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Old 07-24-2007, 01:43 PM   #1 (permalink)
 
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How to Purchase an Existing Salon

You must approach the purchase of an existing salon with the same evaluation process as opening a new salon. This starts with the evaluation of the location demographics. In addition are a list of questions you must ask.

Name and address of salon

Square footage of salon

How many tanning systems in salon

Type and description of each tanning system and manufacture date.

When did the salon open

How many active clients in the data base (tanned in the past 12 months)

Gross & Net income for 2004, 2005, 2006 based on tax returns.

What percentage of gross where lotion sales

Complete tanning price structure in detail

How many tons of AC in salon

What type of advertising do you do and how often

How much did you spend on advertising in 2006

What type of signage do you have in your salon?

What is the dimension of salon?

What are the dimensions of each tanning room?

What is the monthly rent?

How many months left on the lease?

You must calculate the changes that are required to make this a profitable salon and calculate the cost associated with the changes. These cost must be considered part of the purchase cost.

The worth of the salon should be based on 2 to 2.5 times net profit depending on the age and condition of the salon. If the salon is less than 2 years old, the value of the equipment must be considered if it is new. If a salon is for sale it is typically struggling or failing, as the potential buyer you have the leverage.
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Old 07-24-2007, 01:44 PM   #2 (permalink)
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Re: How to Purchase an Existing Salon

Do you think active clients are within 12 months or within a quarter? 12 months seems long.
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Old 07-24-2007, 01:52 PM   #3 (permalink)
 
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Re: How to Purchase an Existing Salon

I agree with Brandy. The list is a good considering some people just see how much they can make in one busy month and only subtract the rent! And then forget about the slow times.
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Old 07-24-2007, 01:56 PM   #4 (permalink)
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Re: How to Purchase an Existing Salon

And I wouldn't of thought of asking about their advertising $$ spent right off. That's a great question.
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Old 07-24-2007, 02:05 PM   #5 (permalink)
 
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Re: How to Purchase an Existing Salon

Great my place would have an asking price of $0. Now tell us how to sell one.
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Old 07-24-2007, 02:07 PM   #6 (permalink)
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Re: How to Purchase an Existing Salon

Yes please do tell
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Old 07-24-2007, 08:41 PM   #7 (permalink)
 
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Re: How to Purchase an Existing Salon

What about

1. Insurance Costs

2. Is the lease able to be transferred to another owner.

3. What are the terms of the lease and the lease renewal increases per cost for rent and CAM Charges

4. When was the last time the beds had the lamps changed and where is the proof.

5. Is there an existing maint contract with the bed manufacturer or distributor.

6. How many clients are on EFT and what type and amounts.

7. How long is left on their contracts, are there contracts

8. What's the story of the current employees

9. Are there any judgments. liens, or outstanding disputes against the business

10. Are you purchasing as an asset only purchase or buying the name and all other goodwill

11. What is the current average monthly revenue versus cost to run the salon

12. Is the salon upgradeable as far as new beds, different and more powerful types, is the electrical able to handle this or will it cost more to do so

13. Have all of the payroll, property, state, federal, unemployment, etc. etc. taxes been paid and up to date

14. Do not consider the value of the equipment as new if it is less than 2 years old. These beds are like cars, you lose 30% the day you drive them off the lot.

15. Check for active clients in the last 6 months, not 12. 12 Months is way too long, and also check for the return and consistency of each client. How much does each client spend on average.

16. Check the competition, is there a new guy in town that just opened within the last year or so. Try and find out what they are doing, which is hard, but check the running averages of the salon for sale and see if it has decreased over the same time period.


So much more to check than just this, but remember, any business for sale is usually a bad deal, not always, but there has to be a reason.
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Old 07-24-2007, 08:57 PM   #8 (permalink)
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Re: How to Purchase an Existing Salon

Looks like Steve's stalker is back.
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Old 07-24-2007, 09:18 PM   #9 (permalink)
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Re: How to Purchase an Existing Salon

how about the former owner dropping in 180 tans to all of her friends and family and not expecting me to find it and expecting me to honor it?????
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Old 07-24-2007, 11:30 PM   #10 (permalink)
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Re: How to Purchase an Existing Salon

Quote:
The worth of the salon should be based on 2 to 2.5 times net profit depending on the age and condition of the salon.
No way, Jose'! Maybe a business broker representing the seller (and his commission) is pitching that blue-sky-hopes-and-dreams scenario but a buyer would have to be crazy to write that check.

A tanning salon should not be confused with a winning lottery ticket.

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