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Starting a salon - buying existing business or an empty shop?

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Alpenrose

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I am considering to open a salon and can't decide what would be better option - to buy an exisitng business or get empty premises and start from scratch?

obviously when starting from scratch I will need to invest more, but I think the good thing about it is that there is no reputation and I can build it my own way. I think that when buying someone's business there is a great chance to inherit lots of problems - bad reputation, poorly trained staff and standards.

What do you think? How did you start and would you do it other way round?
 

Mike16300

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The advertised price of a salon for sale is usually made up of the fixtures and fittings, and "goodwill".

The fixtures and fittings will, invariable need replacing, so be careful what you pay for them.

The goodwill element is effectively the ongoing business, but as you will read in these pages, a lot of workers in this industry feel, rightly or wrongly, that the clients "belong" to them and will take them or tempt them away from the sold business and into their new venture, whether it is a job in a new salon or their own business.

This makes the goodwill element difficult to price corrrectly, and what was a profitable salon for sale can quickly become a loss making salon once the clients have followed the old owner.

For this reason, I would recommend spending your money on buying an empty premises, then you have no rent to pay monthly to a landlord, which you have to find whether you are busy or not, and build the business yourself, for all the reasons you gave in your question (bad reputation etc).

It is also worth noting that the goodwill element is not tax deductable, so in your negotioations, make sure that you divide the purchase price in favour of the fittings.

Good luck.
 

Beansy

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The (established) salon sale price would normally include the lease on the property. The value of this is usually dependent on the terms and length left. You might actually want to renegotiate this with the landlord. It would cost a couple of hundred for legal fees but might save money in the longer term, especially if you negotiate the rent.

You also might inherit staff under TUPE.

I think if you are considering buying an established business then try and find out why they are selling. If its because of wanting to relocate (e.g city) or maybe due to family & wanting to be at home full time, you might decide that there isn't a risk of them setting up next door. You can however mitigate these risks by building in protection clauses in the transfer agreement e.g not to approach clients within xx years, operate within xx miles, take client details etc etc. Your solicitor would advise you.

There's certainly risks in buying or setting up any business. The benefit of an established business is that you should have an understanding of income / profit (from the seller's management accounts) and how you can improve this.

You might also take on staff that maybe you wouldn't have employed but you simply need to manage them within your p&p. This might mean disciplinary& grievance but then thats always something that might be required. On the other hand, an established business gives you the benefit of cash flow from day 1 and, you might just get a staff team who are waiting to be motivated and inspired!

I bought an established business and would do this again rather than starting from scratch.
 

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