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Bain Medium Profitability Merger & Acquisition Entrepreneurship

A Hairy Ordeal

#Retail #Consumer Goods

Practice this intermediate profitability case interview question from Bain in the Retail sector. Includes detailed problem prompt, clarifying questions, structured framework, and expert recommendation. Part of ProHub's 835+ consulting case library.

ProHub Comment

This case requires candidates to build a financial model comparing two business scenarios: Megan's current independent practice versus acquiring Salon Deluxe. The key analytical challenge is recognizing that Salon Deluxe operates at full capacity with pent-up demand, creating an opportunity to increase NPV through operational improvements like utilizing unused space.

Estimated Time 26 minutes
Difficulty Medium
Source Darden
73 / 100
Your friend Megan Black calls you to ask for your advice. Megan had been working in the beauty industry as an independent hair stylist for 2 years when the owner of Salon Deluxe approached her and asked her to buy the salon. It has always been her dream to own a hair salon, but she isn’t sure if she should do it, or focus on her current business, Megan Black Balayage (MBB). She wants your help to figure out what she should do.

Clarifying Information

  1. What is balayage? Balayage is a technique that “paints” the hair to achieve a more natural looking hair dye experience.
  2. What Is Salon Deluxe’s business model? The salon is a high-end hair salon that specializes in balayage. The business has two segments, services and products. Appointments are booked centrally, through the salon’s booking portal, and clients see 1 of 4 contractor employee stylists.
  3. What does a balayage appointment consist of? A balayage appointment has 3 parts: hair & product prep (10 mins), hair painting (90 minutes), drying & styling (50 minutes)
  4. Does Megan have specific metrics or goals related to this project? Her goal is primarily to evaluate which business has the greatest NPV.
Mock Interview
Interviewer

Your friend Megan Black calls you to ask for your advice. Megan had been working in the beauty industry as an independent hair stylist for 2 years when the owner of Salon Deluxe approached her and asked her to buy the salon. It has always been her dream to own a hair salon, but she isn't sure if she should do it, or focus on her current business, Megan Black Balayage (MBB). She wants your help to figure out what she should do.

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
Structure Analysis Communication Business Sense Quantitative
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Practice this case with AI Mock Interview

Megan Black, an independent hair stylist, is considering whether to buy Salon Deluxe or continue her current business (MBB). Candidates must calculate NPV for both businesses and identify value creation levers, ultimately determining that repurposing storage space into a drying station could increase capacity by 37.5% and raise NPV from $1.3M to $1.73M.

Key Insights:

  1. NPV of MBB (current business) is $1.52M based on 200 clients, quarterly visits, and $150 average spend with 60% service margins
  2. Salon Deluxe’s initial NPV of $1.3M appears lower but operates at 100% capacity with 6,000 requested appointments against 3,200 capacity, indicating significant unmet demand
  3. The critical insight is identifying unused storage space that can be converted to a drying/styling station, enabling each stylist to increase capacity by 37.5% with a $100k investment, raising NPV to $1.73M
  4. The maximum price Megan should pay for Salon Deluxe is $210k (difference between improved NPV and current business NPV)

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