Taking over a room, paying for good will, how?

[jayt]

Hi Geeks

I have been looking for a room and decided to send out some letters, I have been surprised by the response. I have found myself with a number of options, 1) take on a room in an osteopaths in the area where I live and most of my clients are, but I will have to continue with my marketing and advertising and pushing my business. They have asked for a % of my takings, I will be sharing the room so will have to take my things when I go. 2)a room above a hairdresser where the beauty therapist is leaving to go back to full time work in an office, (lots of genuine reasons). Now the beauty therapist has said she is happy to show me her books willing to sell all her equipment so that the room stays as it is and as a good will for all her clients she wants £4000. How do you put a price on good will and what should I be asking for and looking at to know I am getting what I pay for ?

 

[Ruthlm]

I am by no means knowledgable in this field, having never rented a room, but wheither you were buying her things or not, you have the opportunity to take over the room, and as she isn't continuing within the industry her clientd would be free to go wherever they want, aas she isn't doing it anymore, so really you should only pay what the value of the equipment is, you are not buying her business as such, so I would look deeply into it, it's really the hairdressers salon and room. You may find the equipment is worth the £4000 and then you have a great deal of luck blowing your way, you would be getting a room that already has clients, and people know that there is abeautician there, well worth looking into!! xx

 

[jes]

2)a room above a hairdresser where the beauty therapist is leaving to go back to full time work in an office, (lots of genuine reasons). Now the beauty therapist has said she is happy to show me her books willing to sell all her equipment so that the room stays as it is and as a good will for all her clients she wants £4000. How do you put a price on good will and what should I be asking for and looking at to know I am getting what I pay for ?

Right firstly, Nobody want's to go back to office work after being self employed. Treat any 'genuine reasons' with scepticism:lol:

She seems to think she's selling some sort of business as a going concern, but she's not! She's made the decision to up and go and take up a completely different line of work. When she leaves, you just take over the room. Her, old, clients won't have anywhere to go so they'll be happy to come to you whether you pay for them or not!.

It might be worth buying her equipment, but second hand salon equipment is very difficult to shift and accordingly very cheap, so make sure you do you homework before handing out the dosh!

jes

 

[Tanya.]

Cannot pay someone for their clients. It doesn't work that way. The clients will decide if they are going to leave or stay, you may have a few, but not all. In the shop I took over, the previous stylist was a 'beautician', did mostly elderly perms and sets, I came from a diverse backround, working in mostly departmentalized salons. Needless to say, night and day difference.

Just like previously said, try to figure out what the equipment is worth and go from there. Hopefully you have some kind of visibility, and parking is very important.

Another thing, I have never relied on what kind of business has been or is at the salon. You are in charge of your own destiny.

Good luck to you :hug:

 

[blutopaz]

Im going to disagree a little here, sorry!! lol

If you own a business be it a whole salon or renting a room, the clientele that attends is yours. If you were to sell a whole salon business you are not selling the lease, that is worth nothing you are selling the fixtures and fittings and the good will. This works on all levels what ever size business you are in. You are paying her a premium to try and keep hold of as many clients as she currently has or as quite rightly said they will all filter into other salons.

Your only concern should be the value she has put on this, you need to check the books and see if the figures stack up. I truely believe she has every right to sell her good will if she is leaving that business, its irellevant as to what she choses to do next with her life other then that it wouldnt be negative to your transaction.

If she gave up the room and you come along and took over after she had gone thats different. but til then she has the option to sell her good will

sorry for rocking the boat guys just my opinion

 

[jes]

Hi Blutopaz,

Yes you're correct, but the difference with this lady is that she's leaving whether she gets any money for her business or not. As she's leaving I can't see the point of paying for a list of clients who'll probably turn up at the door anyhow.

If you want to sell a business, as a going concern, you're supposed to sell it first and then leave

jes

 

[Miss Pink23]

BUT, this is not a 'normal' business as I see it.
Its not a shop, where people will come in regardless of the owner and buy things, its a service. So if the clientele already established do not like the idea that their original therapist has gone, they will please themselves whether they wish to stay and use you or not-irregardless to the fact that you may have paid her £4000 in good will.
Her clientele were hers, based on her as a person and the service she provided.
Im not saying you are bad by any means, but people are drawn to people and thats how she amounted her clientele. She cannot sell 'them' as goodwill-she does not own them!
hths

 

[blutopaz]

completely agree with you, i do actually say that in my reply. but thats not to say she cant do it, which is the debate isnt it... You cant blame her for trying tho as she hasnt technically left yet, business is business after all

 

[blutopaz]

BUT, this is not a 'normal' business as I see it.
Its not a shop, where people will come in regardless of the owner and buy things, its a service. So if the clientele already established do not like the idea that their original therapist has gone, they will please themselves whether they wish to stay and use you or not-irregardless to the fact that you may have paid her £4000 in good will.
Her clientele were hers, based on her as a person and the service she provided.
Im not saying you are bad by any means, but people are drawn to people and thats how she amounted her clientele. She cannot sell 'them' as goodwill-she does not own them!
hths

She can sell the good will and thats what the clients amount up to, after all how would you sell a hair salon if that were the case? A business sale is made up of two things, fixtures and fittings and goodwill. Thats what determins the premium. Sometimes we forget that sole traders like ourselves our businesses. The clients still chose to go where they like but the good will is the right to buy into that already created client base.

 

[hippy-chick]

this is quite common practise and it is up to the therapist/salon owner leaving on a price, basically they are selling you their client list.

I have 300 people on my books, not all of them come on a regular basis. some come for special occasions.

when I took over from a therapist that was leaving to retire I asked if I could have her client list and was told no. she said she had written to them all to say she was leaving but someone else was going to take over.

She didn't realise but she left her diary behind, so I had a list of people (not contact details) for a year to check. I would say in the past 3 years of being there myself, only 20 haven't tried me.

I don't know what the legalities of it is as her database surely should be for her eyes only.

 

[kennedia]

She certainly can sell the goodwill of the business. As has been previously said, it's very normal business practice. There are professional solicitor/accountant types out there who specialise in calculating goodwill values.

It is up to the op whether she wishes to negotiate on it. It is also up to the vendor what she is prepared to settle for, and/or what she chooses to do should the op not agree to the goodwill payment.

It is all part and parcel of buying and selling businesses; which is why it is always a slow and long drawn out process.

 

[kennedia]

Just re-read the last few posts.

Goodwill does not simply mean a list of clients details. It is far more than that. That is why it is so difficult to put a price on.

 

[rouge]

I don't know what the legalities of it is as her database surely should be for her eyes only.

This is what I'm wondering too. How is she going to transfer her clients' details to you without actually giving you any info which is covered under the data protection act?

I'm afraid I don't fully understand how this goodwill thing works, because as far as I can see it's entirely up to the clients whether they see you or go somewhere else when they find out their old therapist has left. So you may find you've paid a lot of money out for nothing. Can someone explain it to me in simple terms please??

Jayt, as regards option 1 in your original post, I've worked in a similar situation and it becomes a real pain in the butt having to pack up your stuff and take it away with you. Is there a lockable storage space where you could leave at least some of it?

 

[The_Retreat]

Hiya guys

Of course she can sell you the business which includes the clients data - I have bought and sold many business and I would check out 2 things:
1. How many clients are on her database?
2. What is her net profit turnover i.e how much does she make a month
3. Value her machines - write down the equiptment she has and then search for like for like i.e if it's a 10 year old model then its probably worth sod all!!!

Keep your wits about you and think about where most clients would want to come? On the up side I probably wouldnt be a new salon client going to an Oeseopaths for a facial???? Good Luck xxx ;-)

 

[persianista]

Sale of goodwill usually only occurs when a whole salon is sold, and the staff are staying on. There remains a serviced clientelle. I struggle with someone giving up a room asking for £4000 for a client list and some secondhand equipment.
If she is "selling" her business in this way, a contract of sale must be drawn up by a solicitor in the same way that a whole salon sale would be. This is to protect the buyer from misrepresentation of the business, and also to make sure she doesn't then go mobile or set up a rival business nearby.
Her legal fees to sell would be approx £3000. Maybe offer her £1000 for her equipment instead?

 

[The_Retreat]

Totally agree with the post above!!

 

[hippy-chick]

there is a salon near me, she wanted to sell up and was selling her biz at a reasonable rate but on top of that she wanted £10k for her "goodwill package".
She had a lot of people interested in purchasing but baulked at the cost of the goodwill package.
Oh and I was asked if I wanted to buy it by the way.

Turns out she was going to turn her garage into a salon and work from it on a part time basis.

Now, she lives 2 minute drive from the salon, and clients love continuity, so are they going to:

a) want the continuity of the salon
b) want the continuity of the therapist

she is still running the salon as no-one wanted to buy the biz.

 

[persianista]

whenever I have bought a salon, I have put a radius clause in the sale contract. Totally enforceable unlike in an employment contract.
Goodwill sale is a normal part of business sales, in this case, I fail to see how it's justified.

 

[bombini]

I would never buy a client database from a therapist leaving a treatment room as you just don't know if they are going to be working from home, mobile, whatever. Loyal clients will follow a therapist they love.

My view is that she has to tell the clients she is leaving and they will obviously want to know if the room is being taken over. If she tells the truth and lets them know another therapist is taking over well of course they are more than likely to try you, why wouldn't they ? If she was planning to lie and pretend that the room is empty well the easiest way around that is to agree with the salon owner that you can advertise before you start (which i would do with or without an existing therapist)

I think with an actual salon you kind of expect a client database to be part of the deal but a one man band is a bit different imo. I think if my hairdresser suddenly stopped trading and then some random contacted me out of the blue I would be very annoyed that my details had been 'sold' without my permission.

 

[persianista]

Just done the maths for you, to justify a goodwill value of £4000, she would have had to have declared profits of 16000 last year. If she could prove she paid tax on this amount of PROFIT, not TURNOVER, then the payment would be justified, subject to a proper contract which would include a radius clause.
Hope this helps x