ACCA June26 SBL Preseen Analysis Part 2 DDK (Hairdressing)

Added: 2026-05-20

[00:00:00]So welcome back. Now before I dip into the presin application notes because the preing application not is prepared by mixing all the prey information together with the real life cases. I would like to go through the pre material in depth.

[00:00:17]So let's get started.

[00:00:20]As we previously mentioned, the DKK business needs to compete with the larger hairdressing businesses in the country Kaland for example 3% of the market share. All right, but also that they need to compete with 98% of a smaller businesses.

[00:00:43]So this means that from a strategic perspective from a pre analysis point of view that we will have lots of opportunities with regards to these 98% okay in terms of its competition. So for example, the DKK business may be buying the remaining smaller businesses alternatively using the franchise way.

[00:01:13]Now in the last sections that we covered the methods to finance the business growth. So one of the ways of course to use the franchise way.

[00:01:25]But of course, don't forget that the industry is highly competitive.

[00:01:31]So this means that the smaller businesses may be thinking about ways to copy our premium offering features already.

[00:01:46]So this is why we need to continue to survive in this particular field which means we need to focus on the premium differentiation and that's our core strategy.

[00:02:01]We are given the prey information in the bottom of page number two about a few competitors for example halo hair trims and our sales DKK.

[00:02:14]So it's important to revise the performance information analysis where you may be given different ratios on the exam day and you need to comment on their respective implications in terms of a market growth.

[00:02:32]what you can refer to on the exam day if the BCG matrix is tested you can talk about the growth of this market I mean it's still good the reason is increasing interests among population to look and feel good so that is the supporting point to support the market growth point here let's now move on to the preying material to page number three about the staff. Now we are told about different types of staff. So for example the hairdressers providing the hairdressing services and also to teach trainees. Now what trainees are doing will be they are studying at college [snorts] or working under supervision of the hairdresser.

[00:03:33]Wash hairs.

[00:03:35]Okay.

[00:03:37]Enabling more efficient work. Okay. As experienced hairdressers do not spend time carrying out the uh washing work.

[00:03:48]This means in assessing whether or not the work is efficient, we could be using the KPI called revenue per appointment hour.

[00:04:06]All right.

[00:04:08]that our business can generate. The reason is if for the appointment hour or we will need to increase the appointment hours to get the revenue that this KPI will be decreasing.

[00:04:24]So this measures the productivity okay among trainees and also experienced hairdressers.

[00:04:36]Next type of staff is salon managers. So usually they are the boss of smaller salons. All right.

[00:04:47]So this means on the exam day if DKK tries to acquire these smaller salons or smaller businesses we will need to think about the culture.

[00:05:02]The reason is solo managers as we are told spend time in managing the solo and also providing the hair dressing services.

[00:05:13]So this means in terms of his internal control it is not robust because usually that they spend more time in looking after the relationship with the uh with the customer rather than managing the business and also they spend a lot of time in improving their technique. So for example to be an experienced hairdresser.

[00:05:45]So if that's the case then if I were to acquire a small business such as these in the future we will need to think of the cultural match starts the key. for example, how we're going to be decentralizing our decision making power and also how we're going to be setting up the KPIs.

[00:06:10]So that's important. Okay.

[00:06:13]And also that we are told the receptionists now they are responsible for booking appointment. So that is the key risk because they are not trained as hairdressers.

[00:06:33]So that means that they are not experienced enough to certain extent they may not know the complexity of a hair treatment.

[00:06:53]So that's the issue that we will need to focus on.

[00:06:57]One of the ways that we can solve this problem is that if a client's hair treatment is relatively complicated, the receptionists need to consult or agree with the salary manager.

[00:07:22]All right.

[00:07:24]before this goes ahead. All right, so that's important.

[00:07:29]Now, a potential internal control weakness that we can identify is that the receptionist also takes payment from the client. So if that's the case, now that is a internal control weakness point. So examples they may be taking a payment okay into their own pocket.

[00:07:54]Alternatively they recourse the wrong thing. So leading to the revenue related to the services and the retail may be misclassified and therefore we may be basing on the incorrect profit margin to make our future decisions.

