tanmonster

Hello all!!! Yesterday I went to see potential salon to buy, located 25 miles from mine. It has 8 tanning units, six of them are 15 minutes Sunsource base beds , one Cyber-Dome 12 minutes 48 lamps stand-up and Cyber-Dome VHR 160 Watts. All beds between three to five years old. His Helios says this salon generated $110,000 last year. When I asked about L&P sheet and bank deposits copies to verify his income, he said he does not report whole income to IRS and he can show me what he filed this year which is way down from what Helios says. He stated that he is netting $35-40 a year. There is no other information how to verify his income and L&P exept his income tax filing. He is asking $38,000. The salon is clean and professional, three employees, there is more space to expand. My question is should I trust his Helios software even thete are no accounting papers to verify his income and expenses? His cusomers base is 5,000, rent is $2,300 a month. advise. The reason of selling that he has other business which is a couple nail salons.

sunshinetanningfactory

I woulod go for it...Thats not a bad price. The cuistomers numbers are good (as long as they are ligit) I just bought a solaon in August and it has older beds (1993 and 1995 sundashs 10 and 20 minute and one stand up) and I am finding out that some of the cusotmers in the database were not all customers. The previous owners could not provied a P & L sheet either but if you are a cusomers orinted salon and provide a great service they will come to you. Plus this is a great oppuninty to be able to expand and broden your market and income potential. You may not make a million the first few years but there is the futhre to look forward to. If I were you I would go for it.

tanmonster

Thank you, Sunfactory. This owner called me and told that he would show ne credit card monthly statements which is between $3,000 to 4,000 a month. Something I could believe.
That is right, the price is not bed at all.

sunshinetanningfactory

If he can give you cc statments that have 3000 to 4000 a month I would go for it. That means atleast they have a EFT program and garenteed income. Just remember to keep up the good service and they will come. Good luck.

acapulco

offer him 10k down and the balance over two years (monthyl payments). if the number don't jive; stop paying. that's how i do it if they can't show irs statements to reflect the true figures.
good luck

tanmonster

Acapulco, this GREAT idea!!!!! I will talk to him first thing in the morning. Wow, you are genius.

soapking

acapulco..your idea sounds 'great',but legally, you can't do that..though you may be justified. The sales contract, or what ever agreement which was signed, is a legal-binding contract. If you are to state, "X" amount payments for aset duration, and you stop those payments because your sales 'don't jive', you can be sued for 'breech of contract'. Unless, specified in the contract, that it would be an acceptable approach, which I can't see him/her/seller agreeing to.

acapulco

yeah, you are correct soapking. technically that's not legal to stop paying if the salon doesn't produce what you were told. however, if the owner is blowing smoke in the wind with his numbers and you have put out all your cash up front; who's going to loose. if the seller is offering a quality business; everything will be fine. if he is selling a bunch of lies - he won't (in most cases) bother to sue you because it will cost him too much to recoup too little. it becomes a he said, she said thing at that point and most attorneys won't mess with things like that unless you pay a sizeable retainer up front. everyone threatens to sue; very few actually make it to court. i have been around and around and anround that block again.

I purchase a beauty salon several years ago from an older couple that wished to retire. gave him a small down payment and agreed to the balance over three years. on the first day he introduced myself and my wife as the new owners to the stylists, they freeeeeeked out - big time and quit on the spot. i'm not kidding ---- tears; cursing; throwing keys; the whole thing.
now, where would i be if i had given him all the money up front.
learned to be very cautious about purchasing an existing business since then.
if it's not a good deal for me---just walk away. there will be another just around the corner.

TanTeks

Be smart and pay only what they can prove via tax returns. I know that many salons do pocket cash and doctor the books, but it's simple, salons are only worth 1x the yearly gross. If they show 95K on a return then you should pay no more. Study the client list and all other records closely. It's a great business but you need to get in without having your head lopped off. Good luck

mouthybrat

Tanmonster,

The fact is that he is not asking an unjustifiable amount for the salon, IMHO. However, I agree with acapulco about the downpayment and monthly payments after that. Soapking makes a good point about breech of contract, however in this case, I believe the breech would be on the current owner's side and not yours. If he misrepresents his numbers to get you to buy his business, then the contract would be null and void due to false information!