gripmarketing

"First: the customer base, repeat tanners and the income they can reasonably be expected to produce NEXT year. Customer acquisition and confidence costs money, you have invested that money in the past, the new buyer will automatically have a customer base in place that he can count on to market products to. I would value my customer base at $10 per tanner who has tanned with me in the past 6 months. Some will be steadies, there every month, others seasonal in nature. Those customers who have tanned in the past 24 months, but not in the past 6 months are worth $3 per name."

This thinking is heading in the right direction but on the wrong track and the valuation misses the mark. The concept being loosely described above is known as LIFETIME VALUE. Lifetime Value is the amount of money, on average that you can expect to get from your customers. To determine LV, simply divide the total number of different customers into the total sales volume. Running averages can be calculated for one year, 3 yrs, and 5 yrs (ie, 3 yrs of customer into 3 yrs of sales revenues).

LV for salons in the US according to our poll of over 7,000 tanning salon clients:
Average $50-$92
Above Average $93-$171
Upper Range $172-$225
Top 1% $250+

In other words, for a salon with a $65 LV, you can expect on average to get $65 out of each customer who comes through the front door because LV takes into account whether someone has tanned with you once or for years. LV also is the indicator of your customer "churn" rate.

A salon with a higher LV is worth a higher multiple because it's customers are more loyal and the salon could better withstand competitive incursion and attack. This will protect the buyer.

A salon with lower LV is worth a lower multiple because it's customer aren't loyal and its churning its customer database and won't be able to withstand competitive attack. This makes the purchase of the salon less desirable.

West Side Tanner

OMG.......not another one of these. Its as bad as white spots!

gripmarketing

West Side Tanner: What? Was your post supposed to appear in another thread?

West Side Tanner

NO ! How many "NEW" posts do we need on this subject?! It's getting very old. IMHO

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[ This Message was edited by: West Side Tanner on 2004-08-18 19:01 ]

engfant

Agreed. (I like when people other than me start to lose it. Fun for me)

gripmarketing

Why can't we create an area of the site that has FAQ's like white spots, salon sale evaluations, etc. and keep these infinity threads there permanently? Chunn?

tanu01

Ok, REAL Annswer, You want out? Get 50% of your equipment,1/2 to 1 one year profit and leave!
Flick

electricparadise

Hey not a bad thread, Anyone want to buy my place, 12 units 4 up grades including a HP, total outlay per month Including rent & heat, Under $1,000.00.Have over 400 swimsuits /400 belly rings/400 sunglasses. Ps.. that $1,000.00 also includes the electric bill &phone & we have parking for 40 +cars.

tanu01

If I had 400 swimsuite's in stock I would cry.
Flick

salonpro

Quote:
On 2004-08-18 19:15, gripmarketing wrote:
Why can't we create an area of the site that has FAQ's like white spots, salon sale evaluations, etc. and keep these infinity threads there permanently? Chunn?


Great idea!