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Do you want to start locksmith business?
Are you planning on how to start a locksmith business? This is a great business idea as the demand for locksmith services is high because people need to secure their homes and businesses. The locksmith industry in the U.S. approximately generates $2 billion in revenue with an annual revenue growth of about 2%. The impressive performance of the construction and housing industry has greatly contributed to the growth of this industry sector. There is no doubt you can make good profits from a locksmith business. However, you need to have a good business plan to guide you on how to successfully start the business.
Executive Summary
2.1 The Business
The locksmith company will be registered as Hamm Locksmith and will be situated in St. Louis Missouri. The business will be owned by Dan Hammond, an experienced locksmith. Business location is key when starting locksmith business.
2.2 Management Team
Dan Hammond, the owner of Hamm Locksmith is a well experienced locksmith professional who has in-depth knowledge of the locksmith industry in the U.S. He has over 20 years of experience and has worked for numerous locksmith companies around the country.
2.3 Customer Focus
Having been in the industry for long, Dan knows the industry well and the various segments that should be approached to maximize business revenue.
2.4 Business Target
Dan Hammond knows the potential a locksmith business has and where to target to maximize sales. He also intends to put in place the best strategies to reach out the right people and businesses in need of professional locksmith services.
Company Summary
3.1 Company Owner
Dan Hammond is an experienced locksmith with a career span of over two decades. In the course of his duties, Dan got an opportunity to work with several top locksmith companies in New York, Chicago, Miami and Los Angeles.
3.2 Aim of Starting the Business
The success of the locksmith industry is directly tied to how well the housing and construction industry performs. Security is paramount for any property owner and therefore, the services of locksmiths come in handy to meet this demand. St. Louis has a vibrant housing and construction industry which informed Dan’s decision of how to start a locksmith company.
3.3 How the Business will be started
Hamm Locksmith will be started after completing an extensive market research to find opportunities the business can tap into. Even though Dan has extensive experience in locksmith business, he has teamed with financial experts to crunch the financial numbers.
| Start-up Expenses | |
| Legal | $2,000 |
| Consultants | $1,000 |
| Insurance | $10,000 |
| Rent | $5,000 |
| Research and Development | $5,000 |
| Expensed Equipment | $10,000 |
| Signs | $5,000 |
| TOTAL START-UP EXPENSES | $45,000 |
| Start-up Assets | $0 |
| Cash Required | $60,000 |
| Start-up Inventory | $30,000 |
| Other Current Assets | $10,000 |
| Long-term Assets | $4,000 |
| TOTAL ASSETS | $10,000 |
| Total Requirements | $15,000 |
| START-UP FUNDING | $0 |
| START-UP FUNDING | $50,000 |
| Start-up Expenses to Fund | $20,000 |
| Start-up Assets to Fund | $22,000 |
| TOTAL FUNDING REQUIRED | $0 |
| Assets | $12,000 |
| Non-cash Assets from Start-up | $7,000 |
| Cash Requirements from Start-up | $0 |
| Additional Cash Raised | $30,000 |
| Cash Balance on Starting Date | $10,000 |
| TOTAL ASSETS | $0 |
| Liabilities and Capital | $0 |
| Liabilities | $0 |
| Current Borrowing | $0 |
| Long-term Liabilities | $0 |
| Accounts Payable (Outstanding Bills) | $0 |
| Other Current Liabilities (interest-free) | $0 |
| TOTAL LIABILITIES | $0 |
| Capital | $0 |
| Planned Investment | $0 |
| Investor 1 | $10,000 |
| Investor 2 | $12,000 |
| Other | $0 |
| Additional Investment Requirement | $0 |
| TOTAL PLANNED INVESTMENT | $70,000 |
| Loss at Start-up (Start-up Expenses) | $55,000 |
| TOTAL CAPITAL | $35,000 |
| TOTAL CAPITAL AND LIABILITIES | $40,000 |
| Total Funding | $65,000 |
Services for Customers
Hamm Locksmith intends to offer a wide variety of products and services in order to increase its competitiveness as a top business locksmith company. Dan intends to offer high quality services and exemplary professionalism in order to attract customers to his business. Starting a locksmith business is not complete without properly identifying products and services to be offered. Hamm Locksmith intends to offer the following products and services.
