Obviously check your liquor laws, but in most states you don't need a
license if you are giving it away.
On Wed, Feb 24, 2016 at 11:29 AM, Chuck McCown <ch...@wbmfg.com
<mailto:ch...@wbmfg.com>> wrote:
So, become a church...
*From:* That One Guy /sarcasm <mailto:thatoneguyst...@gmail.com>
*Sent:* Wednesday, February 24, 2016 10:23 AM
*To:* af@afmug.com <mailto:af@afmug.com>
*Subject:* Re: [AFMUG] Ot buying a salon
Booze is not a bad idea, i dont know if you can just give it and
not have a liquor license, but there are no available licenses
here, i think we get one per church, so we have plenty of bars.
A clarification on the relationship between the two, its a
strained familiar relationship due to differences in visions. Both
parties are more than agreeable to the whole scenario, I met with
each separately specifically to see what the dynamic was, I didnt
want to get into a train wreck. The more im learning of the
details, there were alot of points in time where all it would have
taken was two people just stopping to talk to one another and the
disaster would have been avoidable, I think, based on knowing the
individuals, that had either one of them not been in the
mother/daughter environment, this would never have happened.
A poor choice in the failure chain was retail, it got transitioned
from commission sales to a mechanism the keep the business
floating. Once that happened two things took place, the chairs saw
no real benefit in pushing it which was made worse by the fact it
essentially equated to a pay cut, and the financier partner saw no
gain in risking bringing in any new retail. In the schooling that
costs 16k, they drill that into the girls heads, retail, retail,
retail, without it, all youre offering is a haircut and everybody
offers a haircut. Thats already been an agreed upon term, the
return of retail sales comission, and the return of loss leaders,
they completely eliminated that struggling to float. I was talking
to a friend of mine last night, she crochets artsy shit like baby
covers and boob caps, whatever. these things move like hot cakes
in the salons. We had tried to get them in the salon before, but
what the owners wanted was to make profit on them to the point it
wasnt worth it for her to spend the time making them for what they
wanted to pay, on top of that they wanted to sell them at too much
markup. This girl doesnt live here, she has a real talent at neat
stuff. There are two other chics in town that make similar items,
but their styles are identical to one another, and they sell them
in all the salons.
The old lady ended up selling them to other people in a short time
for her, like crack, ladies love crocheted crack. Id have no
intention of making profit on them, thats actually an expected
cost. If i lose 5 bucks on some tit hat, but that client shows it
to her girlfriend who just needs one as well, and were the only
joint you can get them, the "staff" has the option to discount
them even further when the new customer comes in to get one, if
they can leverage it for a service and new contact capture. Women
are weird in the crap theyll drive 20 miles to buy, but the chair
has the option to grow their client base, and the shop gets a new
marketing contact, thats always worth 5 or 10 bucks "loss".
I also have an expectation of some loss in inventory to the ether,
but one thing the daughter wanted but the financier partner
couldn't justify was surveillance. That will go in day one, the
chairs will know every corner that can legally be recorded will
be. If theyre not serious enough about the industry to know that
theft is a rampant concern, theyre not serious about growing their
small business, and they can find a chair in another salon. This
may be a poor attitude as a business owner, but even a high
revenue generating thief is still a thief, I used to be a thief,
so i know what kind of trash one is deep inside and i dont want
them as part of the team. I know a couple of the salon owners
overlook things. I cant do that. This salon size has potential to
reach the sales numbers quickly again to where the premium pricing
comes back, which is something they dont have right now. combine
sales motivation with a digital retail square app or whatever that
broads can but some overpriced shampoo and some nifty curling iron
at a whim on their phone from the bar in the bathroom on their
night out with friends and theres better pricing for more margin
to offer as increased commission. The way i see that, if the store
is making 3 dollars on a bottle of shampoo after commission and
the pricing gains happen to where theres room for 4 dollars on it
We can give 50 cents or even the whole dollar to the chairs in
commission. So a chair that normally moves 3 bottles a week for 9
bucks is motivated to move more, if they move 4, im still making
the same amount i would have made if i pocketed the discount as an
increase in sales, but there not motivated to sell more than 3. Im
over simplifying it, and probably completely wrong, but thats how
ive always seen retail with commission, and salon markup is high
On Wed, Feb 24, 2016 at 9:28 AM, Cameron Crum <cc...@wispmon.com
<mailto:cc...@wispmon.com>> wrote:
The thing about being the 51 percent share holder is that you
might as well own the whole thing. You get to make all the
decisions. Basically you could make it very hard for the 49%
owner to make a dime off of the business outside of her labor
contribution. I'm not saying you should do this, but it sounds
like there is some dead weight there and it might be time to
move on. However, your best bet is to buy the assets
(Name,chairs,equipment,etc) of the business and leave the
corporate structure alone. They can worry about their own debt
and other liabilities with whatever money you agree to pay.