[00:08:12]Now another points that we can see in the receptionist staff is that they are responsible for booking appointment. So this means they are responsible for inputting clients or customers details. Now if these details are incomplete that will be a disaster. All right.

[00:08:42]So this is important.

[00:08:47]In terms of a solo manager, as we mentioned before, if I were to acquire other smaller businesses such as these, so it's important to decide which parts of the work can be delegated to selling managers and which part of the work needs to be centralized. Now from my perspective that something that cannot be delegated would be in terms of pricing and design and quality of our products for example determining which suppliers that we need to select.

[00:09:24]But the things that we could delegate to the salary managers if I were to buy smaller business is of course in terms of the marketing in terms of operational side. The operational size of example determining uh who will be on leave and who will be on duty. At the same time we may be giving out some samples to our client. Okay. So these power could be dedicated to the solid managers if I were to buy these smaller businesses for example.

[00:10:03]Now we also told uh about the information about the training and skills development. Now we told a lot of ways that we can be the hairdresser assistant but they're not mandatory. All right. So this includes college courses linked to on the job training and salons and larger chains have their own trainingmies.

[00:10:28]So we are thinking of on the exam day why not to set up our own academy.

[00:10:41]If my memory serves me correctly that back in March 2024 exam where we tested about the 80 football club the the academy concept was there. Okay. Setting up academy of course increasing the service revenue.

[00:11:00]So we will need to think about that. And of course when we are setting up our own academy another advantage would be to guarantee consistency right in terms of when we are providing the hairdressing services because we must know the DK relies on its premium brand and premium offerings.

[00:11:27]So that's why being consistent is the key to succeed in this market.

[00:11:36]And of course, we could use the academy as one of our potential support if I were to grow our business using the franchising way.

[00:11:54]So this could be attractive to a lot of potential people that want to work in this industry but they don't need to pay and quite a lot and spend a lot of time in going uh for the college courses. But what they can do is that they pays the franchise fee and they set up their own business. they can start earning revenue for example. So that is an attractive point.

[00:12:26]Now we're also told that they will need to complete their CPD.

[00:12:31]All right. So for example, hairdressers can access the CPD at conferences and seminars such as what ACCA members can do and run and sponsor by global hair product brand. Okay.

[00:12:48]It seems to us that they provide I mean the global hair uh hair care product brands provides good training.

[00:12:58]However, we know the technical stuff in a better way than global hair care product brands uh particularly for our local market in Kaland.

[00:13:16]So that supports the points that I setting up our own academy at the same time over relying on the third party training.

[00:13:33]This means that if staff working in our company that is subsequent leave uh the reason is they are not happy with the pay not happy with a career advancement that they will leave. So this is another point that we could say to make our staff stay in our business.

[00:14:08]We are also told in the next part of these competitions helping the hairdressers to demonstrate their skills.

[00:14:21]So winning the competition will builds the reputation both for the hairdresser and also uh our company.

[00:14:31]Of course some hairdressers use their medium social media platforms to showcase their skills and how to wins the competition.

[00:14:41]So this seems to us that expose them to client That's another way that we manage our talents in a strategic way. The reason is we are not afraid that you take away our clients, you set up your own business. We don't really care because we are such a chain of salos and the third largest hairdressing company in this country. So what I would think of is that we could train a lot of these good hairdressers, expose them to client and that's why it will also improve our reputation and also brand awareness.

[00:15:34]So treating it as a strategic activity that's very key.

[00:15:42]But we also need to think of the downsides of such. The reason is if we allow the individual hairdresser to post whatever they want. Of course, firstly it may have a risk called privacy risk.

[00:16:03]The reason is they may be posting some photos of our clients without their permission. Okay. on the social media platform, we may be sued.

[00:16:16]At the same time, they may be taking a client away. So, that's a key risk there. All right.

[00:16:30]The reason is possibly clients are following the stylist, not the DKK's brand. So if they follow the style list that they may be taking our clients away and to set up their own business. Alternatively they can join other franchising arrangement.

[00:16:51]So that is the key issue we need to consider having the critical thinking.

[00:16:57]Okay. Having a balanced view when analyzing one particular point that is important.

