Leasing an existing salon

[lashed11]

Hi geeks.

I've been looking for premises for over a year now, and haven't had much luck, until recently. It has been brought to my attention, through a friend that an existing salon will be come up for lease. The salon has been around for over 20 years, is in a central , affluent location and is a perfect size. Reputation wise, all I really know is that it's a tradition salon and the owner has a really strong, loyal client base. I haven't heard anything else, none of my clients, friends or family have ever been. I've always known about it, I think probably from when I first qualified 8 years ago and was looking for jobs! Anyway. Money wise, the owner is looking for roughly the same amount that I had in mind when I've been searching for a place. From what I'm aware, the owner is busy with her clients, and employs another girl. This other girl is moving abroad and the owner can't be bothered letting the rooms or employing someone, training them etc at this stage , and she wants to just have a room In her home to see her own loyal clients. I understand that after 20 years, she is wanting an easier life now. For some reason I like to write lists, to help me think clearly about what to do. I wonder if any experienced geeks can add to this, or suggest anything? Mainly geeks that have or are leasing an existing salon.

Pros of renting the existing salon:
Has been established for over 20 years
Good central location, affluent area
Pay and display parking outside
Many of my client work/live near this salon (I'm mobile at the minute)
I'm trained and experienced in all of the treatments and products offered
I have additional services to offer, including sports massage
Good size
Already laid out as a salon
Renovation costs lower than leasing another retail unit
Potential that *some* clients will continue to use the salon
No direct competition
Allows possibility of sub letting rooms to other therapists who compliment my business
Allows me to offer more treatments to my existing clients

Cons:
Is the owner leasing it because it doesn't make enough money? (Apparently not and it's more of a lifestyle change, easier life etc)
Assuming most of existing clientele will follow the owner (she's setting up a room in her house)
Tired looking, needs renovated
Quiet residential street, pro and a con?
I don't know how busy her salon is, all I know is the owner as a therapist is busy, and she employs a girl, who is going travelling.
It will take a lot of work regardless!

This is just what I've been thinking about this morning. I'm going to meet with her next week and have a chat with her about it all.

If anyone has anything to add just now, please feel free to add!

Thank you x

 

[lashed11]

Aaaaaanyone?

 

[surf girl]

If people already know it's a salon that's a good start, starting from scratch advertising wise in a quiet location is hard work, I take it the person you'll lease it off owns the building? You seem to be going well with your list you've got ready
in my experience (I have a salon in a quiet village) my only competition is a very old fashioned barber shop, the folks love that there's a more modern salon they can come to
when you talk to the owner ask about bills and rent and make sure your not paying over the average for the area, the difference between renting a salon compared to a shop unit can be huge! In a town near me there was a salon for rent at £1000 per month or a shop unit for £250 per month, I went with a shop unit after and did it out myself very reasonably

 

[NailsXpress]

Do you mean rental prices differ greatly between renting a salon, that's already fully kitted out, and an empty shop?

 

[Myarka]

The questions I would seek to answer are:

• Who owns the building, i.e. is the owner and landlord the same person.
• What sort of lease is it
• If you are reassigning the lease, how long does it have left to run? If you are taking on a new lease, then you shouldn't be paying for it.
• If there is a landlord, do you know if the lease can be renewed?
• You say it's got a strong loyal client base, I would want that proved through examination of the last 5 years books.
• You say it's a traditional salon, does that mean it's a shampoo and set salon? i.e. an elderly clientele?
• It doesn't mean the business true value is the same as you want to offer. There are so many worthless salons on the market.
• What is it you are actually buying, Good will? Lease? Equipment?
• The goodwill has no value is the owner is going to take the clients to her home.
• If the salon is 20 years old, it probably needs a refresh, 20 year old chairs, equipment, mirrors, stock?
• No or little footfall. How has the area and demographic changed in the last years. Do the clients actually come from the local area?
• What developments are coming in the near future?
• How does the pay & display parking relate to the area... can clients to other shopping, or is the cost parking just for when they visit the salon?
• How would your mobile clients feel about having to come to you?
• If the salon is so dated inside, will it be a place where your clients would want to go?
• Having just renovated my salon, I wouldn't agree that it's cheaper than starting from scratch... but that does depend on the age of the building.
• How do you define no direct competition. Owning a salon is one of the most competitive businesses going and should never be under estimated.

It sound to me that it's a dying salon where the lease has run out. The current own can see no reason to renew and wants to get it off her hands and get some cash before it's too late.

