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Old 03-28-2013, 06:46 AM   #41 (permalink)
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Re: Going to take over salon?

Quote:
Originally Posted by THE_KINGDOM View Post
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.

Earlier you said that $400/day - now, "in season" - was a GOOD day at this salon! You seemed to imply that wasn't "average", but rather spectacular.

Now, keep in mind that tanning is very seasonal. The average statistics showed that salons make approximately 75% of their yearly revenue from Jan-June and 25% the rest of the year. Of that, about 42% came in March-May.

So until you get actual accurate numbers for the business you can't be sure of anything - but I wouldn't "count" on an immediate and significant increase in revenue.
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Old 03-28-2013, 08:40 AM   #42 (permalink)
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Re: Going to take over salon?

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Originally Posted by THE_KINGDOM View Post
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?


Again, until you know otherwise, the rent should be calculated at $4,000. MOST landlords would look for a price INCREASE going forward - not decrease.

$500-600 seems very low for electric - unless you aren't very busy. And if you aren't very busy - you aren't making much money. Granted - this is a SMALL salon without many beds. But in tanning - if you are busy and making money - you have a big electric bill to go with it!

The $1000/relamping is just an estimate. For the number of units you have here and the amount of use, it may be high. Again - if you aren't spending much on lamps, you probably aren't very busy - or making much revenue. Just so you understand -- relamping your beds could be between $300 for the Cobra up to $1000 for an i- bed. High pressure can run up as much as $3000. So it does add up.

Payroll - you had previously mentioned they were open 68 hrs/week. So even if you are working, for free, have to include that as part of the 'investment" to see if this makes sense. If $10.25/hr is the wage there - also have to count on taxes, payroll fees, etc. So I'd say estimate more like $12/hr x 10 hrs/day x 30 days/month or $3600. If you are going to add 2% commission on everything (Why??), and you are thinking revenue will be $8500 - 30,000/mo that will be an extra $200-600/mo. So plan on $3500-4000/mo payroll


Products would include the spray solution ($200-300) plus lotion sales. If your lotion sales were 2000/mo this would be $500-750 plus the spray. I'd estimate product at $750 if you are slow........and upwards of $4000 if you were to actually get to $30k/month.


They mentioned an equipment lease - need to add that in.

Other things to factor in:

-Computer maintenance fees
-Insurance
-Cleaning supplies and other supplies

Finally, need to consider the cost of your debt service. That is, if you pay $40K to BUY the business, have to "pay yourself back" from the revenue as well as pay all the other bills before you can consider anything extra left over as "profit". On $40K, consider that about $1k/month for 4-5 years --- even if you are just "paying yourself back".


So my estimate for this salon would be:

$4000 rent
$3500-4000 Payroll
$1000-2000 all utilities, internet, computer software, etc
$1000 Debt Service
$1000 Advertising
$600-1000 (??) equipment lease
$200 insurance
$200 supplies, misc
$1000 lamps/bed maintenance
$750-1500 product


Basically $13-15K/month or $150-180K/year
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Old 03-28-2013, 08:43 AM   #43 (permalink)
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Re: Going to take over salon?

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Originally Posted by THE_KINGDOM View Post
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,


What makes you think this is a good salon that just needs marketing?


Also - adding a high pressure bed will be $10-20K, even used. It is HIGHLY unlikely you will immediately come in and be able to pocket enough to pay that out, but even if you did, it would be considered another investment. So now the total investment would be $50-70K.
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Old 03-28-2013, 08:47 AM   #44 (permalink)
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Re: Going to take over salon?

Quote:
Originally Posted by THE_KINGDOM View Post
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.

What makes you think you can double the sales very quickly (assuming it is actually grossing $8500/mo now)? And what makes you think they can be tripled?

Also, recognizing the seasonal nature of the revenue, if the salon is making $8500/mo now, that means it could be making just $2k/mo in the fall. It is CRITICAL to see how the salon has done each month since opening and get a LOT more data from these owners!!!!


Realize - a salon of this size, making $30k/sales/month, consistently all year -- would be virtually unheard of.

Even a salon making $360k/year would put it in probably the top 5% of salons in North America.

For a salon this small, with this equipment mix, and the strong competition you have mentioned, and the current sales you have seen - I would be surprised if they are grossing $100k/year.
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Old 03-28-2013, 08:58 AM   #45 (permalink)
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Re: Going to take over salon?

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Originally Posted by THE_KINGDOM View Post
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.
Make sure you have proof of this.

Quote:
Originally Posted by THE_KINGDOM View Post
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.

If you are a serious buyer, have an attorney and an accountant get involved and have them request the business records. Nobody would buy a business without a thorough review of all records.

Based on working there - what are the daily sales currently? How many customers are seen/day? What is the breakdown of how the current equip is used - for example what percentage do spray tans vs red light vs the Ibed vs the Cobra?

