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PMU Salon & Spa (Business Plan) Essay


Executive Summary

PMU Salon and Spa will be aimed at providing the female students within the university a wide range of salon and spa services. The firms’ spa will be devoted towards providing the customers with holistic services with regard to body work, massage, and energy work. These services will be offered in a relaxing setting. With regard to the salon, the firm will offer a wide range of treatments such as hair and nail treatments.

Its location within the university will provide convenience to the female students in an effort to improve their physical appearance and well being. The firm will offer a wide range of salon and spa products so as to satisfy the customers. This is inline with its customer focus strategy. In addition, the firm will ensure that it offers personalized services to the customers in order to ensure that the customers receive a unique customer experience.

This arises from realization of the fact that attainment of customer satisfaction plays a vital role in enhancing repeat purchase behavior amongst the consumers. Additionally, the firm will create an atmosphere that is conducive for promoting unique customer experience. This will be achieved by inclining all its strategies towards the customer which means that the firm is customer oriented.

To achieve its customer focus objective, the enterprise will effectively formulate its marketing strategies. One of the main marketing strategies that the firm will be concerned with is pricing. The pricing strategy will be formulated in such a way that it addresses the customers’ price sensitivity considering that most of them are students and they do not have a source of income. The firm will also maintain a fair and friendly environment. The firm will ensure that its employees are highly qualified so as to offer quality services.

Company Description

PMU Salon and Spa will operate as a private limited company within Prince Mohammed bin Fahad University. The Salon and Spa will be strategically located within the University’s sports center. In order to attract a large number of customers, the management team will ensure that it has qualified personnel.

This will contribute towards provision of expert services. Considering that different individuals have different tastes and preferences, the firm will ensure that it offers diverse salon and spa services. All the firms operations will be customer centric which means that the firm will primarily focus at the customer. To achieve this, the entrepreneurs will conduct a comprehensive research in the University to determine the most preferred products and services.

According to Green (2001, p.7), every firm should have a mission statement which illustrates its purpose of existence. The firm’s mission will be to offer services with the objective of enhancing their customer’s physical beauty and mental relaxation. The firm will be committed at ensuring that its clientele is satisfied.

This is inline with the firm’s value proposition which will be guided by the need to offer unique relaxation and a sense of fulfillment. The resultant effect is that the firm will be able to motivate the customers to develop a sense of physical, mental and emotional balance.

Some of the core aspects which will guide the firm include improving the customers’ beauty, appearance, health and well being. In order to establish a strong customer relationship, the firm will offer personalized services. This will play a vital role in creating a strong bond with the customers.

It is the objective of the management team that effective provision of services will contribute towards the firm attaining a substantial clientele base. Additionally, the salon and spa will be well designed so as to appeal to the customers. By the end of the first financial year, the firm intends to be established as a beauty and well being destination within the University.

Industry analysis

On a global scale, the salon and spa industries have witnessed a rampant growth over the past few decades. This arises from the large number of firms in the industry. The industry is composed of a wide range of enterprises ranging from small, medium to large enterprises.

As a result, the global salon and spa industry is concentrated. The concentration in the industry has arisen from the high rate at which investors are venturing into the industry. For example, in the Middle East countries such as Saudi Arabia, the high rate of concentration arises from the fact that salons and spas are also being incorporated by firms in the hospitality industry such as hotels within their business structures.

Despite the high level of industry concentration, the industry is very lucrative. This is evidenced by the high rate at which the industry is growing. Salons and Spas in Saudi Arabia have become very innovative in their operation. Currently, the Saudi salon and spa industry is worth a number of billions of Riyals.

This growth was experienced since the beginning of the millennium. The Saudi Arabian salon and spa industry is undergoing a double digit growth rate every year. The high growth rate is associated with the high rate of economic growth experienced in Saudi Arabia. Currently Saudi Arabia ranks as the largest economy within Middle East.

Despite the 2008-2009 economic crises, the industry’s performance was not adversely affected in most countries as indicated by the salon/spa performance index. The index has a steady-state level of 100 points. If the performance index is above 100, it indicates that the industry is expanding.