 

[lashed11]

The questions I would seek to answer are:

• Who owns the building, i.e. is the owner and landlord the same person.
• What sort of lease is it
• If you are reassigning the lease, how long does it have left to run? If you are taking on a new lease, then you shouldn't be paying for it.
• If there is a landlord, do you know if the lease can be renewed?
• You say it's got a strong loyal client base, I would want that proved through examination of the last 5 years books.
• You say it's a traditional salon, does that mean it's a shampoo and set salon? i.e. an elderly clientele?
• It doesn't mean the business true value is the same as you want to offer. There are so many worthless salons on the market.
• What is it you are actually buying, Good will? Lease? Equipment?
• The goodwill has no value is the owner is going to take the clients to her home.
• If the salon is 20 years old, it probably needs a refresh, 20 year old chairs, equipment, mirrors, stock?
• No or little footfall. How has the area and demographic changed in the last years. Do the clients actually come from the local area?
• What developments are coming in the near future?
• How does the pay & display parking relate to the area... can clients to other shopping, or is the cost parking just for when they visit the salon?
• How would your mobile clients feel about having to come to you?
• If the salon is so dated inside, will it be a place where your clients would want to go?
• Having just renovated my salon, I wouldn't agree that it's cheaper than starting from scratch... but that does depend on the age of the building.
• How do you define no direct competition. Owning a salon is one of the most competitive businesses going and should never be under estimated.

It sound to me that it's a dying salon where the lease has run out. The current own can see no reason to renew and wants to get it off her hands and get some cash before it's too late.

Thanks for replying everyone!

So what I have established today is that the woman who runs the salon actually owns the property. I believe she has paid off the mortgage. I found out that the salon has actually been there for 30 years! From what she has told me, she is "older", she's at the stage in life where she just wants less commitments and less hassle. She can't be bothered employing more staff, she can't be bothered renovating an training anyone else, she literally wants someone to come along, rent the salon as it is with all of the equipment and products, and pay a premium for the client base. And then continue to see some of her clients in her own home. I have done my own investigations on the company house website, because it was a worry that the salon wasn't making enough money for her to stay around, and I now know by my findings that this isn't the case at all, I was pleasantly surprised.

When I say traditional, I mean mostly body treatments and facials, no shellac, no tan, no lash extensions, no remedial massage- all of which I can bring to the table. Client wise, I have spoken with most of my clients about having a base, and all of them have said it's a great idea because I can then offer them so much more, treatment wise.

When I mentioned renovation costs being cheaper, I am comparing it to units I've seen that needed toilets built in, new flooring, heating etc. This salon only needs re-painted and my own furniture in there. The set up is perfect.

As it stands, she said she needs to figure out how much she will sell her client base/ products for, and I have told her the max I would pay. So I will speak to her next week. I know that regardless of the scenario, opening a salon is always going to take ALOT of work, but after 6 years of mobile work and building up loyal clients, I'm ready!

It's always good to hear what others in the industry think, so thank you everyone!

 

[BannerPenguin]

Personally I don't think you can pay anything for the client base! You aren't buying there loyalty and I can promise you as soon as she starts at home that client base you just paid for if going straight there.

By all means it sounds like you have your heart set on the setup and location etc which is great but unless it's products you want to use I would literally price it based on the equipment and the state of the place.

 

[lashed11]

Hello, yeah I completely agree. I have been told that she's planning on seeing her own clients at her home, which just leaves the other therapists, who is going travelling, clients, and I'm not sure how you can put a price on that. Obviously the owner hasn't mentioned that she will see her clients at home...

Another thing is, there is machinery and products that I'm not trained in, and wouldn't want to use, which I did mention to her. I would prefer to rent a "shell" and decorate and buy in my own products etc, so that should be reflective of the price too. I did ask if she would sell all of her equipment separately and then just rent out the property, but I think her preference would be to rent it as it is, so there is minimal work from her part.

It's such a major decision to make. It's really the only place I've seen that I've thought I can see myself in here. And I've been looking (properly) for over a year now. I know here are pros and cons to any business and premises, but it's good to really think out the box and speak to other people about it.

Thanks! X

 

[BannerPenguin]

Hello, yeah I completely agree. I have been told that she's planning on seeing her own clients at her home, which just leaves the other therapists, who is going travelling, clients, and I'm not sure how you can put a price on that. Obviously the owner hasn't mentioned that she will see her clients at home...

Another thing is, there is machinery and products that I'm not trained in, and wouldn't want to use, which I did mention to her. I would prefer to rent a "shell" and decorate and buy in my own products etc, so that should be reflective of the price too. I did ask if she would sell all of her equipment separately and then just rent out the property, but I think her preference would be to rent it as it is, so there is minimal work from her part.

It's such a major decision to make. It's really the only place I've seen that I've thought I can see myself in here. And I've been looking (properly) for over a year now. I know here are pros and cons to any business and premises, but it's good to really think out the box and speak to other people about it.

