tanTALK - Tanning Salon Business Owners Community - HELP ME!!! Maybe Purchasing First Salon!!

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HELP ME!!! Maybe Purchasing First Salon!!

I'm going to try and remember as many of the details as possible, please be honest in your replies as to what you think, this is a weird situation. I am 23 years old. I am learning so much in this process, so sorry in advance if I sound like I don't know what I’m talking about. I’m going to lay it out the best I can.

I have worked at this salon I want to purchase for 6 years and am now the manager, so I know everything, the books, the numbers, the bills, the clients, and everything else; the current owners have always been completely open with me. The salon first opened in 2000 and in our town there is two other salons that we don't really consider rival salons, but they are still competition. One caters to the high school crowd and is ridiculously cheap with crap beds, and the other is so ridiculously expensive for our town, that people don't even want to deal with them (population growing... but the population was 16,710 in 2008). Our salon is right in the middle pricing wise, we have a lot of older, well off clients, not many teenagers unless they come in with their parents. We have a pretty steady cliental also, we get about 1 new client coming from another salon a day, I think any new client is good, especially since it’s our slow season.

The salon has 3 Ergoline 450 12 minute lay downs, 1 Sundash Radius 12minute stand-up, and 1 Sun Capsule 7 minute stand-up. The Ergolines and Sundash were purchased new in 2000 when the salon opened. They are still in GREAT condition, regularly maintained. Then Suncapsule was purchased in 2007.

The current owners are the second owners of this salon. I worked for the first owner before she sold to the current owners. It is my DREAM and my greatest ambition to be a salon owner, I went to school for small business, and feel so confident that I can do this. I have always known since I was 15 that I wanted to be in the tanning industry.

Now the current owners want to sell... So, here’s the story.

They purchased in November 2006. As far as I know (and I have researched) the books were in tip-top shape in 2006. They purchased with investors that loaned them the money. So no bank loan was involved. It was their choice to do that, so they didn’t have a large loan payment and could pay smaller payments to their investors (which are family to them). In March of 2009, the owner told me they needed to sell, I told her I was interested and started the process of collecting the numbers, the books, and bill amounts... the information. I took all of this to a financial advisor to have them looked at. The advisor told me no way. He said everything in this salon was only worth maybe $70,000. And the asking price in March was $180,000. So I went back to my boss and told her what he said. She then tells me that when her husband was laid off they lived off of this salon and that she knew the books would look like crap. The financial advisor was astonished that she claimed on the books that she spent $10,000 on cleaning supplies in a year. So basically they were taking this money from the salon and saying it went to cleaning supplies last year on the books. On the sales tracers, I see how the money is there! I work here; I see the money in this salon EVERYDAY. This is what is frustrating. I see these year-end numbers from the last 3 years and wonder where the heck all this money is!! But they took it all to live off of, and in the process made the books like there is NO money at all. So this week my boss comes to me and says we need out and soon, and said she would sell to me for what the advisor said the salon was worth $70,000. They need out because the have massive debt in credit cards, and it’s to the point where their house is in jeopardy. I would assume because when they purchased the salon, they went on spending sprees and thought they had all this money. NONE of this debt is related to the salon, it’s all personal. If I were to buy, I WOULD START COMPLEATLY FRESH!!! It would be only me working, so I could cut back on payroll completely. My bills would only equal what the necessities are; they put themselves in this situation by the husband being laid off and trying to continue this lavish life style off the salon. So now the books look like crap and they accumulated all this personal debt to just try and survive, thanks to the economy. I don’t believe they would just hand it over to me and let me make them payments because they need a lump sum to pay off this debt they have, and to give some to their family investors. If they sell, they will still just make payments to the investors out of their pocket, like I said I will have NO debt to anyone or anything (besides a investor if find one or a bank) if I make this purchase.

So I take all this once again to my parents, and they are interested in this salon. BUT they just bought a beach house (bad timing), so my dad and I go to talk to the bank, and I’m sure you can guess what they say. They see that the money is there and the numbers look good, but how can they loan on something when the profit and loss looks like ****. They said, how would we get our money back if the salon failed, because the beds are pretty much the only profit in here and they would just go to auction for nothing.

I thought Obama was all about small businesses, if so why wont the bank loan me the money!?
I don’t really have a question. I just want to know what you all think. I think if I could come up with the money, (any ideas how) I could clean the books up, get everything looking peachy again, and not be dumb with the money like they were. I see so much potential for me and I hate to see the opportunity slip by. =(

I hope I got all the information in here, I’m probably missing some facts that I will remember later. Thank you all for reading my novel and for any advice you can give!