sunsally

The rent is cheap - that is a good thing.

You can't in any way verify if she takes home 20K, 200K, or $.02. Therefore, you cannot use that in your calculations. She doesn't get "credit" for that as a seller. You can only offer her a price based on what she shows to the IRS. If she cheated on her taxes that was her "payoff" - she doesn't get to ALSO get a higher selling price based just on her say-so.

THEREFORE - assume it brings in 25K/year.

$7200 goes to rent.

Assume (even with a slow location) - $4K/electric

Assume $2k in lotion (to sell 8K)

Assume $1k for phone

Assume $1K in credit card fees

Assume $2K to relamp all 4 beds (and assume they'll need it soon)


SO - now we are at $17,200 -- before any payroll.

Even if you work for "free" - have to put in what you WOULD pay if someone else was working the hours. So assume minimum wage. Even at the hours SHE is open - 43/week - that is about 2000 hrs/year or $20K in payroll (with all taxes etc).

SO - right NOW - if she is "taking out" 20K in cash - it is to pay herself minimum wage to sit there all day. But you would have to pay someone ELSE.


Bottom line -right now it is showing a LOSS on paper - and MAYBE breaking even if she truly is skimming cash.

Do you want to pay $25K to buy a business that is losing money?

Black Sun

You Said: "The previous owner has 5 window AC units, which is not my preference".

Is this a joke?

The beds are useless, sounds like the space is trash...can't run professional tanning equipment (tho I question her 'equipment'), off window units..

You would have to have central AC installed, probably in the 8K range, new/better beds..25K total...

PLUS, everything SunSally said

sunsally

There are two ways of looking at salons:

1. Is it not doing well because something the owner is doing wrong that could be changed and make a huge difference OR

2. Is the owner doing things "wrong" because it wouldn't make a difference anyway.


In your market - with 15 other salons, 2 that are big - she probably made some money "in the day". But others have come along since with bigger, better, more convenient etc - and she hasn't kept up.


For YOU to compete - well, it doesn't sound like you could in this space. It would be hard to "attract" new customers as it is set-up --- old equipment, small, less than ideal buildout (the A/C).

So the "regulars" are there with her now - but will they stay for a new owner they don't know and have a relationship with? Perhaps but probably not.

If it were FREE and the landlord just wanted someone to take over the space - maybe (MAYBE). But even then, if you put in new equipment (more money), added more A/C (more money), stayed open longer hours (more money)...........not clear that even 5 units in your competitive market could make enough to be worthwhile.

tanu01

Bottom line is that there are fewer tanners these days..........

I closed my 10 bed store a few years ago, It use to do as well as my 25 bed store.

At one time there were 12 salons where Im at, Now just 2.

Brian Oshman

RUN!!!!!!!!!!

Steve Underhill

Sellers almost always believe their business is worth more than it is. An overpriced business will not “get looks” and then creates angst in the negotiation process. Incorrect pricing is the #1 reason a business stays on the market too long. Getting an objective business valuation is an absolute must to determine a sale or purchase price.

When evaluating the purchase of an existing salon you must approach it as though you are opening a new salon from the ground up. You must first determine the potential of the salon by evaluating the demographics. If the demographics are good you can now evaluate the salon further. Always look at the parking situation and how easy it is to access the location. You should determine all of the changes that must be made to create a successful salon. To do this you must again have the information and knowledge required to be successful. You must determine the cost associated with making these changes.

Paying more than the salon is worth, and not identifying or making the changes necessary to create a successful salon, is a common mistake

The standard in the tanning industry for the value of a tanning salon is 200% of the average net profit of the most recent three years of business if the salon is in good cosmetic condition or where there is little or no net profit an asset purchase is an option.

The additional variables are inventory & services owed for prepayment of tanning services. This is determined by the amount of services owed to tanners that have already been paid for. This amount will be subtracted from the value amount of the salon.

__________________
Stephen Underhill
Consultant
steve@smuconsulting.com

Ksatter3

Hello everyone!

I am looking into buying a tanning salon in a small city, it's very nice and has eight beds and a spray tan system. Their income last year was $154,000 and after all bills and taxes made a net income of $34000. The owner is asking $90,000. I am in love with this Salon but i have no idea how much it's really worth! If anyone can help i would really appreciate it!!