- Sell locking devices, security vaults and safes
- Residential and corporate installation and repair of security systems
- Key cutting and duplication
- Resales of locks and security system products
Marketing Analysis of Locksmith Business
Locksmiths have always benefitted from the growing construction and housing industry which has always remained on a positive growth and stayed resilient even in difficult economic times. Since people need houses to stay in and premises to do business, construction of new housing units and office blocks has continued to sustain demand for the business. This presents an excellent opportunity for anyone planning how to start locksmith business. In this business plan, Hamm Locksmith has carried out a detailed marketing analysis.
5.1 Market Segment
Note
For Hamm Locksmith to achieve its revenue targets, the company has identified market segments it needs to reach out as well as the strategies to be used. Doing this is important to know where the business should direct its energy and focus.
5.1.1 Property Management Companies
Property management companies have been tasked with the responsibility of looking after the properties of the clients with top of the agenda being enforcing security. In this regard, locksmith services are always required by these companies as door locks have to be regularly changed or maintained and any faulty locks or security systems must be fixed immediately. Since these companies manage a wide range of homes from single family homes to large apartments units, property management companies are a lucrative customer target group for Hamm Locksmith. These customer often provide high volume business which substantially increases revenue for the locksmith company.
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5.1.2 Homeowners
When you start your own locksmith business, you cannot afford to ignore homeowners as they form the biggest share market for your business. Everyone who owns a home always strives to put in place the best security measures for their property. Dan knows quite well homeowners are always on the lookout for professional and reputable locksmiths to sort out their needs. This is a great customer segment and the business must find ways of connecting with St. Louis homeowners.
5.1.3 Renters
The most basic thing that a renter looks for when searching for a place to stay is security. In this era where security challenges continue to be witnessed, renters generally want to boost the security of their apartments without having to spend too much. Hamm Locksmith offers products and services that will definitely be of great use to renters.
5.1.4 Construction Companies/Developers
Construction firms work on large scale real estate projects and require the services of professional locksmiths when it comes to enforcing security features of newly constructed properties. With good marketing strategies, Hamm Locksmith has a good opportunity to fetch revenue from developers in St Louis.
| Market Analysis | ||||||||
| Potential Customers | Growth | YEAR 1 | YEAR 2 | YEAR 3 | YEAR 4 | YEAR 5 | CAGR | |
| Property Management Companies | 35% | 6,000 | 8,000 | 10,000 | 12,000 | 14,000 | 7.00% | |
| Homeowners | 25% | 8,000 | 10,000 | 12,000 | 14,000 | 16,000 | 11.00% | |
| Renters | 18% | 9,500 | 10,500 | 11,500 | 12,500 | 13,500 | 14.00% | |
| Construction companies/ Developers | 22% | 10,000 | 12,000 | 14,000 | 16,000 | 17,000 | 10.00% | |
| Total | 100% | 33,500 | 40,500 47,500 | 54,500 | 60,500 | 12.00% | ||
5.2 Business Target
Hamm Locksmith has a wide target area that it intends to reach out to promote the business. Even though St. Louis is a large city with numerous locksmith businesses, Dan Hammond knows there are still untapped revenue opportunities in an ever growing industry sector. The business hopes to realize an annual revenue increase of between 10%-15% in the first three years of operation.
5.3 Product Pricing
When determining how much does it cost to start a locksmith business, a good pricing strategy should be in place as it ultimately determines the revenue a business generates. Pricing will be determined after a detailed market analysis has been done.
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Strategy
Hamm Locksmith intends to come up with highly structured and effective marketing campaign to target its customers. When you start a locksmith business, you should have a good idea of how you intend to market the business.
6.1 Competitive Analysis
Hamm Locksmith has done a comprehensive market research and identified the best strategic business plan to deal with competitors and remain relevant in the industry.
6.2 Sales Strategy
For Hamm Locksmith to reach out to the intended customers, the following sales strategies will be implemented to help the business market its brand.
- Design introduction letters, brochures and other company printed materials and distribute them to targeted customer markets
- Use direct mailing to send information to businesses and residential customers letting them know about the locksmith business
- Advertise the locksmith business in various trade publication and business journals particularly for real estate companies and developers
- Use internet and digital marketing strategies such as search engine marketing, social media marketing and Google Ads.