After that it is their problem. Sign a new lease under the new
company with the landlord and go on your way. Now you don't
have to worry about having a boat anchor as a partner. The
current majority owner should be able to make this decision on
her own. It sucks for the daughter and will probably ruin
their relationship if they have one and the mother will
probably get sued if she sells it out from under her daughter,
but oh well. I would never buy someone else's known
liabilities especially if I knew the business was in decline.
You are asking for trouble. They either need to clear up the
liabilities before the sale (with proof of such) or sell you
the assets only and GTFO. I'm sure your lawyer and accountant
would agree.
I would also worry about the business model a little bit. It
would be too easy to cheat on the % side. Flat booth rent has
lower upside, but more stability, Depending on commission from
work leaves a lot of incentive to hide money, especially if it
is a cash business. They WILL make under the table deals.
Product is going to be a big money maker if you know how to
push it. My wife was the AVEDA rep for SoCal for a few years
back in the 90's, and has manged high end salons in Santa
Monica and LA. She says that unless you make every
appointment, and actually watch what every stylist does, it
will be difficult to make sure they are being honest. The
salon manager has to really on top of her game and somewhat of
a hard ass. However, product in that business can have HUGE
margins. You need to pick a pretty high end line, and make
sure all the stylists are TRAINED correctly by the reps on how
to sell the product, and use that product exclusively for
shampoos and such. Offer them commissions on sales and make
sure they are pushing it. When I was in college I worked on
the beach in S. Padre Island in the summers for a beach
service who also happened to be the Panama Jack distributor
for Texas. As we rented umbrellas and chairs and boogie boards
to people, we would push product giving free samples. They
paid me 30% of what I brought in on product, so imagine the
profit in a bottle of junk most of these places are selling.
It is similar in the hair business.
One last thing...free booze. Keep half decent bottles of Cab,
Merlot, and Chardonnay on hand and maybe some decent beer for
the occasional guy who stumbles in or the poor schlub who was
dragged along by his gf and offer it to everyone. Don't let
them get drunk, but a glass or two over an hour or so helps to
loosen the purse strings. Feeding the dude a beer or two makes
sitting in a salon more bearable and he might even spring for
that $30 bottle of sweet conditioner that makes his chicks
hair soft and smell good so he can take her home and see how
fast he can mess it up.
Good luck
On Wed, Feb 24, 2016 at 5:41 AM, Lewis Bergman
<lewis.berg...@gmail.com <mailto:lewis.berg...@gmail.com>> wrote:
How you pay yourself can depend on the type of corporate
form you take. LLC that are pass through don't pay taxes
and all income follows through to the owner's tax filing
via a K1. I agree with forest in that you should count
your salary, even though sometimes you may have to put it
right back in. The other side of that is if you take
"excess" pay make sure to record that on the books in a
way you can pull that off in a presentation to a potential
buyer.
You should keep forefront in mind that you must pay no
more than what it is worth no matter what the present
owners would like to get out of it.
On Wed, Feb 24, 2016, 3:40 AM Forrest Christian (List
Account) <li...@packetflux.com
<mailto:li...@packetflux.com>> wrote:
I started writing a long post about how to work
through this logically, but it sounds like you're
already going down that path.
The thoughts that occurred to me for you to consider:
The business part of a failing business isn't worth
anything. If you buy this, you're essentially going
to have to pick up scraps (which carry baggage with
them) and try to overcome that baggage. Unless you can
put a hard number on the value of the going business I
wouldn't consider it worth anything. And, one caution:
There is a temptation to treat the existing customers
(which may actually be the stylists, not the people
getting their hair cut/nails done) as an asset, but
you have to realize that a tarnished reputation is
going to make everything more difficult than it would
be if you started fresh. You have to ask yourself if
gaining the existing business is worth the pain. You
may actually decide that the business part of the
business has a negative value as a result.
