Colorado’s oldest tattoo shop provides superior work in a newly remodeled shop, courtesy of a stellar business plan.
When I was approached about writing a business plan for the oldest tattoo shop in Colorado, I was given a tight deadline and sparse information. The work I provided netted the business the investment they needed for full renovations in the time frame they needed them to be completed.
Note: details have been removed to protect the business
Txxx Tattoo Limited LLC, DBA Bxxxxx Tattoo / EOD Tattoo will renovate and remodel the EOD Tattoo location of its business to double its availability of booth space and cater to a high end clientele with a booth-rate charge system for artists. The business will provide custom tattoo work to a variety of clients in the Denver area. The owner, Xxxxxx X. Xxxxx, seeks a $XX,000, 60-72 month loan to complete the renovation and remodel of the space.
The relatively low overhead of the shop, which will include a reduction in overall operating costs due to the redesign of the space, allows for projections of approximately $1XX,000 in gross sales in the first year of business post-renovation. Though we anticipate operating at full capacity within one month of the renovation, the amount requested has accounted for unforeseen circumstances that would sideline business for up to six months.
EOD Tattoo will meet the following objectives as a result of this remodel:
- Reach annual revenues of approximately $1XX,000 within the first year
- Successfully build a clientele base that reflects repeat and referral work, contributing to the overall stability of the shop
- Earn net profits for the owner and allow for the future opportunity to upgrade sister shops, Bxxxxx Tattoo Aurora and Bxxxxx Tattoo Parker
EOD Tattoo will provide exceptional custom tattoo work in a clean and friendly boutique environment, distinguishing themselves as a high-end destination shop in a market that is saturated with shops that operate at or below the status quo.
Keys to Success
Keys to success of this shop include:
- An already established base of customers, built from three shops
- Increasing profits year over year for three shops, post-purchase
- Allowing for artists to establish themselves as part of a shop where they find stability and an affordable option for booth-rent space
Txxx Tattoo Limited LLC, DBA Bxxxxx Tattoo / EOD Tattoo is a a sole proprietorship, designated as an S-Corp, and held by Xxxxxx X. Xxxxx, an experienced tattoo artist and business owner. The company, as it stands, has been in business since June of 2012 and operates in three locations:
Bxxxxx Tattoo – Parker
12345 N Highway XX
Somewhere, CO 12345
Bonaroo Tattoo – Aurora
12345 E Xxxxx Ave
Somewhere, CO 12345
2024 E Colfax Ave
Denver, CO 80206
The Parker location has been in business since 2002, making it the oldest shop in the city of Parker, and the Aurora location has been in business since 1996. The space wherein EOD Tattoo currently resides is the longest running tattoo parlor in the state of Colorado, with a reputable 36 years of business behind it.
The interior of EOD Tattoo, the Denver location of the business, will undergo a renovation to expand the number of available booths from four to eight, doubling the capacity for artists. This will entail closing the shop for two to three weeks for an interior demolition and renovation, including new flooring and windows. The total breakdown of costs is as follows:
|Cost of Operation for 6 Months||$XX,000|
Products and Services
The locations doing business under the names Bxxxxx Tattoo and EOD Tattoo provide high quality custom tattoo work to the residents of Denver and the surrounding areas. The clientele of all shops is a mix of walk-in traffic and appointment-based customers.
In terms of the competitive landscape, this plan will focus solely on EOD Tattoo and its transition from traditional percentage payments, wherein the artist and shop owner split the profits from a job, to a booth-rent system, wherein the artist instead pays the owner a specified amount of money per week in order to use the space.
While tattoos were once the market of rebels and convicts, the transition they have made in recent years has seen widespread acceptance in society, with one in five adults now reporting that they have at least one tattoo. EOD Tattoo long-standing reputation as a premier shop puts it in prime position to continue providing high-end, quality work to the residents of Denver.