- Create attractive signage and have it strategically placed outside the business to increase visibility
- Advertise in local print and broadcasting media such as newspapers, radio and television
- Organize a grand opening party for the business and offer guests free branded gifts to help spread the word
6.3 Sales Forecast
Hamm Locksmith has formulated an in-depth sales forecast to help achieve the set business revenue goals.
| Sales Forecast | |||
| Unit Sales | Year 1 | Year 2 | Year 3 |
| Sell locking devices | 200,000 | 300,000 | 260,000 |
| Residential and Corporate Installation | 300,000 | 350,000 | 450,000 |
| Key Cutting & Duplication | 350,000 | 450,000 | 480,000 |
| Resales of locks & security systems | 500,000 | 550,000 | 600,000 |
| TOTAL UNIT SALES | 1,350,000 | 1,650,000 | 1,790,000 |
| Unit Prices | Year 1 | Year 2 | Year 3 |
| Sell locking devices | $130.00 | $150.00 | $170.00 |
| Residential and Corporate Installation | $200.00 | $300.00 | $400.00 |
| Key Cutting & Duplication | $300.00 | $400.00 | $500.00 |
| Resales of locks & security systems | $400.00 | $500.00 | $600.00 |
| Sales | |||
| Sell locking devices | $150,000 | $200,000 | $300,000 |
| Residential and Corporate Installation | $100,000 | $120,000 | $200,000 |
| Key Cutting & Duplication | $30,000 | $40,000 | $60,000 |
| Resales of locks & security systems | $120,000 | $170,000 | $200,000 |
| TOTAL SALES | |||
| Direct Unit Costs | Year 1 | Year 2 | Year 3 |
| Sell locking devices | $0.50 | $0.60 | $0.70 |
| Residential and Corporate Installation | $0.30 | $0.35 | $0.40 |
| Key Cutting & Duplication | $0.25 | $0.30 | $0.35 |
| Resales of locks & security systems | $2.00 | $3.00 | $4.50 |
| Direct Cost of Sales | |||
| Sell locking devices | $80,000 | $100,000 | $150,000 |
| Residential and Corporate Installation | $45,000 | $70,000 | $105,000 |
| Key Cutting & Duplication | $15,000 | $25,000 | $40,200 |
| Resales of locks & security systems | $14,000 | $36,000 | $70,000 |
| Subtotal Direct Cost of Sales | $154,000 | $231,000 | $365,200 |
Personnel Plan
Hamm Locksmith intends to open locksmith business with the right team of professionals to manage the business. For this reason, a personnel plan has been created to identify staff that will be required to run the locksmith business.
7.1 Personnel Plan
To help realize business objectives, the following staff will be hired by Hamm Locksmith. Dan Hammond who is the owner will be the Chief Executive Office in charge of overall management of the company. He will be assisted by the following staff members
- Assistant Manager
- 3 Locksmiths
- 2 Store Staff
- 1 Marketing Executive
- 1 Accountant/Cashier
- 1 Customer Service Executive
After recruitment, staff will undergo intensive training and orientation in preparation for the grand opening.
7.2 Average Salaries
Hamm Locksmith intends to remunerate its staff the following salaries within the first three years of operations.
| Personnel Plan | |||
| Year 1 | Year 2 | Year 3 | |
| Assistant Manager | $25,000 | $27,000 | $29,000 |
| 3 Locksmiths | $75,000 | $80,000 | $84,000 |
| 2 Store Staff | $35,000 | $40,000 | $45,000 |
| 1 Sales and Marketing Executive | $15,000 | $17,000 | $19,000 |
| 1 Accountant | $20,000 | $22,000 | $24,000 |
| 1 Customer Service Executive | $15,000 | $17,000 | $19,000 |
| Total Salaries | $185,000 | $203,000 | $220,000 |
Financial Plan
Hamm Locksmith has come up with a detailed financial plan that will be used to help the business to achieve financial success. When you open locksmith business, it’s always a brilliant idea to organize your financial parameters in order to make strategic financial decisions that will help the business grow. In this business plan, a substantial amount of capital will come from Dan’s personal savings. He will be assisted by two investors and secure a small bank loan for business plan to finance the budget deficit. The following is a detailed financial analysis for Hamm Locksmith Company.
