+123872983
3873-2224
Social Media Handles/Pages
Executive summary
The shoe shining and repair industry has a reputation of being a pedestrian business, dominated by lone and struggling artisans. Then ease and low cost of setting up in the shoe shining business, coupled with the large flexibility in the business models in this industry have rendered it competitive. However, there are still prospects for innovative business models and considerable differentiation. The proposed Sole’s Shoeshine LLC will seek to change the shoe shining experience by creating an executive ambience and providing the highest quality services. The start-up costs are estimated at $38,500, and the owner will put up more than 60% of the capital. Sole’s Shoeshine LLC will employ seven people and if successful, the business would yield an estimated $16,422, $56,352.9 and $43,825.57 in net profit in the first, second and third year respectively.
Nature of the business
The shoeshine business is part of the Shoe Repair Shops and Shoeshine Parlours industry, which includes tens of thousands of single person businesses across the US. The shoe repair industry is estimated at $310 million a year, employs 4,368 businesses, and employs 5,843 people. Between 2009 and 2014, the sub-industry’s revenues declined by 1.5% but are expected to surge by up to 3% between 2014 and 2019. On the other hand, the shoeshine sub-industry is estimated to be larger than the shoe repair sub-industry due to the fact that people tend to shine their shoes more often than repair them.
Sole’s Shoeshine intends to provide a bespoke shoe shining experience to customers, by providing a relaxing and cosy environment but in high-traffic business areas of town. The emphasis will be placed on both the ambience as well as the quality of the polish for the shoes. The establishment of central locations is also meant to introduce new service categories, in including drop-off service for clients that want to have many shoes repaired and polished. In addition, the company will have an exhibition/event shoe shine service, allowing individuals and services to hire Sole’s Shoeshine services as a way of attracting people to their spaces. For example, a stand at an exhibition can have free shoe shining services to attract clients that then drawn to the stand for the client company/individual.
Strategy formulation
Product differentiation is the primary strategy for Sole’s Shoeshine. The business will offer a relaxing ambience, convenience, charming and presentable staff, drop-off repair/polish services, besides the insistence on only the highest standards of service. The business will set up in high traffic areas including in, or close to malls, office blocks and the train station.
Market Analysis
The shoe repair and shoeshine industry is characterized by perfect competition, with many players and virtually undifferentiated products, even though opportunities for differentiation exist. Sole’s Shoeshine will target the following key markets.
Retail/traditional market – This comprises people who have busy schedules and do not have domestic help to polish their shoes and thus they mostly stop off at the shoe shining parlour frequently to have their shoes polished. This market includes customers that forget polishing their shoes, or simply want to re-polish their shoes in the middle of the day due to dust or rainy conditions. Customers may also drop off (or arrange pick-up) badges of shoes for polishing
Exhibition and Events Market – This comprises of individuals/companies that want to use free shoe shining to attract potential clients to their businesses, exhibition stands and other spaces.
Marketing Plan
Place – The parlour will be located in a high traffic area in town, close to the central business district, train station or mall. To differentiate the company from its competitors, the parlour would be designed to project an executive ambience. The design and location of the parlour would differentiate Sole Shoeshine from the thousands street businesses that offer the same services.
Product – The company services would be in keeping with the executive ambience created by the location and parlour design. The staff would be charming, smart and courteous, would be trained to ensure their shoe shining skills are the best. Customers would also drop off shoes in bulk for polishing, and the company may pick up, polish and deliver shoes back to the clients. In addition, to the high-quality polish, customers would be offered complementary services such as mineral water, chewing gum, and other light refreshments/entertainment.
Pricing – A shine costs between $4- $7 (without tips) depending on the location. Sole’s Shoeshine LLC prices would range between $6 and $7, initially but once the brand is successfully differentiated, the company will explore opportunities for even more premium prices. The danger of charging higher prices without differentiation in a perfectly competitive market structure such as this is potentially losing all the customers and thus price increases would only be used after the business is established. The events products would be charged at $1000 per two-day event.
Promotion – It is important that Sole’s Shoeshine attracts a sufficiently large clientele for the business to break even and ultimately be profitable. Every associate must serve at least 40 clients a day lest the business would collapse due to high overheads. To achieve high customer numbers, promotional activities before, and after the launch of the business would be used. These will include:
Signage- Sole Shoeshine would use attractive and professional signage inside and outside the short to project an air of quality and also create awareness about the business
Flyers – These will handed out to the pedestrians and motorists in the vicinity of the parlour
Outdoor advertising – Will be positioned on the approaches to the parlour to create awareness and drive traffic to the shop
Social media and search engine advertising – This will be used to increase the brand recognition and drive traffic to the shop. Sole’s Shoeshine Facebook, Twitter, and Instagram pages would be created and advertised to internet users in the vicinity to the shoeshine parlour.
Operational Plan
Set-up Costs
The company would employ six people, including the owner. These would include five shoe shining associates and one office administrator. The wage bill is as follows:
It is expected that every associate will serve at least 40 clients a day, which would generate the following revenue levels. At least three events orders are expected monthly.
