of Employees

Year 2009 2010 2011 2012 2013

Stylist 2.0 2.0 2.0 2.5 2.5

Aesthetician 2.5 2.5 2.5 3.0 2.0

Massage Therapist

1.5 1.5 1.5 2.0 2.0

Reception 1.0 1.0 1.0 1.0 1.5

Total 7.0 7.0 7.0 8.5 9.0

Year 2014 2015 2016 2017 2018

Stylist 2.5 2.5 2.5 2.5 2.5

Aesthetician 3.0 3.5 3.5 3.5 3.5

Massage Therapist

2.0 2.0 2.0 2.0 2.0

Reception 1.5 1.5 1.5 1.5 1.5

Total 9.0 9.5 9.5 9.5 9.5

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Appendix C – Service Price List

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Appendix D – Competitive Analysis

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Appendix E – Target Areas in Saskatoon

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Appendix F – Marketing Budget

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Appendix G – Financial Plan – Base Case

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Appendix H – Financial Plan Worst Case

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Appendix I – Financial Plan Best Case

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Appendix J – Financial Plan – Break Even

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Appendix K – Equipment Costs

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Works Cited

City of Saskatoon. Neighbourhood Profiles. 2006.

<http://saskatoon.ca/org/city_planning/resources/neighbourhood_demographics/2007/saskatoon_profile.pdf>

River Landing Project Update. Project Update. 5 Mar. 2008.

<http://www.riverlanding.ca/project_update/phase2/index.html>

River Landing Project Update. Urban Village. 5 Mar. 2008.

<http://www.riverlanding.ca/project_update/phase1/urban_village/index.html>

Yonka, Phytoderm Cosmetics. 2008.

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