Buying Existing Salon Advice - tanTALK

dasouthards · 09-27-2009, 06:51 PM

I know there are more posts like this that you can count, but I would appreciate any advice before I make a decision on buying an exising salon. I have listed the basic salon information below. Thanks in advance for your help!

(4) Soleil Sollux 36.3 Beds - All in very good shape
(1) MaxiMist System with mobile tent
Computer with tracking software (can't remember the software name)
Misc. radios, fans, etc.
TV in lobby
Nice display case/front desk
Refrigerator for drink sales
All Benches, chairs, etc.
All Lotion Inventory

Business has been open for just over 3 years.
Owners both have full time jobs and a special needs child so they have not spent much time at all with business.

Costs:
Rent - $550 / Month for 800 SF, Nice upfit no changes needed
Avg. Power - $350 / Month
Phone/Internet - $80 / Month
Water/Sewer - $40 / Month

Total Costs per Month - $1,020 / Month Average

Total Costs Per Year - $12,240 / Year

Average Yearly Payroll - $16,000 / Year

Total Yearly Costs/Payroll - $28,240 / Year

Total Yearly Revenue (Avg. over last 3 years) - $33,000

Asking Price - $18,000

The location is a very good location on the Main St. of a small town, and is directly across the street from a University (Approx. 3,500 Students). The town is one of the more affluent towns in the area, but this is not an extremely wealthy area. However, there are many residential neighborhoods within 2-3 miles of this salon. The only competition is a hair salon on the other end of town that mainly caters to the hair salon business and the tanning is just an extra service that is offered.

If we were to buy this business we would like to add a spray system such as Magic or Mystic to expand the business. We would also be more aggressive with advertising as there really has been none to speak of thus far. Our goal would be to get this salon to around $65,000 total revenue without increasing the costs tremendously. Does this sound realistic? Again, thanks in advance for any help.

Brian Oshman · 09-27-2009, 08:16 PM

OMG!!!

So you are going to spend $18,000.00 to buy a job that makes $4,760.00 a year before taxes and plan on doubling it?

Well 800sq ft. is very small and I would put money on it that this place has no power to run real beds and no A/C to cool whats there let alone real beds and no power to run the A/C either.

There is no room to expand so you think you will take the same old beds or a lateral move of new ones because again there is no power there and double the income? It ain't gunna happen. They are selling because the place is a money pit, not because they have full time jobs. If the place was profitable then they would keep it since it already is staffed and running itself.

This is a bad move and you will not recoup your investment. You will soon realize that you cannot make any money there to upgrade in a place that there also is no room to upgrade and by the time you realize it the place will have a few more years on it further decreasing the value which you will just be closing and the landlord will be emptying the place into a dumpster. That's right, your whole life savings will just go down the drain because no one will buy it for what you paid for it and you will not be able to afford to keep it open.

Sounds harsh? Well the truth is sometimes. Sometimes we all need to hear the cold hard truth. This is a bad idea.

RUN!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

If you still really, really, really want the place then just wait it out. See what happens because they know they have a dog and are desperate to get out of there. You may just be able to walk into there for next to nothing when the landlord puts the lock on the door and repossesses everything.

I would offer them $5,000.00 tops for the place and that is being generous since the beds alone are worth $500-$1000 a piece max.

Also, college towns are some of the worst to open in. The students are broke and want the cheapest units you have. Well all of them are the cheapest that you would have and you would never be able to make any more there.

1) Buy it real cheap.

2) Wait it out.

3) RUN!!!!!!!!!!!!!!!!!!

