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Old 03-11-2006, 08:06 PM   #1 (permalink)
 
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Young gun: step 2

Alright guys and gals Im moving on to the second step of buying the tanning salon and want to paint a mental picture for you all and gather some responses.

The Scenario:

Im looking at a salon with 8 standard 20 minute beds, two of them equipped as bronzers. The salon has anywhere between 800-1000 tans a month in the slow season, and upwards of 3500 tans a month in the busy season. The owner claims a net profit of 70000, however is not able to provide the tax papers to back this. This is all based off of the software sunnies (sp?) print outs available to me. The business is available to me at roughly $70000 and Im wondering what your opinions are on this price. My plan is of course to replace 2-3 of the 20 minute beds, with upgrades to offer a higher range of options to the customers. My question to all of you is, Do these figures seem realistic to you?
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Old 03-11-2006, 08:41 PM   #2 (permalink)
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Re: Young gun: step 2

Let's do the math, shall we:
3500 sessions @ 20 min = 70,000 minutes = 1,166 hours of tanning a month
1,166 hours / 8 beds = 146 hours per bed per month / 30 days per month = about 5 hours of tanning per bed per day. allowing for 5 minutes per session for dressing and undressing/lotion application, about 6 full hours of tanning per bed per day. From what you know about the salon and it's traffic,is that a realistic number?
Do the hours on the beds support that kind of activity?
Does the utility bill support that activity?
imo never accept numbers that can't be verified
if you ask me, a business that nets $70k doesn't jibe with a $70k price
why no tax form verification, owner doesn't want to give or he didn't claim all the $$.
specifically, what equipment does it have?
any competition?
does the profit/loss figures include all salaries or did the owner work lots of hours and take all $$ as profit and not salary?
why is current owner selling?
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Old 03-11-2006, 10:11 PM   #3 (permalink)
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Re: Young gun: step 2

You might also want to think about replacing SunEase with another type of computer program. Speaking from experience, it sucks. It seems kind of fishy that he can't produce tax papers backing up what he says other than reports. He could have reloaded the program into another computer and altered his sales to produce those figures. Electric_Sun broke it all down for you. Something isn't right.
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Old 03-16-2006, 11:24 AM   #4 (permalink)
 
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Re: Young gun: step 2

When buying any business the value will be based on net profit supported by tax returns. Any additional revenue that is not supported by tax returns does not exist for the purpose of purchase value. What is the income as stated on the 2005 tax returns?
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Old 03-16-2006, 12:25 PM   #5 (permalink)
 
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Re: Young gun: step 2

^^^ what they said
I paid a little less than that. 6 20 min beds. Place was a dump. Needed total over hall. Also produced Sunease documents, but they backed it up with tax returns. I also sat around the salon for about a wk watching traffic flow. I replaced 2 of the beds remodeled etc. I am seeing way more net than than your guy is seeing and I have a similar amount of people tanning daily. I have some long crazy hours though, so keep that in mind.
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Old 03-16-2006, 01:29 PM   #6 (permalink)
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Re: Young gun: step 2

Ask to see what he's done this month alone.
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Old 03-16-2006, 01:38 PM   #7 (permalink)
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Re: Young gun: step 2

Yeah Knx is right, if the salon is operating right now. That salon should be reaching peak busy season. If he is operating with SunEase you can have him give you the sales report for the busy months of the tanning industry.
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