On the other hand, if the index is below 100, it is an indicator that the industry is contracting. In 2010, the industry witnessed a significant expansion as a result of increased in customer traffic. During the 4th quarter of 2010, the salon/spa performance index increased with a margin of 0.5% to reach its all time high of 103. Salon/spa owners expect that the industry will experience a significant growth in the future as a result of increment in retail sales (Professional Beauty Association, 2010, p.1).

Market analysis

Prior to venturing the market the entrepreneur has appreciated the importance of undertaking a market research in the success of the firm. The research will be focused at a number of market variables which include the consumer, market size, market trends and competition.

The consumer market research will be aimed at understanding the consumers’ needs so as to determine the market potential. The firms core target customers are the individual consumers. Identifying the customers will make it possible for the firm to offer products and services which meet their requirements. The research will also enable the management team understand the consumers decision making process. As a result, it will be possible to formulate marketing strategies that influence their buying process.

Findings of a market research conducted in Saudi Arabia revealed a change amongst Saudi Arabian consumer behavior with regard to beauty, personal health and wellness. Over the past years, Saudi Arabia’s culture has been very strict with regard to dress code especially amongst women.

However, this is changing in the 21st century whereby individuals are increasingly developing a desire to look and feel being at their best despite the restrictions. A large number of consumers especially women are spending a significant amount of their money on improving their appearance.

This has played a vital role in the transformation of the salon industry in Saudi Arabia. The industry is providing the ladies an opportunity to transform their appearance in a number of ways such as through modern styles and hair color. The desire to change appearance amongst women in Saudi Arabia is seasonal. Changing appearance is usually a mark of a life changing event for example when one is entering college.

In addition, the rate at which women are entering into the job market is relatively high. Young women are advancing their education to 2nd and 3rd level. Most of the salons and spas in Saudi Arabia especially those located in Riyadh and Jeddah are reporting that most of their clients are university students and graduates.

The high rate at which young women are entering universities located in different provinces indicate that there is a high market potential. Additionally, women are also being employed which means that their disposable income will increase in the future.

Another trend which is evident in the market arises from increased utilization of the internet. Most individuals especially college and university students are searching for information regarding beauty from the internet and other media. This has made them to be sophisticated with regard to beauty in their consumption patterns. They are increasingly demanding more salon and spa services other than the local fashions.

This has significantly strengthened the markets for salon specialists such as that of hair stylists. This has been raised to a different level as a result of change in attitude towards beauty and health.

A study by International Spa Association conducted in 2010 on the global salon and spa market revealed that spa and salon owners experienced a 46% increment in the volume of short term treatments. The most common form of short term treatment sought included manicure touchups. Currently, salons and spas are not a preserve of the super-rich. Even individuals with lower income have become conscious towards self-care. However, they are currently seeking less expensive services which fit their budgets.

One of the sectors which have gained prominence over the past few years is the medical spa salons. These enterprises offer both spa and salon services. Baby boomers and the young women have increased their demand for these services.

Product Design and Development

In an effort to deliver unique customer experience, the firm will help the customers be relieved of their stress. The company shall stress on originality, quality and constancy of service. The firm will differentiate its products and services offering from those of its competitors located within the University by ensuring that it employs qualified personnel. Additionally, the firm will also train its employees on how to relate with its customers. The resultant effect is that the firm will be able to offer quality services.

The salon and spa will be designed in such a way that it can accommodate 14 workers at full capacity. This will enhance the firm’s opportunity to serve its customers efficiently. The firm will diversify its product and services offering by integrating different spa and salon products which will be aimed at meeting the customers’ beauty and appearance needs.

Marketing plan

Marketing has undergone a significant transformation over the past decades. However, one of the most critical factors which firms should consider in their marketing practices is marketing value (D’Angelo, 2010, p.216). To be effective, firms should identify the consumers’ needs and wants. Upon identifying the customers’ needs, a comprehensive plan should be devised so as to determine the most effective ways of opportunities presented in the market.

Market targeting

As the entrepreneur, it will be ensured that the consumers’ needs and wants are satisfied. To achieve this, the firm will integrate the concept of market targeting. The firm’s core target market will include the female students aged between 19 to 26 years within Prince Mohammed bin Fahad University.

The University has a substantial number of female students whose age range between 19 to 26 years. In addition, these students are more concerned with their beauty and physical appearance. Considering the fact that the university is composed of female students from different background, the firm will ensure that the needs of the specific customer category are met.