I would go for number 3.

dasouthards · 09-27-2009, 08:43 PM

Brian,

First of all, thanks for your reply. Given your response, how would you recommend someone entering this business with little to no experience in the tanning business itself (I do have extensive business experience running my own business that has nothing to do with tanning - yearly revenues well over $1 Mil and up to 65 employees). The reason we are looking at getting into the tanning business is for my wife. She is looking to make a career change and we know this business alone will never make enough money by itself, but we were thinking this would be a small salon that would be a good way to learn the ropes of the business, possibly make a few improvements in marketing, pricing, etc. and turn the business to making a modest yearly profit. We could then relocate the business into a larger space (there is currently a space that is approx 2,000 SF around the corner, but not sure about the electrical or HVAC capacities) that has ample parking and several other businesses in the building that drive a good bit of traffic. Eventually this other location could give us the room for expansion and upgrades or we could simply open a second location in a neighboring town. Stand alone tanning salons are few and far between where we are, but there are a lot of people who tan. They currently have to go to hair salons, convenience stores, etc. to tan and the average bed is probably over 10 years old and a 20 min. bed so the competition is slim. I would rather not spend upwards of several hundred thousand dollars to open a high end tanning salon while knowing nothing about this business. I guess my thoughts are that if there is potential in this business to turn it into a modestly profitable business and then expand the business to several locations in the future after learning the business, it may be worth the $18,000 (which is not our life savings). Again, I appreciate your advice and would be interested in hearing yours or anyone else's thoughts on our long term plans. If there would be a better way of getting into the business and learning the in's and out's of running the business successfully without having several hundred thousand on the line, I would be very interested in any suggestions.

Brian Oshman · 09-27-2009, 09:13 PM

Well given your reply of being in other businesses, you may just outgrow this place very quickly. I would suggest to read here and ask questions before making any move on a salon like this. This site is a wealth of knowledge if you sift through it.

Have you pulled the demographics for the area in the 1, 3, and 5 mile radius?

Have you inquired about the larger space and the cost of just starting there instead?

What is the actual pricing structure of this existing salon?

How many "active" clients are there now? (not total in the database but active now)

Is this a stand alone building, unit in a strip mall, store front on a main street, is there adequate parking?

What other businesses are there to compliment this one?

Again, I just think this place has nothing to offer and is just too small to make any real money in.

Since you said it was a career change for your Wife, is she going to take on most of the hours? What would that bring her up to, $20,000 in profit for 85 hour work weeks 24/7/365? You can learn here for free and you will know all you need to know in six months of running a tanning salon and need to move.

I would do more research first.

MATT A · 09-27-2009, 11:29 PM

18k is to much IMO Run from it.

RCKnep3 · 09-28-2009, 06:46 AM

They are saying 16,000 payroll? No way I buy that, even for 60hrs open at min wage for the year would be over 20k. At that, you are talking break even. If you want to do it, I agree just open elsewhere yourself. Put that money into used beds. All of your cost are about what mine are but for 3times the space in a college. Even with the space I have, I am already have about capped my income potential with just 6 beds and 1 multipurpose room. College crowd can be great, though 3500 is pretty small. Nice thing is you do NOT need to buildout expensive. Just get good beds (lamped every well) and keep it clean. We own our town because of those reasons. College crowd is also a renewing base of clients, don't get as many new students this year, just try next year. My big question though is what is the comp around there? If there is none and they can only bring in 33k I seriously wonder about the demand. Oh and we got our 5 bed salon for $30,000 (we redid the entire inside for about 10k though) but with rent of 600 for over 3times that space. Really though, it was the client base we spent for. We honestly had 100 students walking in the door each day from the day we took over. We should net about $40,000 but at the time it was netting about $25,000

Robert K · 09-28-2009, 11:42 AM

^^^Just look at the payroll # alone.

60 hours a week @ $8 would be $480
$480 x 52 weeks $24,960
Now add your share of the SS taxes and other fees.

Even a small salon only open say 8-10 hours a day would have a 30K payroll.