Thanks! X

Do you know what figure she was looking at for everything? Out of interest - don't have to say of course - what did you say your maximum was?

 

[lashed11]

She didn't give me a figure for client database, all she said was for the salon as it is just now, £1200/month. I was aiming more for rent at £1000/month. The salon has 3 treatment rooms, small changing area, small waiting area, nail bar room, reception area x

 

[Myarka]

She didn't give me a figure for client database, all she said was for the salon as it is just now, £1200/month. I was aiming more for rent at £1000/month. The salon has 3 treatment rooms, small changing area, small waiting area, nail bar room, reception area x

There are so many things here, and I think you need to step back. I think she senses your keenness to buy and get trading, and that's all the more reason to be careful. Don't let your guard down.

I see no value in the goodwill, from what you have said it's likely to evaporate. The salon is dated and a lot of the equipment needs replacing, and there's equipment that you're not interested in. So you'll either end up wasting your time doing lots of runs to the local tip, or trying to sell it on ebay. That's really the owner's problem not yours.

It's impossible to comment on the rent without knowing what the going rate is for the area, so it could be cheap or expensive. But if I were seriously considering taking it on, I would have it professionally valued.

 

[Beckybee]

Personally I don't think you can pay anything for the client base! You aren't buying there loyalty and I can promise you as soon as she starts at home that client base you just paid for if going straight there.

I agree, sounds like she wants to dump the overheads and still keep working.

If you go ahead the you need to see a solicitor, and you should have it drawn up that she cannot carry on a similar business within a certain amount of time or/and a certain amount of miles to the old salon.

 

[KHS]

How can she SELL you the client Base then take it with her? If your buying a business as a going concern surly she just walks away not telling her existing clients anything, if they fInd her, so Beit, but she can't sell you something then take it away....

As others have said, get a solicitor to go through the terms with a fine tooth comb before you part with any hard earned cash, lots of what's she's stating just doesn't add up

Sent from my D5503 using SalonGeek mobile app

 

[lashed11]

Hi Geeks, some valid points here thank you.

I've woken up and I'm thinking, yes good size and location etc but I don't want any of the dated furniture and equipment, so I'm not prepared to pay for any of it.

Secondly, this is the awkward part. I know for a fact that she is taking her oldest clients to her beauty room in her house, however she hasn't told me this. So when it comes to her selling me this client data base, she doesn't know that I know...So I'm not sure how to approach the subject without saying "well actually so and so told me your plan"...

So in this situation, I think the best thing for me would be to rent the place with nothing in it, and no selling of the client base. I know she wants to do it privately to cut out the middle man costs, and I also know that she has paid off her mortgage on the place (I have investigated), I believe she WAS paying around £9000/year mortgage. She said she's seeing the com prop agents this week so they can value the place and advise her more.

I will keep you all updated once I've heard back. I think your right, she does know I'm keen, but she also knows I won't pay more than £1000/month, this is about average for this size off retail unit in the city Center of there I live.

Thanks for your input everyone!

 

[mastermjr2004]

Hi Geeks, some valid points here thank you.

I've woken up and I'm thinking, yes good size and location etc but I don't want any of the dated furniture and equipment, so I'm not prepared to pay for any of it.

Secondly, this is the awkward part. I know for a fact that she is taking her oldest clients to her beauty room in her house, however she hasn't told me this. So when it comes to her selling me this client data base, she doesn't know that I know...So I'm not sure how to approach the subject without saying "well actually so and so told me your plan"...

So in this situation, I think the best thing for me would be to rent the place with nothing in it, and no selling of the client base. I know she wants to do it privately to cut out the middle man costs, and I also know that she has paid off her mortgage on the place (I have investigated), I believe she WAS paying around £9000/year mortgage. She said she's seeing the com prop agents this week so they can value the place and advise her more.

I will keep you all updated once I've heard back. I think your right, she does know I'm keen, but she also knows I won't pay more than £1000/month, this is about average for this size off retail unit in the city Center of there I live.

Thanks for your input everyone!

Hi,

How can you sell a client a database? Surely this is invading Data Protection laws. What if say vodafone was to sell your personal info to a 3rd party. Fair enough if you signed a disclaimer opting in for them to do so, but if you hadn't signed up for them to do that you you would be peeved off. But its pretty unlikely the owner has asked permission from all her clients to sell on their personal info. I would watch out for that! Definitely get a solicitor involved!

