Existing Salon Purchase

[bnick007]

Good evening. My wife and I are looking to purchase a tanning salon. The salon has been in business for the last 10 years. The owner recently added 2 hair styling chairs. He also has a massage therapist who works part time.

With being new to the business I wanted to get opinions on the quality of the beds being purchased and the potential value.

1 Sun Ergoline 600
2 Sundash 240G
1 Sundash SR48
3 Sundash 232 (10min)
6 Sundash 232 (20min)
1 MyMyst Mystic Spray Booth

We are in progress with writing a business plan with intent to purchase. We have not signed a purchase agreement. We will be receiving copies of the last 2 years tax returns tomorrow.

Let me know you thoughts or any additional questions I should ask.

[Steve Underhill]

Originally Posted by bnick007

Good evening. My wife and I are looking to purchase a tanning salon. The salon has been in business for the last 10 years. The owner recently added 2 hair styling chairs. He also has a massage therapist who works part time.

With being new to the business I wanted to get opinions on the quality of the beds being purchased and the potential value.

1 Sun Ergoline 600
2 Sundash 240G
1 Sundash SR48
3 Sundash 232 (10min)
6 Sundash 232 (20min)
1 MyMyst Mystic Spray Booth

We are in progress with writing a business plan with intent to purchase. We have not signed a purchase agreement. We will be receiving copies of the last 2 years tax returns tomorrow.

Let me know you thoughts or any additional questions I should ask.

If you would like to give me a call i will tell you exactly what to look for and how to evaluate the information you are given.

[Black Sun]

Beds are old, underpowered...would not doubt they were put into biz 10 years ago...probably not worth more than 15K total....on Craigslist, saw 10 yr old 232's going for $400.00.....and that is probably more than they are worth.

Massage is a total waste for tanning, also would stay away from stylist, unless you have the room to separate and run as an independent business..., don't mix with tanning

[sunsally]

Originally Posted by bnick007

Good evening. My wife and I are looking to purchase a tanning salon. The salon has been in business for the last 10 years. The owner recently added 2 hair styling chairs. He also has a massage therapist who works part time.

With being new to the business I wanted to get opinions on the quality of the beds being purchased and the potential value.

1 Sun Ergoline 600
2 Sundash 240G
1 Sundash SR48
3 Sundash 232 (10min)
6 Sundash 232 (20min)
1 MyMyst Mystic Spray Booth

We are in progress with writing a business plan with intent to purchase. We have not signed a purchase agreement. We will be receiving copies of the last 2 years tax returns tomorrow.

Let me know you thoughts or any additional questions I should ask.

1. Do you or your wife do hair? Will you be personally manning 1 or 2 of the two chairs?

2. Ditto for the massage therapist

3. What is the competition like near this salon?

4. What has you interested in opening a tanning salon in the first place?

5. To purchase this business, will either you or your wife be leaving existing jobs?

6. What room sizes are you working with? How many amps of power? 3 phase or single? How many tons of HVAC? Even if you WANTED to upgrade your equipment - the answer to these questions might make the cost more or less prohibitive.


The equipment, while older, is very solid and will probably run another 10 years without issue. Or you could spend 50K or more replacing all of it.

The more key question is - is it making money, is that enough, or can you do something to make even more?

[Steve Underhill]

Originally Posted by bnick007

Good evening. My wife and I are looking to purchase a tanning salon. The salon has been in business for the last 10 years. The owner recently added 2 hair styling chairs. He also has a massage therapist who works part time.

With being new to the business I wanted to get opinions on the quality of the beds being purchased and the potential value.

1 Sun Ergoline 600
2 Sundash 240G
1 Sundash SR48
3 Sundash 232 (10min)
6 Sundash 232 (20min)
1 MyMyst Mystic Spray Booth

We are in progress with writing a business plan with intent to purchase. We have not signed a purchase agreement. We will be receiving copies of the last 2 years tax returns tomorrow.

Let me know you thoughts or any additional questions I should ask.

A complete sales report will allow you where income is being generated. There are very successful salons that have combined tanning with hair stylist. It all depends on how it is structured. Also sometimes when space permits you can rent a room to a massage therapist. A great many questions must be answered in order to evaluate this business. Only then can you determine if you would like to make an offer and for how much.

[bnick007]

Thanks for the responses. Let me answer some of the questions asked.

