Buying a salon how much?????????????

[OneStopBeauty]

My friend is looking at purchasing a salon, and we are really looking at ways on how you could to a rough judgment of what its worth...... of course there is some equipment in there and a little stock, but putting that aside what is the best way to look at this?

Its based in Essex, and I have been down there to have a look, I have even sat out there for long periods and it does not look that busy (not what they are saying)


Well they want £40000 for the going concern, we have not had a meeting with the owner so I am looking for as much info as I can to give her some support and some really good questions to ask, apart from the normal rates and rent and all that what are good questiond to ask?


they boast of a good monthly turnover, but the agent stated that so much of this was cash. so there would be no way of proving this, so I would not beleive this.

I do not think its worth anywhere near this so how do we look at this please.


Audrey

 

[number1kitty]

First of all you have to break it down into two sections.

The first is the cost of the business which includes the salons name, reputation, staff, client database, existing marketing in place etc.

Then you pay for SAV which is stock at valuation. This includes all the items that are removable and saleable.

You have to ask around frist about the salons reputation. See what people think about it - do people actualy know theres a salon there!

What other competition is their in the area, call them and see how easy it is for you to get an appointment or are they booked up for weeks.

Call the salon your buying up and ask them for appointment availability. Send friends/family in as secret shoppers to see what the general salon runs like.

Ask to look through their client database, when was the last time these clients have been to the salon?

Where are they advertising, what response do they get, do they have a website etc.

Do they have any accounts at all? If so request them. But be careful cause these can be faked very cheaply and very easily!

Ask to see their business bank statements, this can give you some idea of money going through the business.

Ask to shadow the business for a week to see how they operate and any weak points etc that you could change.

Theres lots to consider when buying an existing business and there can be a lot of plus points for it. But I wouldnt part with £40K if you dont have a very strong and regular client database or a very good reputation in the local area.

Good Luck

Kate

 

[Emma Bagnall]

i personally think a business is only worth what someone wants to pay... ie can they set up there own for less? is there a regular clientelle, that will stay once the owner has left? has the salon got a good reputation? what exactly is the 40,000 for? is there a bond on the lease? is this included in the price? or have you also got to replace it? lots and lots of questions...

ask for there accounts, you would expect at least 3 years for an asking price of this amount, unless there is a lot of stock and up market fixtures and fittings. i agree that acconts can be faked, but this is illegal, and i doubt they would take the risk, especially for a 40,000 business. I would think that they have worked there sale price on 4 years worth of net profit. but this isnt always the way its worked out. tread carefully.... its alot of money for something you could set up yourself for less than half of there asking price.

can you not ask to do 1 or 2 weeks observing in the salon to see exactly how full the salon gets and what the owner and therapists plan to do after they sell it....

good luck with it, hope my points help...

 

[sedroca]

I'm facing a similar situation; owner of a salon wants to sell and a price needs to be set somehow.

I get the part about the tangible assets of the salon; the chairs, computers, mirrors, usable stock.

I also get that there is value in the established business. For me that lumps together reputation, client list, location, movement, prices, quality of professionals. But some of this stuff is intangible and hard to assess individually.

Assuming I can get reasonable estimates of the profit situation is it too far off the mark to say that this second part is related to the net profit somehow? Is there some rule of thumb to apply similar to the whole stock market thing of judging a stock's value by its earnings per share?

For example, if the salon is clearing $10,000 USD per month after paying rent, utilities, the professionals and the manager what would be a fair value to assign the 'business' side of the salon?

Is there more to it that I'm not seeing?

 

[persianista]

The usual price formula is 3 years profit. So if the profit is £100,000 the price is £300,000

 

[lucelasticx]

Isnt there some way of proving income of the salon like through a tax return (linked to the books )as i think that is how you will have to prove your income for mortgages here in the future if your self employed!!!
If i was selling a salon and was being truthful about figures i would have no problem proving this information at exchange , with no deposit paid until this was proved. This would also ensure that not just anyone could have a peek!!!
Accounts can be very easily faked beware.

 

[persianista]

To be honest, it comes down to what people will pay. I have been outbid on salons before many times, so it can be surprising how much businesses sell for.

It is still a million times safer than taking on an empty shop and starting from dot.

So if you dont think the salon is worth that money to you, then keep viewing salons for sale. Eventually you will find the one.

40k is very cheap for a salon, you may find that others are looking at it too.