Where are the rest of the expenses?
COGS lotions
Insurance
Supplies
Lamps
Marketing
Repairs
CC Fees
etc etc etc

engfant · 09-28-2009, 12:14 PM

incidentals, ASKadentals????

dasouthards · 09-28-2009, 05:09 PM

As for the payroll, I neglected to mention that they have only been opening the salon for the following hours:

Fall Hours (Aug. - Nov.):
Mon. - Fri. - 2 PM - 6 PM
Sat. - 10 AM - 4 PM
Sunday - Closed

Winter Hours (Jan. - May):
Mon. - Thurs. - 12 AM - 8 PM
Fri. - 12 AM - 7 PM
Sat. - 10 AM - 4 PM
Sun. - Closed

Other Months (June, July, and December):
Salon is Closed

Given these hours, the payroll makes sense, but I really think the changes in schedules would hurt the business. It seems to me everytime you close the doors or drastically cut the hours you would be chasing away your dedicated customers. My wife has been tanning there for some time, and she has mentioned before we started looking into this that the hours seem to always be changing so there has been no consistency.

As for the active customers, I believe I saw that there were between 150-200 active customers in the system at this time. However, some of these may have been customers that came in and paid for a single visit rather than buying a package.

The pricing has been the following:
1 Visit - $6.50
6 Visits - $29.95
12 Visits - $49.95
One Week Unlimited - $14.95
Two Weeks Unlimited - $24.95
Month Unlimited - $39.95

Thanks again for your help...

Robert K · 09-28-2009, 05:12 PM

Put everything into a Income Statement. I would be impressed if you can get a true breakeven below 50K.

09-27-2009, 06:51 PM	#1 (permalink)
dasouthards Join Date: Sep 27 2009 Posts: 5 Rep Power: 0	Buying Existing Salon Advice I know there are more posts like this that you can count, but I would appreciate any advice before I make a decision on buying an exising salon. I have listed the basic salon information below. Thanks in advance for your help! (4) Soleil Sollux 36.3 Beds - All in very good shape (1) MaxiMist System with mobile tent Computer with tracking software (can't remember the software name) Misc. radios, fans, etc. TV in lobby Nice display case/front desk Refrigerator for drink sales All Benches, chairs, etc. All Lotion Inventory Business has been open for just over 3 years. Owners both have full time jobs and a special needs child so they have not spent much time at all with business. Costs: Rent - $550 / Month for 800 SF, Nice upfit no changes needed Avg. Power - $350 / Month Phone/Internet - $80 / Month Water/Sewer - $40 / Month Total Costs per Month - $1,020 / Month Average Total Costs Per Year - $12,240 / Year Average Yearly Payroll - $16,000 / Year Total Yearly Costs/Payroll - $28,240 / Year Total Yearly Revenue (Avg. over last 3 years) - $33,000 Asking Price - $18,000 The location is a very good location on the Main St. of a small town, and is directly across the street from a University (Approx. 3,500 Students). The town is one of the more affluent towns in the area, but this is not an extremely wealthy area. However, there are many residential neighborhoods within 2-3 miles of this salon. The only competition is a hair salon on the other end of town that mainly caters to the hair salon business and the tanning is just an extra service that is offered. If we were to buy this business we would like to add a spray system such as Magic or Mystic to expand the business. We would also be more aggressive with advertising as there really has been none to speak of thus far. Our goal would be to get this salon to around $65,000 total revenue without increasing the costs tremendously. Does this sound realistic? Again, thanks in advance for any help.

09-27-2009, 08:16 PM	#2 (permalink)
Brian Oshman Guest Join Date: Apr 29 2001 Location: Stewartsville, NJ Age: 55 Posts: 3,121 Rep Power: 0	Re: Buying Existing Salon Advice OMG!!! So you are going to spend $18,000.00 to buy a job that makes $4,760.00 a year before taxes and plan on doubling it? Well 800sq ft. is very small and I would put money on it that this place has no power to run real beds and no A/C to cool whats there let alone real beds and no power to run the A/C either. There is no room to expand so you think you will take the same old beds or a lateral move of new ones because again there is no power there and double the income? It ain't gunna happen. They are selling because the place is a money pit, not because they have full time jobs. If the place was profitable then they would keep it since it already is staffed and running itself. This is a bad move and you will not recoup your investment. You will soon realize that you cannot make any money there to upgrade in a place that there also is no room to upgrade and by the time you realize it the place will have a few more years on it further decreasing the value which you will just be closing and the landlord will be emptying the place into a dumpster. That's right, your whole life savings will just go down the drain because no one will buy it for what you paid for it and you will not be able to afford to keep it open. Sounds harsh? Well the truth is sometimes. Sometimes we all need to hear the cold hard truth. This is a bad idea. RUN!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! If you still really, really, really want the place then just wait it out. See what happens because they know they have a dog and are desperate to get out of there. You may just be able to walk into there for next to nothing when the landlord puts the lock on the door and repossesses everything. I would offer them $5,000.00 tops for the place and that is being generous since the beds alone are worth $500-$1000 a piece max. Also, college towns are some of the worst to open in. The students are broke and want the cheapest units you have. Well all of them are the cheapest that you would have and you would never be able to make any more there. 1) Buy it real cheap. 2) Wait it out. 3) RUN!!!!!!!!!!!!!!!!!! I would go for number 3.

