First Time Buyer of Hairdressing Business, any advice please?

[Topbunny]

I am new to the forum, thanks for having me.

I am thinking about buying a hairdressing salon, here is the situation.

I have limited experience in working in a hairdressing salon but I have re-trained at college and I have NVQ 1, 2 and 3, so a full set of qualifications.

A salon I could buy is currently running with two owners who want to sell up, they are both working full time in the salon. I want to possibly work, but mainly manage the salon.

I am concerned that what I am buying will effectively be gone when the two owners leave, I am thinking that 'they' are the business. SO basically I am not buying a business with the main contributors of the business.

Please tell me what you think, am I right in that the alarm bells are ringing????

 

[Mr D]

Yes.

Nothing wrong with buying it - if it meets your requirements and more importantly you know what you are buying.
Even assets have value.

If what you want is a turnkey business where you insert yourself into a running business, that's going to be a different business. Quite possibly a bigger salon.

 

[Mark T Jones]

You are thinking in the right direction - but have lots more questions to ask.

 

[Clinton]

SO basically I am not buying a business with the main contributors of the business.

Salons are an absolutely bloody nightmare! They tend to be owner managed businesses and these owner managers tend to have highly inflated ideas as to what their business is worth. Seriously, seriously stupid expectations.

The business is usually worth jack. Zero. Zilch. Nothing. Nada. But they take the nothing and they spray L'Oreal hair volumiser liberally on their numbers and come out with some £50K or £200K or whatever (depending on how much volumiser they used. And which way the wind was blowing).

But these businesses are worth less than nothing because you're taking on a lease, and that's a big liability!

If this is not a business generating a healthy profit from paid staff, then you're doing the owners a favour by taking over their lease!

Ask them how much they are willing to pay you to buy their business. If they're not high on all that hair spray they've inhaled over the years, they'll make you a decent offer.

 

[Topbunny]

Yes.

Nothing wrong with buying it - if it meets your requirements and more importantly you know what you are buying.
Even assets have value.

If what you want is a turnkey business where you insert yourself into a running business, that's going to be a different business. Quite possibly a bigger salon.

Please could you explain your last paragraph? Thanks for your comments, they are appreciated.

 

[Topbunny]

You are thinking in the right direction - but have lots more questions to ask.

Please could you explain what you mean by more questions? Honestly I am so new to this, I value your advice.

 

[Mr D]

Please could you explain your last paragraph? Thanks for your comments, they are appreciated.

A business where you insert yourself overseeing staff doing the work.
Management is interchangeable - hence you can take over - but work done by the employees who can keep things running while you grab a lunch.

 

[Topbunny]

Yes.

Management is interchangeable - hence you can take over - but work done by the employees who can keep things running while you grab a lunch.

Ok, thanks.

 

[Paul Kelly ICHYB]

What experience in running a business do you have?

My gut feel is stay away:

• they go, so do their clients
• You have lease liabilities
• If they both want to go, my spidey senses start tingling.
• You will have liabilities for remaining staff

the list goes on.

 

[obscure]

As Clinton said, you aren't buying a business that generates money, you are buying a lease that costs money. It is entirely possible that when the existing management leave many or all of their clients leave with them. At that point what do you have? Are there other staff there who bring in clients? If not how will you go about finding new clients and do you have the money to pay the rent while waiting for these new clients to appear? Are there other staff who can do the work and generate money or are you going to have to hire/build a team from scratch?

 

[Socio South West]

@Topbunny The equation that has to be satisfied is very different on both sides....

As @Clinton says, on one side you have the current owners looking through tinted specs at the heads they have transformed over the years, and the old dears who turn up every Friday at 0930 for shampoo, rinse, blue tint and set..... However, hairdressing is a very personal thing and there is absolutely no guarantee that you will get these customers to continue with you if you take over. You cannot attach any value to goodwill, and there is a very good chance there is some ill will in the background that the Owners wont tell you about, so do some investigation.

On the other side, there is a chance to take over an equipped location with contacts to take in whichever direction you so desire. You have to establish what it will cost you to set up the same on your own, and that is your starting point to negotiate. Remember that secondhand equipment which you would be buying will be of limited value, so there is a deal to be done if the Owners will open their minds, but so few do.

The biggest trap however is the Lease of the premises, and you are well well well advised to get a specialist solicitor all over that to make sure there are no stings in the tail such as repairing clauses that you take over with the vendors having done nothing for years.

 

[fisicx]

A salon I could buy is currently running with two owners who want to sell up, they are both working full time in the salon. I want to possibly work, but mainly manage the salon.

This will mean you are already running at a loss. You will have to find three sets of wages not just two. And because you will now have staff there will be extra expenses (sickness and holiday pay for starters).

 

[simon field]

Run away!

I mean, really fast keep going and don't look back!

Instead, build yourself a nice little mobile hairdressing round. Little car or van whatever, some scissors, clippers, bit of advertising and you're good to go. Poach their customers if you have to.

Minimal hassle, minimal overheads and plenty of CASH transactions. Just sayin'

 

[MOIC]

As above.

Learn the trade first, then open a small salon when you have enough regular customers.

 

[Alison Moore]

It depends why they're selling... If they're selling so they can work mobile or work elsewhere then they'd be taking their clients with them. If they're retiring then you might retain some of the clients, but obviously it's not guaranteed and some customers will move away with the change of ownership. Also if there are two owners and they both work in the salon, you'd have to question why they're both working fill time? It's probably the only way they can cover all the costs and it's unlikely that the salon would cover a purely management salary. Good luck with whatever you decide.

 

[Financial-Modeller]

@Topbunny are the current owners selling the business in freehold premises, leasehold premises, or no premises?

 

[The Byre]

It is entirely possible that when the existing management leave many or all of their clients leave with them.

It is not possible - it's an effing certainty! My wife used to go to one very busy salon, but then the Romanian hairdresser working there that she always asked for opened her own place so she went there instead.

But these businesses are worth less than nothing because you're taking on a lease, and that's a big liability!If this is not a business generating a healthy profit from paid staff, then you're doing the owners a favour by taking over their lease! Ask them how much they are willing to pay you to buy their business. If they're not high on all that hair spray they've inhaled over the years, they'll make you a decent offer.

@Clinton has nailed it in one go!

 

[Mr D]

It is not possible - it's an effing certainty! My wife used to go to one very busy salon, but then the Romanian hairdresser working there that she always asked for opened her own place so she went there instead.

@Clinton has nailed it in one go!

She did that because your wife went for one particular stylist. Not the salon.
Not uncommon - people develop friendships and then follow their friend.

Even stylists that retire may keep their hand in for particular clients - so not benefitting the salon left.