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 business or restaurant business 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’.
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.
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.
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:
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:
The startup requirements are as follows:
|Research and Development||$32,750|
|TOTAL START-UP EXPENSES||$187,300|
|Other Current Assets||$232,500|
|Start-up Expenses to Fund||$151,875|
|Start-up Assets to Fund||$123,000|
|TOTAL FUNDING REQUIRED||$0|
|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|
|Liabilities and Capital||$0|
|Accounts Payable (Outstanding Bills)||$0|
|Other Current Liabilities (interest-free)||$0|
|Additional Investment Requirement||$0|
|TOTAL PLANNED INVESTMENT||$620,125|
|Loss at Start-up (Start-up Expenses)||$313,125|
|TOTAL CAPITAL AND LIABILITIES||$251,875|
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:
- 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.
- 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.
- Bar and Restaurant: The Karaoke Planet contains a large menu for serving delicious foods and alcoholic and non-alcoholic drinks to its customers.
- 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:
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:
|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%|
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.
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
|Unit Sales||Year 1||Year 2||Year 3|
|Bowling Alley Games||802,370||815,430||823,540|
|Bar & Restaurant||539,320||770230||1,002,310|
|TOTAL UNIT SALES||3,494,170||4,588,370||4,807,410|
|Unit Prices||Year 1||Year 2||Year 3|
|Bowling Alley Games||$600.00||$800.00||$1,000.00|
|Bar & Restaurant||$700.00||$800.00||$900.00|
|Bowling Alley Games||$120,050||$194,500||$268,500|
|Bar & Restaurant||$50,110||$71,600||$93,000|
|Direct Unit Costs||Year 1||Year 2||Year 3|
|Bowling Alley Games||$0.40||$0.45||$0.50|
|Bar & Restaurant||$0.30||$0.35||$0.40|
|Direct Cost of Sales|
|Bowling Alley Games||$66,600||$119,900||$173,200|
|Bar & Restaurant||$17,900||$35,000||$52,100|
|Subtotal Direct Cost of Sales||$1,294,100||$1,699,400||$2,104,700|
6.4 Sales Monthly
6.5 Sales Yearly
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
|Year 1||Year 2||Year 3|
|Front Desk Officers||$50,000||$55,000||$60,000|
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
|Year 1||Year 2||Year 3|
|Current Interest Rate||10.00%||11.00%||12.00%|
|Long-term Interest Rate||10.00%||10.00%||10.00%|
8.2 Brake-even Analysis
|Monthly Units Break-even||5530|
|Monthly Revenue Break-even||$159,740|
|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|
|Direct Cost of Sales||$15,100||$19,153||$23,206|
|TOTAL COST OF SALES||$15,100||$19,153||$23,206|
|Gross Margin %||94.98%||94.72%||94.46%|
|Sales and Marketing and Other Expenses||$1,850||$2,000||$2,150|
|Total Operating Expenses||$188,766||$220,744||$252,722|
|Profit Before Interest and Taxes||$105,205||$146,040||$186,875|
8.3.1 Profit Monthly
8.3.2 Profit Yearly
8.3.3 Gross Margin Monthly
8.3.4 Gross Margin Yearly
8.4 Projected Cash Flow
|Pro Forma Cash Flow|
|Cash Received||Year 1||Year 2||Year 3|
|Cash from Operations|
|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|
|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|
|SUBTOTAL CASH SPENT||$35,296||$35,489||$43,882|
|Net Cash Flow||$11,551||$13,167||$15,683|
8.5 Projected Balance Sheet
|Pro Forma Balance Sheet|
|Assets||Year 1||Year 2||Year 3|
|Other Current Assets||$1,000||$1,000||$1,000|
|TOTAL CURRENT ASSETS||$201,259||$237,468||$273,677|
|TOTAL LONG-TERM ASSETS||$980||$610||$240|
|Liabilities and Capital||Year 1||Year 2||Year 3|
|Other Current Liabilities||$0||$0||$0|
|SUBTOTAL CURRENT LIABILITIES||$9,482||$10,792||$12,102|
|TOTAL LIABILITIES AND CAPITAL||$198,839||$232,978||$267,117|
8.6 Business Ratios
|Year 1||Year 2||Year 3||Industry Profile|
|Percent of Total Assets|
|Other Current Assets||1.75%||2.02%||2.29%||27.40%|
|Total Current Assets||138.53%||150.99%||163.45%||54.60%|
|Percent of Sales|
|Selling, General & Administrative Expenses||74.29%||71.83%||69.37%||65.20%|
|Profit Before Interest and Taxes||26.47%||29.30%||32.13%||2.86%|
|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.|
|Accounts Receivable Turnover||4.56||4.56||4.56||N.A.|
|Accounts Payable Turnover||14.17||14.67||15.17||N.A.|
|Total Asset Turnover||1.84||1.55||1.26||N.A.|
|Debt to Net Worth||0||-0.02||-0.04||N.A.|
|Current Liab. to Liab.||1||1||1||N.A.|
|Net Working Capital||$120,943||$140,664||$160,385||N.A.|
|Assets to Sales||0.45||0.48||0.51||N.A.|
|Current Debt/Total Assets||4%||3%||2%||N.A.|
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