09-27-2009, 08:43 PM	#3 (permalink)
dasouthards Join Date: Sep 27 2009 Posts: 5 Rep Power: 0	Re: Buying Existing Salon Advice Brian, First of all, thanks for your reply. Given your response, how would you recommend someone entering this business with little to no experience in the tanning business itself (I do have extensive business experience running my own business that has nothing to do with tanning - yearly revenues well over $1 Mil and up to 65 employees). The reason we are looking at getting into the tanning business is for my wife. She is looking to make a career change and we know this business alone will never make enough money by itself, but we were thinking this would be a small salon that would be a good way to learn the ropes of the business, possibly make a few improvements in marketing, pricing, etc. and turn the business to making a modest yearly profit. We could then relocate the business into a larger space (there is currently a space that is approx 2,000 SF around the corner, but not sure about the electrical or HVAC capacities) that has ample parking and several other businesses in the building that drive a good bit of traffic. Eventually this other location could give us the room for expansion and upgrades or we could simply open a second location in a neighboring town. Stand alone tanning salons are few and far between where we are, but there are a lot of people who tan. They currently have to go to hair salons, convenience stores, etc. to tan and the average bed is probably over 10 years old and a 20 min. bed so the competition is slim. I would rather not spend upwards of several hundred thousand dollars to open a high end tanning salon while knowing nothing about this business. I guess my thoughts are that if there is potential in this business to turn it into a modestly profitable business and then expand the business to several locations in the future after learning the business, it may be worth the $18,000 (which is not our life savings). Again, I appreciate your advice and would be interested in hearing yours or anyone else's thoughts on our long term plans. If there would be a better way of getting into the business and learning the in's and out's of running the business successfully without having several hundred thousand on the line, I would be very interested in any suggestions.

09-27-2009, 09:13 PM	#4 (permalink)
Brian Oshman Guest Join Date: Apr 29 2001 Location: Stewartsville, NJ Age: 55 Posts: 3,121 Rep Power: 0	Re: Buying Existing Salon Advice Well given your reply of being in other businesses, you may just outgrow this place very quickly. I would suggest to read here and ask questions before making any move on a salon like this. This site is a wealth of knowledge if you sift through it. Have you pulled the demographics for the area in the 1, 3, and 5 mile radius? Have you inquired about the larger space and the cost of just starting there instead? What is the actual pricing structure of this existing salon? How many "active" clients are there now? (not total in the database but active now) Is this a stand alone building, unit in a strip mall, store front on a main street, is there adequate parking? What other businesses are there to compliment this one? Again, I just think this place has nothing to offer and is just too small to make any real money in. Since you said it was a career change for your Wife, is she going to take on most of the hours? What would that bring her up to, $20,000 in profit for 85 hour work weeks 24/7/365? You can learn here for free and you will know all you need to know in six months of running a tanning salon and need to move. I would do more research first.

09-27-2009, 11:29 PM	#5 (permalink)
MATT A I'm Banned Join Date: Sep 6 2004 Posts: 13,921 Rep Power: 0	Re: Buying Existing Salon Advice 18k is to much IMO Run from it.

