Do you want to start karaoke business?

Do you want to start a karaoke business? Karaoke business is one of the most profitable and alluring businesses, which will start yielding returns as soon as you start it. However, if you don’t know how to start a karaoke business, we are here to help you.

A karaoke bar is a bar or restaurant that provides karaoke equipment so that people can sing publicly, sometimes on a small stage. Karaoke bars are highly visited places and you can easily generate a revenue without putting much effort into it. So, for the first step as a startup, you will have to make a detailed business plan covering all major aspects of your business. To help you write an effective business plan, here we are providing a sample business plan of a Karaoke business startup named, ‘The Karaoke Planet’.

Executive Summary

2.1 The Business

The Karaoke Planet will be a high-tech singing bar equipped with several other entertainment facilities located in Midtown Atlanta. The bar will be owned by Ketty Roberts – a socialite lady from Atlanta.

Ketty, born to a millionaire father, is a senior member of many bars and clubs and is an extremely popular personality in Atlanta. Due to her high-end social life she knows how to start a karaoke bar and how much does it cost to start a karaoke business.

2.2 Management

The Karaoke Planet will have the best management and staff in town comprising of manager, cashiers, bartender, greeters, waiters, DJ, cleaners and security officers, all of whom will strive for providing unparalleled service to our esteemed customers.

2.3 Customers

Our primary customers will be the residential community living near our bar, including children, teens, young, adults and senior citizens. We will ensure an environment where people belonging to all age groups can have the best time of their lives.

2.4 Target of the Company

Our business targets are as follows:

Karaoke Business Plan - 3 Years Profit Forecast

Company Summary

3.1 Company Owner

The Karaoke Planet will be owned by Ketty Roberts – a socialite lady from Atlanta. Ketty, born to a millionaire father, is a senior member of many bars and clubs and is an extremely popular personality in Atlanta.

3.2 Why the Business is being started

Ketty has both money and passion needed to open karaoke bar. She wants to use her socialite stature and managing skills for a fruitful purpose. Her venture is not only aimed to generate profits in the industry but also to provide a trusted public place where the members of the society can have the best time of their lives.

3.3 How the Business will be started

The Karaoke Planet will be started in the Lava Lounge building – located in Midtown, Atlanta – which will be decorated and furnished into a karaoke bar. For the startup, the company will procure the karaoke digital systems, good quality speakers, cables, microphone stands, amplifiers and restaurant equipment. In addition to all this, a contracting firm will be hired for construction and setting of the bowling alley lanes.

The costs for startup are as follows:

Karaoke Business Plan - Startup Cost

The startup requirements are as follows:

Start-up Expenses  
Legal $55,300
Consultants $0
Insurance $32,750
Rent $32,500
Research and Development $32,750
Expensed Equipment $32,750
Signs $1,250
TOTAL START-UP EXPENSES $187,300
Start-up Assets $220,875
Cash Required $332,500
Start-up Inventory $32,625
Other Current Assets $232,500
Long-term Assets $235,000
TOTAL ASSETS $121,875
Total Requirements $245,000
START-UP FUNDING
START-UP FUNDING $273,125
Start-up Expenses to Fund $151,875
Start-up Assets to Fund $123,000
TOTAL FUNDING REQUIRED $0
Assets $23,125
Non-cash Assets from Start-up $18,750
Cash Requirements from Start-up $0
Additional Cash Raised $18,750
Cash Balance on Starting Date $21,875
TOTAL ASSETS $373,125
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 $620,125
Planned Investment $620,125
Investor 1 $0
Investor 2 $0
Other $0
Additional Investment Requirement $0
TOTAL PLANNED INVESTMENT $620,125
Loss at Start-up (Start-up Expenses) $313,125
TOTAL CAPITAL $251,875
TOTAL CAPITAL AND LIABILITIES $251,875
Total Funding $255,000

Services for customers

Before starting karaoke business you should be very clear about the services and the entertainments you are going to provide your customers because the planning of other subsequent components depends on your services. So, make sure to plan your services before you start a karaoke business.

The Karaoke Planet will provide the following services to its customers:

  1. Hosting the Karaoke Night: We will arrange ‘themed music nights’ for the youngsters to sing popular songs over pre-recorded backing tracks and enjoy themselves.
  2. Bowling Alley Games: The Karaoke Planet will contain bowling alleys not only for youth but also for old aged people. We’ll arrange fully equipped bowling alleys for hosting televised bowling tournaments.
  3. Bar and Restaurant: The Karaoke Planet contains a large menu for serving delicious foods and alcoholic and non-alcoholic drinks to its customers.
  4. Video Games for Children: The Karaoke Planet will also have a gaming zone where children and teens can play video games.