What percentage of the sales are product vs services? Is there a membership (EFT) program? How much do they do in membership sales/month?


Quote:
Originally Posted by THE_KINGDOM View Post
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.

The biggest thing isnt if the equipment is worth it. But sure, it is. They are reasonable beds, but not necessarily a line up that can make enough money to pay off the costs for this place.

Nothing you have said so far tells me this is an investment that will pay off. I would NOT pursue this - with what you have shared so far.
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Old 03-28-2013, 10:17 AM   #46 (permalink)
 
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Re: Going to take over salon?

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Originally Posted by Matthew24 View Post
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.
Again I'm sorry rushing details down I forgot to mention there is also a UWE iDome (stand up) here also
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Old 03-28-2013, 10:18 AM   #47 (permalink)
 
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Re: Going to take over salon?

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Originally Posted by Black Sun View Post
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
It's not that salon.
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Old 03-28-2013, 02:47 PM   #48 (permalink)
 
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Re: Going to take over salon?

You said,

I would work about a full time 40h a week in the salon if need be for the first few months, but ideally I don't want to have to live in the salon. What I mean by this is not that I don't want to dedicate myself to the business, I do. But that I wish to focus on marketing etc I think if a salon can't support itself without the owner being present, then clearly finances are way too tight..


I could tell you right now. With that attitude, you are doomed. Owning/running/managing a business is a 24/7 career. If you think you could own any business and work on your schedule, you are totally clueless and will be doomed to fail.

If it a career in advertising and marketing is all you seek, and NOT the responsibilities/headaches of business ownership, i suggest you go to Madison Ave. My gut feeling is, you are not 'entrepreneurial' to succeed
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Old 03-28-2013, 04:41 PM   #49 (permalink)
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Re: Going to take over salon?

I have really enjoyed the goings on, back and forth with you and Sally. I have come to the conclusion, that you don't have a clue on how to run a business, and like Black Sun states, you are doomed. There's no way in heck, that you are going to double you income, with so few beds. I've got 20 beds and make no where near what you are projecting. I keep my expenses under $5000 a month, and this is the reason I'm still open for business. I realize that rent is a lot higher in bigger populated areas, but your customer count and bed count has to also be a lot higher to compensate for the bigger expense. Also the current owners, seem to beating around the bush. Run away fast, and ask to work 40 hours. You'll make a lot more.
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Old 03-28-2013, 04:52 PM   #50 (permalink)
 
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Re: Going to take over salon?

Quote:
Originally Posted by Black Sun View Post
You said,

I would work about a full time 40h a week in the salon if need be for the first few months, but ideally I don't want to have to live in the salon. What I mean by this is not that I don't want to dedicate myself to the business, I do. But that I wish to focus on marketing etc I think if a salon can't support itself without the owner being present, then clearly finances are way too tight..


I could tell you right now. With that attitude, you are doomed. Owning/running/managing a business is a 24/7 career. If you think you could own any business and work on your schedule, you are totally clueless and will be doomed to fail.

If it a career in advertising and marketing is all you seek, and NOT the responsibilities/headaches of business ownership, i suggest you go to Madison Ave. My gut feeling is, you are not 'entrepreneurial' to succeed
Not the case at all, I wish I had more time to reply to this post and explain exactly what I mean. But I was saying: "NO! I don't want to be stuck behind the desk, that's completely counter productive!!" I'd be putting in an estimated 40-50h/week of work towards the salon, but I'd prefer to be spending the better portion of it, marketing, advertising and creating cross-promo's with other businesses, rather than simply saving on employee expenses.........

FYI I have worked in managerial, marketing and business development roles for a business that is now successful..

Quote:
Originally Posted by parrot head View Post
I have really enjoyed the goings on, back and forth with you and Sally. I have come to the conclusion, that you don't have a clue on how to run a business, and like Black Sun states, you are doomed. There's no way in heck, that you are going to double you income, with so few beds. I've got 20 beds and make no where near what you are projecting. I keep my expenses under $5000 a month, and this is the reason I'm still open for business. I realize that rent is a lot higher in bigger populated areas, but your customer count and bed count has to also be a lot higher to compensate for the bigger expense. Also the current owners, seem to beating around the bush. Run away fast, and ask to work 40 hours. You'll make a lot more.

ParrotHead you are simply wrong, sorry.
The only place I have failed so far, is calculating the actual monthly expenses of this salon, with some helpful advise from SunSally, I have corrected some underestimations and I have been crunching numbers all day, got a bit more information from the owners, who are selling the business "as is".

Quote:
Originally Posted by sunsally View Post
Again, until you know otherwise, the rent should be calculated at $4,000. MOST landlords would look for a price INCREASE going forward - not decrease.

