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General Tanning Industry Discussions Tanning Salon Owners and Professionals in The Tanning Industry Discuss a wide Variety of Topics. |
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05-06-2005, 08:33 PM | #1 (permalink) |
Join Date: May 4 2005
Posts: 29
Rep Power: 0 | Hi all, I would appreciate any input from fellow owners or past ones about establishing a price to sell. I sold one before and the broker let me come up with it. (shouldn't have paid him I sold it myself) I used 1yr net +FFE. But I've seen 2ys net, 1.25 and up of gross and some I can't figure how they got a price, all listed by brokers, I am talking with a new one for current location, we are moving out of state, and he is telling me that Tanning Trends mag says a salon should sell for 70 to 75% of gross!(should we thank em or slap em) HELP .. PLEASE im if not wanting to post for non owners thanks |
05-08-2005, 08:18 AM | #5 (permalink) |
Join Date: Nov 10 2004
Posts: 70
Rep Power: 0 | As a former Business Broker one of the guidelines for what salons SOLD for was 70-75% of yearly gross sales. Thats selling price of the ones that SOLD. Proper pricing usually is determined by Owners Cash Flow then using a mutiple of 2 to 3 times. Owners cash flow includes Owners salary, owners perks, depreciation, amortization, interest expense, yearly profit on Tax Return, etc. Equipment plays in and would lower the price if its worn out and needing replaced in the near future. Of course other factors might be considered like room to expand, customer base, etc. Over the course of 3 years I looked at many Salons that wanted to sell. On the whole they had terrible records and a professional apprasial was a shot in the dark. It all comes down to what the new owner can generate in revenue and the ability to run the business and pay off the debt. |
05-08-2005, 08:38 AM | #6 (permalink) |
Waiting Confirmation Join Date: Apr 22 2004
Posts: 3,646
Rep Power: 0 | I agree with traditional companies...but a tanning salon will have a hard time getting 3x or even 2x net. It would have to be a top player that has new equipment and a huge EFT base. I have seen a lot of people ask this question and it usually ends with it is less expensive to open up your own... |
05-08-2005, 11:04 AM | #7 (permalink) |
Join Date: May 4 2005
Posts: 29
Rep Power: 0 | DWhite, we have no eft's it is EXTERMELY hard to do them here,(customers won't go for it, we have alot of sunshine!) a couple of chain salons have tried, their out of business now. mostly small business owners. The latest salon that opened spent around 350k and I have customers comming back after the specials are over because they don't like the staff(kids) and don't feel they got the color that my bed gave, and they don't even offer eft's, I have looked into it though.And opening a new one is tricky because of saturation in some areas. And people want to travel no more than 1 1/2 miles because of trafic. Ictire, I know about all the items that go into pricing one, have done the homework, but I have found that alot of people do not do due diligence when buying and go with a feeling of I can do better. By the way my equipment is (3 units 2.5ys 2units 4.5) and they really do still look new, I'm sort of a fanatic. 3 more beds could be installed and possibly a small boutique area because we get alot of tourist.It has been a tanning salon for 22yrs. I'm not trying to retire off the sale, just pay off the beds,and broker, and have some left over. We are in a hot real estate market, so we plan on making $$ on our home. By the way Ictire,who set the rates for broker fees? 12% yikes! |
05-08-2005, 11:29 AM | #8 (permalink) |
I love Derf!! Join Date: Mar 12 2002 Location: Undisclosed Secure Location
Posts: 2,636
Rep Power: 26 | I get so tired of repeating myself. Please, everyone, learn to use the search function before asking common questions. This question has been answered time and time again. There is a wealth of information is the archives. ---- Short answer: the business is worth exactly what a buyer will pay. Clue: net asset value plus a little thrown in for goodwill. That's all. The 2X and 3X net B.S. from brokers is nutz. The odds of an inexperienced person still being in this business in 2-3 years is slim and none. Personally, I won't negotiate through a broker. They are nothing but an impediment. They inflate the "value" because that is what their commission is based on. They will tell an owner anything to getting a signed listing agreement. I have had brokers tell me that they don't like selling tanning salons to people that own tanning salons because "they never want to pay what it's worth". Hello? It's brokers that don't know and they pump up sellers with unrealistic expectations. |
05-08-2005, 02:42 PM | #9 (permalink) |
Join Date: Jan 31 2004
Posts: 139
Rep Power: 21 | ive sold all my stores at 2 to 3 years net plus partial equip value. all new owners are happy one even paid off note early. the other has replaced some equipment and added more. and one store im selling for asset value so each situation is different. |
05-08-2005, 09:12 PM | #10 (permalink) |
Join Date: Dec 2 2003 Location: East Amherst, NY
Posts: 396
Rep Power: 21 | As Jim stated "what a buyer will pay" if someone is interested in starting a salon they will compare to an existing considering buildout and the existing cliental, after that the decorating, equipment and location may not be as much of a value to them as it is to the current owner, each person has their own taste and reference to equipment, the existing one would be priced as high opening their own, they might consider all new with the idea that all new is better. |
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