Business Plan for an Adult Strip Bar - Assignment Example

Contents Introduction Company summary 2 Start up Expenses (Table) 3 Profoma P&L Sheet 6 Profoma Balance Sheet 8 Rules of the house (dancers) 10 Rules of the house (customers) 12 Market Analysis 13 Marketing Strategy 14 Sales Forecast 15 Conclusion 16 References 17 Page 1 Introduction: The paper aims at preparing a detailed business plan for an adult strip bar in Port Elizabeth, South Africa in lieu of the forthcoming 2010 FIFA. The paper will consist of financial specifications for the start up of the bar which includes the complete ledger of Profit and loss, and the projected balance sheet for the first three years of business. The paper further delves in a comprehensive enlistment of the prevailing competition and market scenario along with the initial requirement of stock and staff for a smooth entry into strip bar business. Rules of the house for customers and dancers are also part of the business plan to enhance professionalism. Mark who has proposed to start the adult strip bar in the Eastern Cape, Port Elizabeth is seeking a loan from bankers against collateral security in this case his family property. The comprehensive business plan is as follows: Executive Summary: 'Cloud nine' is the proposed adult strip bar will entice the crowd flowing in for FIFA 2010. A professional adult strip bar and most importantly law abiding and with no Prostitution or drug trafficking. Situated very close to the Boardwalk Casino Entertainment world which assures ample flow of tourists, 'Cloud nine' is in the same building that served as a night club previously. 'Cloud nine' has also cleared the zoning criteria for setting up strip bars. (Documents from the local municipality authority attached.) Objectives: >'Cloud nine 'offers visual entertainment only. > It assures customers a good time in accordance with its terms and conditions. > The club is law abiding and does not indulge in prostitution, terrorism, drug or human trafficking. > It aims to provide quality entertainment and service to customers at a premium price to give tourists a pleasurable and unforgettable experience Page 2 Mission: 'To delight customers in a way that keeps them coming back for more'---- 'Come 'it's the ultimate cloud nine experience!' Keys to success: Adhering to the laws that govern the business of adult strip club Ensure that every customer and staff is above the legal age of 18. Management and staff to strictly follow rules of the house Ensure rules of the house are properly communicated to all customers. Check papers of every staff and dancer, including nationality status and previous record of prostitution through a private detective agency. Always alert customers politely but firmly in case of their misbehavior with dancers and ensure there is a staff always close by in case of a table dance or lap dance in private booths. Company Summary: Ownership: Mark who is the sole proprietor of the bar and is liable to legal and financial claims stated against the bar will own the business 'Cloud nine'. Mark will be liable to pay taxes in accordance with the income tax act of the state from time to time as instructed by the government. The owner Mark will face all criminal and civil action in case of law breaking. Staff: The bar will start with an initial of 8 dancers and an in house governance staff of 10. This excludes two cooks 2 and 6 waiters. Size: Initially the bar will have 12 tables with a seating capacity of 36. The private booths for the private booth dance. Services offered: The bar offers strip dancing for customers with food and drinks. This means Page 3 only strip dancing and no sex. Sex for money is not offered here as customers are not allowed to touch dancers .The dancing can be on stage, on the customers table, a lap dance or private booth dance and the prices for these vary accordingly. Type: 'Cloud nine' is an adult strip bar opened with a legal 'commencement of business certificate' in the proper zoning area and a liquor license. It is clearly an up market establishment. It entertains customers who walk in to enjoy the dance of the women. It caters to that customer who comes with their wife or girlfriend however old, and ensures that it gives everyone a good time without having to feel embarrassed in anyway Find below the estimated start costs for the business along with money required as investment from the bank. As mentioned earlier the place of the bar served as a nightclub