[00:17:05]Now as we can see hairdressing companies they will provide to a variety of services. So for example washing uh as we are told that the assistant will be responsible for this.

[00:17:19]So that's why the previous KPI that the pre is called the revenue per appointment hour to uh assess the productivity of such.

[00:17:31]We're also told the uh cutting, perming, and coloring and even straightening services that we could provide.

[00:17:42]Don't forget, not only is that we provide such services, but also we will need to mind the risk.

[00:17:52]For example, services could increase our income but and also maintain our brand consistency but also we need to consider the risk. So in terms of the supplier supplying us with a product that containing certain chemicals that may be harmful to our client at the same time from an operations perspective that our staff may be doing something wrong. All right.

[00:18:22]But don't forget that we also provide grooming services. Okay. So for example, shaving, beards, a mustache, trimming. So it seems to me that this is particularly for the male market possibly.

[00:18:43]Now the advantage in focusing on the male market is that the time to treat each client will be a lot less usually on average compared to that uh where you are targeting the female market.

[00:19:06]So if you're targeting the male market, it's very likely that you will get stable income, stable revenue, recurring income, okay, from these male customers.

[00:19:23]Not only for that, you also need to think of the retail products that you can sell.

[00:19:32]Previously in the last section in the final post of a preine that we could see the proportion of the retail products nearly staying the same over these years.

[00:19:46]So if you're focusing on the grooming uh services or the male market possibly you can think of to expand the offering of such retail products to them because usually the they need less time to treat each male customer.

[00:20:08]So that's why it will improve the utilization of our stuff as a result.

[00:20:24]Now we're also told that services are often combined. For example, the clients may have their hair washed uncut.

[00:20:35]Now we know this but we need to think of we provides different services.

[00:20:45]What would be the gross profit margin of each type of service that we provide at the same time the time that we can spend in each of the service in turn.

[00:21:07]Okay.

[00:21:09]So this means in managing this business from a financials perspective we cannot simply focus on the number of appointment. This is rubbish.

[00:21:22]We need to focus on the service mix profitability analysis to see which parts of the service is more profitable and how we will be utilizing our capacity. Okay, so that's the very key there.

[00:21:49]But as we can see the service mix is quite complicated.

[00:21:57]Firstly complicated appointments in terms of the booking.

[00:22:05]The reason is the clients we on page number four usually book appointments for services in advance. We are not told how many days okay before the appointment. Now in terms of the booking so for example from an operational perspective that's relatively complicated. The reason is perhaps they come to the salon and the hairdresser is dealing with other clients which means it's not on time and of course the clients may not be happy about that. Now, in the previous section that I just talked you through on page number 12, the client's retention uh has been decreasing from 84% and in 20x5 down to 81%.

[00:22:58]Okay, it's a sharp decrease.

[00:23:00]So that's why it could be due to a lot of reasons on the exam day that we may be given a digital exhibit. Okay, to talk about that. Now not only for that also it's relatively complicated in terms of the customer's needs.

[00:23:23]Okay.

[00:23:26]Because we are told in the second paragraph here the younger client wants coloring.

[00:23:35]Okay.

[00:23:39]and some salons specialize grooming.

[00:23:44]Now, if I were to do the market segmentation, of course, that is one of the points in your SBO syllabus in terms of in terms of market segmentation. Well, if you're targeting the younger customers, we need to think of what they like. For example, coloring and also fashion styling and even social media friendly looks.

[00:24:22]However, for business customers on the other hand, they may be favoring cutting, maybe favoring premium styling and so on.

[00:24:37]And particularly for the male market they may be preferring grooming. Okay.

[00:24:47]Uh and beard trimming and also styling wax and so on.

[00:25:00]So this is how we segments the market.

[00:25:03]Okay. in this industry.

[00:25:09]Another funny point from the pre that we're told we open 9 to7.

[00:25:18]Now it seems to me it's a bit traditional but we are offering premium stuff.

[00:25:26]So why not to increase the number of hours that we operate a business. So for example, some customers may be favoring evening appointment and even Saturday appointment. Okay. And even sometimes special occasion starring and even premium express services that they want. So what we can do is to suggest to the examining team that this has problem. So for example for example they might be favoring Saturday appointment.

