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Old 01-25-2006, 10:11 PM   #1 (permalink)
 
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Reporting Cash

The salon I'm thinking of purchasing had revenue of 59K last year. The owner told me that 60-70% of the tanning business is cash and the 59K is what was reported to IRS. So he told me to use a low ball # of 30% and that should tell me what the actual revenue is. I can't survive on 59K but if there is an add'l 30K in cash that he's not reporting then maybe it's an option. Does this sound correct? I wouldn't want the IRS on my butt so I would want to do it the legtimate way. I'm just trying to find out what the actual revenue for this business is. Can anyone help me?
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Old 01-26-2006, 07:41 AM   #2 (permalink)
 
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Re: Reporting Cash

When buying a salon or when a finance company is looking at the books of a salon, only what is reported is real. Anything else does not exist. When you look at purchasing a salon it is a good rule that a salon is worth 2 to 2.5 times the Net profit of the most recent completed year. Age of salon and equipment will determine the .% variance.
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Old 02-02-2006, 09:32 PM   #3 (permalink)
 
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Re: Reporting Cash

I learned the hard way, just go by what was reported. The person I purchased my salon from told me that it did 55K off the books and 35K on. Yeah right. My first year was WAY better than his and I only did 40K. Just go with what was reported and if you do better than that you win, but you don't want to go with what they say was done because in the end you will probably not be doing that. But good luck to you.
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Old 02-02-2006, 10:31 PM   #4 (permalink)
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Re: Reporting Cash

Reporting Cash



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Old 02-03-2006, 08:21 AM   #5 (permalink)
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Re: Reporting Cash

Yes, by all means, don't believe any profit numbers that can't be verified. I owned a laundromat back a few years ago and I knew first-hand how much skimming took place in these types of businesses. I purchased another bigger laundromat based on the numbers that the prior owners showed me. I also added 30-40 % for what I assumed was their skim. Never assume, because the numbers they gave me were entirely what that laundromat made. They were honest owners and I was lucky to sell that losing venture in 6 months.
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