Buying a ready made salon - HELP!!

[Jacqui'snewnail]

Hi Geeks, I have come to the one and only place where I know I can get good honest frank advice! Right might be a long one so bear with me. A year ago I went and viewed a Beauty Salon that was on the market for £19,000.00. It was quite run down, not too bad, I've seen worse, but the premises are quite big, so you could do bundles with it and make it really something. I telephoned the owner to see current state of play and she advised that it is still for sale and she is desperate to sell. It is leasehold obviously and one year ago I must say that I was very naive. Im not particularly up there with the Richard Bransons or Sassy Hassys :hug: now but perhaps a little more savvie than I had a year ago! You certainly learn loads from this site!

Well in the last year I have given up my office job and am working for myself which I love, but I am looking to open my own salon, so that I can really go to town on the pampering side. Yer know those little extras that certainly salons around here dont offer and are just not possible when working mobile.
My home salon set up is ok, but would love to take it one step further!

I have arranged a meeting tomorrow with the current owner and am going prepared with loads of questions etc!

This is where I need your help - if you could ask the owner 3 questions what would they be?

Also her equipment is bog standard, so is there a rough price on what I should be paying for the actual shell, bearing in mind that I have to pay £7000.00 annual rent. Lease runs out July, but is renewable with owner.

Basically what I am saying is that her stuff is worth £500.00 if that, what is reasonable offer for the business. I appreciate that this is like "how long is a piece of string?" but a general guide or any inside know how would all be greatly appreciated.

Thanks Geeks - I look forward to any of your valuable advice!

 

[gemsie1983]

Suppose one of the questions has got to be why is she selling up, is it for personal reasons or is the business not doing so well?

As she is trying to sell it too you she may not answer honestly so do a bit of observing at different times of the day and see how busy they are

 

[Jacqui'snewnail]

She has moved out of the area with her new husband, she used to live around the corner with her mum and doesnt drive. I know all of this to be fact.

A good question - thank you.

 

[pinkcat]

Hi there, have just bought a ready made salon and can advise you that you need a break down of the asking price to negociate a better price before buying, first you say you will buy, then get a solicitor and someone to do a survey on the property normally a commerical lease means you are responsible for all internal repairs electrical, heating etc and have to redecorate every 3 - 5 years you can use this to get a better deal.
on getting a breakdown of price ie £15,000 goodwill, £2,000 lease £2,000 furniture then look at the clients records cards how updated are they, do they have name and addre on all of them sort out whos been in the last year etc if only half have got address and been in in the last year you could reneg for £7,500 for goodwill you may not get that but try lower first then look at lease does it say you must repaint outside every 5 years, if so when was it last done as soon as u sign that lease you are responsible a survey will tell you if any items are old etc biggest outlay could be heating how old is the boiler will it need replacing soon taps sinks you could say well all this needs doing how about a reduction in lease then theres the furniture as you say you think its only worth 500 get an inventory from seller then go through and say well i do not want that or this or take it all away i do not want it. remember you can negociate right up till the time you part with your money to the solicitor and it can take up 3 - 5 months for the sale to go through.
Remeber if the place is run down how updated are all health and safety issues check fire exits - fuse box - extingushers - door frames - window frames if all have been left then you will need to repair them in the future could cost you.
sorry my spelling is appalling.
hope this helps good luck.

 

[Jacqui'snewnail]

That was all fantastic - thank you very much.

 

[lublu]

hi pink cat,
I bought an existing salon over two years ago. I would advice that you see proof to back up everything she/he says. Can you speak to her accountant and see figs? also you need it in writing that the lease will def be renewed.

if i can help in anyway please ask

lublu

 

[Jacqui'snewnail]

Ah thanks so much to all you Geeks - I am seriously considering this and will keep you all informed. I am nervous as hell! lol!

 

[minime1]

i would ask...

what advertising does she do?, when?, how?

Whats the average, daily, weekly, takens?

what competion is there around the salon? what treatments do they do that you don't do,

what are the 3 most popular treatments that you customers have, it will give you an idea of what type of customer you have visiting the salon,

can she tell you the type of customer she has?, eg, young, ladies that lunch.

when are her busiest days,

If she could offer new treatments to the salon what would she invest her money in & why?

would she do a handing over period, so you could see the business running, get to meet the customers. if so how long?, a week?,

Also could you spend 1/2 a day in the salon, to see again how its run.

really important that you ask what she is going to do after she sells the place, you don't want her setting up at home and keeping half her customers that you have paid for.

if there is staff, whats going to happen to them.

can't think of any thing else, very excited for you,

can she tell you any gossip about what may be happening in the area, ie, new offices, new housing estate, etc the good things but also the bad things, like road closed for a couple of months.

cheers
Natasha

 

[Jacqui'snewnail]

Thank you for your reply! Well as I have known that the salon was up for sale for the last 12 months I have done abit of research and from what I gather, her main business is nails and she has a very loyal clientbase. She is very good at nails and offers Gel. (I am looking to train in gels asap - currently doing acrylics)

I have heard that she might come back to Dagenham once the shop is sold to do her clients on a mobile basis. She is currently tutoring part-time at a college. She has owned the salon for about 4 years and met her husband a few years ago and has just lost interest in it. She is hardly ever open. She had one part-timer but really messed her about with hours that they fell out and the girl left.