Marketing mix

In an effort to effectively penetrate the market, the firm will incorporate the concept of marketing mix. This will ensure effective formulation of marketing strategies to be used in the marketing plan. The four components of the marketing mix which include price, promotion, distribution and product will be taken into account. This arises from the fact that they affect the effectiveness with which a firm penetrates the market.

Products

To be successful a firm should offer products or services which effectively meet the prevailing market demand. In an effort to increase its customer base, the firm will offer a wide range of unique spa and salon services. This will be achieved by ensuring that the firm has all the necessary equipments for the operation of a spa and salon. This will increase the probability of a large number of customers being attracted to the firm.

The equipments to be fitted include barber chairs, bowls, shampoo bowls, dryers, dryer chairs, hair processors, hair steamers, heat lamps, facial beds, facial bed machines, facial accessories, light therapy, waxing and paraffin, stone massage, manicure tables, mats, massage beds and tables, pedicure spas and tubs, salon irons, blow dryers, salon stools, shampoo chair, backwashes, spa/Vichy/hydrotherapy, styling hydraulics, styling stations and tanning booths.

Some of the equipments range from basic managerial equipments like computers, office supplies, phones, cash registers, and appropriate furniture. The products which the firm will offer are listed in the table below.

Swiss reflex massage A therapeutic massage performed on the feet
Indian head massage -Working along certain points of the head to ensure that there is frees flow of prana (body’s energetic life force)
Thailand massage A stretching and deep massage which does not require use of massage oil. It is performed while the client is on the floor.
Pedicure and manicure -Pedicure- Treating the toenails and the feet superficially using cosmetics treatment of the

-Manicure- Cosmetic treatment of finger nails to improve their beauty.

Hair treatment
Oil hair mask -A form of treatment on hair using oil to correct any damages that have occurred as a result of other forms of treatment.
Vitamins hair mask Treating the hair using a complex of vitamins such as vitamin A, E, B3,H, B8 so as to nourish the hair and protect the scalp skin.
Herbs mask Treating the body using herbs which aid in body detoxification, tone the skin, remove muscle and joint pain
Hair curling Creating curly hair styles
Hair coloring -Changing the color of the hair depending on the customers’ preference.
Nail sculpting Constructing a new nail over an already existing nail- for example if the nails are damaged.
Waving
Nail polishing Applying a nail varnish on fingernails and toe nails to protect them and to improve their appearance.
Body waxing Removing the body hair from their roots
Skin cleansing Removing backlog of body waste from the skin.

Pricing strategy

The entrepreneur appreciates the fact that determining the price of a product or service is a vital component that will ensure that its products and services are priced moderately in an effort to meet the needs of the consumers (Greene, 2011, p.45). The firm’s core target customers include the female students. Most of these students do not have a source of income. However, they depend on their guardians for their necessities.

In order to be effective in its pricing strategy, the firm will utilize penetration pricing strategy. Baker (2011, p.66) defines penetration pricing strategy as a strategy which entails setting the price of the firm’s product and services at a low point compared to the competitors. To be effective in its pricing strategy, the firm will conduct a competitor market research to determine how other salons and spas located around the university price their products and services.

However, the pricing strategy will ensure take into account the cost of providing the products and services. In determining the price points, the firm will also incorporate the concept of psychological pricing strategy. This strategy entails setting the price at a point which influences the emotions of the customers. The table below illustrates the price of the products offered by the firm in Saudi Riyal.

Product Price in Saudi Riyal (SAR)
Swiss reflex massage 105
Indian head massage 105
Thailand massage 105
Pedicure

manicure

25

25

Oil hair mask 55
Vitamins hair mask 55
Herbs mask 60
Hair curling 85
Hair coloring 150
Nail sculpting 75
Nail polishing 75
Body waxing 105
Skin cleansing 90

Promotion strategy

Product and service awareness is the initial level which promotes a consumer to purchase a product. The firm will put effort to ensure effective creation of market awareness. A comprehensive market communication program will be integrated. The program will entail both traditional and emerging market communication strategies. The traditional promotion mix which the firm will use includes public relations, advertising, personal advertising, and sales promotion.