8.1 Important Assumptions
The financial forecast for Hamm Locksmith is based on the assumptions below.
| General Assumptions | |||
| Year 1 | Year 2 | Year 3 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 8.00% | 10.00% | 11.00% |
| Long-term Interest Rate | 6.00% | 6.00% | 6.00% |
| Tax Rate | 15.00% | 16.00% | 18.00% |
| Other | 0 | 0 | 0 |
8.2 Brake-even Analysis
Hamm Locksmith brake-even analysis is shown in the graph below.
| Brake-Even Analysis | |
| Monthly Units Break-even | 5000 |
| Monthly Revenue Break-even | $80,000 |
| Assumptions: | |
| Average Per-Unit Revenue | $100.00 |
| Average Per-Unit Variable Cost | $1.10 |
| Estimated Monthly Fixed Cost | $70,000 |
8.3 Projected Profit and Loss
Profit and loss information for Hamm Locksmith as calculated on a monthly and annual basis is indicated below.
| Pro Forma Profit And Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $70,000 | $90,000 | $11,000 |
| Direct Cost of Sales | $6,000 | $8,000 | $9,000 |
| Other | $0 | $0 | $0 |
| TOTAL COST OF SALES | $76,000 | $98,000 | $20,000 |
| Gross Margin | $80,000 | $85,000 | $90,000 |
| Gross Margin % | 80.00% | 84.00% | 90.00% |
| Expenses | |||
| Payroll | $185,000 | $203,000 | $220,000 |
| Sales and Marketing and Other Expenses | $2,000 | $4,000 | $6,000 |
| Depreciation | $1,000 | $2,000 | $3,000 |
| Leased Equipment | $0 | $0 | $0 |
| Utilities | $3,000 | $5,000 | $7,000 |
| Insurance | $1,000 | $1,500 | $1,700 |
| Rent | $5,000 | $6,000 | $7,000 |
| Payroll Taxes | $25,000 | $30,000 | $40,000 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $150,000 | $200,000 | $250,000 |
| Profit Before Interest and Taxes | $70,000 | $80,000 | $90,000 |
| EBITDA | $30,000 | $35,000 | $40,000 |
| Interest Expense | $0 | $0 | $0 |
| Taxes Incurred | $12,000 | $15,000 | $18,000 |
| Net Profit | $60,000 | $75,000 | $90,000 |
| Net Profit/Sales | 20.00% | 30.00% | 40.00% |
8.3.1 Monthly Profit
8.3.2 Yearly Profit
8.3.3 Monthly Gross Margin
8.3.4 Yearly Gross Margin
8.4 Projected Cash Flow
Below is a summary of Hamm Locksmith Pro forma cash flow, subtotal cash received, subtotal cash spent, subtotal cash from operations and subtotal cash spent on operations.
| Pro Forma Cash Flow | |||
| Cash Received | Year 1 | Year 2 | Year 3 |
| Cash from Operations | |||
| Cash Sales | $25,000 | $27,000 | $29,000 |
| Cash from Receivables | $3,000 | $4,000 | $5,000 |
| SUBTOTAL CASH FROM OPERATIONS | $28,000 | $31,000 | $34,000 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
| New Current Borrowing | $0 | $0 | $0 |
| New Other Liabilities (interest-free) | $0 | $0 | $0 |
| New Long-term Liabilities | $0 | $0 | $0 |
| Sales of Other Current Assets | $0 | $0 | $0 |
| Sales of Long-term Assets | $0 | $0 | $0 |
| New Investment Received | $0 | $0 | $0 |
| SUBTOTAL CASH RECEIVED | $28,000 | $31,000 | $34,000 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $6,000 | $8,000 | $10,000 |
| Bill Payments | $4,000 | $5,000 | $6,000 |
| SUBTOTAL SPENT ON OPERATIONS | $10,000 | $13,000 | $16,000 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $0 | $0 | $0 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $0 | $0 | $0 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 |
| SUBTOTAL CASH SPENT | $12,000 | $14,000 | $17,000 |
| Net Cash Flow | $10,000 | $14,000 | $16,000 |
| Cash Balance | $20,000 | $23,000 | $24,000 |
8.5 Projected Balance Sheet
Below is a Projected Balance Sheet for Hamm Locksmith that shows assets, liabilities, capital, long term assets and current liabilities.