In addition to all this, there will be a comfortable and furnished lounge where guests can sit, talk and listen to the songs sung by other people.

Marketing Analysis of karaoke business

The most important component of a karaoke business plan  is its accurate marketing analysis because it decides whether your startup will become a success or end in failure. That’s why an accurate marketing analysis must be carried out before you think about how to start a karaoke bar. If you are starting on a large scale, it is better to seek help from the marketing experts who can better guide you through all the processes needed for starting a karaoke business including how to carry out the marketing analysis of a karaoke startup and how to open a karaoke bar. On the other hand, if you are starting on a small scale, you can take help from this sample karaoke business proposal plan.

5.1 Marketing Trends

The karaoke bars were started in Japan but soon they spread in entire Asia. Now there are thousands of karaoke bars in the US as well as in other countries across the globe. Although the US karaoke industry has experienced a negative annual growth, still there are around 1,270 karaoke businesses running in the US according to the IBISWorld. The industry is generating a revenue of $435m annually while it is responsible for employing more than 6,288 people across the country.

5.2 Marketing Segmentation

Marketing segmentation shows the various segments or groups of our prospective customers. Our target market is mainly the residential community living nearby at the 15 minutes’ drive from our bar. Our experts have identified the following target groups who can become potential consumers of our services:

Karaoke Business Plan - Market Segmentation

The detailed marketing segmentation of our target audience is as follows:

5.2.1 Children & Teens: The first target group of our customers will be the children living in the vicinity of our karaoke bar. All parents want a safe and trusted place for their children where they can spend good time with their friends playing productive games and that’s exactly what we will provide to this group. We will provide a safe and clean environment where children and teens can play games, have delicious meals and enjoy themselves.

5.2.2 Adults: The second and the biggest category of our customers includes the individuals who aren’t shy and want to interact with new people. These individuals aged above 18 years will find our karaoke bar as the perfect place for socialization where they can also enjoy the musical nights as well as the bowling games.

5.2.3 Senior Citizens: The last category includes the elderly people who just want to kill their time or have chats with other people of their age. These people can listen to the songs of the youth, play the bowling games and can grab a bite at our bar.

The detailed market analysis of our potential customers is given in the following table:

Market Analysis
Potential Customers Growth Year 1 Year 2 Year 3 Year 4 Year 5 CAGR
Children & Teens 30% 12,867 14,433 15,999 17,565 19,131 13.43%
Adults 55% 22,334 32,344 43,665 52,544 66,432 10.00%
Senior Citizens 15% 11,433 13,344 16,553 18,745 20,545 15.32%
Total 100% 35,201 46,777 59,664 70,109 85,563 9.54%

5.3 Business Target

Our business targets are:

  • To become the most visited karaoke bar in Midtown Atlanta
  • To achieve the net profit margin of $10k per month by the end of the first year, $15k per month by the end of the second year, and $25k per month by the end of the third year
  • To add more games and facilities for the customers by the end of the first year
  • To balance the initial cost of the startup with earned profits by the end of the first year

5.4 Product Pricing

Product pricing is one of the most important factors to decide the success of a startup. For the purpose of encouraging sales, we have priced our services slightly lower as compared to our competitors. We will basically offer three types of membership packages to choose from:

  • Monthly membership for $100 per month
  • Semi-annual membership for $500 per six months
  • Yearly membership for $900 per year

Non-members can also visit and enjoy our karaoke bar where they will be charged on the basis of activities they partake and the food they eat.

Strategy

Like marketing analysis, sales strategy is also an important component of a karaoke business plan so it must be thought through before starting your venture. After you have learned how to start karaoke business, you now have to decide how you will attract your customers, compete with your competitors and flourish your business.

6.1 Competitive Analysis

Although we have a tough competition, we have entered the market with several competitive aspects. Our prices are reasonable. We have many activities as well as lounges for those who are shy to sing songs. Our biggest competitive advantage lies in the safe and fine environment maintained by our responsible staff.

6.2 Sales Strategy

We will attract our customers towards us through various efforts, such as:

  • We will arrange themed musical nights for the young people
  • We will advertise our bar through mass and social media
  • We will offer discounts on the membership for the first three months of the launch