- According to a study done by Harris Interactive, the rates are much higher than 1 in 5 in the West, with 26% of the residents reporting having tattoos
- When you look at the demographic breakdown in terms of age groups, the Harris study estimates that 38% of adults between the ages of 30-39 and 30% of adults between the ages of 25-29 are tattooed
- This bodes well for Denver who, according to the 2012 Census, has a population of 25-34 year olds that equals 19.6% of the total; more than 6% above the national average
- Forbes has listed Denver as the 6th most popular city in the United Stated to move to, with a growth rate last year of 1.75%
- Taking all of these numbers into account, with a current population of approximately 275,000 18-44 year olds, the Front Range plays host to over 70,000 current and potential clients
Aside from the raw numbers, it is impossible to ignore the fact that Denver is the liberal hub of the West, attracting a younger, more permissive population than neighboring states. As a city that holds art in high esteem, we appeal to a wide variety of creatives, who are often the collectors of body art that provide repeat, long-term work for the members of this industry.
At the current time, the market for EOD Tattoo is broken into two categories: walk-in clients and appointment based clients. The nature of a percentage-based shop is to focus on providing a high number of tattoos, as evidenced by the fact that it accounts for approximately 80% of our current clientele. Based on the success of other booth-rent shops in the area, we expect that the market will reverse, as stable artists generate 90% of their clientele by way of repeat and referral customers.
Competition and Buying Patterns
With over 300 percentage-based tattoo shops in Denver, the competition for that market is saturated, leading to many shops either closing within months of opening or see high turnover in artists due to so many other available options. In terms of booth-rent tattoo shops, however, Denver currently has only eight:
- Th’ink Tank
- Bound by Design
- Sol Tribe Tattoo
- Dedication Tattoo
- 80D Tattoo Studio
- Ritual Tattoo and Gallery
- Mammoth American Tattoo
Of these shops, every one has a waiting list for booth space, as artists seek more and more stability in terms of building a reputation and gaining a repeat clientele. A waiting list for artists also means a waiting list of clients that artist is bringing with them, generating more traffic and revenue for the shop as a whole.
Strategy and Implementation Summary
With this remodel, EOD Tattoo seeks to follow the strategy of appealing to new customers with a clean, high-end urban boutique environment, while concurrently building on the base of clientele that established artists, who seek out booth rental space, bring with them.
Though already well known in the community, EOD Tattoo will increase its competitive edge through this remodel. By changing from a percentage-based shop to a booth-rent shop, we attract artists who have an established client list and seek a semi-permanent workspace where they can continue to build on appointment-based work rather than rely solely on walk-in traffic.
While the owner will maintain the same level of marketing for the shop, putting artists in place who are responsible for creating their own traffic means adding 8 additional persons who will add to the overall marketing plan. As each artist targets a demographic that plays to their specific talents, we draw a diverse group of individuals from across the city who have one shared desire.
Sales Structure and Forecast
As booth rent space is difficult to come by, and highly sought after in Denver, we anticipate the shop operating at full capacity by the end of 2014. Comparing the first to quarters of the fiscal years for 2013 and 2014, Tiki Tattoo Limited LLC, DBA Bonaroo Tattoo / EOD Tattoo has increased profit each quarter.
|Q1 – Gross Sales||$XXX, XXX||$XXX,XXX|
|Q1 – Gross Profit||$XX,XXX||$XX,XXX|
|Q2 – Gross Sales||$XXX,XXX||$XXX,XXX|
|Q2 – Gross Profit||$XX,XXX||$XX,XXX|
Prior to the remodel of EOD Tattoo, artists are required to pay a percentage of their profit to the shop in order to maintain workspace. Generally, this has been set at a 50/50 split, with opportunity for the artist to increase their percentage based on contributions to the overall community of the space. With four booths, the average take-home for EOD Tattoo has been approximately $X,XXX per month. When changing to booth-rent, each artist will be charged a flat rate of $XXX per week, for a guaranteed total of $XX,XXX per month for eight booths.
|Cost of business as percentage shop||Cost of business as booth rent shop|
With the increase in the amount of rent EOD Tattoo will be taking in, this arm of the business will also increase gross sales for the single shop by more than 300%, in turn making the other two shops more profitable by allowing full retention of all monies to their respective spaces.
- July 2014 – Procure funds necessary for remodel and begin the process of bidding and retaining contractors
- October 1, 2014 – Begin remodel and renovation of interior; fiscally slowest month for the business, making profit loss minimal
- October 27, 2014 – Reopen for business
- November 2014 – Begin repayment of loan
- November 2019 – Have loan repaid in full