| Pro Forma Balance Sheet | |||
| Assets | Year 1 | Year 2 | Year 3 |
| Current Assets | |||
| Cash | $140,000 | $180,000 | $220,000 |
| Accounts Receivable | $9,000 | $11,000 | $14,000 |
| Inventory | $1,500 | $3,000 | $4,500 |
| Other Current Assets | $2,000 | $2,000 | $2,000 |
| TOTAL CURRENT ASSETS | $152,000 | $196,000 | $240,500 |
| Long-term Assets | |||
| Long-term Assets | $8,000 | $10,000 | $12,000 |
| Accumulated Depreciation | $11,000 | $13,000 | $15,000 |
| TOTAL LONG-TERM ASSETS | $1,000 | $500 | $300 |
| TOTAL ASSETS | $150,000 | $180,000 | $210,000 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $10,000 | $12,000 | $14,000 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| SUBTOTAL CURRENT LIABILITIES | $10,000 | $12,000 | $14,000 |
| Long-term Liabilities | $0 | $0 | $0 |
| TOTAL LIABILITIES | $10,000 | $12,000 | $14,000 |
| Paid-in Capital | $20,000 | $20,000 | $20,000 |
| Retained Earnings | $25,000 | $50,000 | $75,000 |
| Earnings | $80,000 | $110,000 | $140,000 |
| TOTAL CAPITAL | $150,000 | $180,000 | $210,000 |
| TOTAL LIABILITIES AND CAPITAL | $165,000 | $195,000 | $225,000 |
| Net Worth | $190,000 | $210,000 | $250,000 |
8.6 Business Ratios
The following is the Ratio Analysis, Business Ratios and Business Net Worth for Hamm Locksmith.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | INDUSTRY PROFILE | |
| Sales Growth | 5.00% | 20.00% | 40.00% | 3.00% |
| Percent of Total Assets | ||||
| Accounts Receivable | 5.00% | 4.00% | 3.00% | 8.00% |
| Inventory | 2.00% | 1.80. % | 1.60% | 9.00% |
| Other Current Assets | 1.00% | 2.00% | 1.95% | 20.00% |
| Total Current Assets | 100.20% | 130.10% | 150.25% | 44.00% |
| Long-term Assets | -5.00% | -20.00% | -25.30% | 40.40% |
| TOTAL ASSETS | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 4.00% | 3.00% | 2.50% | 23.70% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 20.50% |
| Total Liabilities | 4.10% | 2.00% | 1.50% | 44.10% |
| NET WORTH | 80.30% | 90.00% | 100.10% | 34.00% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 80.10% | 82.00% | 84.00% | 0.00% |
| Selling, General & Administrative Expenses | 73.00% | 70.00% | 65.00% | 62.00% |
| Advertising Expenses | 2.00% | 1.00% | 0.20% | 1.20% |
| Profit Before Interest and Taxes | 22.00% | 25.00% | 28.40% | 1.50% |
| Main Ratios | ||||
| Current | 10.1 | 13 | 16 | 0.5 |
| Quick | 23 | 25.88 | 30.36 | 0.3 |
| Total Debt to Total Assets | 2.08% | 1.00% | 0.66% | 45.00% |
| Pre-tax Return on Net Worth | 60.00% | 70.00% | 72.20% | 1.20% |
| Pre-tax Return on Assets | 54.20% | 57.00% | 60.00% | 5.00% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 15.20% | 18.10% | 20.00% | N.A. |
| Return on Equity | 40.00% | 43.00% | 46.00% | N.A. |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 3 | 4 | 5 | N.A. |
| Collection Days | 82 | 89 | 104 | N.A. |
| Inventory Turnover | 16 | 19 | 22 | N.A. |
| Accounts Payable Turnover | 13.1 | 13.4 | 15 | N.A. |
| Payment Days | 25 | 25 | 25 | N.A. |
| Total Asset Turnover | 1.6 | 1.4 | 1.2 | N.A. |
| Debt Ratios | ||||
| Debt to Net Worth | 0 | -0.01 | -0.03 | N.A. |
| Current Liab. to Liab. | 0 | 0 | 0 | N.A. |
| Liquidity Ratios | ||||
| Net Working Capital | $100,000 | $120,000 | $140,000 | N.A. |
| Interest Coverage | 0 | 0 | 0 | N.A. |
| Additional Ratios | ||||
| Assets to Sales | 0.35 | 0.38 | 0.41 | N.A. |
| Current Debt/Total Assets | 3% | 2% | 1% | N.A. |
| Acid Test | 20 | 24 | 27 | N.A. |
| Sales/Net Worth | 1.3 | 1 | 0.4 | N.A. |
| Dividend Payout | 0 | 0 | 0 | N.A. |
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