[00:26:16]They may be favoring special occasion stling and sometimes premium express services.

[00:26:34]So what we can do is try to think of the ways that we can diversify our business on the exam day. just to diversify our business by holding different companies that each specializes in each of the niche. All right? So that will be more attractive and uh more resilient.

[00:27:01]Okay. When we grow the business, we're also told in the next part of the 95% revenue coming from providing hairdressing services. Now it's quite clear that the revenue proportion will be limited by the capacity of the hair stylist or the hairdressers.

[00:27:35]So this means on the exam day why not to think of the retail product and of course that would just to be the recommendation but you will need to justify your answer. So the example whether or not you're working with the good third party supplier. All right and so on so forth.

[00:27:58]The reason is the retail products usually that we display these products in our solo. We don't need to manufacture them on our own.

[00:28:09]Alternatively, of course, you can build your own factory to produce these products, but it's entirely up to you.

[00:28:16]You can work with the third party partner providing these retail products. It's absolutely fine.

[00:28:26]Usually by doing so you don't need to input lot of initial investment at the very first start except for some of the uh uh prepayments fee to the supplier which may be refunded if you cannot sell the product at the end of the day perhaps.

[00:28:46]So usually higher margin products possibly comparing to the services that we provide but we are not particularly sure because we are not given these data.

[00:29:00]At the same time if we were to display these premium retail products usually for professional hairdressing use only.

[00:29:13]This will help a brand.

[00:29:17]All right.

[00:29:19]Attracting a price premium. Of course, I know that price premium will increase our profit, increase our sales revenue, but you don't really have to say that in your answer. Okay? So, price premium, that's a good point that we could use.

[00:29:36]But think of it like if I were to display these products in the wrong way and this would damage our brand. If you simply pay commission to a hairdresser to sell this product if they over sell these products alternatively in a hard way in a very hard way.

[00:30:07]Of course customer will be upset about that and especially if you're targeting the male customer.

[00:30:15]If you're selling this product in the hallway, of course, you will upset them instantly perhaps.

[00:30:23]But from my perspective, one of the very very effective marketing ways for examples, the promotional way is to give sample of products to clients. Is an example of experiential marketing. You help them experience the products before they buy and you keep them happy. If you keep them happy, they will keep you happy. So that is the way when we talk about the marketing mix is called the promotion way.

[00:31:02]Okay, it's the final P is in the marketing mix that we've got seven Ps or four Ps. The product, price, place, and promotion. And in terms of services, we also got people process and physical evidence. All right? So physical evidence in terms of the appointment, in terms of a consultation, and also in terms of the window displaying the professional products that the selling would use. Of course, these are examples of physical evidence. Okay? Just give confidence to your customers. For example, next section from the preing on page number four, we're told about the pricing and costs. Now, Thursday, we are told that the pricing will be basing on the time taken to perform a service. Now the advantage of doing that of course it can reflect the value of a stylist or the hairdresser because more experienced that they spend more time charging more and it's reasonable.

[00:32:15]However, from a customer's perspective if you're charging more they may simply go to a competitor because this industry is so competitive. So better ways to think of this issue is to agree a fixed price with our customer. However, the downside of agreeing a fixed price to a customer is that if you cannot guarantee the number of effective appointment of course agreeing the fixed price to search next term we may be losing margin on this. The reason is for particular services the price will also reflects the skills and experience of the hairdresser and the length of a client's hair.

[00:33:15]So agreeing the fixed price that will be a problem. Okay, the hair is long of course agreed to fix price possibly losing a margin.

[00:33:31]Okay, we are also told for these experienced hairdressers, they may have a very large social media following or willing lot of competitions.

[00:33:46]Now we've analyzed this before. So for example is the risk of taking away our customers.

[00:33:57]That's the key that we need to think of.

[00:34:04]Do you notice that the industries that we are working in is the service industry.

[00:34:09]So this means that if we are available at 10:00 a.m. this morning and nobody comes to our salo this means the service is perishable. We cannot store it. So this means how do we utilize our capacity is vital in this industry.

