sunsally

Yes..........now you see why it is more important to FIRST get the financials for the business rather than focusing on the value of the equipment or the costs of putting in new room doors.


So tanning is a very seasonal business, and this is "busy season". March, April and May are traditionally the busiest months of the year. Jan and Feb start leading to that.

If the busiest day you have seen, so far, in two months, is $400, then yes..........your math is starting to show you how much the salon might be making..........

sunsally

So it sounds like you work there now - how many hours/week? Do you have another "primary" job or is this your primary job currently?


To have pre-paid the rent for the location until the end of the year seems unusual - but possible. Are you sure they have pre-paid the RENT, or just that the lease they signed will expire but that the RENT itself is being paid (and due) each month. If it is the latter, I would expect they would want you to begin paying that if you bought the salon.

You will need to find out how the bed equipment was paid for initially. Did they buy it outright, paying cash? Or did they use bank financing or leasing money? If the latter, then there may be payments still due that they would be wanting you to take over. That would be very different than getting the equipment paid in full.

THE_KINGDOM

Only 1 of each yes. Do you guys know approximate going rates for these units? I know there're all pretty new late 2010/2011 models

THE_KINGDOM

Hi SunSally,

So yes I do work at the location, and it's a nice location. I work only about 25/h week, and that's by choice, I could start working 40h tomorrow, but quite frankly i'd rather put that time in when I'm working for myself. There is a fair amount of competition near by but I believe the salon is capable of much more. I have spoken with the manager/owner yesterday and although they haven't yet shown me the book, they have told me that the salon is breaking even and that's it.

Now here's where the situation is different from you average.
The rent is paid until the end of the year, they have assured me, and this will of course be put down on paper. This saves me about $3500-4000 every month, it's actually $4000 rent for this space but I'm confident I can get the landlord down to at least $3500/mth if not lower come Jan, 2014.
With these saving per month, I will be doing better than "breaking even" even if I didn't promote the business more, simply because I won't pay for rent until Jan, 2014, and therein reduces my approx calculated $8500/mth expenses down to $5000/mth, that's significant. So I will be making money with the salon even at the beginning and with some good marketing and promotions, awareness etc I should be able to make the business excel.

Now the reason I came to an $8500/mth expense is after talking with the owner via manager is:

Here is the monthy expense breakdown estimates for this salon:

• $3500 rent (which I wont pay until 2014)

• $1000 electric+water+phone+internet (she said sometimes electo/h20 only around $500-600? any truth to that?)

• $1000 advertizing

• $1000 re-lamping

• $500 products

• $1640 employee payroll 40h@$10.25h (I didn't calculate commisions in yet, but Im thinking about 2% of every sale)

TOTAL: about $8500 expenses per month.
And right now they're "breaking even"
do these stats look about right for expenses?


Basically the way I see this salon, is that it is a good salon, with room for growth but the effort and marketing hasn't been put in. I do believe I can take it off the ground, taking the money I make in the first few months to market and perhaps adding a high pressure bed, Im guessing I can pull this place pretty quickly to around $15,000-20,000/mth gross sales, I would aim for $30,000/mth sales (but I think that's unrealistic), but right now it's only grossing about $8500/mth.

All of the beds are purchased outright except 1 bed which still has a very short lease-to-finance term on it, again, they say it's not much, I don't have the exact figures or know for how long.

They are extremely reluctant to show me the stats of the business. But because I work here, I am able to predict quite accurately. As I have said, they admitted to it only breaking even, currently.

The biggest thing here IMO, is finding out if the equipment is worth $40-50k, because basically I'm only really buying the equipment and the fact that the rent has been paid out until the end of the year. I am not buying a successful business. But I think with that being said, it's still worth the buy, I say this because I have an advantageous situation to take over a tanning salon that most people ordinarily wouldn't have, that includes not having to pay rent until 2014, a good line of bed's (but no HP) and a clientele base that makes sure at least I don't loose money in the first few months.

Would you agree SunSally? I'm very interested to hear your views.

kookyguy

So, under $1k per mo. for power, but 1k per mo. for lamps? This has to be wrong.

Matthew24

I can't see you ever coming close to 15k-20k a month with a few (3) tanning beds. Breaking even on a annual basis would be cause for celebration from the information I see.

Black Sun

This sounds like a salon I am familiar with.

You did not mention where it is located, and certainly DO NOT want you to, for your own security and protection, however, if it is located in metro-Atlanta, GA, PM ME

sunsally

So we will assume you currently count on the money you make from this job to pay YOUR expenses. And even if you did NOT, as an "investment", to determine profitability, you still need to factor your OWN hours/"investment" into the equation. Therefore, when we calculate payroll - we will need to include YOUR time as well.

In addition - as most small business owners will tell you -- it is rare you get to work "just" a 40 hour week when you own your own business. Even if you were NOT "working the desk" to try to build the business, there is ordering product to be done, bills to pay, marketing to do, staffing, payroll, ensuring salon is maintained (cleaning, re-lamping, downed units fixed,......). If an employee "no shows" - be prepared to cover a shift last minute. Be prepared to work holidays. Etc


Also - "there is a fair amount of competition nearby" --- how much, how close, what sort of beds, etc? What do you know about them? How long have they been established? What sort of traffic (number of customers) do they see.

As a recommendation - work one of your shifts this week (say a Thursday from 1-7) and count how many customers come in EACH HOUR during that time and what your total sales are.

Then, over the next few days, sit outside your nearby competitors for similar time periods and count THEIR customers/hour. For example, maybe sit from 1-4 at one salon then another from 4-7 and repeat until you monitor all of them. See how yours compares to theirs, at least on traffic flow.

Go inside as well and do a competitive analysis. How is the cleanliness? Customer service? Equipment? Pricing?

sunsally

Until you SEE it, believe nothing. Generally speaking, if they are SAYING it is breaking even.......it is probably less than that. Also, since the "manager" is a family member, they may be working for free and considering that a "savings" in payroll. Nobody works for free. When you analyze a business, must assume everyone gets at least minimum wage to see if it is a smart INVESTMENT.

sunsally

For CASH FLOW - you save this money now, yes. That should be considered an "asset" you are purchasing more or less. But all this does is help to reduce initial cash flow. It doesn't make the salon more - or less - profitable. Because rent was still OWED - they just decided to pre-pay it. In analyzing the business, that was still a bill to be factored in for them.

So if you took over May 1, you believe they have already pre-paid 8 months of rent or 8 x 4000 = $32k. And they are only asking $50K for the business?? Seems unusual.


Also - it is a rare landlord who REDUCES the rent "just because". If he has a current tenant who has paid in full, a year in advance, and a new tenant is coming along to continue things as is, what will his incentive be to let you pay $6k/year LESS - just because?