Mistifide

I live in a suburb of Chicago, a lot of salons are dropping like flies. I've never purchased a turn key business before, so I was hoping for a little guidance from all of you.

I've done the demographics, only 2 salons in the area and she has owned this place for 8 years. 99k sales in 2010, on target for approximately the same 2011. 35k net cash flow. Over 4000 clients in database. HOWEVER, I seem to get the same answer no matter what salon I look at. When I ask, how many are current within the last year - the answer is hard to say. Seriously? Can't helios tell you that?

Anyway, the beds are paid for and were purchased in 2003. All ergolines. (3) are 300's, (2) are 350's (1) is a 450 and (1) is a 600 and finally a Radius 252. She's asking 70k. She's had it for sale for 6 months. There is an airbrush broom and that equiptment and finally there is an additional room wired for the capability to put another bed.

I'd like to meet with her again this week, and I know I need to see the financials from the last 3 years. But, if they are basically the same....What is this salon worth? what would you change or add if you purchased it?

Wow! this was all a mouthfull. But, if anyone would care to throw their 2 cents worth in....I'd greatly appreciate it!

Thanks so much!

Robert K

You need to take a hard look at the expenses. The breakeven is probably around 100k when you factor in all the overhead. How much is the rent? How many hours a week is she opened?

The equipment is worth about 25K to you since it is up and running in the salon.

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Superior UV Technologies
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Mistifide

She is closed on Sundays half the year, So as of right now M-Sat is about 48 hours. Rent is 2700. 3 part time employees at 8 dollars an hour. Electric is 600 a month. Not sure what insurance is, I would have to find out, others I've talked to seem to be in the 250 a month ballpark.
Then...what else is there other than gas and water? Am I just missing a boat load of other expenses here? Ugh!

Robert K

25K Payroll
33K Rent
8K Electric
2K Insurance
3K COGS Lotions
2K CC Fees
3K Lamps
12K Misc (Advt, supplies, bank fees, repairs, gas, etc)

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Robert Klem
Superior UV Technologies
(888) 526-7712 x77
robertk@superioruv.com

Mistifide

Gotcha. Thanks Robert for breaking those down for me.

sunsally

Robert's numbers are on the mark.

The most common number NOT figured in - which she clearly didn't include here either - is the TOTAL payroll.

Working a place for free - and calling that "net profit" - is wrong.

The "payroll cost" is what it would cost to have it staffed FULL TIME - EVERY HOUR it is open. If you CHOOSE not to take a paycheck - that is a matter of cash flow - not "profit".

As the numbers stand, you would be paying $70K for a salon that is just breaking even - with about $25K in equipment. So is that worth it to you??

Unless you have a plan - based on something besides hope - of what SIGNIFICANT things you are going to do DIFFERENTLY (and the cost to do that) to bring in SIGNIFICANTLY more revenue - doesn't sound like a good "investment".

Brian Oshman

Offer 5K.

House of Tan

Robert did nail it, that is dead on +/- a few thousand.

Do an asset purchase only-
I would pay no more than $30k; $25K for equipment, $5k for good will. But only if I could see a clear path to significant profits. Do some serious research first and consult with an accountant to see if the split I laid out works for your taxes. You can not build out and equip a 8-unit salon for $30k. So if it is possible to get it on the right track, it could be a good buy.

Do you have to honor pre-paid sessions? If so, how much $$$ is out there? Gift cards? Any back issues with rent? Are you changing the name? Re-decorating? Other investments in getting this salon back in line?

Biggest question in my mind is: why are the sales so weak?

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Brian Oshman

EQ is worth 15K. 300's are Dumpster Food® Offer 5K.

SprayRayz

I love reading all this great advice and info! I went through this process about 2 years ago, purchasing a salon of a similar size. When negotiating price and going over a bill of sale with my lawyer (definitly get a lawyer to draw up and assist in this process and a CPA. They are well worth the money and piece of mind.) I was able to clearly understand how much to offer opposed to the asking price based on what the salon was actually worth. By overpaying for a business, you are setting yourself up for a tough and long road ahead paying off loans and building a profiting business. Good luck in your journey! The purchase is truly just the beginning. This site serves as a fantastic resource.

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