[00:34:29]starts weighing the next prog. They offer discounted prizes at certain times of a day or on days of a week. That's an example of utilizing the capacity. It's a good strategy there. Okay.

[00:34:52]You could argue that our margin providing discounted prices will be quite low. But the ways that I like to think of it is that we've got lot of fixed costs to pay or fixed costs to account for.

[00:35:12]So this means even those that we providing discounted services we've got revenue we've got contribution because we've got discounted prices minus variable costs we can have these contribution and to pay these fixed costs for us to survive. So not only is the way that we utilize our capacity okay from an operational perspective and from the yield management or the profit management's perspective that we are surviving in this competitive market. So don't reject any discounted offerings because you're saying that we are offering the premium stuff. So that's why say no to these discounted offerings. No, you should welcome that because you should view that as a strategic activity.

[00:36:14]We are also told in the next part of the labor costs accounting for 50% of the revenue. Now let me write this down. The labor costs over revenue is like 50%.

[00:36:31]So this effectively saying that well the hairdressers in this country they receive very high payment and especially for the experienced hairdressers.

[00:36:52]So that's why on the exam day if I were to further improve the profitability of this company I would certainly focus on the staff the staff whether or not they're productive.

[00:37:14]We are also told that cutting and grooming services having low margin. The reason is will we need to involve the hairdresser entirely of the service.

[00:37:31]That's why if later on you're focusing on the cutting service only or perhaps the mail market, you will need to sacrifice the margin.

[00:37:43]But at the same time, you will need to monitor the total profit or the revenues that you can get by focusing on the revenue per appointment hour to make sure that you're fully productive and uh generating these revenue and the speed to generate these revenue starts important if you're focusing on the male market.

[00:38:20]We're also told coloring and perming service is a high margin.

[00:38:26]Okay, the reason is that we spend less time compared to other services.

[00:38:34]But the downside of coloring and perming services would certainly be the chemical risk.

[00:38:47]we need to consider.

[00:38:52]But at the same time when we are dealing with a capacity we could say that well you're doing the coloring at the same time you can perform other services. So that's the reason why the appointment scheduling is the key.

[00:39:16]If this is not accurate that will be a disaster.

[00:39:22]So for example the the staff may be accompanying our client okay during the coloring and perming services of course losing potential revenue and of course you can also argue the other important factors determining the success of coloring perming uh services.

[00:39:48]So for example, how about the waiting time from a customer's perspective? How long they need to wait?

[00:39:55]The waiting time for example and also the chemical processing time.

[00:40:05]Okay. And also that's important and whether or not the assistant can hand it over. Okay. Uh to the uh hairdresser.

[00:40:17]So in a smooth way that's also be the key.

[00:40:26]Now don't forget in the next part of the variable costs also includes the water used.

[00:40:36]So that's something related to the environmental part.

[00:40:41]Okay. when we are talking about the CSR or the corporate social responsibility is so the water costs is not the fixed costs it's variable depending on different services that our company provides.

[00:41:01]How about the fixed cost element? Well, the rent, heating, lighting, insurance, marketing and even the products that we sold to the customer because we need to buy it in advance.

[00:41:16]Okay, so these are the fixed costs. This means that we can work out the break even point.

[00:41:24]This is important in the service industry. We need to take for example the fixed costs. You could say the exam including heating, light, insurance, marketing and so on over the average contribution per service or the product that we sold. So you can work out how many appointments do we need to have on average in order to cover these fixed costs. Okay, starts the way to manage the performance of such.

[00:42:07]We're also told the margin of retail products much higher than the hairdressing services.

[00:42:16]We know this. That's why we will need to monitor certain KPIs.

[00:42:24]So for example, whether or not the customer has made a formal complaint against our assistant. For example, the hairdresser selling this product.

[00:42:36]How about the refund? How about their satisfaction rate?

[00:42:43]Okay, so one of the ways that we can do previously is to provide sample products to them. All right, they can try it before they buy it to release the buying pressure. Okay, hopefully you are happy and I look forward to seeing you soon in the next section where we we will be continuing to go through the preing material before we d into the preing application note.

[00:43:18]Bye for now. Accounting for your future.