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Old 09-25-2007, 05:09 PM   1 links from elsewhere to this Post. Click to view. #1 (permalink)
 
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Reviewing the numbers for a salon

I came across a tanning salon for sale and met with the owners this morning. The salon is a 5 bed, and rents a room to a massage therapist and a nail tach. The business was started as a side project for a wealthy builder's daughter here in town. They are asking $149,500 which includes the building, equipment and inventory. They are motivated sellers and don't need the money, so I think this would be a good deal for owner financing, assuming I can make it into a good deal! Gross income for 2007 (so far) has been $38k which does not include the side income from the massage lady or the nail tech as they just started. (Total gross income from them is $300/month each). Bringing a true estimate to closer to $45k. Estimated utilities are $400/mo (ranging from $100/month in the off-season to $700/month during peak.) Their client list is around 1500, and they are growing about 25% per year. They have only been in business 2.5 years and the seller wants out as his daughter is starting her own building company. I would add additional features to this salon, such as bathsuits and vending machines.

My questions are, "What amount of gross income is reasonable for a startup?" "At what point should a startup be expected to turn a substantial profit?" "How much revenue can a 5 bed be expected to make?" "What would fair market value be for a tanning salon with gross income being so low-even if the building is included?"

Any insight would be much appreciated.
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Old 09-25-2007, 05:22 PM   #2 (permalink)
 
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Re: Reviewing the numbers for a salon

What kind of building? Strip mall or just big enough for a 5bed salon?

Do you own the land it's on?
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Old 09-26-2007, 07:13 PM   #3 (permalink)
 
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Re: Reviewing the numbers for a salon

The salon is a converted home that is zoned commercial. The asking price includes the house and land. The house is big enough for maybe 9 beds, but two of the rooms are used by the massage lady and the nail gal. There is a large lot behind the house that is useless- (not easy for parking) that I could add another building, or expand the current one.
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Old 09-27-2007, 08:20 AM   #4 (permalink)
 
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Re: Reviewing the numbers for a salon

i would walk away from the deal
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Old 09-27-2007, 08:45 AM   #5 (permalink)
 
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Re: Reviewing the numbers for a salon

$150K for a building isn't very expensive but it depends where you are in the country I guess.

What's a house go for in that area of equal size?

The biggest risk of owning a small business is that unless you own the building (and land. See if that's included. It isn't in my area) then you really have nothing of value other than revenue.

If you own a building you at least have something of value.
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Old 09-27-2007, 03:42 PM   #6 (permalink)
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Re: Reviewing the numbers for a salon

Unless you can live in it,I would run! If I can't get 10+ beds its not even worth it IMO.I passed on a nice place a couple months that had capacity of 8 plus a stand-up on the floor.You need to break it down to how much each bed can make you and factor in operating expenses.

Remember you will be paying taxes on the property if its included,not to mention your major building maintenance will be at your expense.

38k would not even cover my rent and electric.
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Old 09-28-2007, 02:22 PM   #7 (permalink)
 
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Re: Reviewing the numbers for a salon

I think it might make better sense to give up on the tanning salon idea. get her to take a mortgage on the property then rent the property to a family. If you can get the owner to carry 100% of the financing, highly unlikely, but what the **** do i know. Sell the equipment and pokcet the money. tanning is not the hot industry it used to be. ask anybody on tantalk and they will tell you this. i hope this helps.

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