earlier and requires limited renovation to bring about the dance bar ambience Start-up Expenses Legal R16290 Stationery etc. R4207.5 Insurance R8415 Rent R33660 Research and Development Interior Refit R252450 Expensed Equipment R168300 Air Cond. Upgrade R42075 Audio/Lighting R84150 Bar Equipment/Supply R84150 Fees and Permits R58905 Bathroom Upgrades R42075 Page 4 Initial Marketing R25245 Opening Salaries Deposits R126225 Other Total Start-up Expenses R946687.5 Start-up Assets Cash Required R652162.5 Start-up Inventory Other Current Assets Long-term Assets R168300 Total Assets R820462.5 Total Requirements R1767150 Start-up Funding Start-up Funding Start-up Expenses to Fund R946687.5 Start-up Assets to Fund R820462.5 Total Funding Required R176150 Assets Non-cash Assets from Start-up R168300 Cash Requirements from Start-up R652162.5 Additional Cash Raised Page 5 Cash Balance on Starting Date R652162.5 Total Assets R820462.5 Liabilities and Capital Liabilities Current Borrowing Long-term Liabilities Accounts Payable (Outstanding Bills) Other Current Liabilities (interest-free) Total Liabilities Capital Investment as bank loan R1767150 Other Additional Investment Requirement Total Planned Investment R1767150 Loss at Start-up (Start-up Expenses) -946687.5 Total Capital R820462.5 Total Capital and Liabilities R820462.5 Total Funding R1767150 Page 6 According to the table, Bank loan required to commence business is R1767150. A collateral security of R196500 is provided to prove the applicant's credit worthiness. Following is the projected Profit and loss account for the first three years of business. Profoma Profit and Loss Sheet - All figures in African Rand 2008 2009 2010 Sales 4,794,867 7,363,125 15,526,800.00 Direct Costs of Goods 1,099,841 1,622,984 3,425,623.00 Other Production Expenses 0 0 Cost of Goods Sold 1,099,841 1,622,984 3,425,623.00 0 0 Gross Margin 3,695,027 5,740,149 12,101,177.00 Gross Margin % 77.06% 77.96% 77.94% Expenses Payroll 2,928,420 3,265,020 5,466,235 Sales and Marketing and Other Expenses 192,704 210,375 305,000 Depreciation 22,030 24,033 24,033 Leased Equipment 277,695 336,600 336,600 Utilities 30,294 30,294 30,294 Page 7 Insurance 100,980 100,980 100,980 Rent 403,920 336,600 336,600 Payroll Taxes 439,263 489,753 629,045 Other 0 0 0 Total Operating Expenses 4,395,306 4,793,655 7,228,787 0 0 Profit Before Interest and Taxes (700,279) 946,494 4,872,390 EBITDA (678,249) 970,527 1,865,231 Interest Expense 353 2,104 0 Taxes Incurred 0 283,316 527,241 0 0 Net Profit (700,633) 661,074 4,345,149 Net Profit/Sales -14.61% 8.98% 27.98% The bar projects a net profit percentage of 27.98% at the end of 2010 owing to the expected rise in sales due to customer flow during the FIFA 2010. The bar will work out a comprehensive plan in mid 2009 depending upon customer turnout, and flex, to work around the number of dancers and staff to accommodate the customers walking in. Besides, rent the upper floor and design it to suit the bar. The projected net profit percentage is a conservative number, which can be met with the existing space itself as the current space on the floor is enough to accommodate extra customers. Page 8 Below is the projected balance sheet for the three years end of 2008, 2009 and 2010. The balance sheet at the end of 2008 shows a bar at a comfortable position with a net worth of R 1,927,944. This again is a conservative one assuming the bar has the lowest increase in customer turnout. The bank loan is a constant as the modalities of interest rate and repayment structure is pending communication from the bank. Pro Forma Balance Sheet (Fig in African Rand) 2008 2009 2010 Assets Current Assets Cash 27,660 596,943 1,737,908 Accounts Receivable 100,122 153,750 184,852 Inventory 131,215 193,621 258,728 Other Current Assets 0 0 0 Total Current Assets 258,997 944,314 2,181,488 Long-term Assets 0 0 0 Long-term Assets 168,300 168,300 168,300 Accumulated Depreciation 22,030 46,064 70,097 Total Long-term Assets 146,270 122,236 98,203 Total Assets 405,266 1,066,551 2,279,691 Page 9 Liabilities and Capital 2,008 2,009 2,010 Current Liabilities Accounts Payable 243,353 285,647 351,747 Current Borrowing 42,075 0 0 Other Current Liabilities 0 0 0 Subtotal Current Liabilities 285,428 285,647 351,747 Long-term Liabilities 0 0 0 Total Liabilities 285,428 285,647 351,747 0 0 0 Bank loan 1,767,150 1,767,150 1,767,150 Retained Earnings -946,688 -1,647,320 -986,246 Earnings -700,633 661,074 1,147,040 Total Capital 119,830 780,904 1,927,944 Total Liabilities and Capital 405,266 1,066,551 2,279,691 0 0 0 Net Worth 119,830 780,904 1,927,944 Cloud nine has formulated an initial set of rules for dancers staff and customers and they will be revised depending upon the complication any situation poses. Find below a simple set of instructions for dancers, staff and customers along with the opening price list. Page 10 Rules of the house for dancers. 