$500-600 seems very low for electric - unless you aren't very busy. And if you aren't very busy - you aren't making much money. Granted - this is a SMALL salon without many beds. But in tanning - if you are busy and making money - you have a big electric bill to go with it!

The $1000/relamping is just an estimate. For the number of units you have here and the amount of use, it may be high. Again - if you aren't spending much on lamps, you probably aren't very busy - or making much revenue. Just so you understand -- relamping your beds could be between $300 for the Cobra up to $1000 for an i- bed. High pressure can run up as much as $3000. So it does add up.

Payroll - you had previously mentioned they were open 68 hrs/week. So even if you are working, for free, have to include that as part of the 'investment" to see if this makes sense. If $10.25/hr is the wage there - also have to count on taxes, payroll fees, etc. So I'd say estimate more like $12/hr x 10 hrs/day x 30 days/month or $3600. If you are going to add 2% commission on everything (Why??), and you are thinking revenue will be $8500 - 30,000/mo that will be an extra $200-600/mo. So plan on $3500-4000/mo payroll


Products would include the spray solution ($200-300) plus lotion sales. If your lotion sales were 2000/mo this would be $500-750 plus the spray. I'd estimate product at $750 if you are slow........and upwards of $4000 if you were to actually get to $30k/month.


They mentioned an equipment lease - need to add that in.

Other things to factor in:

-Computer maintenance fees
-Insurance
-Cleaning supplies and other supplies

Finally, need to consider the cost of your debt service. That is, if you pay $40K to BUY the business, have to "pay yourself back" from the revenue as well as pay all the other bills before you can consider anything extra left over as "profit". On $40K, consider that about $1k/month for 4-5 years --- even if you are just "paying yourself back".


So my estimate for this salon would be:

$4000 rent
$3500-4000 Payroll
$1000-2000 all utilities, internet, computer software, etc
$1000 Debt Service
$1000 Advertising
$600-1000 (??) equipment lease
$200 insurance
$200 supplies, misc
$1000 lamps/bed maintenance
$750-1500 product


Basically $13-15K/month or $150-180K/year
SunSally THANK YOU. I have dug deeper, asked a lot of questions, and here's a new approx breakdown based on the info the manager gave me, by mouth.

Here's the new monthly expense breakdown:

Rent: $4000 (paid until Dec, 2013)
H20 + elect: $1000
Bed Lease on 1 bed: $1000
Lotions/Products/Mystic refill: $1000
Advertising: $1000
Relamping: $1000
Payroll employee(s): $1840 (40h@$10.25+fees etc = 11.50/h)
Employee commission: $400 approx
Payroll myself: $2000 (40h+@$10.25+fees etc = 11.50/h)
Insurance: $200-300
Phone/Internet: $100

TOTAL: $13,000 approx.

The Salon is currently making (with absolutely NO ADVERTISEMENT AT ALL):
A new re-evaluated AVERAGE monthly sales of $4000
Based on a daily sales avg. of approximately $150 (sadly) High of $400/Low of $0


Losses per month: -$8000-9000 month (if paying rent)

Losses per month: $4000-5000 (if taking rent out of the equation)


Now, one could even say that taking over this salon which is currently at a major loss, is still more doable than opening a new salon, which would have massive startup costs, and guaranteed losses in first few months, which would arguably be way way worse than taking over this salon.

With that being said, at this point I'm reconsidering and leaning more towards not taking over this salon. Simply because I was under the impression that it was "breaking even" before. Which has now been uncovered as a lie. It will require a tremendous amount of work to pull this place up off the ground, although I would still say, much less work than a new salon!

The only value in this business here, are the beds and lack of rent:
- UWE Ibed
- UWE Idome
- UWE Silverbullet
- UWE Cobra
- Beauty Angel (Red light therapy)
- Mystic Tan HD

and with an estimate of their worth in combination with NO RENT, would therein lie, if this business was worth buying for $40-50k.

And this is now where the owner(s) argument lies:
Quote:
"Simply we are selling tanning beds in a space with rent paid until Dec, 2013.
Forget what the business is making or not making, we are not selling you a successful business or a business at all.
If you see value in the beds and the lack of rent, and think you can take it off the ground, then buy it for 50K."
With that being said, what would the market value of these beds add up to approximately?

The figures as of recent have really discouraged me from pursuing this, but there is still a chance I would go ahead, IF it made sense in the equipment worth, lack of rent and the fact that I know I can market this salon well.

THE BIG QUESTION: Would YOU buy over this salon:
  • a partially established clientele/awareness
  • the bed's listed
  • rent paid until the end of 2013
  • Very nice looking salon, good logos, security system, computer system, sound system, etc
  • 2 empty rooms to fill with beds in future

OR should I just walk away?? Because I fear that this is too much work for salon.. which I originally thought and hoped was at least breaking even on expenses with income.
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