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Cost and Benefit Analysis

Cutting Corners Owner Vs. Quick Cuts Salon Barber

As stated in my previous business proposal, Cutting Corners Barbershop will be a “home away from home” where men and women can freely express their opinions, debate about culture, showcase their individual talents, and most importantly feel like a “boss”, whether they are sitting in the chair or holding on to the clippers (By Any Means Necessary). That is the culture I have always envisioned for my ideal barbershop, before my dreams actually began to unfold. Now that I am faced with the option to either be a barber for Quick Cuts Salon, or branch out and chase my dream of becoming a barbershop owner, I must decide which path will be best for me presently and for the future to come. Cutting Corners Barber Shop is the proposed set up barbershop that will be placed in the heart of Miami, Florida, U.S.A. I plan to jumpstart this business on a medium level barbershop status with five employees who will be helping me in the hairstyling/barber/ego-boosting business.

The initial investment for this business that will be required to ensure effective turnaround is $25,000.00 USD. Out of the predicted startup amount, $10,000.00 will be spent on the purchase of equipment and the remaining $15,000.00 will be put aside for other expenses throughout the year. $10,000 will be invested into equipment to motivate my employees by providing them with top of the line equipment to let them know they are top of the line barbers when working for Cutting Corners. It is ideal to have my barbers know that their boss has invested in them and believes that they are a valuable part to the Cutting Corners family. As a business owner, this will be my main job to ensure the satisfaction of my employees because it will reflect in their work, which will in turn leave customers satisfied and coming back for more. There is a common saying, “What you put out, is what you get in return”, which I truly believe in to the T. With that being said, job satisfaction has been proven to result in productivity, less absenteeism, and better customer service. With the proper equipment handy, the main services that will be offered inside Cutting Corners Barber Shop are all haircuts and shaving services and all the related services, including complimentary head and face massages after all haircuts. The business is expected to reach 25% profit on its revenues in the third year as business grows and clientele expands. If I stick with the option to stay at my job at Quick cuts salon, I will continue to bring in a salary of $1,500.00 per month on top of the money I have saved over the past 4 years for my dream shop. I have $25,000 in my fixed deposit that is earning 10% interest annually. The start up costs for branching out to creating my own business is given below:

Start up Costs

Opportunity Costs

The opportunity costs are the opportunities or the incomes that I would have received if I have not selected to open the barbershop and continue with my job in Quick cuts Salon.

As I have been offered a $1,500 per month salary package at Quick Cuts Salon, I have earned $18,000 per year. Also, that the investment of $10,000 for the purchase of equipment’s and the $15,000 for other expenses would have earned an interest of a fixed 10% per annum which amounts to $2,500 each year. So the opportunity cost for each year is $20,500.

The profits and loss projection for the first three years is given in the following table. The expenses are taken as a medium level barber business and these expenses are fictional and also the incomes are fictional, however, these are on the proper grounds of what an average barbershop can earn. The net profit of Cutting Corners barbershop will increase throughout the years, with increases of 15%, 21% and 25% respectively for each of the first three years. The reason for an increase in the profit is that the revenue inflates with the expansion in the number of visits but as the fixed costs remain the same in all three years – or does not change much – it increases the percentage of profit in each coming year.

Cost and Benefit Analysis

From the above table of cost and benefit analysis we can see that even if the opportunity costs are deducted from the net profits of the business each year, still the net benefit is very attractive and it supports the idea of starting the business and ditching the idea of being a worker forever.

Conclusion

Cutting Corners Shop is the proposed business that I will be starting in Miami, FL and hope to expand to major cities all throughout the United States. Cutting Corners is the barbershop I have dreamt of owning since I was a young child sitting in my father’s barbershop everyday. Sometimes it takes a major leap and strategic planning in order to turn dreams into reality. Therefore, the cost of leaving an opportunity to work at the Quick cuts Salon and breaking the fixed deposit of $25,000, will be the right move! After all the cost and benefit analysis it is found that the business is expected to earn enough profit to make a net benefit of $332,270 in the third year of its opening. If you had the choice to make $18,000 a year or work hard, save, invest, dream, and plan to make $300k+, which one would you choose? Cutting Corners will be the barbershop to be at!

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