6.3 Sales Forecast

Karaoke Business Plan - Unit Sales

Sales Forecast      
Unit Sales Year 1 Year 2 Year 3
Karaoke Night 1,887,030 2,680,320 2,588,240
Bowling Alley Games 802,370 815,430 823,540
Bar & Restaurant 539,320 770230 1,002,310
Video Games 265,450 322,390 393,320
TOTAL UNIT SALES 3,494,170 4,588,370 4,807,410
Unit Prices Year 1 Year 2 Year 3
Karaoke Night $140.00 $150.00 $160.00
Bowling Alley Games $600.00 $800.00 $1,000.00
Bar & Restaurant $700.00 $800.00 $900.00
Video Games $650.00 $750.00 $850.00
Sales
Karaoke Night $2,149,800 $2,784,000 $3,383,200
Bowling Alley Games $120,050 $194,500 $268,500
Bar & Restaurant $50,110 $71,600 $93,000
Video Games $139,350 $194,600 $249,850
TOTAL SALES
Direct Unit Costs Year 1 Year 2 Year 3
Karaoke Night $0.70 $0.80 $0.90
Bowling Alley Games $0.40 $0.45 $0.50
Bar & Restaurant $0.30 $0.35 $0.40
Video Games $3.00 $3.50 $4.00
Direct Cost of Sales
Karaoke Night $989,300 $1,839,000 $2,679,700
Bowling Alley Games $66,600 $119,900 $173,200
Bar & Restaurant $17,900 $35,000 $52,100
Video Games $19,400 $67,600 $115,800
Subtotal Direct Cost of Sales $1,294,100 $1,699,400 $2,104,700

6.4 Sales Monthly

Karaoke Business Plan - Sales Monthly

6.5 Sales Yearly

Karaoke Business Plan - Sales Yearly

Personnel plan

If you are thinking, ‘what do I need to start a karaoke business’, you can take help from this sample business plan. After defining sales strategy, you must prepare a personnel plan describing the staff needed for the startup along with their salaries.

7.1 Company Staff

The Karaoke Planet will initially hire the following staff:

  • 1 General Manager for managing the overall operations
  • 2 Cashiers for maintaining financial records
  • 2 DJs for assuming all musical responsibilities
  • 6 Waiters for serving food
  • 2 Bartenders for serving drinks
  • 5 Cleaners for maintaining cleanliness
  • 2 Front Desk Officers for acting as a receptionist and greeters
  • 2 Security Officers

7.2 Average Salary of Employees

 Personnel Plan      
Year 1 Year 2 Year 3
General Manager $85,000 $95,000 $105,000
Cashiers $85,000 $90,000 $95,000
DJs $90,000 $95,000 $100,000
Waiters $410,000 $440,000 $480,000
Bartenders $55,000 $60,000 $65,000
Cleaners $87,000 $94,000 $101,000
Front Desk Officers $50,000 $55,000 $60,000
Security Officers $55,000 $60,000 $65,000
Total Salaries $465,000 $500,000 $545,000

Financial Plan

The final component of your business plan before you start karaoke business  is a detailed financial plan outlining all financial information. Our financial plan is as follows:

8.1 Important Assumptions

 General Assumptions      
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 10.00% 11.00% 12.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 26.42% 27.76% 28.12%
Other 0 0 0

8.2 Brake-even Analysis

Karaoke Business Plan - Brake-even Analysis

 Brake-Even Analysis  
Monthly Units Break-even 5530
Monthly Revenue Break-even $159,740
Assumptions:
Average Per-Unit Revenue $260.87
Average Per-Unit Variable Cost $0.89
Estimated Monthly Fixed Cost $196,410

 

8.3 Projected Profit and Loss

 Pro Forma Profit And Loss      
Year 1 Year 2 Year 3
Sales $309,069 $385,934 $462,799
Direct Cost of Sales $15,100 $19,153 $23,206
Other $0 $0 $0
TOTAL COST OF SALES $15,100 $19,153 $23,206
Gross Margin $293,969 $366,781 $439,593
Gross Margin % 94.98% 94.72% 94.46%
Expenses
Payroll $138,036 $162,898 $187,760
Sales and Marketing and Other Expenses $1,850 $2,000 $2,150
Depreciation $2,070 $2,070 $2,070
Leased Equipment $0 $0 $0
Utilities $4,000 $4,250 $4,500
Insurance $1,800 $1,800 $1,800
Rent $6,500 $7,000 $7,500
Payroll Taxes $34,510 $40,726 $46,942
Other $0 $0 $0
Total Operating Expenses $188,766 $220,744 $252,722
Profit Before Interest and Taxes $105,205 $146,040 $186,875
EBITDA $107,275 $148,110 $188,945
Interest Expense $0 $0 $0
Taxes Incurred $26,838 $37,315 $47,792
Net Profit $78,367 $108,725 $139,083
Net Profit/Sales 30.00% 39.32% 48.64%