She always over-runs on clients and is not interested in revamping the salon at all.

The fact that she might come back to do her nail clients, really doesnt deter me, because if I go ahead I really plan to change the whole set-up. I am looking to offer top quality treatments with all the extras that you will find in a lush hotel/country club establishment. There is nowhere around here that does that. It seems that local salons just offer basic treatments and it seems as though the emphasis is money money! I appreciate that this is why everybody goes into business, but around here it is at the expense of quality!!

 

[minime1]

she seems like a one trick pony!!!

excellent it seems to me that you have a vision of what you want, i know its different but when i was looking for a room to rent, i saw at least 10, but knew that this was the one, it was horrible, smelly and old fashion, but i knew that i could change it and make it work... as the location was brilliant.

good luck, please lets us know how it goes....

 

[Jacqui'snewnail]

H & thanks to all the geeks that replied to my first questions! They were very helpful.

So I had the meeting and well I am just left thinking "Erm!!!"

The owner wants £20k for her shop, it is leasehold and the annual rent is £10k. She is currently only open for 3 and half days a week because of her teaching at the college, which is what she wants to do full-time when the salon is sold. She is fully booked for those 3 and a half days and says when she was there f.time she used to take £1000.00 a week.

I believe that the shop is not worth £20k, but being abit of a novice, I may be wrong!

My plan is to go and do a business start up course, speak to business advisers and see if I can find out as much info as poss in the coming weeks/months.
The shop has been up for sale for 18 months and hasnt sold, so I dont think I need to rush!!

If anybody can offer opinions/advice on how much they have paid for their premises or any other matter, it will be greatly appreciated.

Thanks once again.

Jacqui

 

[Kim Lawless]

The first thing you need to do is sit outside on the days she's open and see how many people go through the door. Phone up and see if you can get a last minute appointment for a Saturday.

Ask to see the books but keep in mind that books are not always a true picture of takings.

My friend paid £28,000 for a salon in a very wealthy area but it never took off. Now 18mths later she can't give it away...............well that's not quite true actually; she has just given it away. She got deeper and deeper into debt and has just sold her house to help clear the debts.

Be careful, she may want £20,000 (my freind originally asked for £36,000) but that doesn't mean it's worth anything like that.

 

[loubylou]

It obviously is not worth the asking price or it would have been sold by now, i would go to a solicitor and ask for some advise, you can usually find solicitors that will give you half an hour for free

 

[jax]

Hi Jacqui

Lots of good advice on this thread so far. Here's my tuppence worth -

The lease 'goodwill payment' which sometimes takes place when a person buys a lease from another does not sound appropriate in this case. The lease is up in July - chances are she may not extend anyway. If you bought the lease from her, you would only inherit her lease conditions until July after that time you would have to sign a new lease agreement with the shop owner who could in theory hike up the price. Therefore I would suggest you pay nothing (or as close to nothing) for the lease itself.

As for the business, do you know if she is going to extend her lease in July and continue running her business? Sounds like she doesn't really want to continue the business so in theory she might vacate the premise in July and just shut up shop?. In which case you may not have to pay her any money at all. Maybe you could wait till she vacates the premises in July and secure the lease yourself with the owner. Maybe make her an offer on any equipment you might want.

If you do make an offer to her for the 'business' I would be very very careful. Think about what the 'business' is? Does the shop have a great reputation? Does the shop have long term regular clients? It sounds like she is going to take her clients with her anyway! Its realistic to expect that on day one you will not have any regular clientele - you'd have to build it from scratch. Therefore why pay her anything for the business? Also, are her current clients your target market? Will they appreciate the new shop and the new prices? Are they worth paying her for?

My advice - save your money for the equipment and decor you need to transform the place. Every penny you pay for her business is money you cant spend on your business.

