HELP ME!!! Maybe Purchasing First Salon!! - Page 4 - tanTALK

excusemesir · 10-15-2009, 06:34 PM

Quote:

Originally Posted by kbsunlover

A lot of you are missing what my problem is I think, because I am so confused. To get a small business loan from a bank, and I could be wrong on this, but I don't think I am, you have to show them the profit and loss and what the books say the business brings in, and how it could support the loan payment. And as I mentioned the problem is that the current owners had lived off this salon for three years because the husband was laid off, car payments, house payments, children, bills... and because of this the books look really bad. So I can't take them to a bank to get a loan. Call me dumb, but I honestly don't think this is a oppurtunity I can pass up. The other salons in town over the years have been bought and sold for prices in the $200,000's and this salon is BETTER then those in sooo many ways, clean, BEST location, best equiptment in town, customer services, parking. The current owners need out for personal reasons and personal debt. I just am unsure how to go about the financing! Uhg.

kbsunlover...what many here are trying to tell you is you have a bigger problem than what you think your problem is. You are in love with the idea of owning your own tanning salon. You really need to take a deep breath, step back, and take a look at the big picture. You can't make a logical, rational business decision with your heart. You must use your head. If you are unable to do this you could be in for a very, very hard lesson in business, and in life.

kbsunlover · 10-15-2009, 06:42 PM

I seriously appreciate all the advice I have got, I have learned so much more then I ever expected, I hate to sound ungreatful, I am far from ungreatful, I am just soooo stinkin confused and frusterated because it just seems so easy, and black and white to me. This is what the salon brings in every month, and this is what I have to payout each month (bills/lease). I guess I don't understand what the bigger problem is then.

megatanman · 10-15-2009, 06:43 PM

Did they show you the tax returns?

If not then walk away..You might be hot on this place,but if they fail to disclose any information,they probably have something to hide.

Don't take the negativity here the wrong way,these people are trying to help you avoid mistakes they have seen and made.

In all honesty,you could probably build a small starter salon from scratch with good used beds down the street for less than 50K...that is what you have to "emphasize" to them...Because if they really want to get out of the biz..it will be hard to sell with more competition.

kbsunlover · 10-15-2009, 07:04 PM

I could get the tax returns. I haven't seen them yet. I just thought I needed to see the profit and loss forms from the accountant. I'm sounding dumb right now; but I don't think I know the answer...what will the tax returns show?

engfant · 10-15-2009, 07:16 PM

nothing.

You are in a catch 22. You worked there. You know the place. Tax returns are for making El Presidente happy and nothing else. If you do your taxes and show profits out the whazoo then you didn't spend your money correctly and will have to come up with money for taxes.

That's why you'll never get a tax return the banks like. They want to see a place that makes 80K net on 100k gross.

Fantasy land.

kbsunlover · 10-15-2009, 07:28 PM

Ok, so the tax return is just a joke, because you will never get one the banks like, so it's pointless to even get a bank to loan to a small established business? Good lord. How the heck do people buy tanning salons then!!!? Just have a ton of money sitting in the bank and write a check!? If so, that really sucks for the people who really want to be in the industry and who know they would rock at being a owner. =(

BreAnna · 10-15-2009, 07:38 PM

I've heard that the banks aren't loaning on tanning right now. Do you have a house or some personal assets you can pull the money out of instead? A car, expensive jewelry??

As far as fair price goes, you need to see what the cap-rate is. cap rate = net opperating income / sales price. In a market like this, you should be at 10% or higher. And, you go off the tax return for the NOI.

Or, another way to determine the price, is 3x the annual net profit on the tax return plus the value of equipment (which is almost nothing because it is a depreciating asset). I got this method from an attorny. Example: tax return says $15,000 x3 =$45,000 + $4,000 for equipment = $49,000 sales price. In a good market, some businesses sell as high as 10x the annual net profit.

So, if you get the price down, and borrow against your personal assests, you may be able to buy the salon!

BreAnna · 10-15-2009, 07:42 PM

BTW, usually you are purchasing a building with the business when you use the cap rate method, so it's probably not the best method to use.

Brian Oshman · 10-15-2009, 10:09 PM

The tax returns are not a joke, they are important. That is what determines the value and proof of income. That is what is negotiated on. You need to have that.

If you do not have capitol to buy this salon then it ain't gunna happen.

Do you have any money to throw at this place? Do you have colateral?

engfant · 10-16-2009, 11:32 AM

Brian is correct. It's not even that the salon isn't making money hand over fist it's that you yourself is looking for someone to front 100% of the $$$ for some crap shoot of a business with no collateral other than a smile and a handshake.

10-15-2009, 06:42 PM	#32 (permalink)
kbsunlover Join Date: Oct 12 2009 Location: Washington State Age: 38 Posts: 36 Rep Power: 0	Re: HELP ME!!! Maybe Purchasing First Salon!! I seriously appreciate all the advice I have got, I have learned so much more then I ever expected, I hate to sound ungreatful, I am far from ungreatful, I am just soooo stinkin confused and frusterated because it just seems so easy, and black and white to me. This is what the salon brings in every month, and this is what I have to payout each month (bills/lease). I guess I don't understand what the bigger problem is then.

10-15-2009, 06:43 PM	#33 (permalink)
megatanman I love Derf!! Join Date: Aug 17 2007 Location: Ohio Age: 48 Posts: 1,360 Rep Power: 17	Re: HELP ME!!! Maybe Purchasing First Salon!! Did they show you the tax returns? If not then walk away..You might be hot on this place,but if they fail to disclose any information,they probably have something to hide. Don't take the negativity here the wrong way,these people are trying to help you avoid mistakes they have seen and made. In all honesty,you could probably build a small starter salon from scratch with good used beds down the street for less than 50K...that is what you have to "emphasize" to them...Because if they really want to get out of the biz..it will be hard to sell with more competition.

10-15-2009, 07:04 PM	#34 (permalink)
kbsunlover Join Date: Oct 12 2009 Location: Washington State Age: 38 Posts: 36 Rep Power: 0	Re: HELP ME!!! Maybe Purchasing First Salon!! I could get the tax returns. I haven't seen them yet. I just thought I needed to see the profit and loss forms from the accountant. I'm sounding dumb right now; but I don't think I know the answer...what will the tax returns show?

10-15-2009, 07:16 PM	#35 (permalink)
engfant Join Date: May 20 2003 Posts: 9,301 Rep Power: 29	Re: HELP ME!!! Maybe Purchasing First Salon!! nothing. You are in a catch 22. You worked there. You know the place. Tax returns are for making El Presidente happy and nothing else. If you do your taxes and show profits out the whazoo then you didn't spend your money correctly and will have to come up with money for taxes. That's why you'll never get a tax return the banks like. They want to see a place that makes 80K net on 100k gross. Fantasy land.

10-15-2009, 07:28 PM	#36 (permalink)
kbsunlover Join Date: Oct 12 2009 Location: Washington State Age: 38 Posts: 36 Rep Power: 0	Re: HELP ME!!! Maybe Purchasing First Salon!! Ok, so the tax return is just a joke, because you will never get one the banks like, so it's pointless to even get a bank to loan to a small established business? Good lord. How the heck do people buy tanning salons then!!!? Just have a ton of money sitting in the bank and write a check!? If so, that really sucks for the people who really want to be in the industry and who know they would rock at being a owner. =(

10-15-2009, 07:38 PM	#37 (permalink)
BreAnna Join Date: Aug 24 2009 Location: USA Posts: 3 Rep Power: 0	Re: HELP ME!!! Maybe Purchasing First Salon!! I've heard that the banks aren't loaning on tanning right now. Do you have a house or some personal assets you can pull the money out of instead? A car, expensive jewelry?? As far as fair price goes, you need to see what the cap-rate is. cap rate = net opperating income / sales price. In a market like this, you should be at 10% or higher. And, you go off the tax return for the NOI. Or, another way to determine the price, is 3x the annual net profit on the tax return plus the value of equipment (which is almost nothing because it is a depreciating asset). I got this method from an attorny. Example: tax return says $15,000 x3 =$45,000 + $4,000 for equipment = $49,000 sales price. In a good market, some businesses sell as high as 10x the annual net profit. So, if you get the price down, and borrow against your personal assests, you may be able to buy the salon!

10-15-2009, 07:42 PM	#38 (permalink)
BreAnna Join Date: Aug 24 2009 Location: USA Posts: 3 Rep Power: 0	Re: HELP ME!!! Maybe Purchasing First Salon!! BTW, usually you are purchasing a building with the business when you use the cap rate method, so it's probably not the best method to use.

10-15-2009, 10:09 PM	#39 (permalink)
Brian Oshman Guest Join Date: Apr 29 2001 Location: Stewartsville, NJ Age: 55 Posts: 3,121 Rep Power: 0	Re: HELP ME!!! Maybe Purchasing First Salon!! The tax returns are not a joke, they are important. That is what determines the value and proof of income. That is what is negotiated on. You need to have that. If you do not have capitol to buy this salon then it ain't gunna happen. Do you have any money to throw at this place? Do you have colateral?

10-16-2009, 11:32 AM	#40 (permalink)
engfant Join Date: May 20 2003 Posts: 9,301 Rep Power: 29	Re: HELP ME!!! Maybe Purchasing First Salon!! Brian is correct. It's not even that the salon isn't making money hand over fist it's that you yourself is looking for someone to front 100% of the $$$ for some crap shoot of a business with no collateral other than a smile and a handshake.

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