beachtanning

Hi everyone! I'm a brand new poster but this site has been tremendous help. I wanted to get your opinions on a business I am considering buying. Thanks in advance for reading my long post.

The salon has 6 beds: 5 laydowns and an 8-minute stand up. Nice build out with room for only one more bed. The gross revenues were $85K first year, then $89K and $110K for the last 3 years but 2004 was only $40K. There are several reasons for the change, including absentee owner who was ill, employee theft, major road construction that obstructed entry into the salon parking lot (near completion next month), etc. In addition, the salon has NEVER done advertising of any kind, has no good signage to even let folks know they are there and is not taking advantage of the HUGE opportunity for retail products at this location. This location is in a great tourist destination and could market some other products not usually found in a salon.

Expenses are not terrible..run about $45K per year (plus any part time help)...that figure includes about $400 per month advertising, bulb changes, etc.

The salon has been updated with 2-10 ton ac units, upgraded electrical to accommodate growth and has 2000 "active" members according to owner. I would say 2000 members are actually anyone who ever went there, not active. The price they are willing to go is $60K - first asked $180K, $100K and now listed at $85K.

Any thoughts or opinions about this business? I think I could turn it around but I thought I would ask the professionals their opinions before I made the final decision. Thanks for any and all opinions!!

Brandy1

No more than 1 time revenue.

DWhite6872

It depends.....I have looked at buying a couple of salons...but I could never justify the asking price...and the reason they are usually selling it is just about the time they need to upgrade equipment. I like to build our own with our choices...but if buying an exsisting salon helps you with financing or maybe they are carrying a note for you...and this is your only option...then go for it as long, as you have done the math and you think there is an upside..but also look at your location vs.. someone new coming to your town...could your store compete..would you be out positioned based on your location? There are tons and tons of variables....I know if you hit a search on here there is good information on this topic...if this thread does not produce the answers you were looking for...

beachtanning

Brandy,

Thanks for the response. So, do you think I should only be willing to pay $45K even though the business prior years show $85-$110K. We had originally offered them $40K and they said they could not take less than $60K...and they are holding firm.

I guess I just wonder that since it had so many problems in 2004 (like employees didn't bother to open for 10 days over Memorial weekend and owners didn't even know) would it be worth the added risk knowing that the prior years were doing well and on the rise? The owner had been an owner operator until this year - and that's when the problems began. I don't want to get taken, but is the extra $15K worth the risk? Thanks!

Angie

Brandy1

Your only as good as your last year.....

beachtanning

The equipment is only 3-4 years old with the Starship stand up less than a year old. The beds have new bulbs every 600 hours and have been updated to replace trim, etc so they look new..they are 20 minute beds.

My next question then is if I could buy 5 lay down beds and a one-year old Starship 8 minute bed, wouldn't it be more $$ to do a start up than buy existing for $60K. I would need to upgrade AC, electrical, buy a computer, software, buildout, equipment, fans, cc machine, signage, etc. Are my figures off? Or could I do all of that for under $60K?? I know this particular location paid $10K for AC units and $8K for electrical upgrades this past year..but the owner got sick and became absentee right after.

Angie

beachtanning

Oh by the way, we would be paying cash for the business...if that changes anything!

Angie

Brandy1

Yes it would cost you more, but the previous owners have not proven that the business itself is worth what they are asking. How badly do they want out?

Sherin

I sounds to me that they have destroyed the existing business with inconsistancy.
I would try & determine what the fixtures were valued at and not give too much creedence to the clientelle. Have you checked your areas demographic to see if you can build the business back up in a short period of time?
Yes, if you were to start out from scratch, it would be about 3 or 4 times that much, depending on where you are.
Make sure you have a good business & marketing plan...I think you will have somewhat of an up-hill battle getting those customers back in & re-building rapore.

Neon Beach

Were you offered a reason as to why there was such a large drop in revenues for 2004?