Purchasing a Salon, insite?

[jjg21588]

I have found a salon that I'm looking into purchasing. The salon is selling for a very low price do to the owner wanting to get rid of it. There are also practically no other potential purchasers looking into buying the salon, I heard through word of mouth.

Alright time to get to business. I am going to meet with the owner next Sunday and was wondering if anyone has some good advice on what type of questions I should ask about the business. I have never purchased a business before, let a alone a salon that I know nothing about (I have heterosexual male syndrome when it comes to knowledge about salons).

What are some questions I should ask? Specifically what should I find out about the salon?

I have managed and seen business ran before... but a salon is not what I'm used to at all. I guess the best way to learn is just to jump in feet first.

Thanks for the help!

[BusinessAdviser]

These may seem a bit obvious or general, but I think that your question was a bit general as well:

If I were in your situation, I would want to see the books to start to get an idea of the financial state of the company. Although books don't always tell the whole picture, they can likely give you part of it and possibly give you a few more questions to ask (regarding debt, for example).

I would also want to know about recent marketing efforts and sales information. As an example of why this is important, I would hate to purchase a company and come to find out that there was no longer a strong clientele base, meaning that I would need to spend greater amounts on marketing than I had anticipated.

Finally, I would address legal issues, such as any current or possible legal liabilities. This is something that an attorney can help you identify and plan to deal with.

This is just the tip of the iceberg, my friend. Hopefully others can pick up where I'm leaving off.

[paul2145r]

I would recommend finding someone with experience in that particular field.

1.Financials: ask to see their financial paperwork. Make sure that there is money coming in to the business. It might be a good idea to bring along your accountant or CPA to look over everything.

2.Brick-and-Mortar: Make sure to find out about lease terms-- Some leases run out in the even of the sale of a business. This may be one of those "unexpected" things that generally occur with the start of a venture. Make sure to receive a list of all of the equipment included in the sale. Take the list home and do a quick self-appraisal of al of the equipment.

[edwardhalim]

What is the owner's "reason" for wanting to get rid of it?

[hl68]

I don't know too much about salons but I have a friend who does and something to look into is if the stylists that work there are employees of the salon or operate as independent contractors.

Also, I would personally due some more in depth research of the companies previous year’s financials in comparison to the number (either increase or decrease) of competitors in your specific area. I know where I live there a couple areas saturated with salons.

As well, as look into everything my fellow posters have mentioned. Good luck in your new venture.

[rogercbryan]

I have found a salon that I'm looking into purchasing. The salon is selling for a very low price do to the owner wanting to get rid of it. There are also practically no other potential purchasers looking into buying the salon, I heard through word of mouth.

This statement alone scares me!

Everything that jmenq2 said is right on the money. In this type of business you want to make sure you do an analysis of the competition as well. It’s often misunderstood as to how cut throat this industry is.

One of the first questions you need to ask yourself is “do I have enough capital to run this company for six months even if I do not make a single sale”. Make sure you make a complete list of projected expenses and then double check them. Most small businesses fail because they do not have enough working capital to sustain their idea. Once you have developed a business plan I would be glad to take a look at it.

[stand856]

I have never purchased a business before, let a alone a salon that I know nothing about (I have heterosexual male syndrome when it comes to knowledge about salons).

Thanks for the help!

I gotta say that this part scares me the most besides the points that others have brought up this one is the worst of all. If you do want to buy a salon, you would need to get 3-6 months experience working in one to start. It is a turnkey operation since its already there, but you have 0 experience with knowing anything about it. Learn first then jump into it.

[BusinessAdviser]

"I gotta say that this part scares me the most besides the points that others have brought up this one is the worst of all. If you do want to buy a salon, you would need to get 3-6 months experience working in one to start. It is a turnkey operation since its already there, but you have 0 experience with knowing anything about it. Learn first then jump into it."

Or as an alternative, seek the help of a mentor, advisor, or consultant. A major mistake that entrepreneurs make is not being humble. Accept your weaknesses (such as the lack of knowledge regarding getting a business up and headed in the right direction), and seek help so that they do not ultimately lead to the failure of your business. You don't need this to be YOUR BABY that you made successfull ALL BY YOURSELF. If you have this attitude (which again is VERY common with entrepreneurs inexperienced and experienced alike), you are almost certainly headed for disaster.

[jjg21588]

What is the owner's "reason" for wanting to get rid of it?

The owner has managed the business for the past 20 years. She is tired of managing a business and would much rather work there.

[jjg21588]

I don't know too much about salons but I have a friend who does and something to look into is if the stylists that work there are employees of the salon or operate as independent contractors.

Also, I would personally due some more in depth research of the companies previous year’s financials in comparison to the number (either increase or decrease) of competitors in your specific area. I know where I live there a couple areas saturated with salons.

As well, as look into everything my fellow posters have mentioned. Good luck in your new venture.

Thank you for the information on stylists vs employees. I actually just got off the phone with my friend who manages a salon and got a little info on that myself.

After talking to the owner it seems that she leases the facility being the main source of expenses, and all the income is in the form of rent from the stylists. Which leaves me wondering how much work is required for a business such as this?

From what she tells me (but I am still going to check in person of course) the place is busy enough to keep a small profit coming in. After talking with her it seems that she is burnt out from running the place. She got her business up and running, then that was it. She became content with the fact that it was up and running. It seems that she never tried to expand or increase the profit. Which is something I am going to look into doing, mainly to see how much potential this venture has if I do choose to embark upon it.

[jjg21588]

Once you have developed a business plan I would be glad to take a look at it.

I truly do appreciate the help with this. I have found that with the great synergy from entrepreneurs coming together that any entrepreneur can run anything they put their mind too. Entrepreneurs, well at least all the ones I've met and found mentor ship in, seem to have this persistence driven from their passion that keeps them motivated no matter all the ups and especially all the downs along the way. As long as everyone is humble and open to helping each other out it truly does pay off in the end for everyone.

As far as humbleness goes, I found out the hard way. Just as little as last year I used to try and do everything myself. I wouldn't give any jobs out to anyone else no matter what I was doing. I didn't do this because I wanted all the credit, instead I did this because I felt that I could do everything better than all my colleagues. I felt like this because I always put much more into it. What I found instead was that I was spreading myself to thin and the important things weren't near as polished as they should have been. Now I outsource all the tasks to my colleagues that are a waste of my time, and focus more on the important things that I can do correctly. This has also freed up a lot of my time, and time is money of course. Working together and being humble truly does make difference.

[BusinessAdviser]

Have you considered paying the previous owner to stay on board for a couple months to help you get your feet wet?

[jjg21588]

Have you considered paying the previous owner to stay on board for a couple months to help you get your feet wet?

Actually after talking to her she would like to stay there to work. I was wondering about how to go about bringing up the fact that I would like her to stay on board for a couple of months kind of co-running the place while I learn. Does anyone have any suggestions on how to talk to her about staying on board as far as management goes in the beginning? In other words what type of offer I should make her for compensation?


Also another problem I have is that I live about an hour away, which means I will need to have someone there to operate it. I would most likely be stopping in once a week, because I am a busy full time college student. This is a task that I am going to have to figure out how to balance out.

[BusinessAdviser]

The issue of how to approach her about helping you get your feet wet is rather simple.

However, you just raised a MUCH larger issue. My opinion: If you are not able to be there fulltime running a business, ESPECIALLY at the time that you first take it over, you need to avoid the business for now altogether. Just a month or two ago, a young entrepreneur here was in the same situation. He purchased a franchise, hired a manager, dropped in a few times a week (which is even more than you would be able to do so), and came to the forum seeking advice on how the hell to get out of the situation. Needless to say, it was a failure.

And your proposed solution, to have the previous owner continue to manage in virtually the same capacity as before is a terrible idea. She is selling the business because SHE DOESN'T WANT TO DO IT ANYMORE, regardless of the income! What kind of management do you think you'll get from her, especially when you're not there but once a week.

It sucks to consider, but I would advise not purchasing the business until you are able to devote yourself fulltime to it. The only alternative that I can think of is to offer someone else ownership in the company in exchange for running it.

[jjg21588]

That is something I am looking into right now, trying to find someone in the area to be able to run it in exchange for co-ownership. This is most likely going to be the route that I am going to take. I will be able to come up with the money. But running it from a distance with little time I see as a big problem, leading me to the option of a co-ownership.