OK, the main take-away seems that have wanted to be a hairdresser since you
were five...
From: That One Guy /sarcasm
Sent: Tuesday, February 23, 2016 7:42 PM
To: af@afmug.com
Subject: Re: [AFMUG] Ot buying a salon
That was the 3-5 year plan, her build the clientele, which is going swimmingly,
and we learn the business, which I have been, but neither component are at the
point of venturing out new, that's the then.
And yes, women are very much married to their beautician, more so than their
husbands.
I guess I wasn't clear, the current daughter owner doesn't want to exit, even
if there is a full purchase, other than losing her baby, as it were, she very
much wants to stay on, and she has a client base, I suspect many off the books,
and the other full time chair wants to stay as well. I know she has a lot of
off the books clients. The off the books would be addressed, that's also a
lawyer liability discussion regarding the potential skeletons. As bad as that
does sound, I can't go into the details due to time (it would be a book) it's a
manageable issue, because I knew about it and when I brought up the issue,
there was no deception, it was kind of like office pilfering, only it was
accounted for by both on personal tax returns so assuming the lawyer reviews
and signs off on it as not being a liability then it's a quiet benefit if the
lawyer red flags it, it's a show stopper. But there is a decent amount of
clientele is the point.
The daughter owner to clarify, has been in the industry for over twenty years,
six of her people have moved on to start their own salons under agreeable
circumstances, I'm good friends with one of them, and have verified the
reputation hit is not irreparable if the internal issues resolved. Benefit of
small town living.
A major component of the breakdown is that a mom and daughter went into
business without a very clear and detailed business arrangement. The mother
funded, the daughter worked, and nobody talked to one another. I've been doing
work for the mother for ten years, so I'm more privy to the finer details of
the situation than most potential "investors" would be. I've also been thinking
about and looking at various aspects of the salon industry since I was 5 and
accompanied my mom at night to clean on regularly at night, they always had a
dish of hard candies, so obviously they're a magical place. That and the fact
it's a loose cash industry that has little legitimate value as a neccesary
service but women would sooner skip a rent payment than miss a nail
appointment, it's crack for the housewife.
About 8 years ahoy when I saw a purse for 42 bucks that I know cost ten in the
purse bin that they can't keep full at my friends salon, I realised there is
potential. I actually had looked into ad driven WiFi hotspots attached to
vending machines that dispensed small retail electronics as a neat idea to
approach salons with until I priced industrial vending machines.
I don't see salon ownership outside of franchising as a get rich quick or at
all thing, but I do see it as a good residual income to adjunct another income.
This particular scenario actually is ideal because the particular arrangement
allows me to maintain my current job since I can't legally do much of anything
in the salon beyond running a broom. It also solves a long term conundrum I've
had regarding alternatives to my current job in that I can go out on my own as
a simpleminded it contractor and match my current income and pay rent, but not
insure my family, the location and available space within is a good brick and
mortar, and a lot of the salon client base at this particular salon is my
target market, the small to tiny business and wives of business owners who
wouldn't violate my current non enforceable no compete. Plus I've been building
my role into something that can be outsourced for the last three years, leaving
the opportunity to have cake and eat cake til it goes stale and molds.
I am rambling about all this because of the request for advice from experience,
like I said, not to be argumentative, but to hear why my grand ideas are
destined for failure, that's not sarcasm, it's a much less expensive way to
find out than just doing it the hard way and ending up living under a bridge in
my minivan feeding my family whatever scraps I can muster from the dumpster
behind McDonalds.
On Feb 23, 2016 7:49 PM, "Lewis Bergman" <lewis.berg...@gmail.com> wrote:
You should primarily look for tax returns. They represent the minimum a
person is willing to represent as their income. Assets in a business like that
seen pretty few and lie value. Probably easy to get an idea of what used
equipment would cost.
From your description it sounds like they have a bad reputation and I think I
would rather start with nothing and work to go above zero than start will below
zero and try to claw back to it.
I may be wrong but my wife is attached to her hair dresser; aren't all woman?