8.3.1 Profit Monthly

Karaoke Business Plan - Profit Monthly

8.3.2 Profit Yearly

Karaoke Business Plan - Profit Yearly

8.3.3 Gross Margin Monthly

Karaoke Business Plan - Gross Margin Monthly

8.3.4 Gross Margin Yearly

Karaoke Business Plan - Gross Margin Yearly

8.4 Projected Cash Flow

Karaoke Business Plan - Projected Cash Flow

 Pro Forma Cash Flow      
Cash Received Year 1 Year 2 Year 3
Cash from Operations
Cash Sales $40,124 $45,046 $50,068
Cash from Receivables $7,023 $8,610 $9,297
SUBTOTAL CASH FROM OPERATIONS $47,143 $53,651 $59,359
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 $47,143 $53,651 $55,359
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $21,647 $24,204 $26,951
Bill Payments $13,539 $15,385 $170,631
SUBTOTAL SPENT ON OPERATIONS $35,296 $39,549 $43,582
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 $35,296 $35,489 $43,882
Net Cash Flow $11,551 $13,167 $15,683
Cash Balance $21,823 $22,381 $28,239

8.5 Projected Balance Sheet

 Pro Forma Balance Sheet      
Assets Year 1 Year 2 Year 3
Current Assets
Cash $184,666 $218,525 $252,384
Accounts Receivable $12,613 $14,493 $16,373
Inventory $2,980 $3,450 $3,920
Other Current Assets $1,000 $1,000 $1,000
TOTAL CURRENT ASSETS $201,259 $237,468 $273,677
Long-term Assets
Long-term Assets $10,000 $10,000 $10,000
Accumulated Depreciation $12,420 $14,490 $16,560
TOTAL LONG-TERM ASSETS $980 $610 $240
TOTAL ASSETS $198,839 $232,978 $267,117
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $9,482 $10,792 $12,102
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
SUBTOTAL CURRENT LIABILITIES $9,482 $10,792 $12,102
Long-term Liabilities $0 $0 $0
TOTAL LIABILITIES $9,482 $10,792 $12,102
Paid-in Capital $30,000 $30,000 $30,000
Retained Earnings $48,651 $72,636 $96,621
Earnings $100,709 $119,555 $138,401
TOTAL CAPITAL $189,360 $222,190 $255,020
TOTAL LIABILITIES AND CAPITAL $198,839 $232,978 $267,117
Net Worth $182,060 $226,240 $270,420

 

8.6 Business Ratios

 Ratio Analysis        
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 4.35% 30.82% 63.29% 4.00%
Percent of Total Assets
Accounts Receivable 5.61% 4.71% 3.81% 9.70%
Inventory 1.85% 1.82% 1.79% 9.80%
Other Current Assets 1.75% 2.02% 2.29% 27.40%
Total Current Assets 138.53% 150.99% 163.45% 54.60%
Long-term Assets -9.47% -21.01% -32.55% 58.40%
TOTAL ASSETS 100.00% 100.00% 100.00% 100.00%
Current Liabilities 4.68% 3.04% 2.76% 27.30%
Long-term Liabilities 0.00% 0.00% 0.00% 25.80%
Total Liabilities 4.68% 3.04% 2.76% 54.10%
NET WORTH 99.32% 101.04% 102.76% 44.90%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 94.18% 93.85% 93.52% 0.00%
Selling, General & Administrative Expenses 74.29% 71.83% 69.37% 65.20%
Advertising Expenses 2.06% 1.11% 0.28% 1.40%
Profit Before Interest and Taxes 26.47% 29.30% 32.13% 2.86%
Main Ratios
Current 25.86 29.39 32.92 1.63
Quick 25.4 28.88 32.36 0.84
Total Debt to Total Assets 2.68% 1.04% 0.76% 67.10%
Pre-tax Return on Net Worth 66.83% 71.26% 75.69% 4.40%
Pre-tax Return on Assets 64.88% 69.75% 74.62% 9.00%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 19.20% 21.16% 23.12% N.A.
Return on Equity 47.79% 50.53% 53.27% N.A.
Activity Ratios
Accounts Receivable Turnover 4.56 4.56 4.56 N.A.
Collection Days 92 99 106 N.A.
Inventory Turnover 19.7 22.55 25.4 N.A.
Accounts Payable Turnover 14.17 14.67 15.17 N.A.
Payment Days 27 27 27 N.A.
Total Asset Turnover 1.84 1.55 1.26 N.A.
Debt Ratios
Debt to Net Worth 0 -0.02 -0.04 N.A.
Current Liab. to Liab. 1 1 1 N.A.
Liquidity Ratios
Net Working Capital $120,943 $140,664 $160,385 N.A.
Interest Coverage 0 0 0 N.A.
Additional Ratios
Assets to Sales 0.45 0.48 0.51 N.A.
Current Debt/Total Assets 4% 3% 2% N.A.
Acid Test 23.66 27.01 30.36 N.A.
Sales/Net Worth 1.68 1.29 0.9 N.A.
Dividend Payout 0 0 0 N.A.

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