planatan

Also, I saw a previous post about someone offering 6.5 k for a tanning salon. What kind of piece of junk salon this must be. The w hole salon is only worth the price of a half decent used bed?

This is a first for me.

sunsally

Always, Always, ALWAYS, ALWAYS......... analyze ANY salon using a payroll figure that covers "all the hours staffed by paid employees"!!!!!!

A rule of thumb - for approx 75 hours/week, single staffing most time, moderate commissions on lotions -- $3K/month or $36K/year.


If you CHOOSE to work some of the hours yourself - and not take a paycheck - you can do that to help CASH FLOW. But it doesn't impact the PROFITABILITY of the investment opportunity.

That is - buying a business, then working there for free, so you can make a "profit" at the end of the year of 20K isn't a profit. It is just your payment for your free hours. Sometimes even less than minimum wage!

To look at it as an INVESTMENT you must factor in TWO key pieces that a LOT of people looking at business opportunities overlook:

1. Payroll to cover ALL hours/Positions/Requirements covered by Paid Employees.

2. Debt service to pay back ANY monies used - WITH interest - to buy the business.


#2 is similar to #1 - just because you have cash and "buy" the business without a loan from a bank or an equipment lease........or just because you own the building and don't charge yourself rent.......this does not make the money that SHOULD go toward those things "profit" -- it is just CASH FLOW. To look at the PROFIT - you have to be factoring in payments to pay back any money you use (because you COULD have invested it somewhere else for whatever THAT return would have been) and any market value rent.

House of Tan

Here is my evaluation:

Current salon tanning equipment at present value

$3,200 (4) Sunstar 232 tanning beds ($800/each)
$1,600 (2) Sunstar 232/3 tanning beds ($800/each)
$3,500 (1) Supersonic Suncapsul stand-up tanning unit
$3,000 (1) Radius 252 stand-up tanning unit
$1,000 Miscellaneous supplies and equipment
$500 Washer and Dryer
$250 In-stock tanning lotions (retail)
$450 Three tanning bed acrylics
$13,500 Total prior to unit repairs and leases

($7,600) Remaining lease on Radius 252 (20mo. X $380)
($2,130) Re-lamp all units (@50% of actual cost)
($9,730) Total reconditioning cost and lease acquisition

$3,770 Total offer for equipment @ current value minus reconditioning and lease acquisition

Goodwill (client-base, name, phone number)

$15,500 For active client base (3,100 x $5)
($11,494) Minus current contractual obligations (pre-paid sessions, minuets and memberships)

$4,006 Total offer for goodwill

$7,776 Total offer to purchase XXXXXXXXX Tanning salon assets (AS-IS) and assume all lease liabilities and contractual obligations in regards to pre-paid tanning services.**

__________________
Startbucks

House of Tan

1.) The seller informed me that all the units needed re-lamped (some at 1,000 hours or more)
2.) Almost no EFT base, all blue sky
3.) Salon needed a new floor, more A/C, repainted and more
4.) The equipment is old ETS stuff
5.) There would be pricing objections by current clients when an adjustment was made
6.) I personally think that $5 per active client is generous
7.) You always have to deduct the pre-paids
8.) I would have to assume a lease (the 252) for a stupid amount of money; I can buy one used all day long for $3k
9.) This was the counter offer; the first offer was $6.5k (I missed a couple of things)
10.) This salon was not making a profit, so it was evaluated as an asset sale

So many people have an emotional attachment to their salon; bottom line is: True value for a salon not making money is not much.

As for build out, I am a great negotiator; I can almost always get the landlord to give me a liberal TI account to get 80% or more of the build out done at no cost to me.

I could have replicated a salon like this for under $40k with better equipment and in a better location.

I wish this owner the best and even offered to share what I was going to do at no charge after they rejected my offer.

__________________
Startbucks

Chrisadamley

Hmmm, she listed her merchandise stock (which she wanted extra for) at like 8k ....that being lotions mainly...she also sold a few purses and stuff but she had this massive wall of lotions lol.

sunbreak

Total annual profit (Total revenue less total expenses-factor in every hour open as a payroll expense, regardless of who's working). Example $200k annual revenue less $120k of total annual expenses=$80k/y "profit". If you pay double this amount for the salon ($160k) you are making 50% ROI (Return on investment).
Although it's not quite that simple... Value of equipment less required maintenance on equipment (including lamp changes), leasehold value is nice, but unless major repairs are required, doesn't factor into the real value of the business, as these are owned by the landlord and not the salon itself. Major repairs/renovations should be deducted from the value.
Be careful evaluating inventory... I would personally ask for no inventory, and when removed determine its' value at 50% of the wholesale you'll pay to your supplier (as you may not want all of their inventory)
Don't buy an existing business based on asset/equipment value! I've seen a lot of salons with terrible equipment outperforming ($$$) state of the art salons with the best equipment.
If the money's coming in you can always upgrade equipment, but great equipment doesn't always upgrade your clientele.
Not sure if any of this helps, but I wish you the best of luck! :)

Chrisadamley

Well based on the information you guys have given me, and further looking at the financials. taking both into account i made an offer to the broker for the salon. Not official just an email telling him what im looking at. I told him i would offer 65k for the salon.

I HIGHLY doubt they will accept :) but from the information you guys and gals were kind enough to share along with my experience i feel that is really a fair offer for what she has there.

I will update this if she accepts, if no update she declined !

once again i really appreciate the help!

Black Sun

Because 'prospects' are painted a beautiful landscape by franchisors. They,the prospects, have it imbedded in their heads that franchisees have the support system behind them that prevents failure.

The reality is, that 'support system' becomes added debt, like other monthly bills must be met and paid for. This leads to as many failures as the mom/pop operation. In fact, I have seen 2 PB's near me close within last 12 months, another selling equipment, with PB logo, on craigslist

sunsally

I'd probably follow it up with an email breaking down how you got to that number - basically your assessment of her "Net" each year (about 36K), showing that your offer is between 1.5 and 2x net.

Her broker may not know anything about tanning - but when he sees it laid out like that he may convince her that the 165K asking price is blue sky and to go for it.

Doesn't hurt to ask!

dalton33

We are looking to purchase a tanning bed salon that has two stores....I have been taught to take the value of the equipment and add the net income...does anyone know where I can find values for used equipment that is reliable.....