In launching the firm, the management team will organize a concert within the university. The concert will be aimed at creating awareness on the products and services offered within the spa and salon amongst the students. During the first day, the firm will also conduct sales promotion by offering some of its services such as manicure and pedicure free to individuals who will participate in the salon and spa opening event.

In order to reach a large number of students within the university, various mediums will be used in the firm’s advertising campaign. These include print media such as magazines and posters. The firm will post adverts in the university’s newsletter. The posters will be elected at strategic positions within the university such as the universities pavements leading to the lecture .

This will enable a large number of customers to access the information. The firm will also ensure that it has employees who have effective interaction and interpersonal skills in addition to their qualification. This will play a vital role in creating an effective customer relationship.

The firm will also incorporate public relations campaigns. This will be achieved by sponsoring the university beauty contests. For example, the firm will offer the beauty pageants free services such as hair styling. This will play a vital role in strengthening its relationship with its customers.

Considering the growth in technology, the firm will make use of emerging market communication technologies. One of the technologies which the firm will incorporate is the internet. To achieve this, the firm will develop a website through which it will post information regarding the products and services it offered at the salon and spa.

Through the internet, the firm will be able to undertake direct advertising effectively considering the fact that university students visit the internet more often in their effort to search information. Web 2.0 will also be integrated to enhance sharing of information and to build and online community. Additionally, the firm will also enter into a contract with search engines such as MSN and Yahoo. The contract will ensure that information regarding its products and services is posted on the homepage.

The firm will also incorporate emerging social communication networks such as Blogs, Wikis, Facebook, and You Tube. The social networking tools such as Wikis, Facebook and Blogs will give customers an opportunity to interact with the firm’s management team. In addition, consumers will be able to air their complaints and complement. The interaction will culminate into creation of a strong customer relationship.

Place

Place refers the ability of customers to access the product more easily. This is achieved through a number of ways such as opening outlets to distribute the product. In their distribution strategy, firms use different distribution strategies which include both direct and indirect methods. However, distribution of a service is different. This is due to the fact that it is difficult to separate the place from the service provider. With regard to salon/spa business, an entrepreneur should ensure that there is a high degree of convenience.

To ensure that the salon is easily accessible, the salon will be located next to the University’s sports center. This will enable the customers to easily access the salon and spa. Decision to locate the salon and spa at this location was considered after consideration of the traffic around the area. Additionally, convenience will also be attained by ensuring that the salon/spa is customer oriented. One of the ways through which this will be ensured is by emphasizing on the concept of affordability.

Financial projections

In its financial plan, it is the objective of the firm to initiate and maintain the various factors that lead to creation, increasing and stabilizing a firm’s cash flow. In developing the financial plan, it is assumed that the firm will access the required equity capital. Additionally, it is assumed that there will be no economic crash which has the effect of reducing the firm’s target market consumption patterns.

A comprehensive research was conducted to determine how the salon will be started. A number of financial projections regarding the firm’s operations have been made. Upon its establishment, it is expected that the firm’s sales will be relatively low. However, the firm projects its sales to increase every month with a significant proportion for the first four months upon its establishment. After some time the sales will stabilize and then increase again. The chart below illustrates the firm’s sales forecast for the first 12 months of its operation.

Figure 1: Table showing the Elegant PMU Salon/Spa sales forecast

Month 1 2 3 4 5 6 7 8 9 10 11 12
Sales in SAR (000) 600 680 780 780 780 770 770 770 770 800 850 900

Figure 2: Firm’s pro forma income statement amount in SAR

Year 1 Year 2 Year 3
Sales revenue 900,000 1, 800,000 2,200,000
Total cost of sale 500,000 1,000,000 1,200,000
Gross profit 360,000 700,000 800,000
Expenses

Payroll

160,000 180,000 190,000
Sales and marketing expenses 40,000 45,000 50,000
Rent 120,000 120,000 120,000
Insurance 12,000 12,000 12,000
Utilities 9,000 9,000 9,000
Payroll taxes 23,000 24,000 24,000
Total operating expense 364,000 390,000 405,000
Profit before interest and tax 36,000 41,000 595,000
Tax incurred (3,000) 0 10,000
Net profit 39,000 41,000 585,000

Pro forma balance sheet

The firm has a well formulated balance sheet which makes it possible to meet its debt obligation.

