TanAtCoCoBeach

1925/mo plus cam? versus 1500/mo plus cam? Thats a difference of 5100 the first year. Thats $5100 that can be put in to a new bed or advertising or both to get this struggling business back on its feet to get more customers.

And if he can get into a center for $1300 a month inclusive of cam for 2000 square feet thats a savings of $7500 a year but then you factor in the lease of the walls and fixtures at $300 a month and you still save $3900 a year. Factor in electrical and you still save $1500 a year AND he gets a better location...

TanAtCoCoBeach

and the interest from his loan shouldnt be sunsurfers problem. If I were the landlord I would much rather lose $400-600 a month instead of potentially losing $1500-1800 a month. I am also pretty sure the landlord would not have spit out the $1500 number without knowing what his bottom line number was. $1500 is his bottom line he needs to make the mortgage payment. He wants to make money.

Play hardball and walk if you need to. You are in control. It is a bear market in real estate right now. Plenty of vacancies. Plenty of landlords that are willing to deal. We tried negotiating with our prior landlord when we bought our salon. The landlord didnt want to even bring up the location up to code so we walked. That location still sits empty after a year.

If the landlord wants to play that game, let him choke on it.

iheartmytan77

I'm going to have to agree with tanatcocoabeach. Don't let the landlord intimidate you. People are to quick to avoid confrontation in this country, especially when it comes to business. There is nothing wrong with push back and walking if necessary. Don't put yourself in a position that you may regret. Better to be patient and not sign than to give in b/c you want to own a tanning salon. Remember you want to own it b/c you want to make money and enjoy what you do.
You WILL NOT enjoy it if you go under b/c of overbearing rent! Push back and be patient.

sunsally

Guess I missed this thread..............couple of red flags for me, although as I have just looked at your posts it appears you are asking about lamps now, so it may be too late. Even so, here goes...........:

1. The salon is the newer of all we have looked at but we feel even though it does not have the clientele, amount of equipment, or size of some of the other we feel it is the one we can make successful.


Those are 3 GIANT "buts". In fact - they are killers. if it doesn't have clientele, equipment or room to grow, what is it that is possibly giving you the signal it can be successful??


2. The salon opened in late 2009 and is being sold by a couple who have some family issues and have really been neglecting the business and letting a manager run it.

There isn't a salon in existence today where the prospective buyer doesn't look at it this way --- or the seller doesn't try to position it this way! It is the oldest story in the books. Unfortunately, if a salon opened in late 2009 and is already for sale, the bottom line is IT IS NOT PROFITABLE - and THAT is why it is for sale. No other reason.

3. The cost to buy I feel is a little high due to the lower revenue, however I also feel its fair because it is new and in a new strip mall and the amount of money spent in the build up and electric upgrades.

You never said........how much is the seller asking? FYI, since you said the equipment is NOT new, it sounds like you are paying for new decor/buildout --- which is NOTHING you can take with you and belongs to the landlord. You should NEVER pay for that! If the salon wasn't profitable, you should have paid the value of the assets - from what you describe here, I'd put a value on this salon of $10K. $15K at the most if the lamps were fresh and you were also getting a computer with software, some inventory, etc.


4. The equipment is not new, it is all the Harpo/Prosun Lumina 34/3 (3), 36/3 (2), and (1)Lumina 42 stand up. There is a total of 6 beds but 8 rooms. So room to grow.

This is a very "low profitability" mix - basically level 1/2 beds. If you CHOOSE to fill in the other 2 rooms -- that is at a greater investment than you have already made, so that gets added to the total investment cost. What size rooms and what electric (if any) is already run to them --- or will you have that investment as well?


5. The overhead is in the lower level, during the off season it has ran about 5000 and peak season about 6000. Some product, not much, is in the salon.

What is in this number of 5-6K? By my calculations:

Rent - $2700
Payroll - should be approx $2500-3000 (to be the equivalent of $8/hr plus taxes & minimal commissions for a salon open 60-70 hrs/week which would be normal)
Electric - $500-1000 (even with limited customers, will be running AC most of the year in FL)

Still to add --
Insurance
Cost of Product
Phone & internet (if needed)
Credit card & bank fees
Other utilities - gas & water
Maintenance including re-lamping
Supplies - cleaning, towels, etc
Advertising
Loan costs (even if paying self back)


Even if you are "working it yourself" and don't take a check - you MUST figure in this minimal payroll cost in your calculations to see if it makes sense as an "investment" or not. Ditto the cost of money to buy the business (even if it is your own money and/or money being paid to the seller over time)
I'd estimate their "real" costs as about $8K slow/$9K busy (only thing that changes is more electric, commission, products costs)

That is BEFORE ADVERTISING - and if you don't advertise, it will NEVER succeed.

For YOUR costs, add in the cost of the business purchase (still unknown to me), plus advertising.


6. Part of our reason for my wife wanting to get out of banking and buying the salon is she drives an hour or more depending on the time she get off of work. This particular salon is about 15 min away from our home and in the city I work. She does not need to make the same money, but she wants to make some money. My job covers the benefits and bills. I think this salon has the potential to pay her salary of what she made plus still profit. Its a risk for sure, to quit a job that pays without a risk of losing.

