GOOD BUY??

[rowekyle]

Hey thanks for checking out this post. I am in desperate need of some help!!

I am looking to buy an existing tanning salon it has been in operation for about 5 years now. It is in a prime location, 99.9% white, good income, high traffic etc.

The lease is $1580/mth, about 2100 sq ft. Only one other salon in the area, very little competition as they are a fairly crappy salon.

All the beds are relatively new all 2003, most all of them are made by TanSES. They all look MINT, not marks etc. Very well maintained salon.

Beds:

4 - 28 Lamp Beds - TanSES
3 - 32 Lamp Beds - TanSES
1 - 52 Lamp Beds - TanSES
1 - VHR Stand UP Level 1
1 - VHR Stand Up Level 3
1 - Ultrabronz Bed
1 - Mystic Tan Booth

Client Base:

4,400


(not exactly sure how many are active, however was told when current owner took over there was only 1000, and he has increase that number over the last 3 years)


The current asking price for this business is $200,000.

I have been told and shown with financial statements last years yearly GROSS OF $190,000

With profits around $85-95,000


ANYONE!! HELP! DOES THIS SOUND GOOD??? BAD?? ANY HELP WOULD BE SO SO SO GREATLY APPRECIATED!!!

THANKS!!

	Bodi Tox

[CoCopelliTanning]

Check with their bank if you can as well

[tanman0302]

As far as financial statements...do you mean tax returns??? If those show the #'s tehn it sounds good. Anyone can fudge other paperwork. Also, check the bed hours if you can (alot of beds have hour meters on them). 3 years of use should show atleast a couple thousand hours per bed. Also, past electric bills...$500 bills do not justify 190k a yr in sales.

[mikejones]

could be good. those tanses beds are not going to break anytime soon

[tnannie]

Tanman is right. The hours don't add up for the amount of income the seller is claiming came in. I would ask to see bank statements for the past few years as well as tax records. Sounds like it could be a good investment, but the price seems a little high IMO. Good luck. :)

	Bodi Tox

[sunsally]

A couple of thoughts....

1. For only 3 years old, the equipment is a little "outdated". Specifically, they are starting with 4 28 lamp units, then "moving up" to 3 32 lamp units. In most salons opening today, these would ALL be considered "level 1 beds". 28 lamps is really not competitive commercial equipment in most markets anymore. And the difference BETWEEN 28 lamps and 32 lamps (unless the 32's have High Pressure facials or something) is too small.

2. What you are "missing" is a good level between the 32 and the 52! I'd get rid of the 28's, and bring in some new mid-range (e.g. 40-44 lamps) to serve as your Level 2 instead

3. Look VERY carefully at the expenses. 85-90K profit on 200K seems a bit high, but possible. The rent is very low which is good. But take a look at how much they spend on utilities (elec should be high!), advertising and payroll. If payroll is low, it may mean they are working it themselves and part of that "profit" is money you would have to pay someone else if you don't plan on working or money that you should at least consider "payroll" even if it is going to you -- "profit" is after at least a fair wage is paid for all your time!

4. Agree with Tanman0203 -- check the hours on all the beds. Also , ask to see the last THREE years of financials -- not just the past one. They won't be as good probably (the business was still building), but see if the "ratios" of expenses to revenues seem similar.

5. At that price -- will the beds be paid off by him and "owned" by you outright (not picking up any existing leases)? Is the landlord willing to continue this rent rate to you?

As a general rule -- you are buying the "assets" of a business. Here, you are buying a bunch of 3 year old base beds, a couple of stand-ups, a "big bed" and a HP and a Mystic. On the used market, this might cost 100K -- at the TOPS!!!! So, at 200K, they are asking for 100K in "goodwill" -- the buildout "belongs" to the landlord. And if you were smart -- you would invest an additional 50K in equipment to really make it have potential!

That said - contrast that to building out your own. You'll spend 200-250K that way too. You would pick the location, your equipment, decorations, pricing model, etc -- but would still spend at least that much.

If you think the location is KILLER, investigate further and believe what you see in the books, and try to negotiate him down a bit on the price (does that include his lotion inventory? Washer/dryer? When were the beds last re-lamped?..), than it is possible. In the meantime, while you are doing your due diligence, have him sign something saying he won't run any "crazy specials" to try to lock people into packages where HE takes the money and YOU have to honor the sessions later!

Good luck - tell us how it turns out!

[rowekyle]

Awesome, you guys are great! Definitely appreciate all the feedback so far.

Just to answer your questions.

I can understand what you mean about the beds, they are all 2003's and in good shape. There are (4) 28 lamp units which is not the best, but in the area it really isn't too horrible. However I know for a fact that they run the crap out of the 52, as well as the VHR.

The 28's, 32's all have an average of 600-850 hours on them. That is if I'm reading it correctly which I am pretty sure I am, I Just got back from there now. The 52 has about 1800 hours I believe.

The currenty owner spends about 36-40 hours there a week which I am definitely willing to do. His payroll is very minimal because he only has 2-3 girls on the payroll, and they each usually work by themselves during off season and possibly 2 of them at the same time during Jan - Jun. They make $6.50 to $7.50 an hour.

Yes, the beds will all be paid off at the time of sale, so I will not have any bed payments. I would probably work it for a year as is and then re-invest in sprucing up the bed selection.

Yes, I was trying to gain a little knowledge on how much these beds were worth on the street. I just got back from writing down all the models etc. But I was banking on about 100K worth of equipment. The price would probably include lotion but that is not worth writing home about.

They always run a CRAZY DAY sale in December, only for 1 day, peopel can double their packages for a $1. So I will have to live with that so to speak. The lease was just signed for another 3 years which is going to carry over to me if I decide to purchase.


Any more helpful tips??!!

Thanks!

[sunsally]

If the 52 has 1800 hours and the other levels are averaging about the same (but across 4 and 3 beds each) then that salon is SCREAMING for more upgrade equipment!!

I stand by my original recommendation -- dump the 28's altogether, or WORST case, keep 2 for now and sell two. But I still don't see enough of a difference between those and the 32 (you didn't say -- do they have HP facials?) and there would be a LOT more money to be made in having another 52 and a couple of 42 (or so) lamp beds in there instead of so many base beds (even a Level 1 standup!).

And -- if you "run it for a year as is", in my opinion and experience, you will be running the risk of another year of it being... "so-so" and tanners looking around for something else. You are the "new sherriff" -- this is a GREAT time to show you mean business and to "invest" in the business, not just slide in quietly. You don't have to do it ALL in year 1 -- but at a minimum you need another 52, and better yet, you would also add at least 2 at that "mid level".

Payroll -- figure he would have to pay someone else $15,600 to work those hours he works (40/week x 52 weeks x $7.50). With taxes etc, consider it more like $20K. Take that right off the profits - that isn't "profit". OR, if you are already working now, take off what YOU make now! If you are going to trade some "other" employment, for working 40 hours/week in your salon, then you have to factor out what you "would" have been making in your old job.

Do the math to see if the "hours" work out to the revenue he says. For example - if the 52 is a 15 minute bed, 1800 hours is 7200 sessions (4 per hour). Some people probably go less than the 15 minutes, but staff may tan free and probably use that bed, so take a 7200 or so and multiply it by the "average" price they probably pay on that bed. If walk-in is $16 and 20 sessions are $8 per session, the "average" might be $10 or so. Do your math, get your best estimate, and do that for all the equipment. Are you getting to the revenue figures he's claiming? Remember -- need the numbers from ALL 3 years -- not just this past one.

How well do you "know" this salon? I'd hang around for a day or two -- all day -- watch how many customers come and go, how they interact, what they say, what equip they use, how well the staff "sells", etc. Does the salon get too hot or does it stay comfortable when all the beds are jamming? Is it a "high school hangout" or a good mix of clientele?

Sounds like you are doing your homework -- keep it up!

[mikejones]

make him an offer. That rent is cheap. the beds are not going to break. 28lamp tanses is not the same as a 28 lamp sunvision.

ramdon guess at a possible day at this place. Doesn't matter if the numbers are off. It's called a starting point. Adjust as necessary.

4 - 28 Lamp Beds - TanSES x $5/visit x 30visits/day = 150
3 - 32 Lamp Beds - TanSES x $8 x 30 = 240
1 - 52 Lamp Beds - TanSES x $10 x 15 = 150
1 - VHR Stand UP Level 1 x $7 x 10 = 70
1 - VHR Stand Up Level 3 x $10 x 10 = 100
1 - Ultrabronz Bed x $18 x 6 = 108
1 - Mystic Tan Booth x $15 x 5 = 75

= 893/day (round down to $800)
=800 x 30days = 24K x 12months = 288000

doesn't seem unrealistic to make some real money with this place.

[bronzeman11]

All great points ^^^^^^^Don't rush into it. Research alot! He's not "giving it away" so there's no urgency to make a fast decision. Take your time , it's a big investment & commitment. Good luck.