Year 1

Amount in SAR

Year 2

Amount in SAR

Yea Amount in SAR r 3
Assets

Current assets

Cash

Inventory

Total current assets

85,000

55,000

140,000

400, 300

107,000

507,300

800,000

120,000

920,000

Total long term assets 0 0 0
Total assets 140,000 507,300 920,000
Liabilities and capital

Accounts payable

Current borrowing

Subtotal current liabilities

Total liabilities

62,000

0

0

62,000

106,450

0

0

106,450

115,800

0

0

115,800

Paid-in capital

Retained earnings

Earnings

Total capital

160,000

(94,000)

9,800

75,800

160,000

(84,000)

325,000

401,000

160,000

240,000

415,000

815,000

Total capital and liabilities 137,800 507,450 930,800
Net worth 75,800 401,000 815,000

Firms projected cash flow analysis

Considering the fact that the firm operates as a luxury business, the firm will required to have an initial amount of money to cover its operations. After its inception, it is expected that the firm will have a continual cash flow to meet its milestones.

The firm has incorporated the concept of electronic commerce. As a result, it will be possible for consumers to pay using credit cards. Use of electronic commerce will enable the firm address diversity in consumers’ payment methods. The resultant effect is that the firm will be able to maximize on its profits.

Item Year 1

Amount in SAR

Year 2

Amount in SAR

Year 3

Amount in SAR

Cash received
Cash from operation
Cash sales 900,000 1,800,000 2,000,000
Total from cash operations 900,000 1,800,000 2,000,000
Other cash received
Sales tax& VAT received 0 0 0
Current borrowings 0 0 0
Other liabilities 0 0 0
New long-term liabilities 0 0 0
Sale of other current asset 0 0 0
Sales of long term assets 0 0 0
Investment received 0 0 0
Total cash received 900,000 1,800,000 2,000,000
Expenditures

Operation expense

Year 1

 

Year 2 Year 3
Cash spending 160,000 170,000 175,000
Payment on bill 630,500 1,200,000 1,400,000
Total on operation 790,000 1,370,000 1,575,000
Other cash spending
Sales tax & VAT paid 0 0 0
Principal paid on current borrowing 0 0 0
Additional liabilities on principal payment 0 0 0
Principal payment –long term liabilities 0 0 0
Purchases on other

current assets

0 0 0
Purchase of other long term assets 0 0 0
Dividends 0 0 0
Total on operation 790,000 1,370,000 1,575,000
Net cash flow 110,000 430,000 425,000

Problem solved by the firm’s products and services

Findings of a research conducted revealed that female students are within Prince Mohammed bin Fahad University are increasingly being concerned with their beauty and wellbeing. In their quest to achieve this, they are increasing their consumption of salon and spa products. The salon and spa will ensure that the female students and their female relatives achieve their requirements by supplying them with different salon and spa products.

According to Jordan, it has become a routine amongst female consumers to patronize spas and salons for professional treatments such as hair treatment, manicure, facials and pedicure (2008, p.354). To alleviate their aches and pain, female consumers are patronizing spas for various body treatments such as massage. PMU salon and spa will ensure that the female consumers within the university receive these products more effectively.

Solution

In order to ensure that the customers are satisfied, PMU salon and spa will be well equipped to with salon and spa facilities. Some of these facilities include steam baths, therapies such as crystal healing, and saunas. As a result, it will be possible for the firm to provide the customers with the required beauty and well being needs. In addition, the firm will also ensure that quality services are offered by hiring professionals with regard to beauty and wellbeing.

Opportunity and Target market

The salon and spa will target the female students aged between 19 to 26 years within the university. This arises from the fact that the demand for salon and spa services amongst these customers is relatively high. As a result, there is a high probability of the salon succeeding in this market.

By offering quality services to these customers, there is a high probability that they will refer their female relatives to this facility. This presents an opportunity for the salon and spa to increase its customer base. Therefore, setting up a salon and spa within Prince Mohammed bin Fahad University is very feasible since there is an opportunity for future growth.

