HBT6872

What is your market like? How many salons in your 3 mile? How big is your city? What is the pricing and beds at the competition? How much are you paying for the salon?
The beds are not worth anything, and I am curious how much (you are just paying for buildout on this one).

Neon Beach

Me 2.

TFranssen

PaceCarNut, what they really mean is:

Do your homework!!

What is the pricetag on that salon? 4 beds arent' worth much and there is more than likely no established customer base. If the leases are new, then the equipment is probably financed through some secondary lender and your interest is probably way high - depending on whether the owner financed through a direct lender or a broker. If the salon was financed by a local bank, there is a chance there is a blanket lien on everything in there that isn't under the bed leases, so check on that information.

I'd say there isn't equity in the salon to invest more than a few thousand dollars into it but there is a lot of homework to do before you give her a dollar - unless you're feeling generous and want to do something nice for someone with health problems.

Other than the obvious -
1) Checking liens on the company and loan balances/ interest rates
2) Electrical capabilities;
3) Adequate review of invoices for the equipment and everything within the salon;
4) Review of the 1 month income, advertising and promotional efforts in presale;
5) Database already established;
6) Actual growth potential of the salon - determin how many beds and what electrical additions the location is capable of;
7) Talk to the other tenants to find out how the landlord is about repairs and response;
8) Research the demographic you are catering;
9) Potential location expansion in the future by finding out the property lease term of each neighbor;
10) Is the location easily accessible to traffic;
11) Will each tanning bed generate enough income to pay the bills?
12) Project income potential - year 1, 2, 3 etc. - multiply the average ROI of each tanning bed/room by the number of customers it would take to pay you a salary and the other expenses;
13) How much disposable income is available after that?
14) Will it afford you to expand into other locations?
15) If the answer to number 14 is no, why would you invest your hard earned money into a location that merely "gets by"?
16) What is the electricity bill for the past month? How many tans did that include? Divide that to get the average cost of one major bill per session.

There is so much leg work and 4 beds running 18 hours per day have the potential of earning you $8064 per day if properly located in a FANTASTIC LOCATION! ($7(average return) x 4 tans per hour (max tan) $212/hr. x 18 hours = $2016.16 x 4 beds = $8064/day.) NOW, PLEASE REMEMBER - this is all four beds running at maximum capacity for every hour. Does the salon have that traffic? I'm sure the answer is NO! Traffic must be 1152 people per day for this kind of income.

Reality is - it's probably tanning about 20 people maximum per day - (my perception for the number of units purchased) especially right now - some days less and some more. If you have a small location in a bad location - that number could be less than 10. Lets be fair and say 20 people per day tanned there in November - $7 per tanning session x 20 tanners = $140 per day x 7 days = $980 per week x 4 = $3920 per month.

If you have a lease for $50k on those units - I'll be nice and assume the leasing company gave you half way descent rates and you have a $1250 payment for the equipment - not including taxes. Lets add a $1000 property lease payment - throw in some utilities (conservatively, of course) $800. Your pay out is now $3050 and you haven't even writen pay checks to your employees! Even if you worked it day and night yourself - can you and your wife live on $870 per month or $217.50 per week - work 18 hour days and promote your businesses effectively?

4 tanning beds can not pay the expenses without extra services. 10 tanning beds - now that is a slightly different story but still has ups and downs.

Please understand - if you are coming into a market place for the first time - it's imperative to do it correctly. Haphazard entry into the tanning industry would be a huge mistake - on the otherhand, there are folks who've become millionaires with a good plan in place!

Best of luck!

Neon Beach

Many of which were millionaires to start. :)

mmalibutans

Is this Salon called "Quick Tanning"? If so the cost is $6500 and the beds are all 24 bulb beds. This salon is right down the street from me and is already on its second owner. It's not even been open for two years. I would think it is a "Buyer Beware".

TFranssen

If the price included beds "free and clear" take the beds and sell them - then you can say you've invested your money and received a return! There probably isn't $6500 worth of product within and no way there is a customer base worth that amount.

mmalibutans

He stated that he had a 2 year 9 month lease he ws willing to take over. I was assuming this was on the beds.

TFranssen

The bed lease probably costs more than the salon makes in a month - expecially if they were obtained 2 years and 3 months ago - interest rates in the industry were through the roof!! And probably the reason for the turn over in ownership.

I knew that, just wanted to make a point that $6500 in and of itself would be better invested to buy/sell the 4 tanning beds, if they were free and clear.

HBT6872

I think he/she has had great advice, and they need to give us more information.