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Old 03-02-2010, 02:46 PM   #1 (permalink)
 
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Buying an existing salon. Would really appreciate your advice/help!

I have been looking into purchasing a tanning salon for a while now. I have sent out many emails to business's for sale in my area, many are a ways away. Here are the questions I have been asking. I came up with this from researching this forum as well as some research on my own.

1. Why are you selling?
2. How long have you been in business?
3. Can I see your financial statements for the last 3 years?
4. What are your expenses, lease amount, utilities, payroll, etc. Also how long is left on the lease term?
5. Who are your biggest competitors in your area?
6. Are you willing to finance part of the purchasing price?
7. How many clients are in your database? Both active and inactive.
8. Do you have any outstanding loans/debts? Also do you have clear title to all your equipment?
9. Who knows that your business is for sale such as employees?
10. Where are you located?

The reason I did not ask about equipment is because 9/10 places already have the equipment listed.

Now, just the other day I found out a very nice place just down the street from me is for sale. I always said if I could own one in my area it would be this one. They aren't the cheapest but they are by far the best in my area. Problem is, it seems to me they are asking way too much, not surprising considering their reputation but still.

The equipment is about 10yrs old, all Tan America beds made out of aluminum. The place is spotless, he's one a bunch of awards, strongest beds around, very nice owners who have a great reputation, etc, etc.

Now for the price. I hear 2 times net profit is a good starting point for negotiating. They do not have any employees, just the owner and his wife run it. His gross for 09 was $126,000, total expenses were about $34,000 I believe which gave them a profit of about $92,000 last year. They are asking $140,000 for the place.

Now I have been following all the business's for sale for a good 2 months and they are priced high compared to everything else I have seen. Yes, their operating cost are less then everyone else because they don't have employees but still. The only place I have seen in their price range is in a VERY nice area, grossing over 165k in 09 and asking 150k.

If I am going to get something I think now would be the best time as busy season has just started.

Any and all advice is very appreciated.

Thanks in advance,
KRJ
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Old 03-02-2010, 03:06 PM   #2 (permalink)
 
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Re: Buying an existing salon. Would really appreciate your advice/help!

I forgot to add he is willing to give me a 5yr promissory note at 5% and would like 50% of the selling price upfront.
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Old 03-02-2010, 06:49 PM   #3 (permalink)
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Re: Buying an existing salon. Would really appreciate your advice/help!

I would look hard at the expenses. They seem very low.

COGS (lotions)
Lamps
Electric
Insurance
Rent
Other rent
CC fees
S-tax (if included in gross sales)
Marketing
Repairs
Supplies
Professional fees
ITA membership
Phone / Cable / Gas
etc

You also have to figure in payroll. Time is money. Use $10 per hour for every hour open. Lets say the salon is open 70 hours a week then your payroll would be $36,400.
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Old 03-02-2010, 08:02 PM   #4 (permalink)
 
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Re: Buying an existing salon. Would really appreciate your advice/help!

Quote:
Originally Posted by Robert K View Post
I would look hard at the expenses. They seem very low.

COGS (lotions)
Lamps
Electric
Insurance
Rent
Other rent
CC fees
S-tax (if included in gross sales)
Marketing
Repairs
Supplies
Professional fees
ITA membership
Phone / Cable / Gas
etc

You also have to figure in payroll. Time is money. Use $10 per hour for every hour open. Lets say the salon is open 70 hours a week then your payroll would be $36,400.
Thank you very much for this list. I use it and find out all the details when I meet with him in the evening. As for how much they pay themselves and then what is left, if any, I don't know yet.
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Old 03-03-2010, 07:06 AM   #5 (permalink)
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Re: Buying an existing salon. Would really appreciate your advice/help!

Don't worry about how much they pay themselves. Figure in what payroll will cost you.
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Old 03-03-2010, 11:22 AM   #6 (permalink)
 
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Re: Buying an existing salon. Would really appreciate your advice/help!

Quote:
Originally Posted by Robert K View Post
Don't worry about how much they pay themselves. Figure in what payroll will cost you.
I plan on working at least Monday-Fri, normal business hours during those days is 13hs/ed which I plan to work myself. On the weekend I can have my mom worth for me. She will do it for extra money for around $10/hr. I would like to be working there as much as I can.
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Old 03-03-2010, 11:35 AM   #7 (permalink)
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Re: Buying an existing salon. Would really appreciate your advice/help!

If you and your mother are not great salespeople you'll be hurting the salon more than helping it. Only the best salepeople you can hire should be working behind the counter. This is IMO one of the biggest mistakes salon owners make. They think that because they own the salon they can work the counter even if they aren't the best choice when it comes to making sales.
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Old 03-03-2010, 01:14 PM   #8 (permalink)
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Re: Buying an existing salon. Would really appreciate your advice/help!

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Originally Posted by KRJ214 View Post
I plan on working at least Monday-Fri, normal business hours during those days is 13hs/ed which I plan to work myself. On the weekend I can have my mom worth for me. She will do it for extra money for around $10/hr. I would like to be working there as much as I can.
Your time is still worth money. You need to factor that in. Are you buying yourself a job or investing in a business?

If you are buying yourself a job put your money in the market and go get a job instead. If you are investing in a business then you need to factor in a full payroll.
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Last edited by Robert K; 03-03-2010 at 01:18 PM.
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Old 05-13-2010, 07:29 PM   #9 (permalink)
 
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Re: Buying an existing salon. Would really appreciate your advice/help!

Hey guys. I'm looking at purchasing a tanning salon that I have been going to since it opened in 2002. The owner says the sales for the last 3 years were approx. 155k and it cost approx 70k to operate and pay the supplies and bills, In 2008 50k was spent updating the beds and he cleared approx 86k each year for the last 3 years. It has 7600 clientale The salon has the following beds employes 3 people (that cost is included in the 70k). He is asking 170k for the business.....advice on a wise buy or not? Its a very well taken care of salon and in a great location (a strip mall with a Kroger, restaurants etc)

7 20 min.beds
2 15 min. bronzing beds
1 12 min. stand up bed
1 13 min. high intensity bed
1 12 min. high intensity bed
1 spray on bed
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