KaseyandTheSun

So here's the deal I'm think about buying a tanning here's the facts of it it's for sale for $50,000

rent avg 1870mo, electric 250avg salon insurance 105mo. 42,000 cc sales this yr, 16,000 in lotion sales and avg 1000 mo in yrly memeberships. Tan Now Longview wa can be found on facebook, google places, Yelp, merchantile circle etc. currently entertaining two offers. Time is of the essence as the busy season begins. Purchase price includes 1rst mo. rent and re-lamping of salon as bonus.

avg 6-10k on 7beds 2-ergoline 32/120w 15min....3=ergoline 32/120w 20min.....1 52/200w ergoline standup 12 min and 1 34/3 prosun med pressure 160w canopy/100w bench. 3 or 5yr w/option avail. will relamp beds. will pay your 1rst mo. rent and will stay on 1mo if needed. not less than 40k firm

There are two main competitors both with 20 or so rooms in the same salon he wants to move down to San Fransico where his family is should I buy it or make another offer? I'd want to relocate it after a year or so...

sunsally

So, in your thinking ---

1. What is the "value" the 50K is buying - what do YOU see worth 50k there?

2. Ditto if you then plan to move the location - what is your estimate of what they would cost you?


Also - when you say there is $42,000 in credit card sales and $16,000 in lotion sales and $1000 monthly in memberships - do those numbers overlap? For example - are the $1000 monthly included in those $42,000 in credit card sales? What about the lotion? The real number you need to know is - what are the TOTAL sales - cash and credit card.


The equipment certainly isn't worth 50K. And it doesn't sound like the sales would justify 50K - doesn't sound like it is even breaking even. So what do you see that attracts you to consider purchase?

peach

The asking price is way too high and they are trying to unload it at the worst possible time of the year for you. You will eat another 15-20k between now and next tanning season. Cut a deal that is not more than 25k out of your pocket until Jan 2014 or walk.

Steve Underhill

A quicker less expensive way of getting into the indoor tanning industry is to purchase an existing salon. However you must be cautious because there are many potential pit falls.

Some salons that are for sale are profitable and ready for a new owner with minimal changes required. A large percentage of all tanning salons are struggling or failing, typically if a salon is for sale it falls into this category. This alarming statistic is not due to a week industry, instead it is a result of new salon owners not being properly educated and prepared for success.

When evaluating the purchase of an existing salon you must approach it as though you are opening a new salon from the ground up. You must first determine the potential of the salon by evaluating the demographics. If the demographics are good you can now evaluate the salon further. Always look at the parking situation and how easy it is to access the location. You should determine all of the changes that must be made to create a successful salon. To do this you must again have the information and knowledge required to be successful. You must determine the cost associated with making these changes.

You must determine the value of the salon by asking a number of very important questions. Net profit of the salon, equipment value or a combination of both will determine the value.

Very old salons can be a problem because the rooms are typically too small. With proper evaluation, a proven plan for success that the previous owner did not have and the proper funding to make the appropriate changes will allow you to own and operate a successful salon saving a great deal of money over opening a new salon from the ground up. Major mistakes made by people that purchase failing salons: Paying more than the salon is worth, not being any more qualified to operate a successful salon than the previous owner, not identifying or making the changes necessary to create a successful salon, not being properly funded. It is just as easy to succeed as it is to fail, knowledge is power.

__________________
Stephen Underhill
Consultant
steve@smuconsulting.com

sunsally

What makes it worth 25K? How did you decide they would "eat another 15-20K between now and next tanning season" without knowing what the salon actually brings in?? It might cost another 60K between now and peak tanning season to keep the doors open!!


Just because you pay LESS - doesn't make it a deal.

Again - with the information presented, it MIGHT be that the "right" price would be for them to pay YOU to take it off their hands and relieve them of their landlord obligations etc.

Need more info to make an educated estimate.

peach

My assessment is based upon the value of the beds, and buildout of the salon. The beds and buildout in most cases would make the value about 20-25k. That is not to say that I would do the deal. I just said that the value is there. My experience has been that during the slow season Sept-Dec, you go into the red on average 3-5 k per month (as a rule). So, that is where I get the 15-20k loss from now until next season. These are general rules of thumb, and of course every situation is different. But I have run up to 6 salons at once and I always set aside 15k per store to maintain cash flow during the slow season. I would not buy anything at this time of year, unless it was discounted to take the slow season into consideration.

tanislands

You need to go back to the seller - there are A LOT OF MISSING NUMBERS (what are the operating costs?).... What about payroll? payroll taxes?, maintenance? (cost a lot to maintain a salon), supplies? Advertising? Internet Charges? Phone bill? Etc..... Did the seller provide you with their last profit/loss statement?? I would also compare last year numbers to this year numbers as you do not want to buy a sinking ship.

KaseyandTheSun

Thanks all for the feedback! I never knew it was so much to open a salon! I need to sit down with my investor and we need to go over all the numbers! As far as payroll goes he has no employees besides himself I would probably have my sisters work their with me for a while. Then add maybe one or two do you think I should buy at this time or wait for another... salon once again thanks for all feedback more advice would be awesome!!

sunsally

Read this site for 6 months before you even CONSIDER buying a salon.

Payroll - whether he works mostly himself or you make your sisters work for you (for free?) HAS to be factored in to see if it is a good "investment". Minimum wage plus taxes etc works out to about $3k/month for a salon. So it costs YOU $3K/month to either pay someone else minimum wage OR you pay yourself that much (you wouldn't take home that much - maybe $2200) to work 70 hours/week, 7 days/week, every day, all the time. Are you ready for that? Nobody works for "free" for long. And even if they would - why?? It isn't a good investment if you can't afford to even pay yourself and others minimum wage!

At $250/mo electric, this salon isn't making money - because that is barely enough electric to keep the lights on!

If you consider payroll, rent, utilities etc -- this salon costs about $6K/month or $75K/year just to BREAK EVEN. If you BUY IT for $50K, then your costs are THAT much - plus paying back toward the $50K. From what you are describing, this salon might be grossing $60K/year. So at BEST it is probably breaking even, but more likely it is losing money - probably in the form of him/her not taking any money for themselves and working there for free.

Do you want to go from being PAID to work there to paying someone ELSE for you to now work open to close, for no money??

No "investor" would put money into this without a lot more information. And the information will show it doesn't make sense =- as an "investment".

Black Sun

The fact that the present owner works there alone is an indication of no business. If one person can handle the work flow, there is obviously a lot of 'down time'


I'd offer 5K as a generosity and take over the lease...