Why not try to recruit some good hairdressers and start your own?
I imagine the half life of a customer in that business is about three weeks.
I would bet you'll lose most of them during the negotiations. Lastly, never
think the person running a successful business doesn't earn the margin they
make. Unless you have the pockets to find this I would suggest your wife find a
successful salon to work in, build her clientele diligently, then if she still
wants to own one, start her own when she has the customer cash flow to make the
jump.
On Tue, Feb 23, 2016, 6:57 PM That One Guy /sarcasm
<thatoneguyst...@gmail.com> wrote:
Salons are service industry with subcontractorish environments, so it's not
all that different than wisp, except it's all broads.
The salon my woman works at is failing, poor management decisions, partners
who are family (mother funded, daughter managed) mother owns 51 percent
daughter 49. At one point it was an established and successful business, but
feelings got hurt, partners fighting, a staff coup that took a substantial
amount of clientelle, facilities not maintained. No clear company structure as
far as owners getting paid. A 7 thousand dollar and 13 thousand dollar note
owed to the mother partner, etc. Management software client capture went from
over 800 clients to under 200 captures over a one year span indicating to me
the "staff" quit putting a lot of services on the books and was pocketing the
cash. It was an llc but they quit paying it and transferred it into what they
refer to as a partnership with the 51 49 thing, I have not seen that
documentation
I assume a lot of this could be correlated to many of your purchases of
family run wisps.
This has the potential to be turned around, the salon had a good
reputation, and volume at one point, and its the only full service one in the
town, so it's not completely failed. There also is room to incorporate some
other sources of revenue into the mix.
The 51 percent partner wants out, they would like to simply recoup the
majority of their outstanding debt and was their hands of the matter. Initially
this was offered to us for 7k but that left an outstanding liability of 13 on
the business to the same person, and that note is secure via a mortgage
extension. That didn't sound like a good risk so we told them to get a better
proposal consisting of buying out that half of the partnership as well as a
second proposal for buying out the entire partnership. The "assets" including
minimal revenue of a single occupied station for a year was informally
estimated at around 34k.
The daughter partner who is the primary "contractor" had a 45k recorded
revenue. I don't recall the revenue from the other occupied chair of the 5
chairs and the retail had substantially dropped, I suspect due to it becoming
free when nobody was looking.
Recovery could take place, as they offer the full spa set of services,
however they currently are limited in their massage and facials by contractors
who don't show up. This can be resolved fairly quickly for the massage
therapist by recruiting one I'm aware of who is looking for a new place to
operate because her stand alone office did not generate the revenue to justify
the expense and overhead. Also my it job has allowed me to build good personal
relationships with a lot of beneficial businesses, primarily the beauty school
for recruiting fresh "contractors" to fill the empty chairs, they just don't
come with clients.
This is a more rushed scenario than I would prefer, this was a 3-5 year
plan, but circumstances presented. Our lust for business ownership stands to
cloud judgement, and that in itself is enough to walk away.
We have a meeting later this week for presentation of the proposals. What I
don't know is what documentation in particular I should request. I can ask for
"financials" but I don't know what that actually means, or what further
information to ask for.
I'm reaching out here because you guys are my favorite cheap dates, and a
lot of you have experiences more valuable than any advice I could pay an
attorney for. After this next meeting is when our expenses start, so we need to
be able to make a personal judgement at that point if it's a good enough
opportunity to go to a lawyer and start paying for the non refundable advice.
It's also when we make the decision of how foolish we want to look in front of
our bankers. I like my banker though, and he might be in poor spirits and need
a good laugh.
Smart me knows this is not the right time to take risks like this when I
only have 7 short years til my boy needs a college education and if this goes
south, mom and dads financial support will be out. But the potential makes it
worth looking at, like watching a train wreck. There are also some other long
term prospects this makes possible so that benefit alone makes it well worth an
investigation.
I really would appreciate some sage advice from experience in small
business.
From what I have seen, there is no formal business structure, in other
words I don't see
