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Old 06-30-2011, 10:44 PM   #1 (permalink)
 
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Hello All

Hello everyone,

Great website you guys have here and the wife and I are diving in head first going through old threads. I decided to take a break and make a quick post. I have no experience in the tanning business but I have worked and been successful in sales. My wife has 10 years of tanning salon experience, working her way up from sales to management. She knows a lot of the ins and outs and how to sell and suggest based upon the clients needs. She currently accounts for nearly 75% of her current salon's sales and is wanting to branch out and work for herself. We recently attended the Tanning Seminar in Vegas and learned a lot of what pushes sales and what owners can do to set their business apart from others.

We are thinking about buying an existing salon in the next year or two or sooner if we can get money saved up a bit faster. We have one that we are very interested in. It is in a very good location as far as accessibility is concerned. It is near the local mall, it is in a complex that includes a 24 hour starbucks, verizon store, applebees, Red Lobster, Olive Garden, WinCo grocery store and a Famous Dave's BBQ Restaurant. We are very encouraged by this but are a bit weary of the sales price.

The owner is selling for 60k and saying her gross income is 100k. We have emailed her and opened up dialogue and will be attempting to sit down and look at the numbers she has made at the salon. We would like to ask you guys and gals what specifics should we look for and ask her for when we have our sit down meeting.

So far we know that she has (4) conventional Sundash, 24/120 beds, (2), Sundash Genesis 15, (40/120 & 160), (1), Ergoline 340 Super Power, 36/120 with 4 high pressure face lamps; (1) Sundash 252 Standup, (52/200), and an Ergoline 450 Classic (40/160) and 5 high pressure face and shoulder lamps. She says that she maintains the beds and are in perfect working order, but she mentioned nothing of lamp changes. The salon has three employees that make minimum wage. Another thing that worried us was the sq footage. The salon is 1010sq ft. A lot smaller than what my wife thinks we should get to encourage expansion and ample beds for the future. It is a tough situation as the location is absolutely perfect. There is no direct competition present.

I don't want to go on too much as this is turning into a novel. We can not afford to buy a salon that is a lot higher priced as I only make a meager salary as a Soldier and hers is all in her sales and hours. We really want to make this work, but would like to have a basis road map so that we are driving in the dark.

Thanks in advance for the advice
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Old 07-01-2011, 05:14 AM   #2 (permalink)
 
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Re: Hello All

First off the beds are old, and IMO, useless...nobody uses 24 lampers any more, and the older Ergos are not true ballast to lamp power...in other words they are underpowered.

The only two of any worth is the 450 and 252 standup..though I believe the 450 has 140w ballast, I may be wrong, but think not...the lower ballast are only powering the 160w lamps at 140w...

With this salon, you will find at some point to replace equipment..even used, a good VHR bed could cost 10-15K..you need to add sunless and HP to be competitive..a good used HP bed would be 15-20K...you need some good basic beds, at least 32 lampers at a cost of 3-5K used...I just do not see what 60K is buying..the best laydown here is the 450, and again, underpowered for a top tier.

The lamps would need to be replace...looking at over 15K alone for current beds (Good lamps could cost $15 each). Could you attract business with current set-up? Depends on location/competition. Also, if new/better beds are added, what about current AC and electric. Could they handle added load? If not, upgrades would be needed, Could cost 10-20K. Your wife is correct about the 1010 sq ft size. Too small for larger beds to be added or any hope for expansion..and at that size, I doubt current AC/electric could handle it.

But, honestly, I would not touch it..

And I doubt she is able to prove a 100k gross income @ a 60K price. I would have to assume she is losing money....

Have her show last 3years of tax records/utility bills..low bills equates to no business..call power company and get history...#active users, not how many in data base...

You need to do a research here..This has been discussed many, many times...

Also, state laws have changed. (You never gave location)> While in years passed, many states lacked the interest in tanning, that has changed the last 3 years. new stringent regs have been placed..some states have established a minimum tan time..no more 20minute beds..more state inspectors..

Frankly, if I was to open a new business, it would not be tanning. It is a fading biz, public interest not there..the glory days of the 80's..the boom years...are not here anymore...lot of negative press...many states have banned under 18yo tanning, some under 16yo...strong anti-tan lobby in place..tan tax now added, some states, like GA in 2012 will be adding a new 'Cosmetic Tax' to all beauty-enhancement services...there is no more money to be made...at least 300K minimum is needed today to open/operate a salon, or to even have a chance of survival...salons closing/offered for sale everyday...
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Old 07-01-2011, 10:32 AM   #3 (permalink)
 
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Re: Hello All

Thank you for the reply. We are located in Washington State. My wife said 16 and 18 year olds can still tan here. She said they attempted to pass the legislation but it was never passed. Oddlu, enough we are not getting into this to become millionaires, we know those days are gone and many salons have gone under. My wife worked and watched the rise and fall of Desert Sun. She saw the negative behaviors that lead to their demise.

My wife wants,to do this as it is her dream. She lives, breaths, and absolutely loves tanning and helping people. Thank you so much for the info on the beds and what to ask the seller when we have our meeting.

I am not sure if our first post conveyed this, but we are in the infancy stage of our research and search for a salon. I know this something we will eventually do, I just want to be as well prepared as possible.

Thanks again for your advice.
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Old 07-01-2011, 01:15 PM   #4 (permalink)
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Re: Hello All

You have the right approach - read, research, take your time. And your wife has experience.

Here are some rules of thumb when evaluating businesses for sale:


Whether they pay it or not - whether you plan to work the salon yourself or not - put in a payroll figure of $36K/yr ($3K/mo). This is how much it would cost on average to staff a salon at basically minimum wage plus commission, mostly just one staff on at a time, typical hours, for a year.

Rent - make sure this includes CAM or NNN (Triple Net - taxes, common area maintenance, etc)

Electric - probably 10-15K/yr for the size salon you are considering. Ask to see a year's worth of actual bills.

Insurance about $2K, Computer software & Support $1K, Phone & Internet $1-3K,

Cost of Goods Sold (Lotion) - about 25-30% of the amount of product sales they do

Lamps - $3-12K/year depending on equipment mix & busyness of a salon like you are suggesting

Towels, cleaning supplies, etc - $1-2K

Then - put in a "loan amount" for what you spend to buy and re-decorate the business --- again, even if you have the cash and using your money, put it in the "budget" to see if will be a profitable investment. On $60K, this would be about $1500/mo for 4 years.



Finally - if is is an EXISTING business -- ask to see their electric bills, tax returns and computer software (if any) to try to judge the "real numbers". Does it make sense? Are they saying they are really much busier and they "hide" the money from the IRS --- but the electric bills aren't that high to support that? Be a critic - don't just fall in love with a decor or a location. Make sure the salon can support your investment AND making you money on top of that!
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Old 07-01-2011, 08:26 PM   #5 (permalink)
 
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Re: Hello All

Thank you for the reply. We are having a phone conversation and will bring up some of those points. You guys are life savers
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Old 07-03-2011, 12:38 AM   #6 (permalink)
 
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Re: Hello All

At first glance the $60k figure makes no sense to me. Beds are old and grossing $100k a year should be two turn offs right there. To me the equipment isnt worth more than a couple thousand in which to stay competitive you would need to rip it all out and start over anyway if you wanted hope of making any money. But those are my opinions. Main thing is to look at the P&L statements. Without those you can't get an accurate feel of how much the business is drowning (and im pretty sure the business is drowning)

Good luck with the biz
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