My wife currently is a hair stylist she would be leaving her current position to be at the Salon. She would continue doing hair at the salon. So she would be using one of the chairs. We have another stylist that would be joining as an employee if and when we decide this is a smart purchase. The massage therapist currently has one room and works part time. The beds were purchased in 2002. The Mystic in 2008. The salon is located near a directly behind a college campus with another only about 8 blocks away. There are 2 main competitors in the area. The first being Suntan city and another local business. The local business offers massage as well.

HVAC has been upgraded to a 25 ton unit, 3 phase electric.

When my wife became a hair stylist 5 years ago. Her goal was to open her own hair salon. The time has come where she has a great clientele base that this is more feasible. Ideally we would want a hair salon only. But with first speaking to the owner the numbers sounded like they could work out.

The current owner added in the hair services only 18 months ago. He had 2 stylists that rented the chairs for $500 each. This part of the business is not really accounted for in current gross sales figures. Both bailed within the last month. Both have moved out of state. We would have hair stylist be commission based employees. Commission being for a top level stylist 48% of sales. Conservatively we would project $4000 in sales per stylist. Currently with 1 being my wife and another employee.

From the P&L sheets the business over the last 3 years has seen about a $15000 loss. Gross sales average 140,000. I don't have the tax returns yet to see a details. Which is frustrating to say the least. We have given the current owner a deadline of Monday.

He also has a teeth whitening system taking up one room which we am really not that interested in.

I have been looking online at used bed pricing to get an idea of FMV. The Ergoline 600 he would estimate the value at 12000. I would estimate 7500. To be honest his FMV estimate of the inventory and Leasehold improvements and ours are significantly different.

Obviously without knowing more detail into the tax returns it make it very difficult to assess a value to make an offer. Our feeling right now is it is very overvalued. The asking price is significantly higher then what I feel it is worth.

Let me know if anyone has any other questions. I really appreciate the help. We know more about the hair salon of course but really think it could work.

[sunsally]

1. College campus location can be very good.

2. SunTan City as a competitor will be very formidable.

3. Nothing "wrong" with the equipment, but it IS catering to the low end. Take a look at the STC equipment mix by way of comparison. You basically have 9 "level 1" beds, 3 "level 2" and a "level 3".

4. It depends on condition..........but.......to put a value on this equipment today, already installed in the salon and ready to go, if you ASSUME all new lamps (which is not likely), I would value it at $40-45K. If you have to relamp all, subtract $4-5K. If you have to replace any acrylics, subtract $200 (232's) to $800 (600) each.


The kicker for me in what you said was: " Ideally we would want a hair salon only". If that is the case, and this salon is currently operating at a loss, I'm not sure I see the attraction in buying it. Why not just set up a hair only salon if that is your interest and background?



Upside - there are fairly inexpensive (relatively speaking) changes that could be done to this equipment mix to boost profitability. So it comes down to --- how much do they want, how much is it really worth, and do you have the money to buy it plus make the changes to bring the tanning side into a better position --- when what you really want to do is run a hair salon??

[kookyguy]

I see too many reasons to walk away and too few not to walk away. So...walk away.

[bnick007]

And to be honest with the lack of providing tax statements and the high pressure to close a deal soon we have been turned off by his deal. He is asking $140,000 for a business that is losing money. Which he claims is due to improvements and his own income. He has valued the tanning equipment at $66000 which I valued at $33000. At this time with the included inventory and other miscellaneous equipment (computers, lotions, salon chairs, Marketing, Name, customer lists, leasehold improvements, etc). I would be willing to put in an offer of maybe $50,000 - $60,000. We would be financing the purchase if we pursue further with additional taken for operating and improvements.

[Steve Underhill]

Originally Posted by bnick007

And to be honest with the lack of providing tax statements and the high pressure to close a deal soon we have been turned off by his deal. He is asking $140,000 for a business that is losing money. Which he claims is due to improvements and his own income. He has valued the tanning equipment at $66000 which I valued at $33000. At this time with the included inventory and other miscellaneous equipment (computers, lotions, salon chairs, Marketing, Name, customer lists, leasehold improvements, etc). I would be willing to put in an offer of maybe $50,000 - $60,000. We would be financing the purchase if we pursue further with additional taken for operating and improvements.

This is typical behavior for a person that is loosing money that is trying to sell a business. There is a process that will not only establish the actual value of the business but will also motivate the owner to sell at a fair price.

It is important to understand that there are additional cost associated with the changes that must be made to this business for it to be profitable.

You must establish those cost up front. That will be part of the investment as well as a tool for negotiating a purchase price.

I negotiate dozens of business purchases each year and there is a process for getting it right. The first step requires determining if this is the right business for you and can the business with the correct changes be profitable quickly.