Coppertone

Just crunching some numbers

College - rent

$1723 x 12 = $20676 per year $23000 - $20676 = $2324 left for rest of bills

Residential - rent

$2202 x 12 = $26424 per year $34000 - $26424 = $7576 left for rest of the bills

$7576 / 12 = $631 per month for bills

There is no way that these numbers can add up and you haven't even added or asked about insurance, advertising, office supplies, repairs and maintenance (outside of lamps) and so forth.

sunsally

Coppertone is on the mark!

You haven't asked, but if you read through here, you'll see you need to figure costs of:

Rent
Electricty
Gas, Water
Phone
Internet
Credit card terminal (either rented or purchased)
Tanning insurance
Licenses - tanning, vendor's, etc
Payroll
Payroll fees
Bank & Credit card fees
Accountant/Attorney or other professional fees
Advertising (HUGE - don't forget this!)
Cost of inventory - lotions, other retail
Relamping costs
Any bed payments/business loans (are the beds all free & clear?)
Cleaning Supplies
Magazine subscriptions?
Gift Card costs
Tanning Software Technical assistance monthly charge
Towels and other salon supplies (TP, baby wipes, ...)


At a glance, my "gut" tells me.........

He's OVER estimating his revenues -- not making that much from those few beds

He's UNDER estimating his expenses - by a significant margin

If the leases are up soon, if he doesn't renew, you can walk in and snag the buildout for free -- customers will still show up (keep the phone numbers) and you could just replace the equipment -- what he has is worth very little!

Is there room to expand -- put in more equipment?

Are their enough Amps of Electricity and tons of AC to expand?

Are the rooms big enough to put in bigger/better/more upgrade equipment?

Are these salons drawing far outside the 30,000 population limits? Statistically, in a town that size you would only expect about 3,000 of them to be tanners.

Check the tax returns -- and do NOT take "well, I didn't show everything!". Sure, he may not have -- but he already got THAT advantage over the government -- he doesn't get to have it over you too to now say the business is worth more than he's showing!

Doors closed? In May??? No WAY that is a good sign!! If customers DID want to come there, they've abandoned ship to the 3rd salon in town already!

My gut tells me -- Bad Deal.

Sebastien

Right, a lot of things don't add up. He keeps changing how much the rent is, it went from $1,600 for the college one the first time I spoke to him to $1,700 the last time I spoke to him which was today. I still have to talk to the landlords about all that. I'm not gonna go by the spreadsheet he gave me, earlier today I asked for the books so that my accountant can look over them. And guess what, when I asked about the books he was like: Everybody wants to see the books! What is a book? Is that an expression or something?....I was like: you're kidding right? don't you write down how much you take in everyday since the day you opened?? and he said: Yeah I put all that on the computer... Righhhht, you mean you gonna do that tonight when you get home??? <---didn't actually say that but I almost freakin did, i was so ******.

Anyways, he's gonna give me his "books" and tax returns tomorrow night or wednesday.....hopefully. Not that it's gonna mean much but we'll see. I'm also going to look at all his bills. I've just only started getting into details with him...

All I know is that those numbers better add up on his books and those expenses don't double magically overnight. If not, i'm about to waste mucho dynero on my accountant and lawyer....

It's all beginning to look very shady to me...

Thanx for the input Coppertone!

EStevens

Salon in the residential area:
Gross last year: 164k
Net: unknown
Expenses not including payroll: 34k (rent, phone, gas & electric)

Salon by college:
Gross last year 83k
Net: unknown
Expenses not including payroll: 23k (rent, phone, gas & electric)


It seem like he is making a butt load of money. If his numbers are verified to be correct. If that is the case why would he be selling it. Seems worth the drive to me.
It seems to good to be true. Does he have a profit and loss statement?

Sebastien

You're absolutely right sunsally, i don't think this guy is very honest about everything. I mean, he's lying about things that are so simple and stupid and that he KNOWS i'm going to find out BEFORE the deal is done. Like how much rent is, electric (from looking at his bills) and other bills that he may be lying about so he probably isn't honest about how much he's grossing either, **** he can't even tell me how much he's netting! not even approximately...

He still has some loans but very little on a couple of the beds but that's his problem. It won't have anything to do with me.

Advertising, he doesn't do any at all and says he doesn't need to but IF i did take over it would definitely be a different story...

By the way, i forgot to mention that the population of 30,000 that was back in 2000. I'll have to look to see what it is now....don't think it went up much but you never know. That area has been booming lately.

In one of the stores, there's definitely no room to expand but in the other one (residential one) you could probably add 2 more beds in there.

Yeah, i still can't get over the whole thing about the salon being closed yesterday. I brought it up today and he just kept saying it was the electric companies fault when i actually spoke to them and they told me there hasn't been a problem since last August.

Thanx for the info sunsally, i definitely took note of all that!

Sebastien

Yeah EStevens it does look too good to be true and that's exactly what it is...Too good to be true!

I just need to double check it all myself and with my accountant. Not sure about profit and loss statements yet.

Thanx for the input.

sunsally

Just to give him the benefit of the doubt (not that I think that this is probably a good deal, but a general statement for all looking at existing businesses....)

It is POSSIBLE that he really IS in the dark. That he DOESN'T track very carefully. That he ISN'T sure about the expenses and all of that. Which may be why he is selling -- it SEEMS like he should be making plenty given his revenues, but it seems to be draining him and he can't figure out why.....

A lot of owners seem to track the REVENUES religiously -- and pay very little attention to their expenses!! They remember the $1000+ days easily -- and forget the ones where they made $62.43. They remember rent, payroll & loan payments -- and forget all the little (and not so little, like elec & advertising) that add up to plenty!

And MANY want their cake and eat it too! They do NOT report all their cash or bulk up house supplies on their expenses (wahoo -- free TP for all!), but then when they go to sell, try to say it isn't accurate! That may be -- but if you want to KEEP a salon and minimize your taxes, skim the revenue & hide extras in the expenses. If you want to SELL your salon, keep it straight and narrow and show the true value so you can GET a true value of a sales price!

You're asking the right questions, and keeping yourself from "falling in love" without a clear picture -- that's a good thing!

Keep us posted!

Sebastien

It does sounds like he is in the dark...from what he tells me, his manager knows more about the salons than he does. And he is never EVER there during business hours always after 11pm.

sunsally, you're awesome. Thanx for helping!

By the way....i was totally wrong about the rent. The first time i spoke with him he told me it was $1700 for one and $2200 for the other....which is what he told me today too. So i was wrong, and i'm sorry i called him a liar about that! just checked my notes from the first phone call which i should've done before calling him names...lol

So i just made a rough estimate for both stores together of all the big expenses not including advertising (which i know is big but not sure how much it will be for the year, if you could tell me how much you pay a year i would appreciate it), bulbs, lotion and other little things. It is NOT accurate:

Payroll: $69888 that's $8 an hour for 8736 hours
Rent: $47100
Cable: $1827
Phone: $4842
Gas & Electric: $10434
Insurance: $2500
Loans: $30000

Total: $166,591 in expenses

Net (if last years gross was somewhat accurate):
250,000 - 166,591 = $83409 Net

My lawyer will cost me: $1500
Accountant: $75 an hour

The only thing that's accurate is the rent, everything else came from the spreadsheet he gave me. Lawyer and accountant fees ARE accurate.

Now i am going to be working at one of the salons most of the time and my girlfriend will be working at the other salon most of the time too so i will be saving some money on payroll, maybe cut it back by half? that should give me an extra $35000 a year.

Please tell me if the numbers look realistic, compare them to yours or something. I just want to make sure they are somewhat close to what they should be.

Thanx!

EStevens

Sorry your last post just sparked a few questions.

What if he is fluffing the gross income and even with the savings in payroll you barely break even? Do you work full time now?
Are you going to quit to run the salons? Well you would have to to it seems. I don't know about you but I do not want to work for free. How much will it cost to replace the bulbs and maintain the beds. (I think you said 15 beds, that could be expensive) How many times a year do you need to replace the bulbs?

This is a great post, lots of need to know this stuff here. Before I take the leap myself, I need to know this stuff. I am not as far into the buying process as you are, you could say I am on the fence. Sunsally how long have you been in the business?

Keep us posted.

Ed

Coppertone

There still is a bunch of expenses unaccounted for that will effect the bottom line.

Where's the cost of the TP? How about those cartridges for the printer? Stamps? That service call to the plumber for the AC unit leaking? Think you get the idea.

Like some have stated are you working full time now? Are you gonna quit to run the salons? Owning/running a salon is no get rich business as sometimes people think, especially ebay with it's own a tanning salon manual. Your doing a great job researching and asking questions. Some people just see the $$$$ and not the rest. There is many salon owners that either work another job or have there partner work outside the salon. If you research off this site there is many times when owners have stated stiitng for hours upon hours and might make $10 for the day. Have you though about just getting 1 salon and both you and your girlfriend running it? That way it will not be such a big out lay of cash, you gain the experiance of running a salon, and have less headaches.

Keep on pushing as your definitely doing your homework