Pro-forma P&L Accounts
Cash Flow Statement
Balance Sheet
Management Structure
The owner, will serve as the managing director (MD) and chief operations officer, will manage sole’s Shoeshine, including strategic decision-making, new business development and marketing. The office administrator, responsible for bookkeeping, housekeeping and other general administrative functions will deputize the MD. The associates, who will be responsible for customer service, fall under the office administrator.
Figure 1: Sole's Shoeshine Organizational Structure
Human Resources Plan
The staff members will be recruited at least a month before the official opening of Sole’s Shoeshine in order to allow for adequate training, acquisition of uniforms and other preparations that will closely involve them. The office administrator will be first to be recruited on the account of the importance of this position to the firm. Once, a manager is recruited they will be involved in the recruitment of the associates. Sole’s Shoeshine will set itself up as an equal opportunity employer, which will engage only the most qualified staff in their respective positions. Additionally, in order to create an inclusive workplace, all employees will be expected to maintain the highest professional honesty, integrity, to seek and share knowledge, while at once avoiding discriminatory and unruly conduct. A Sole’s Shoeshine Workplace Conduct & Code of Ethics would be developed and enforced to the letter.
Ownership
Sole’s Shoeshine would be set up as a limited liability company (LLC) with the owner being the sole shareholder. LLC structure has been chosen because it protects the owner’s private assets, have lower compliance costs and taxes are not paid at the business level, but are passed through the owner’s income, which saves on the accounting/legal fees in filing of returns. In addition, an LLC has a relatively more credibility in the eyes of customers, creditors and business partners compared to sole proprietorships and partnerships. This structure is also flexible with regard to ownership and management, which allows for the future incorporation of other investors and expansion.
Timetables and Milestones
Figure 2: Sole's Milestones
Risk Analysis
It is assumed that the business would secure the requisite financing and market conditions, including interest rates, and consumer demand would remain the same. In the case of adverse changes that would affect the ability of the firm to attract at least 40 clients per associate, further product diversification would be included. Further, debt financing has been kept low to avoid interest rate risk exposure, and the loan would be paid off within the initial three years. Other risks include changes in rent and other overheads, high employee turnover because they may want to start their own practices given the low start-ups. Even most importantly, the low entry costs presents the existential challenge of other businesses adopting a similar business model as Sole’s Shoeshine, to the detriment of then brand and market.
Evaluation and Control
The most important variable in the shoe shining industry is the number of customers per day or week. For the business to be successful, every associated must serve at least 40 customers per day, translating into 1400 customers per week. This is the only, and most important control measure that would be continually evaluated. Remedial action would include increasing promotional spending/activities.
Summary
While there remain considerable risks of new entrants with the same business model, there are immense prospects for Sole’s Shoeshine to succeed. Given the low start-up and operational costs, this is a promising venture. If successful, Sole Shoeshine will break even within the initial six months and bring in more than $15,000 in net profit during the initial year of operations, before rising to more than $43,000 in the second and third years respectively.
Works Cited
Hertz, Giles T., Fred Beasley and Rebecca White. "Selecting a Legal Structure: Selecting Strategic Issues and Views of Small and Micro Business Owners." Journal of Small Business Strategy (Bradley University) Volume 20, No. 1 (2009): 82-101.
IBISWorld. Shoe Repair in the US: Market Research Report. Market Research. New York: IbisWorld, 2015. Web.
Kotler, P. and K. L. Keller. Marketing management . Upper Saddle River, N.J: Prentice, 2012.
Porter, M. Competitive Strategy. New York: Free Press, 1998. Print.
Rugman, A. M. and S. Collinson. International Business (6th Ed). London: Pearson Education, 2012.
Stout, Kelly. Making Money: There’s No Business Like Shoe Business. 5 March 2013. Web. 21 April 2015.
US Bureau of Labor Statistics. SIC 725 - Shoe Repair Shops and Shoeshine Parlors. 2015. 20 April 2015. <http://www.bls.gov/oes/2001/oesi3_725.htm#b00-0000>.
Yip, G. and T. Hult. Total Global Strategy. New York: Pearson Education., 2012.
Appendixes
Anecdote of Kelly Stout’s story for the New Yorker
“New York City is full of shoe shiners, and their economy is based on politeness and charm, in addition to convenience. Overhead is low: a large can of Kiwi polish will cover around fifty pairs of shoes and retails on Amazon for anywhere from $4.29 to $6.99. A jar of shoe dye lasts for only four pairs, and costs between $2.89 and $9.01 on Amazon. Don uses shoe cleaner that he makes himself. It looks a lot like carrot juice, and the formula is classified: “Colonel Sanders has his secret recipes; I have mine.” Don’s total cost of supplies comes to about two hundred bucks a week. Don won’t say how much he makes, but he works from 10 A.M. to 6 P.M. and he sees anywhere from forty to sixty customers each day, at a price of five dollars a shine, plus tips. Don’s overhead also includes a fair amount of duct tape. He stands on a piece of carpet that may, at one point, have been white, and that he must tape down every day. (He also tapes up his sign anew each morning.) Don politely declines to discuss his current storage arrangement. But he says that at one point he paid a hundred dollars a month to keep his stand—which he rolled out each morning, and rolled back each evening—safe at night.”