09-28-2009, 06:46 AM	#6 (permalink)
RCKnep3 I'm Banned Join Date: Feb 23 2008 Location: Slippery Rock, PA Posts: 139 Rep Power: 0	Re: Buying Existing Salon Advice They are saying 16,000 payroll? No way I buy that, even for 60hrs open at min wage for the year would be over 20k. At that, you are talking break even. If you want to do it, I agree just open elsewhere yourself. Put that money into used beds. All of your cost are about what mine are but for 3times the space in a college. Even with the space I have, I am already have about capped my income potential with just 6 beds and 1 multipurpose room. College crowd can be great, though 3500 is pretty small. Nice thing is you do NOT need to buildout expensive. Just get good beds (lamped every well) and keep it clean. We own our town because of those reasons. College crowd is also a renewing base of clients, don't get as many new students this year, just try next year. My big question though is what is the comp around there? If there is none and they can only bring in 33k I seriously wonder about the demand. Oh and we got our 5 bed salon for $30,000 (we redid the entire inside for about 10k though) but with rent of 600 for over 3times that space. Really though, it was the client base we spent for. We honestly had 100 students walking in the door each day from the day we took over. We should net about $40,000 but at the time it was netting about $25,000 Last edited by RCKnep3; 09-28-2009 at 06:48 AM.

09-28-2009, 11:42 AM	#7 (permalink)
Robert K Team TanTalk Join Date: Aug 27 2002 Location: East Coast Age: 56 Posts: 2,888 Rep Power: 22	Re: Buying Existing Salon Advice ^^^Just look at the payroll # alone. 60 hours a week @ $8 would be $480 $480 x 52 weeks $24,960 Now add your share of the SS taxes and other fees. Even a small salon only open say 8-10 hours a day would have a 30K payroll. Where are the rest of the expenses? COGS lotions Insurance Supplies Lamps Marketing Repairs CC Fees etc etc etc __________________ Robert Klem Superior UV Technologies (888) 526-7712 x77 robertk@superioruv.com

09-28-2009, 12:14 PM	#8 (permalink)
engfant Join Date: May 20 2003 Posts: 9,301 Rep Power: 29	Re: Buying Existing Salon Advice incidentals, ASKadentals????

09-28-2009, 05:09 PM	#9 (permalink)
dasouthards Join Date: Sep 27 2009 Posts: 5 Rep Power: 0	Re: Buying Existing Salon Advice As for the payroll, I neglected to mention that they have only been opening the salon for the following hours: Fall Hours (Aug. - Nov.): Mon. - Fri. - 2 PM - 6 PM Sat. - 10 AM - 4 PM Sunday - Closed Winter Hours (Jan. - May): Mon. - Thurs. - 12 AM - 8 PM Fri. - 12 AM - 7 PM Sat. - 10 AM - 4 PM Sun. - Closed Other Months (June, July, and December): Salon is Closed Given these hours, the payroll makes sense, but I really think the changes in schedules would hurt the business. It seems to me everytime you close the doors or drastically cut the hours you would be chasing away your dedicated customers. My wife has been tanning there for some time, and she has mentioned before we started looking into this that the hours seem to always be changing so there has been no consistency. As for the active customers, I believe I saw that there were between 150-200 active customers in the system at this time. However, some of these may have been customers that came in and paid for a single visit rather than buying a package. The pricing has been the following: 1 Visit - $6.50 6 Visits - $29.95 12 Visits - $49.95 One Week Unlimited - $14.95 Two Weeks Unlimited - $24.95 Month Unlimited - $39.95 Thanks again for your help...

09-28-2009, 05:12 PM	#10 (permalink)
Robert K Team TanTalk Join Date: Aug 27 2002 Location: East Coast Age: 56 Posts: 2,888 Rep Power: 22	Re: Buying Existing Salon Advice Put everything into a Income Statement. I would be impressed if you can get a true breakeven below 50K. __________________ Robert Klem Superior UV Technologies (888) 526-7712 x77 robertk@superioruv.com

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