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Old 04-09-2006, 05:35 PM   #1 (permalink)
 
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Is this Salon a buy or pass?

I am looking at purchasing a salon here in NY (state not city). It is 4 years old but current owners have only owned it for a little over a year. Story is that the male partner was in an accident and he was supposed to be running the store while the other partner is silent. My first thought was "yeah right" but after meeting him I am leaning towards thinking it just might be the truth...I saw stuff that was hard to fake. It is their only salon and they seem a little clueless to me...however they could be good fakers. Nonetheless here are the numbers..what do you think?

Sq Ft 1040
Beds from 2001:
4 x Orion 35/3
2 x Orbit 44/4
1 x Dr Muller standup (I forget the name) with dressing room.

Gross: $89,585
Net: $18,641

Monthly Expenses:
Lease / CAM: $3,351
Gas and Electric: $600
Cable and Phone: $160
Insurance: $185
Sewer $38
Employees: $1,590

Asking $27,000. Includes beds, $1,000 (they say) worth of bulbs, computer, washer / dryer etc.

There is room for one more bed and it's already wired. They have no clue how many hours are on the beds or how to check but he told me that I was welcome to check myself if I knew how...so I will. How do you check...lol?

Rent to me seems super high but New York so close to the city is like that. Actual rent is $2,300 with $1,000 of CAM charges...wow. Their lease is up in December so I would have a chance to renegotiate but I bet I can't get it down more than a couple of hundred bucks.

They are using full time employees as neither of them are working at the salon. Paying $7.50 per hour. Also, I asked for the tax returns and they are going to provide them but he already said it's a 50% cash business so don't plan on seeing that on the return. I already told them that I couldn't take anything into account that wasn't reported.

It's the only gig in town..nearest competitor is a chain about 7 miles away but very difficult to get to (have to make a u turn on a divided highway.)

Thanks in advance for all the great advice I know I'm going to get!
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Old 04-09-2006, 06:18 PM   #2 (permalink)
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Re: Is this Salon a buy or pass?

well the rent is high, how many more yrs on the lease...if thety are grossing almost $90k why only selling for $27k......do they own the equipment? wher in ny is it?
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Old 04-09-2006, 06:48 PM   #3 (permalink)
 
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Re: Is this Salon a buy or pass?

The beds are owned outright. The lease is up and will start anew with me or whoever buys. It's in Rockland county. $27k didn't seem that low to me. I was trying to judge it on how much the equipment was worth today and it seems to be around 20k. They need to get out since the one partner who was supposed to work there can't for physical reasons.
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Old 04-09-2006, 06:53 PM   #4 (permalink)
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Re: Is this Salon a buy or pass?

How many hours were worked by owners and were they paid an hourly wage. this can change the payroll number
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Old 04-09-2006, 07:02 PM   #5 (permalink)
 
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Re: Is this Salon a buy or pass?

56 hours a week there is an employee there and the healthy owner is working the rest (nights and weekends) at no pay.
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Old 04-09-2006, 07:10 PM   #6 (permalink)
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Re: Is this Salon a buy or pass?

Run 4 years 89k rent at almost 4k I don't think so.
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Old 04-09-2006, 07:27 PM   #7 (permalink)
 
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Re: Is this Salon a buy or pass?

Quote:
Originally Posted by MATT A
Run 4 years 89k rent at almost 4k I don't think so.
I don't understand what you are saying.
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Old 04-09-2006, 08:05 PM   #8 (permalink)
 
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Re: Is this Salon a buy or pass?

Their Gross seems correct for the number of beds. Their Net seems a little low however. There is a slight discrepancy with their cost but not a big deal. I see they didn't add the cost of lotions to their expenses. Is the $18,600 before or after the working owners paycheck? My guess is the $18,600 is NOT counting how much the working owner took. If that's the case, you'll be paying $27,000 for the privlege of working a full time job making less than $18,600/year. That would equate to making just $8.90 per hour based on a 40 hour work week. Think I'd pass on that one.
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Old 04-09-2006, 08:12 PM   #9 (permalink)
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Re: Is this Salon a buy or pass?

Quote:
Originally Posted by Sunnytimes
I don't understand what you are saying.

After 4 years all they are doing is 89k per year. That is pathetic and their rent is almost 4k a month. You forogt to include lamp changes and repairs plus some other items.
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Old 04-09-2006, 08:13 PM   #10 (permalink)
 
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Re: Is this Salon a buy or pass?

Quote:
Originally Posted by Sunnytimes
I don't understand what you are saying.
Maybe that the rent/cam is at almost 40k a year, around 45% of the gross. after 4 years there is a chance there is no more money to be had in that area ? Take your 30 grand to vegas.... you may have better luck of making more there.
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