Would you evaluate a beauty salon the same as another business or what exceptions and considerations would you take into account for evaluating things.
When buying a business it's essential to do due diligence because you are putting your money at risk. If you are taking on a lease, that's a huge responsibility. Ideally you would do a business plan that if done correctly would tell you if the business is viable or not.
Other than years profit after expenses, any owed debts, accounts and equipment on hand. Are there anything else that should be considered?
You shouldn't take any debts from the business. The books are important, and that's where many acquisitions fall over. As they say the devil is in the detail. Firstly, what is your confidence level that the accounts presented to you are correct? When I bought my salon the equipment was worthless and therefore I didn't pay for it. Is there a building involved? Have you had it surveyed? Is it listed? In a conservation area? How long has the lease left to go? If you are signing a new lease then the business has no value, so don't pay for what you don't get. If you're paying for stock, make sure it's in date, so again don't pay for worthless stock. What is the reputation of the business? I did a lot of asking around to find out what people really thought. I also sat in the café opposite a few times, to see if the number of clients going in supported the books. It was also interesting to see when the staff knocked off.
A price may be asked but 50% of the business turnover could be down the owner/therapist that is leaving and a big drop in income is going to be experienced.
This is the tricky one, but you should see the takings by therapist. I was looking at buying another salon, and when I went through the books I saw that one member of staff accounted for 50% of turnover. I found out that she had moved to a salon up the road. In the end there was no value in that salon, so I didn't buy.
Speak to the landlord, a salon near me has been up for sale for about 4 years, it's now closed. Reason the landlord wasn't going to renew the lease because he wants to redevelop the block.
You have to go through everything with a fine tooth comb, because the sell wants out, and will say anything to get you to buy. Don't believe their reason for selling, either because it might just be that the business is going down the pan.
Sounds cynical I know, but you have to protect yourself and the more work you put into it, the better chance of success.