Your wife is changing from a 40 hr/week M-F job (assumedly) with an hour commute each way to..........

a 7 day/week, 10+ hour/day business.

Open every day of the year other than maybe a couple.

No paid vacations, so sick time, no medical benefits


An hour she isn't there PERSONALLY to run the business - you have to turn it over to someone else, pay them, and hope they put in the effort (that you feel the previous owners did NOT get from their staff and hence the failure).


Not sure what she makes now, but for this "investment" to make sense it has to:

a. Pay back what you pay to buy it
b. Replace the current salary your wife is giving up to run this
c. Make additional money in order to actually be a "profitable" investment

That is putting a LOT on the back of a 6 bed salon in a saturated area that is currently losing money.

7. I have spoke with the landlord and renegotiated a much lower rent then what the current owners are paying. We had it reduced from 2700 to 1500 for the first year and 1800 the following two years, this is for 1500sf. Our original agreeement was 1500 for 1 yr and 1800 the two after. (Now he wants 1925 a month plus 3000 each November for property taxes on 1400sf usable space,)

So the rent went from $2700/mo to $2175/mo (averaging the $3K Nov payment). A savings of $500/mo off their costs.

8. There is a pretty large parking lot and in a busy area.

But yet they have very few customers. This is NOT a "if you build it they will come" sort of business - as the sellers realized.


9. From looking at the books from mid November to April it was very busy for a salon of it size averaging around 50 people a day, some days more some less. The highest revenue day was a little more than 750, but in peak it average about 350-400 a day. Non peak season is much lower, around 120 to 150.


$350-400/day for mid-Nov to April. I calculate that to about $55-60K

Non peak - 25-30K

TOTAL YEARLY REVENUE - 80-90K. Am I close?

As calculated above - the cost to RUN this business is approx $95-100K/yr (with your rent reduction) -- BEFORE ANY ADVERTISING OR LOAN COSTS.

So, BEFORE adding extra equipment or relamping, adding inventory, advertising to try to build clientele, any prof'l fees to buy the business (attorney, accountant, new signs, checks, deposits for utilities,...) OR paying on the cost of the money you invested - you are buying something that is losing about $10-20K/year right now.

10. Because of buying a new home last year, we cannot pay cash for it and have money to help out till busy season or till we start to grow clientele. We are willing to give ½ down and the owner is willing to finance the other half.

You are starting undercapitalized. And this is when your wife still HAS a job. Now she is going to quit that job to do this instead. Undercapitalization will doom you before you start - it is the number one reason for business failure.

11. I feel it is a marketable salon and it by far the nicest we have been in. It is very well designed and decorated. It is very welcoming.

People don't tan at a salon for these reasons. They go for performance and price. Your salon's equipment is "low average" in performance. So you are left with price or investing more in equipment to try to improve the quality. If the decor and design was the key to this salon, they would already be doing well.

Also, you have to pay to get bodies IN THE DOOR to SEE how 'Nice and welcoming" it is. That costs money (more investment) to advertise.


12. We do have three other tanning salons in the area one within a mile two others about 3.5 miles away each way. This location I feel is much better.

Again, you "feel" this is much better, based on what? That is a very saturated market. Have those salons been there longer, better established? You are all fighting over the same pie - and you are the last to get your "dibs". That isn't a great position to start from.

13. I have a business plan with the numbers needed to make this be successful, I have a exit strategy, and have some marketing ideas. How hard is it to draw new customers for the summer months?, especially here in FL where we have beaches everywhere.

I hope this is true, but my fear is that if you did, you would not be investing in this salon.

And yes - it is VERY challenging to attract new customers during the slow season. The slow season is just slow - period. Memberships help even out the revenue, but they had to be sold when people were there tanning.




If I'm too late, and you've already purchased the salon, I hope you take my comments to heart and factor the information into your business plan! Depending on how much you paid for this salon, and how much in salary your wife gave up --- you have quite an uphill climb ahead of you to profitability.

I'd welcome your feedback on any of my assumptions/comments.

iheartmytan77

sunsally,
WOW! I wish someone had given me that complete of an analysis (for free no less) when I was in the process of buying my salon! Totally agree with everything you said. They'd be foolish not to taken advantage of such advice!

Brian Oshman

TanAtCoCoBeach

Brian that made my morning!!!

sunsally

Thanks. You would be surprised how much good advice IS given on these boards and NOT listened to! I've put together pricing, suggested equipment mixes, etc etc etc - some listen, some do their own thing. It is ALL here already from many others besides me --- people just have to take the time to research, read and apply to their own situations. And be willing to change what THEY think is the "best way" if it isn't working.....

I was fortunate enough to get some great mentoring & advice from others before me -- so keep paying it forward to others. If it makes a difference for someone - that's great!

delany

Sunsally saved me from making some bad decisions back when I had my salon. Saved me thousands of dollars!

gravesmc

Ditto for me. It' s nice to see her back on here and I take all the advice I can from her post and replys.