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.

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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.

Locksmith Business Plan - 3 Years Profit Forecast
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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.

Locksmith Business Plan - Startup Cost
Start-up Expenses 
Research and Development$5,000
Expensed Equipment$10,000
Start-up Assets$0
Cash Required$60,000
Start-up Inventory$30,000
Other Current Assets$10,000
Long-term Assets$4,000
Total Requirements$15,000
Start-up Expenses to Fund$20,000
Start-up Assets to Fund$22,000
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
Liabilities and Capital$0
Current Borrowing$0
Long-term Liabilities$0
Accounts Payable (Outstanding Bills)$0
Other Current Liabilities (interest-free)$0
Planned Investment$0
Investor 1$10,000
Investor 2$12,000
Additional Investment Requirement$0
Loss at Start-up (Start-up Expenses)$55,000
Total Funding$65,000
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    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


    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.

    Locksmith Business Plan - Market Segmentation

    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 CustomersGrowthYEAR 1YEAR 2YEAR 3YEAR 4YEAR 5CAGR
    Property Management Companies35%6,0008,00010,00012,00014,0007.00%
    Construction companies/ Developers22%10,00012,00014,00016,00017,00010.00%
    Total100%33,50040,500              47,50054,50060,50012.00%

    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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    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.

    Locksmith Business Plan - Unit Sales
    Sales Forecast   
    Unit SalesYear 1Year 2Year 3
    Sell locking devices200,000300,000260,000
    Residential and Corporate Installation300,000350,000450,000
    Key Cutting & Duplication350,000450,000480,000
    Resales of locks & security systems500,000550,000600,000
    TOTAL UNIT SALES1,350,0001,650,0001,790,000
    Unit PricesYear 1Year 2Year 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
    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
    Direct Unit CostsYear 1Year 2Year 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
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    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 1Year 2Year 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 1Year 2Year 3
    Plan Month123
    Current Interest Rate8.00%10.00%11.00%
    Long-term Interest Rate6.00%6.00%6.00%
    Tax Rate15.00%16.00%18.00%

    8.2 Brake-even Analysis

    Hamm Locksmith brake-even analysis is shown in the graph below.

    Locksmith Business Plan - Brake-even Analysis
     Brake-Even Analysis 
    Monthly Units Break-even5000
    Monthly Revenue Break-even$80,000
    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 1Year 2Year 3
    Direct Cost of Sales$6,000$8,000$9,000
    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%
    Sales and Marketing and Other Expenses$2,000$4,000$6,000
    Leased Equipment$0$0$0
    Payroll Taxes$25,000$30,000$40,000
    Total Operating Expenses$150,000$200,000$250,000
    Profit Before Interest and Taxes$70,000$80,000$90,000
    Interest Expense$0$0$0
    Taxes Incurred$12,000$15,000$18,000
    Net Profit$60,000$75,000$90,000
    Net Profit/Sales20.00%30.00%40.00%
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      8.3.1 Monthly Profit

      Locksmith Business Plan - Profit Monthly

      8.3.2 Yearly Profit

      Locksmith Business Plan - Profit Yearly

      8.3.3 Monthly Gross Margin

      Locksmith Business Plan - Gross Margin Monthly

      8.3.4 Yearly Gross Margin

      Locksmith Business Plan - Gross Margin Yearly

      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.

      Locksmith Business Plan - Projected Cash Flow
       Pro Forma Cash Flow   
      Cash ReceivedYear 1Year 2Year 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
      ExpendituresYear 1Year 2Year 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
      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   
      AssetsYear 1Year 2Year 3
      Current Assets   
      Accounts Receivable$9,000$11,000$14,000
      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 CapitalYear 1Year 2Year 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
      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 1Year 2Year 3INDUSTRY PROFILE
      Sales Growth5.00%20.00%40.00%3.00%
      Percent of Total Assets    
      Accounts Receivable5.00%4.00%3.00%8.00%
      Inventory2.00%1.80. %1.60%9.00%
      Other Current Assets1.00%2.00%1.95%20.00%
      Total Current Assets100.20%130.10%150.25%44.00%
      Long-term Assets-5.00%-20.00%-25.30%40.40%
      TOTAL ASSETS100.00%100.00%100.00%100.00%
      Current Liabilities4.00%3.00%2.50%23.70%
      Long-term Liabilities0.00%0.00%0.00%20.50%
      Total Liabilities4.10%2.00%1.50%44.10%
      NET WORTH80.30%90.00%100.10%34.00%
      Percent of Sales    
      Gross Margin80.10%82.00%84.00%0.00%
      Selling, General & Administrative Expenses73.00%70.00%65.00%62.00%
      Advertising Expenses2.00%1.00%0.20%1.20%
      Profit Before Interest and Taxes22.00%25.00%28.40%1.50%
      Main Ratios    
      Total Debt to Total Assets2.08%1.00%0.66%45.00%
      Pre-tax Return on Net Worth60.00%70.00%72.20%1.20%
      Pre-tax Return on Assets54.20%57.00%60.00%5.00%
      Additional RatiosYear 1Year 2Year 3 
      Net Profit Margin15.20%18.10%20.00%N.A.
      Return on Equity40.00%43.00%46.00%N.A.
      Activity Ratios    
      Accounts Receivable Turnover345N.A.
      Collection Days8289104N.A.
      Inventory Turnover161922N.A.
      Accounts Payable Turnover13.113.415N.A.
      Payment Days252525N.A.
      Total Asset Turnover1.61.41.2N.A.
      Debt Ratios    
      Debt to Net Worth0-0.01-0.03N.A.
      Current Liab. to Liab.000N.A.
      Liquidity Ratios    
      Net Working Capital$100,000$120,000$140,000N.A.
      Interest Coverage000N.A.
      Additional Ratios    
      Assets to Sales0.350.380.41N.A.
      Current Debt/Total Assets3%2%1%N.A.
      Acid Test202427N.A.
      Sales/Net Worth1.310.4N.A.
      Dividend Payout000N.A.

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