Table of Content

    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.

    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  
    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

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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

    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.

    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.

    Bank/SBA Business Plan

    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.

    Locksmith Business Plan - Unit Sales

    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
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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 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.

    Locksmith Business Plan - Brake-even Analysis

     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%

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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 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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