Need Advice on Buying an Existing Salon

[Shar]

Hello

I wondered if any salon owners or previous owners could give me some advice please on buying a salon as a going concern.

I am interested in buying the lease of an existing salon, it is a medimum size salon in a good location, 3 treatment rooms and room for nail bar/2 nail stations. It is in a good location main road near high st. It only has basic fittings i.e basic treatment couch, wax pot, one facial steamer, tables for nail station chairs ect, not much stock.

The problem is, there is only 2 years on the lease, and the owner has only had the salon for just coming up to a year, and has no salon accounts. Also the owner before this one also only had the salon a year and the present owner bought the business without seeing any salon accounts.

I have been to see Business link and they have said before I go to my bank with a business plan looking for funding, I would need to have 3 years salon accounts, which the owner does not have, to prove the profit and loss.

The price for the business with 2 year lease is £36K, my question is, is it worth it, how do you value an existing business with no books. Where can I get advice, account, Solicitor?

I know your advice maybe, back away don't buy a business with no accounts, but I've been looking for a year, and this one is the ideal size and location for what I want and I love it.

What can I do?

 

[tinkywinky]

That seems a lot of money for someone not to have accounts, I wouldn't go there if I didn't see proof of income. 36K is a hell of a lot to invest if you aren't sure what you are investing in.

 

[emmad]

You could try joining the federation of small businesses, they give free legal/business advice on things like this. You have to pay to be a member but it might save you mocy in the long run plus there are other perks.

 

[oey]

How busy does the salon seem to you? Have you seen what the appointment book looks like - might give you a better idea? What is your impression of the salon when you walk in?

 

[loualarta]

Have you looked into how much the lease will be in 2 years time.

 

[Pink Pickle]

Hi,
Think at the end of the day you need to go with your insticts.
I bought a salon 5 years ago which was doing really badly, the owner had lost interest, it had only a handfull of clients and the place was a mess. I loved the area the size of the salon and it had the added bonus of a car park. Friends and family were against me taking over the lease but I really wanted to make a go of it so I did.
It was'nt easy, I really went for it big time especially with the advertising, I can honestly say I'm glad I did'nt listen to them and went with my gut feeling.
I'm now doing really well, I have a very good turnover, and a good client base and am on the look out for another salon.
Books can give you an idea of what the takings are but they are never 100%.
Take a look at their appointment book, have you checked out other salons in the area to see what they are going for? Does the place need decorating or can you just take over straightaway, you dont want to have to close the place to decorate as clients will go elsewhere.
I say if you get a good feeling when you walk in then go for it.:biggrin:

Let me know how you get on.....

PINK PICKLE

 

[Loufd]

The first thing i would do is contact the person who owns the building to see if they are going to renew the lease after the 2 years, and also ask them if the rent is going to remain the same then or is it set to increase, otherwise you could end up with no premises or one which has a higher rent than you expected.

I would find it hard to believe that someone who had run the salon for the last year does not have any accounts for you to look at - like they have to be paying tax etc so they must have SOME record of what they were taking in, and it's just to give you a rough idea of what business base is there. Even mobile beauticians keep a record of how much money they are taking in!

Lastly i would look at the competition around and compare what they are offering (and for how much) to what the salon you are buying was offering. This in itself may give you an indication of why the business is for sale, it will also show you what you need to do to turn it around.

And then if it all looks positive after all that take out a ten pence coin, heads for buy it tails for walk away:biggrin: !

 

[Sassy Hassy]

It seems a lot of money for somewhere that hasn't been open for long, but you don;t include what you are getting for that money. I was looking at opening my own place last year, even after all the fixtures and fittings, equipment and stock I was look at half that cost and everything would have been brand new. I really think you need to seek professional advice as it could be a sound investment, or it could be a dud.

 

[Shar]

Thank you for all your replies, I have spoken to the owner again about the accounts, she said because she has only been there 11 months she hasn't had an accountant do the books yet ????????? the staff she has is self employed. she has said she has her own version of accounts which I am welcome to have a look at.

The salon does seem quite busy but I deff think there is room for improvement with the right marketing. I haven't seen the appoitment book yet, and I plan to go and watch how many people go in and out on different days and times.

As for the lease I have been assured that it will be renewable but that's somthing I will look into also regarding a rent increase.

As for what I'm getting in the price, there is 3 treatment rooms each with sinks, shelves, treatment couches. there is 2 wax pots, 2 trolleys 1 steamer. Small kitchen, toilet, Small shower room. Reception area has small desk, display cabinet for retail, two nail tables. chairs in waiting area. There is hardley any stock.

The treatment rooms are great and would need nothing doing to them at all, apart from adding products. it's the reception area I would change as the furniture is not to my taste and I would like to change the small nail tables into a nail bar, I would prefer shelves fixed to the wall for the retail rather than the cabinet, none of it would take very long to change. I would like to close it for a week or so, as I would change the name have a little re-vamp and have a re-launch party.

I have done research in the area, been to the other salons and got price lists. I've found the gap which I can fill, None of the other salons offer electricial facials, body treatments, hox waxing which I do and the others only offer one type of massage and I offer 4 types.

My gut insticts is go for it, I feel I could really make a go of it. my future salon has been in the planning stage for over a year now, I've just bee waiting for the right location. I know of a couple of great therapists who would help me out. My only negative is the lack of accounts with profit and loss and I think the cost is too high.

What I've decided to do is get an accountant, as the owner If he can look at her own version of accounts and get his opinion of what the business is worth and haggle over the price.

Thanks emmad for the info regarding the federation of small businesses, that's something else I will look into.

