FLTan

I'm sure you guys are tired of giving advice....but I'm another newbie.

I'm looking at purchasing an established salon. The tanning salon is in a good location and the customer satisfaction is amazing. I've tanned there and also talked to several other customers.

The salon has monthly overhead of approximately $6600 including:
Equipment lease
Property lease $3400/month...ouch
Electric (average)
Insurance
Alarm Service
phone bill includes high speed
Web Site
property taxes
lamps
lotions

The average sales for 2007 were $6900/month and so far in 2008 the average monthly sales are $9800. The salon has continued to grow the past 3 years since opening. It has 400 amp service, 10 tons of AC, 675 square feet of unused space, washer and dryer etc. The build out was done extremely well and it is a gorgeous salon. I would be running the salon myself.

The are 2 years left on the lease for the beds which I would aquire and then purchasing for the salon for about $50k.

1 ergoline 600 12 minute bed, 2 sun dash 240, and 6 sun dash 232 beds. Also, one spray tan booth.

What are your thoughts just after seeing this information?

unity

My thoughts? Why are they selling?

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BP

Are you willing to work for that kinda money? You need to look at the first figure. Average over the last year. Then take the taxes out. Figure out total costs plus add 10% per month for repairs to facility and beds and lamps etc... Then advertising. Then figure what you will do for your second job.

FLTan

Yeah....its not looking so hot is it.

Ken

Jan - Apr 43% yearly sales
May - Dec 57% yearly sales

2008 Avg Jan - April $9,800 x 4 = $39,200
Projected May - Dec 57% = 51,962
-----------
Total Yearly Sales $91,162
"Overhead" 79,200
-----------
Gross before advertising, payroll,
owner's salary, repairs, depreciation,
etc.................................... $11,962

Owner's 50 hours @ week at
a measly $10.00 per hour with
no benefits: $10 x 50 x 52 weeks $26,000

Return on $50,000 investment = NEGATIVE $14,038.00 or NEGATIVE 28%

FLTan

Not to mention the expense of the business loan to purchase the business. Even more Negative.

I think you all answered my questions! Thanks!

movieking

IMO this would not be the purchase of a business but instead an asset purchase. When a business is losing money (which this one is) you don't have any cah flow to pay a multiple of. Two of the beds are leased and probably have more owed on the leases then the actual value of the used beds so the only assets to purchase here are the remaining beds that are not leased and they are worth less than half of what they sold for when new (assuming they were bought 2 years ago).

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DolceEntGroup

Sounds like if they had the right marketing team behind it to draw in more EFT's then that would increase the monthly revenue and drop the selling price then it would probably be a better steal.

Leasing equipment can sometimes be a good thing but, when it comes to buying a location like this it's a bad. If you want spend the time on pumping advertising into it and spend the money marketing it or use other resources (that I have available to myself for my salon) then it's another story.

It depends on what you think is the best. My advice is tell them to drop the selling price and then make sure you want spend the money on marketing it and increasing your EFT's cause, that's truly where your money is going to be.

sunsally

^^

Out of curiosity - In a 9 unit salon, with just 3 upgrade units (and fairly moderate to low level upgrades in terms of profitability), how do you see pumping up EFT's going to be the "answer" for this salon? It will need much more than that.



FL Tan - find out how much is left on the leases. If it is minimal, you might consider just taking those over (with no additional $50K payment to the seller). But this is never going to make much - or enough - with this equipment mix. Plus - you need to figure in payroll "expenses", even if you think you'll work all the hours yourself and not pay yourself anything - that isn't an "investment", it is slavery. Look at it as if you had to pay someone else to work every hour you are open. On average - about $3K/month with taxes, fees, commissions, etc. So closer to $10k/mo on breakeven or $120K/year.


If you have the money to build out the remaining 675 s.f. (that you are already paying rent on) and put some upgrade beds in there, it could have potential. However, you would probably need another panel of electric (200A 3 phase ideally) and probably another 5 tons of AC to really do it right.

Maybe 30K on buildout and 50K on equipment (used)?

If there is enough volume to turn this from a 9 bed salon to more like 15, and you have the money to do it, could be worth exploring further. But you have to KNOW you can take this salon from making $80K/year to more like $200K -- and that is a large leap of faith without more information!

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Ann Wiggins Noe
VP of Leasing

anoe@highlinecapital.com

Direct line - 720-562-0450

missmojorising

Hummmmmm -- could it be -- this post:

---Quote (Originally by missmojorising)---
Is this the salon you are "Hoping" to open "someday soon" which you
have no business plan for?

THIS kind of advice, from Dolce, is why ALL potential salon owners
should work with a legitimate, professional consultant and NOT take the
advice given on these boards for FREE as gospel.
---End Quote---


is interfereing with the self interest of a bed distributor or 2? I can't figure out another reason to delete these posts because the advice rings true.

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