Competition

Prior to entering the market, entrepreneurs are required to conduct a competitor analysis. According to Sandlin (2010, p.50), the analysis is aimed at determining the number of competitors operating in the target market. The firm’s management team will conduct a competitor analysis. The analysis will be aimed at determining the competitor’s strengths and weaknesses. This will enable the firm to relate to its weaknesses and strengths. The resultant effect is that the firm will identify gaps which it can capitalize on.

The firm will face intense competition from other salons located around Prince Mohammed bin Fahad University. Findings of a market research conducted revealed that there are a number of salons and spas located within the university’s vicinity. These firms have been in the industry for a number of years.

In addition, the salons and spas have diversified their product and services offering. For example, they offer salon and spa products females. This means that the salon and spa will be faced by direct competition. Considering that they have been in operation for a number of years, they have gained substantial recognition.

Despite the intensity of competition, the firm intends to attain a high competitive edge by offering unique services. Coupled with its strategic location, there is a high probability of the firm attracting most of the female students from within the university who had been customers to these salons and spas.

This arises from the fact that customers store loyalty is determined by its proximity to the customers’ place of residence, work or school. Through provision of a holistic and integrative salon and spa, the firm will enhance creation of a strong customer satisfaction and trust.

Marketing and sales

The firm will ensure that it is effectively positioned as the top spa-salon within the university. According to Porter, effective market positioning can contribute towards a firm improving its competitive edge. This is due to the fact that it’s positioning acts as a defense against its competitors.

Prior to its establishment, the entrepreneur took into consideration a number of key success factors. The core factors considered include location, environment, reputation, and convenience. The firm is effectively located in an area with a substantial population of females.

The firm will also provide an environment that is relaxing. A high degree of convenience will be ensured through provision of a wide range of salon and spa products and services. In collaboration with the employees, the management team will ensure that the marketing activities are undertaken effectively by offering personalized services.

Management team

The firm will be effectively managed in an effort to enhance customer satisfaction. Effective organization will also be aimed at creating an environment conducive for working and employee development. This is inline with the firm’s management philosophy which entails respecting the employees and the customers.

In its operation, the firm will have a management team composed of two key personnel’s who include the founder of the firm and the vice president. The founder of the firm will act as the Chief Executive Officer. He will be charged with the responsibility of overseeing the overall operations of the firm. This means that it is his responsibility to ensure that all activities are undertaken effectively and efficiently.

On the other hand, the vice president will be charged with the responsibility of ensuring that all the administrative functions are smooth. For example, he will ensure that the employees are in good relation. Additionally, he will be charged with the responsibility of overseeing other activities such as marketing, and public relations.

Initially, the firm will operate with a human resource base of 17 employees. The employees will be organized into two departments which include the salon and the spa. The spa will have a 1 nail specialist, 1 energy therapist and 3 massage therapists while the salon will have a total of 10 stylists and a receptionist. Each department will have its own receptionist.

Current status

Currently, the firm is in the process of formulating it operational strategies. The firm is also seeking for investors who can assist in lending financial capital to the firm. In addition, the firm has also posted an advert in the local dailies as the initial recruitment drive.

Financial sought

The entrepreneur has estimated the set up capital to be SAR 700,000. The firm’s core source of startup capital is from investors. The firm will seek financial capital from investors who intend to venture into the industry by lending their money to the entrepreneur. In return, the investors will receive a return on the amount advanced. The interest rate will be relatively higher than the rate offered by banks.

In summary, it is expected that the firm’s plan will attract investors to invest in the business. This is due to the fact that there is a high probability of the business having high returns.

Reference List

Baker, R. (2011). Implementing value pricing: a radical business model for professional firms. Hoboken, N.J: Wiley.

D’Angelo, J. (2010).Spa business strategies: a plan for success. Clifton Park, N.Y: Milady Cengage Learning.

Green, M. (2001). Salon management. London: Thompson Learning.

Greene, C. (2011). Entrepreneurship. Mason, OH: Cengage Learning.

Jordan, T. (2008). Vancouver: the complete residents’ guide. Dubai: Explorer Publishing.

Professional Beauty Association. (2010). Salon/Spa performance index gained 0.5% in the first quarter amid rising sales and and customer traffic level. PDF File. Web.

Sandlin, E. (2010). Start your own hair salon and day spa: your step by step guide to success. New York: Entrepreneur Press.

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