 

[BannerPenguin]

Hi,

How can you sell a client a database? Surely this is invading Data Protection laws. What if say vodafone was to sell your personal info to a 3rd party. Fair enough if you signed a disclaimer opting in for them to do so, but if you hadn't signed up for them to do that you you would be peeved off. But its pretty unlikely the owner has asked permission from all her clients to sell on their personal info. I would watch out for that! Definitely get a solicitor involved!

I think how it works is the data is company property therefore as part of the business sale it's transferred over for access by the new owner.

 

[persianista]

Selling the goodwill of a business is quite a normal thing to do.
I've always bought existing salons. Someone else has checked out the location. You always get residual clientelle.
The walls, plumbing and electrics are all in the right place, and you have cash flow from day one.
The SG ideal of taking a cheap, empty shell and fitting it out can be as problematic as taking over a salon.
If it fails, you have to put the building back how you found it. That will mean ripping out stud walls, plumbing and electrics, possibly at a time you can least afford it.
Is that cheaper, empty unit in the right location? You have no way of knowing.
From day 1, you need to cover overheads. Rent will be approx 1/3 of your costs.

On the downside of an existing shop; you'll need to redecorate (but you'd want to anyway), the fittings may be tired or not to your taste. At least if they're present, you can work while you plan what you'd like to have, rather than be forced into fast decisions.

As for the business owner wanting to do less, I absolutely understand that, and don't for one minute think she'll be aggressively taking all the clients. If she wanted to work hard, she'd keep her salon.

To summarise; buying an existing salon is often the cheapest, least risky route to salon ownership. However, taking an empty unit may be better if you have your heart set on having everything brand new from day 1.

 

[lashed11]

Selling the goodwill of a business is quite a normal thing to do.
I've always bought existing salons. Someone else has checked out the location. You always get residual clientelle.
The walls, plumbing and electrics are all in the right place, and you have cash flow from day one.
The SG ideal of taking a cheap, empty shell and fitting it out can be as problematic as taking over a salon.
If it fails, you have to put the building back how you found it. That will mean ripping out stud walls, plumbing and electrics, possibly at a time you can least afford it.
Is that cheaper, empty unit in the right location? You have no way of knowing.
From day 1, you need to cover overheads. Rent will be approx 1/3 of your costs.

On the downside of an existing shop; you'll need to redecorate (but you'd want to anyway), the fittings may be tired or not to your taste. At least if they're present, you can work while you plan what you'd like to have, rather than be forced into fast decisions.

As for the business owner wanting to do less, I absolutely understand that, and don't for one minute think she'll be aggressively taking all the clients. If she wanted to work hard, she'd keep her salon.

To summarise; buying an existing salon is often the cheapest, least risky route to salon ownership. However, taking an empty unit may be better if you have your heart set on having everything brand new from day 1.

Thank you, good to hear from someone who has leased an existing salon.
The thing is, the commercial properties that I have seen have either been too big or too small, or a good size but the wrong area, and the going rate is roughly the same. I've found that units are extremely hard to come by in the area that I would like one in. So when I heard about this, I really jumped at the chance to see it.

From my end, it seems less risky operating from a place that has been a salon for 30 years, than starting from scratch. I have asked a lot of my clients what they think about the location, and the fact that they would come to me, and only one of them has said "I would prefer you stayed mobile but I will go wherever you go", the rest of them said it's a good location and they would be happy to come for treatment there.

Obviously there is the fact that even though it's central, the street is mostly residential so I will have to work hard to make myself known, and my new services that I'm bringing. But it's going to be a tough ride whatever the scenario is.

I have a few more days left to think about this, before she comes back to me. I don't want my excitement to cloud my brain so I'm still doing a lot of research.

Thanks again

 

[Myarka]

..... however she hasn't told me this. ....... she doesn't know that I know...

Great basis for negotiation - not

I know she wants to do it privately to cut out the middle man costs...

Or to stop you getting professional and legal advise.

 

[lashed11]

Hi everyone,

Just giving you all in update re the salon. The owner wants to sell the business (fixtures, fittings, equipment, clients) for £38k and rent the place for £12k/year.

Bit of an awkward one because I don't want any of the products etc, I just want to rent the unit and turn it into my own.

She said she can show me her books etc so I can see for myself the opportunity that's there. I just don't think this will work now. I can see from her point of view she wants to sell everything because she has built it up for 30 years, but I would be changing treatments, renaming, rebranding so I don't think this will work for me.

I have nothing to lose by putting this across to her. If I see the books and I am confident that there is a good customer base then I would consider paying for the client base, but I'm not sure how this can be measured really. I don't know what the "going rate" for a client base is. Little bit disappointed now...

I'm going to email her explaining I'm really just after a unit, plus potential client base and that spending £38k on the extras isn't an option for me. If she would consider selling all of her equipment etc separately then that would be great. We will see.

That's all for now x