1. Timing : Day shifts Monday : 18:00 - 4:00 Tuesday- Friday: 20:30 - 4:00 Night Shift Tuesday - Friday: 12.30 - 20.30 Saturday : 18:30 - 04:00 2. Decision of the management is final when it comes to closing and opening the bar Moreover, dancers should be at least half an hour ahead of their shift time Dancers can choose their shifts, also work double shifts. All issues related to fatigue or tiredness will not be condoned. Leave requests have to be made in advance. Dancers should only call the shift manager in case of leave and if they care running late for work. Every dancer will be allotted on safe to keep her belongings. Cloud nine is a Drug and Prostitution free club. If the management finds any dancer, indulging in any of theses acts will be fired on the spot. Dancers are not allowed to use the toilet for more than half an hour else, they will be fired for prostitution. Any dancer found with forged documents relating to nationality will be fired immediately. Page 11 Customers are not allowed to touch dancers at any point of time. The dancer must alert the management staffs close by if she realizes the customer is trying to misbehave or break the house rules. Dancers are not allowed to date, go home or call customers If found out they will be fired . Every dancer is must behave like a lady at all times. 'Cloud nine' is an up market establishment and clients come in to see the ladies dance, and enjoy time with their wives or girlfriends of all ages. Payments to the dancers will be made every Friday by cash. 'Cloud nine' will follow a unique hi- tech system when it comes to customers choosing dancers for a lap or table dance. A bill with the scanned photo of the dancer is printed. The customer looks at the photo to confirm and pays for the bill and the dancer gets a copy of the bill signed by the customer. Just to avoid confusion hence the dancer will not miss any payment for her dance. No dancer is allowed to date or marry staff in the bar if found out both will be fired. Page 12 Every week the dancers pay a levy of R50000 to the bar. Your income is subject to tax. This tax is deducted at source. Rules of the house for customers: All customers must entering must be above the legal age of 18. Customers are requested to look at our detailed price list before they enter the house this is displayed at the foyer and sufficient copies of the same are kept. 'Cloud nine' is prostitution and drug free, up market establishment. Customers are requested to abide by the rules of the house and not touch dancers, date, or have sex for money or otherwise. All customers are requested to treat dancers in a decent manner, as the dancers are there to entertain you not to get you to bed. Kindly refrain from verbal abuse. If customers do not pay for services, they will be handed over to the cops. Our staffs are there to assist and make your time pleasurable do not take advantage of them. Page 13 'Cloud nine' is there to entertain and serve customers co-operation will make our interaction with customers mutually beneficial. Find below our price list: Entry Fee - R225 Table dance - R150 Lap Dance - R250 Private Booth dance - R525 G - String dance - R100 *** Rates kept competitive enough to attract customers. Dancers levy and rates for dances are also better than competition to gain ground and attract a steady flow of the locals. Market analysis: The FIFA 2010 opens new opportunities for business in South Africa. The cup is expected to garner 2 million tourists into the country. The FIFA 2010 will inject into South Africa R21.3 billion as investment. Besides the country known for its rich natural landscape with fauna and flora is already a potential tourist destination. The nightlife and entertainment is unlimited and is known to prove as the place for ultimate entertainment. Needless to say, that the country especially all the coastal cities provide a host of entertainment for tourists. Some of the Page 14 world's best strip bars have their roots in Port Elizabeth the Eastern Cape. 'Cloud nine' has enough competition coming from the 'Teazers', 'Mavericks' and the 'Razputins'. The much established 'Teazers' chain of strip clubs is still not free from the clutches of the local police and continuous mudslinging on the owner Lolly Jackson by staff or dancers who were fired or dissatisfied police personnel. However, 'Teazers' is a strip club which ha earned its name and fame. Tourists and locals throng into the club to see the dancers. The price list of 'Cloud nine' competitively placed For Example a Lap dance in Teazers cost R275 and 'Cloud nine' R250. A table dance in 'Teazers' cost R 165 and 'Cloud nine' R150. Similarly the levy rates for the dancers is R50000 in 'Cloud nine' in comparison to R75000 in 'Teazers' this is basically to attract good trained dancers from competition so the initial quality of dancers will set a precedent for the other dancers. 'Cloud nine' will be working with tough margins for year one. Marketing Strategy: 'Cloud nine' has planned a marketing strategy to ward off competition and keep the money rotating. 1. To offer complimentary 'Lap dance' twice a week to the first 10 visitors of the bar that day. 2. To offer one complimentary beer to every table in the bar one day a week. Page 15 3. Customers visiting the club for more twice a week get a 10 % off on their bill on the third visit. 4. If a customer spends more than R 2500 or an average of R2500 if accompanied, in one evening he gets one free Lap dance. 5. Customers who get new customers or tourists to the bar get 5% off on their bill. 6. To tie up with all leading hotels and inform guests regarding the bar and its attractions in the evening. 7. Market the bar to all tourist operators to bring guests to the bar if they are interested also work out a mutually beneficial deal with them. 8. Hire a professional dance choreographer to choreograph a strip dance with the football for the season. It will be the highlight of the season for all soccer lovers. Sales Forecast for the years 2008 2009 and 2010. Year Sales (In African Rand) 2008 4,794,867 2009 7,363,125 2010 15,526,800 The projected sales is assumptive with a high degree of conservatism for the bar. The year 2010 has more in store due to the advent of FIFA 2010 the proceeds of sales on the year 2010 is expected to even double on the projected figure if all goes well and the bar has earned its reputation in the first two years. Request the bank to go through the details of the above mentioned business plan and grant loan to commence business. As mentioned in the report the business in an attempt to increase the share of SME's and earn a reputation for the city and capitalize on the forthcoming tourist inflow for FIFA 2010. Cloud nine promotes legal employment and encourages a healthy attitude towards sex and entertainment. Page 16 The bar is strictly against any form of illegal activity or even remotely illegal it looks to serve as precedent for all such businesses. The tax derived from the proceeds of sales in this business is sure to benefit the country as a whole and the team is proud to be a part of the nation building exercise. Conclusion: 'Cloud nine' aims at promoting business in the best of its forms. Port Elizabeth the hub of entertainment in South Africa cannot have better business than to capitalize on the forthcoming FIFA 2010. This favorable climate for business is sure to give a big boost to the bar. The initial tight corners have to be managed with great diplomacy and a strong code of conduct and an aggressive marketing strategy as mentioned above. The key to success is to pull in crowds first and make them experience the entertainment and hospitality and keep giving the customers more than what they expect. Of course margins can shrink further but keeping the business going in high momentum and ensuring that they is a never ending buzz about the bar is mantra. On the other hand the keeping a tab on the local law enforcement personnel can be an up hill task, this can be mastered if tourists turn out is higher. 'Cloud nine' for sure has an edge over competition with it's aggressive marketing strategy. However rubbing shoulders with competition for a new business can prove fatal. Either it should be fast enough to get over once there is a steady flow of customers. Else drop the strategy and move to the next one. The overall environment for the business is clear and positive and 'Cloud nine' is sure to succeed in the long run. 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