Sorry for the long read

Thanks again
Shar

 

[LBR]

Something else to think about is if the landlord is willing the Assign the Lease!

The landlord would require references and accept you as the new tenant.

It may even be worthwhile if the current tenant were to terminate the lease so that you could negotiate a new lease with maybe a rent free period so that you have time to get it up and ready the way you like.

I do think that even with my little experience that it sounds expensive for what you are getting. But as you mentioned you will get that looked into by an accountant.

Best of luck

 

[victoriah]

Hi,
I've taken tons of advice from you all and am now starting my CND course in September/ October locally, thanks to this site so cheers!
I've been in finance, especially commercial for most of my adult life so I'd like to give something back, here goes:

Shar, the salon's 'version of accounts' need to be treated with exteme doubt. It's unprofessional but very common to not keep weekly books and even not to have an idea of profit/ loss even after an 11 month period. A lot of times businesses go for years making a loss whilst the owner/ manager believes it to be doing well on cash flow without considering outlay. They also live a more lavish lifestyle whilst believing they are doing well, the debt tends to snowball and the result is obvious sooner or later.

I think that the only way you can get a good handle on what the success COULD be of the outfit is to put yourself in there on a self employed basis and watch the activity on appointments and associated sales. This is going to take time but will give you more experience on the floor and gives you time to recognise how you can improve on them.

Do you know if the current owner is quitting the industry? Perhaps she is going mobile and taking a majority of the clientele? Do you have your own clients to bring?

How are you funding the purchase? No bank out there is going to fund this outright without existing, glowing books. Can you match what the bank agree either in cash or some other security?

Somebody further up the thread mentioned about seeing the freeholder, I'd give that a go too. Only problem is that they are very unlikely to sign an agreement saying that they will not increase the rent in two years time if they see you making a good go at it / making good money.

I think the key to this is research, if I was thinking of ploughing 30ish K into a shop with no proof of cashflow I'd be putting myself on the shop floor for a couple of months with my eyes wide open and looking for a substantial discount. I'd also be taking all free advice I could get probably starting by asking my bank manager to refer me to a senior business manager.

All the very best of luck, I hope you pull it off if after the research you still feel like it's a goer.

V.x

 

[Sassy Hassy]

As for what I'm getting in the price, there is 3 treatment rooms each with sinks, shelves, treatment couches. there is 2 wax pots, 2 trolleys 1 steamer. Small kitchen, toilet, Small shower room. Reception area has small desk, display cabinet for retail, two nail tables. chairs in waiting area. There is hardley any stock.

sorry but 36K for a couple of wax pots and stuff is way too much. The rooms were already there, they are not an asset! The salon hasn't been open that long, and why would someone want to dump a business after 11 months.
Also I am worried that the girls aren't employed. Who's to say that they aren't going to do a runner as soon as you have paid your money and take the client base with them?

You'll have to forgive me because I am the MOST suspicious person in the world and it may well all be genuine.

Having tried to open my own place last year I know how easy it is to go against what seems obvious to others. You just want THAT salon and nothing else will do, and if you're like me then when you want something you want it YESTERDAY!!!! Just tread carefully and don't let your heart rule your head hun :Love:

 

[gina g]

I cant express how hurt I am. :Scared:
This is my salon which is being mentioned here and I feel I should make it known my reasons for selling are genuine but also very very personal.

First of all when I bought the salon 11 months ago I completley refurbished it.
The sinks were not already there as stated by Sassy, only one room had a rotton old sink in the corner. I had modern sinks installed in all three beauty rooms, the whole salon has been decorated throughout and furnished in a shabby chic/french style, OK its not to everyone's taste but I wanted something a little different which is was until Jade Goodie came on the scene, but all I can say is she has good taste. If 'Shar' did'nt like the furniture I would have been more than happy to remove it and use around my home and re-think the asking price. When I bought the salon it had no client base, I spent hundreds on advertising, myself and my staff went out delivering leaflets to let it known I was up and running... I have spent around 10,000 on furniture decoration, retail and salon products which include the whole of the Creative nail range and Nimue skin care, St.Tropez and not forgetting my unusual service menus which me and my manageress spent ages designing. I have receipts for everything. I now have a client base of around 100, not bad from having zero. I hold regular Bottox evenings, permenant make-up treatments, I have developed a good reputation and have no fear of competition from other salons in the area. I have a huge car park with security gates. All this has neglected to be pointed out. I'm sure there's loads more but I'm so upset I cant think straight. I fully understand one has to be careful when buying a business but if you are going to ask for advice, please be honest with others.
My landlord has already told me the lease is extendable to which I have already told 'Shar,' again I am more than happy to get this confirmed in writing even though this would show in any sale agreement as it did when I bought it.

I am more than happy to show 'Shar' my appointment books, and record cards but as yet she has not requested to them. I do keep accounts but none which have been put together by my accountant as yet. At this moment I feel no one can really appreciate my hard work at putting this business together and really feel that I want to just hand over my salon to my manageress while I deal with my problems and see if it can be run without me for the time being.
I could go on and on but think I have said enough and dont want to appear troubled at the salon in the morning. I'll just end by saying I have worked very hard to achieve what I have and will not let my salon go for anything less than I feel its worth.
:Scared: gina g.
PS. sorry for any spelling mistakes, I'm just not thinking straight.

 

[Shar]

Gina

I am very sorry if I have offended or upset you in anyway by my comments on this forum, I was only looking for some advice on buying a salon. I will send you a Private Message.

Shar

 

[BABSann]

Gosh,just goes to show how careful we should all be about what we say about people,and situations ,anybody can be looking at us.:Scared: