Vouchers

[cj7]

Hi there friends,

One more question in buying a business, and your help would be soo valuable. The salon I am buying has £7 k worth of vouchers to be used up in 12 months. How much would you suggest is fair to pay them back? They are asking for 22.5% VAT which is fair as they have already paid that, however on top they want 35% of the voucher value on top of the 22.5% VAT as profit due to them selling it. This would leave me with only 42.5% value of the voucher when I could use the room to gain 100% if I wasn't using their voucher. To me this is quite complicated so please excuse me if I have written this down wrong.

Any advice so great fully received.

Thanks

Xxxxx

 

[AcidPerm]

Sorry, can you clarify?

The salon you are buying has already sold these vouchers to customers and you are expected/planning to honour them?

 

[cj7]

Hi AcidPerm! Yes sorry should have mentioned that! Yes I will honour them and yes they have already sold them xxx

 

[KrisKross]

Am I being really thick here... why on earth would you have to pay for the vouchers?

The salon owner has already received money from the people that bought them and now they want you to pay for them too?

Surely when the vouchers are redeemed you'll be twice out of pocket.

 

[cj7]

Hi no it's probably me not explaining it very well what ever price we agree they will take off the price of the business. Xxx

 

[Jen889]

Hi no it's probably me not explaining it very well what ever price we agree they will take off the price of the business. Xxx

So your saying that you have to pay them a percentage plus VAT and that amount will be taken off the asking price?

If so that still makes zero sense as you shouldn't have to pay them back anything, even VAT as they have paid it for the purchase of the voucher. When the client redeems you won't be taking any money from them (if they stay within the voucher limit) so you won't be taking in VAT etc. Those vouchers were paid for under their ownership, they already got the money and paid the VAT Those vouchers come with the business and there shouldn't be a price tag on them, they can't ask for taxes back as they have already been paid

 

[Absolutebeautyx]

You are already going to be 7k out of pocket by honouring these vouchers, really they should be giving you money for them as its you redeeming them or give all the customers their money back!!

 

[lilacm]

If you are honouring all the vouchers then you should take £7k off the asking price (unless that was already discounted to allow for them). That would be normal practice anyway.

 

[AcidPerm]

I don't understand why you are not reducing the price by a straight £7k and why VAT is involved?

If the Salon had been selling £7k worth of jars of cream and every purchaser returned them expecting a full refund, would you automatically pay the previous owners 22.5% of the refund in addition to refunding the original purchaser in full?

AM I missing something obvious here?

I hope you have your own business lawyer checking the contract.

 

[surf girl]

Who the heck has sold £7k in vouchers!? My god it dosent even sound realistic? What kind of salon is it?

The business owners need to give u a price for the business then deduct £7k from it so you have £7k in cash in your bank so that you can honour the vouchers you have no reason to pay them anything they must give u the full value

 

[surf girl]

Also are you personally vat registered? If your not then why is vat involved?

 

[cj7]

Thanks kahuna hair! I know it does seem very steep for me as well! I have asked so many people and they all agree it should be the face value but he thinks they deserve a profit from them? What do you think? Thank you sooo much xxx

 

[cj7]

Thank you AcidPerm and lilacm I completely agree too! He is still questioning this so if anyone else has any other experience or knowledge all is greatly received.

 

[Urbanspa]

VAT is 20% so I don't understand how they can charge 22.5%.

The vouchers they sold totalling £7k was part of their turnover, which should be reflected in their selling price surely not an added sale on top. I don't see why they should get paid twice effectively and not carry out the treatments as You will be the one honouring those vouchers.

Just seems a bit bizarre for me and I think they are trying to get you to pay over the odds as you are a willing buyer.

 

[Julie-Liz]

I may have got this a bit wrong, bear with. Personally I would tell them to refund their customers (7k sounds like ALOT of vouchers so I wonder what that's all about) because even if you buy the business at £7k less than the asking price, u still absorb that loss when clients redeem those vouchers. Or you buy at full agreed price and they give you 7 grand in cash to cover the loss from these vouchers. They have already had that money and you will be using your products and time to honour the vouchers. Time that could be spent on an actual paying client. Obviously I don't know all the terms or if I have even got this right but I hope you have some sound legal bods to run this by because it sounds complicated. I don't get the VAT thing at all in this instance, considering VAT is 20% I wouldn't be thrilled with 22.5% being thrown into the mix. Good luck with this.

 

[surf girl]

Thanks kahuna hair! I know it does seem very steep for me as well! I have asked so many people and they all agree it should be the face value but he thinks they deserve a profit from them? What do you think? Thank you sooo much xxx

If I sold a £10 voucher to a customer and before they redeem I sold my business to you, when the voucher holder comes to redeem lets say £10 off a colour service (hypertheticaly) you should have the whole £10 to pay for your cost (hair tint etc) why would you give me a bit of it?

Another way to look at it is I'm a salon owner and I rent a chair to a self employed stylist. If I sold a voucher for £10 and I couldn't do the appointment & I ask the self employed stylist will she do it and she says yes do you think it's fair if the customer books in for say a dry cut priced at £10 normally but I then give my colleague £7.50 rather than £10?

Do you think it's fair for me to keep £3.50 for doing nothing?
She wouldn't think it was fair!


It confuses me how that would work at all?

If they charged vat for the voucher at whatever % they claim that back at the end of the year anyway don't they?

You personally shouldn't be (I'm guessing) vat registered when u buy this business because you may not even make £10k let alone £75k!? Most business owners register for vat when their making decent money and are established or are nearing the threshold it dosent make sense to be vat registered if making say £20k a year because the offset isn't great enough and your out of pocket

May I ask what kind of business were even talking about tho please, I'm really trying to imagine what business could sell £7000 in vouchers that haven't been redeemed yet?

Recently I was having a meeting with my mentor and in my book it showed a £50 voucher id sold the previous week, he asked me had I put the money safe, his reason for asking was because should the customer want a refund I'd need to have that cash ready to give back, does make me curious as to wether the owner of the said business has taken such precautions? If every customer asks for a refund after you buy the business YOU will be paying it in full not minus 20 odd % but with the 20 odd % you gave away, every single voucher that needs refunding you will pay 20% out of your own pocket!?

I'd tell them to do a full refund to every client and offer them to buy again directly from you, when you buy a business not all customers will follow & want to go to a new owner they deserve a choice & you don't deserve to luck out financially because of it

 

[lauren27]

Hi they already sold the vouchers for 7 k which should have included the vat in my eyes you need to take a min of 5k off the selling price

 

[cj7]

You guys are literally amazing!! And so kind to take the time out to reply! I appreciate it so much. Thank you. Also my mistake I put 22.5% of course its 20 apologies!! Xx

 

[TheHairRetreat]

Hello, I personally think u should leave the business alone if this is a 1st adventure! You are already questioning them and they are asking a lot, you need to ask yourself why these vouchers were sold n why are they selling the business if they have produced that many vouchers?
Starting a new salon u want no overheads or stress. A salon selling should have all of that covered and it's clientele sorted before moving, sounds a bit iffy to me By reading this I don't think u should go for it xx

 

[stokesy]

Sounds odd, I just brought my first salon of which there was 700 dollars of vouchers, we deducted that amount as an adjustment, reflected in the purchase price, I wouldnt agree to less, your costs in 12 months may be higher! Be strong and if you need to walk away do! It must be a busy salon to have sold that amount of vouchers