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Old 02-21-2012, 05:52 PM   #11 (permalink)
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Re: Help with salon value!!!

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?
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Old 02-22-2012, 02:59 AM   #12 (permalink)
 
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Thumbs down Re: Help with salon value!!!

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
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Old 02-22-2012, 06:45 AM   #13 (permalink)
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Re: Help with salon value!!!

Quote:
Originally Posted by Queenie14 View Post

She has been in business for 12 years.

She has 4 beds.
1 & 2.) 2 Wolfe beds that are 12 years old. One is a Sunstar zx30 3f
the other Wolfe is a stand up

3.) Mega Sun which is 8 years old (stand up)

4.) Ovation which is 5 years old and has 32 bulbs.

These beds are in perfect shape.
She does have all kinds of lotion and she was getting another shipment in today.


Her hours right now are very small, M-F 10-6 and Saturday 10-1.

There are 15 salons in the area, this includes hair salons with tanning. Most are small but there are two that are very large.

If I were to purchase this salon I would extend the hours first thing.

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.
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Old 02-22-2012, 07:50 AM   #14 (permalink)
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Re: Help with salon value!!!

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.
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Old 02-22-2012, 10:55 AM   #15 (permalink)
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Re: Help with salon value!!!

RUN!!!!!!!!!!
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Old 02-26-2012, 12:46 PM   #16 (permalink)
 
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Re: Help with salon value!!!

Quote:
Originally Posted by Queenie14 View Post
Hello,

I am interested in buying a tanning salon in PA. The seller is asking $25k but her income tax return shows about 25500, but she flat out told me she takes almost all cash out and she took home $20k cash last year. She has been in business for 12 years.

She has 4 beds.
1 & 2.) 2 Wolfe beds that are 12 years old. One is a Sunstar zx30 3f
the other Wolfe is a stand up

3.) Mega Sun which is 8 years old (stand up)

4.) Ovation which is 5 years old and has 32 bulbs.

These beds are in perfect shape.
She does have all kinds of lotion and she was getting another shipment in today.


Should I be weiry of this? Her hours right now are very small, M-F 10-6 and Saturday 10-1. There are 15 salons in the area, this includes hair salons with tanning. Most are small but there are two that are very large.

If I were to purchase this salon I would extend the hours first thing.


HELP please!! I know this isn't a large amount of money, but still.
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.
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Old 03-04-2013, 02:35 PM   #17 (permalink)
 
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Re: Help with salon value!!!

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!!
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