Good luck and be tough. x

 

[Sassy Hassy]

Hi Jacqui

Lots of good advice on this thread so far. Here's my tuppence worth -

The lease 'goodwill payment' which sometimes takes place when a person buys a lease from another does not sound appropriate in this case. The lease is up in July - chances are she may not extend anyway. If you bought the lease from her, you would only inherit her lease conditions until July after that time you would have to sign a new lease agreement with the shop owner who could in theory hike up the price. Therefore I would suggest you pay nothing (or as close to nothing) for the lease itself.

As for the business, do you know if she is going to extend her lease in July and continue running her business? Sounds like she doesn't really want to continue the business so in theory she might vacate the premise in July and just shut up shop?. In which case you may not have to pay her any money at all. Maybe you could wait till she vacates the premises in July and secure the lease yourself with the owner. Maybe make her an offer on any equipment you might want.

If you do make an offer to her for the 'business' I would be very very careful. Think about what the 'business' is? Does the shop have a great reputation? Does the shop have long term regular clients? It sounds like she is going to take her clients with her anyway! Its realistic to expect that on day one you will not have any regular clientele - you'd have to build it from scratch. Therefore why pay her anything for the business? Also, are her current clients your target market? Will they appreciate the new shop and the new prices? Are they worth paying her for?

My advice - save your money for the equipment and decor you need to transform the place. Every penny you pay for her business is money you cant spend on your business.

Good luck and be tough. x

Have to say this is exactly what I was going to say. She's probably desperate because she knows the lease expires in July and she's hardly likely to renew it is she if she wants out that badly? I'd try and find out who the landlord/ acting agent is and ask if you can take the lease over from July. you can then invest that £20K into the business.

Really you would need to contact an accountant or solicitor or similar to tell you the exact worth of the business, I really cannot imagine it woud be £20K. Don't let the excitement of it all blind you to walking away from it. £20K put into another property could get you set up with all fab new equipment and starting from anew. you would need to see a copy of her accounts to give you an idea of the state of the business, and Kim is right, stand outside the door and see exactly how popular it REALLY is!

I also am never that keen on buying the goodwill of the business, often when an ownership change the clients use that time to try elsewhere.

good luck whatever you decide to do :hug:

 

[christips]

As suggested try and find out who landlord is, and negotiate directly with them, sounds as if she doesn't want to renew lease anyway herself - also find out how often the rent reviews are and how much the rates are on the property.

May also be a good idea to do some local research and check that there is no new competition too close for comfort (or someone opening shortly) also look for planning applications for change of use - this could mean that you end up buying the remaining lease when it wont be renewed anyway.

Could be a great buy at the right price !!!! but I would be careful.

 

[Sassy Hassy]

Also, if you do decide to buy it then negotiate a new lease from the start. Otherwise you will have to renegotiate in July and have to bear all the legal costs again.

 

[Jacqui'snewnail]

Thanks Geeks - I must firstly say that once again this site is truly magnificent. All of your replies have been fantastic and have helped me so much.

When I originally met her a year ago, with a view to buying the business, she advised that the lease was up in July 2007. I have also been informed this by other people, so last night when we met and I was armed with all my questions, I asked about the lease.
She then said that she had made a mistake and that the lease actually expires in 2021???? (Im not quite sure where she got 07 from??) So she is stuck there!
I asked why she thought it hadnt sold, to which she replied, "I honestly dont know - I have had a lot of people interested, but they were all timewasters" She went on about wanting to get out and go into teaching full-time and be nearer her home which is about 20 miles away. (She doesnt drive)

I asked what would she do if the shop didnt sell and asked whether she had considered hiring a manager. She didnt want to do that as she has debts, so she has to continue there or sell it. She kept saying that the shop was her baby.

My personal opinion is that she has debts of say £10k and wants to walk away with a bit in her pocket. I dont think for one minute that someone professional has valued that business at £20k.

I have today booked myself on a 4 day business start-up course, I just plan to research research and then do some more research! Whilst researching I will check out other busniess premises to see about rents/lease etc etc.

But finally - once again thank you all again so much, I always feel in debt to peoples goodwill on this site. I will keep you posted on the ongoing saga!!

Jacqui

 

[Cathie!]

Be careful, paying all the money out for some second hand furniture and a bit of goodwill and the privilige of paying the rent and other overheads until the year dot......do you have a book full of regulars to hit the ground running, I doubt it....please be very careful xxx

 

[Urban Geek]

Jacqui - If I were you, I would build a healthy client base, either mobile, working from home or renting space before opening my own salon.

It would be different if the local market wasn't so swamped by nail technicians and beauty therapists but it is so I would prefer to play it a bit safer.

Most of us dream of opening a luxury beauty salon/spa which is THE best but you need to have the potential clients to pay for that bit extra.

Good luck and keep us all posted xxx:hug: