Buying an exsisting salon

[sunsally]

A couple of things from different posts:

1. For Jensunquest - 30 minute beds will tan WAY different than 10 minute beds, so I'm not surprised your clients prefer them -- for the tan, more so than the time. To get a base bed to run 10 mins, you have to have a lot more "B". It is more reddening and drying to the skin and exfoliates a lot faster -- so doesn't "last". The 30 minute beds will have a lot more "A", be more bronzing, tan will last longer, etc. So it isn't just about time -- even if they say that -- it is about results. For a base bed, in only rare cases, is 10 minutes a good option. 15 minutes is IDEAL for both the customer's results, and the salon's profitibility/turnover.

2. For Sabatoi's situation -- IF they are netting -- NETTING -- $70K -- a few things to determine:

a. Is this with them WORKING the salon, or not? Because if so, then that isn't really net PROFIT, that is their own payroll plus profit - a BIG difference! Even if they were working "only" 40 hrs/week, if you were to hire someone else to do that then that would cost you about $25,000 minimum in their wage, benefits, taxes, etc -- could be a bit more -- and that is for a $7/hr worker tanning salon clerk who might not "produce"/sell as well as they can.

Thinking about it this way, it is only "profitting" more like $40-45K/yr.

b. What has been the trend over the past 5 years? Revenues steady or increasing or decreasing? What about customer visits? Lotion sales? New customers? Any change in competition in the past 5 years? Do you anticipate any new competition coming (e.g. new strip malls going up, etc?). Very important to see if you can consider this "typical" or a sign of good news -- or bad news -- ahead.

c. Think about what you are paying for. The equipment is worth virtually $0 to resale. If I were to guess, I would guess the rooms, electric and AC will all be undersized if you were to try to "upgrade" the salon to newer equipment let alone more upgrade and higher profitability equipment. If so, not only would you have equipment with little value, you would have a buildout with little value. That means your original $175K investment might require another $100-250K if you wanted to bring it up to "current standards" for a salon. I understand you are interested in paying cash, but if you tried to get a loan, most banks would say no. There is no "collateral" per se -- you are basically paying $175K for the "goodwill" this owner has built over their 17 years -- which may or may not transfer to you (you have no guarantee those customers keep coming after a change in ownership).

d. How much of the revenue is coming from the hair/nails now, rather than tanning? Is the current owner involved in doing any of the hair/nails? Is there other staff? Will they be staying on if you take over? Most women are VERY "loyal" to their hair and nail people -- not necessarily the salon where they work. If those staff go, you may find the customers go with them -- and the revenue.

There is more, but that is a start. You have to also weigh what else you COULD do with that money, and what else you are currently doing with your time. If you have a job now, that you would give up, factor in that lost opportunity. What else could you invest the $175K in -- real estate, other businesses?

Not saying it is necessarily a BAD opportunity, but not a slam dunk 'good' in my book either. Need a lot more information, and a LOT more detail before you get too wrapped into whether you should add a spray booth and which particular one might be good!

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