Assuming the business part of the business has no
value, you need to ask yourself how much are the
physical things you're buying (i.e. the chairs, nail
beds, etc.) worth. That's probably all you want to pay
up front. Paying extra for the 'idea' of a salon seems
silly. Remember things haven't been maintained so some
of these are going to have to be replaced, maybe soon.
So you need to look at the depreciated value (how much
value they actually have left) - taking it back to a
wisp, if you buy a router which lasts 5 years, 2.5
years in that router is only worth half as much, quite
possibly even less. Consider that when valuating items.
Assuming you could come to a purchase price that was
reasonable, then, and only then should you look at the
financials to see if you can make it work, including a
reasonable return on investment.
(Ok that sounded kinda wrong. What I mean is: Don't
over pay for the assets. Don't justify over paying
for the assets just because the business operation
numbers (P&L) look good based on your best guesses of
costs. Figure out what the assets are worth
(including the business part of the business), and use
that for negotiations, not any percieved potential
future benefit. That isn't what you're paying for -
you're paying for the assets.).
A bit of a note in relation to the above is to mention
that if you can make a business case for a business
salon in your town, then there's a good chance you
could start a salon with or without buying the
existing business. That's why I'm saying 'the business
part of the business is probably not worth much,
especially with a tarnished reputation'.
Once you get to the point of working through your
business operation numbers (P&L), there are a few
caveats/suggestions:
1) YOU MUST PAY YOURSELVES. This is important. Plan
on paying yourselves from day one. Figure out what a
reasonable pay rate is and pay yourselves. If you
don't do this, you will never ever make any money at
this. It's ok to escalate this with increasing load.
For instance, when you start, you may only need a few
hours a week... but still pay yourselves. One even
worse gotcha is that not paying yourself sometimes
indicates to the IRS this isn't intended as a going
business and that isn't something you want to have
happen. Ok, it's okay to put a bit of sweat equity
into the business at first, but very shortly, you
should start paying yourself for your time.
2) You must consider depreciation of equipment. You're
going to have to replace that equipment sometime, you
need to plan for it, and book for it. This needs to
be put in your business plan from day one. That
equipment you purchased costs you on an ongoing basis.
If your business plan doesn't account for replacing
the equipment at correct intervals, you will end up 7
years from now with an even shoddier place which is
worth less than you paid for it.
3) Consider an exit strategy. How can you position
yourself to be able to sell this for *more* money than
you paid for it a few years from now.
4) If "your woman" plans on being a stylist there,
consider treating her from a financial point EXACTLY
like any of the other stylists, at least for her
stylist work. That is, charge her rent for her
station, etc. etc. etc. That way she will be pulling
an income from the business just like if she was a
stylist elsewhere. This will produce revenue for the
business which it will need to pay the rent and also
her salary for management duties.
I think that's all I can think of for now...
I do have one other reference I point ANYONE starting
a business to, and thats a book/website called
"business model generation". It contains tools to help
people work through a successful business model. If I
was doing what you're considering, I'd work through
this process considering your customers as your
stylists (which seems to be the normal model) which
means the services (aka value proposition) you provide
to your customers are things like providing a
workspace, credit card processing, advertising, etc.
Your goal in this business model is to fill every slot
in your salon with happy stylists which you can charge
large amounts of money for the quality workspaces you
provide and the continuous flood of new customers your
advertising provides to them. The other option is
running a business model where your customers are the
actual people getting their hair and nails done.
I'd recommend getting a dead tree version of the book
(by Alexander Osterwalder), but you may want to check
the first part out online at
businessmodelgeneration.com... They have a exerpt
which is basically an introduction available. This
isn't for everyone - some people just don't get this
book. I haven't figured out a pattern about who this
does or doesn't work for yet either (I'm usually
wrong, so maybe it's all the people I don't think
would like it).
In any case, good luck.
On Tue, Feb 23, 2016 at 5:57 PM, That One Guy /sarcasm
<thatoneguyst...@gmail.com
<mailto: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
--
*Forrest Christian* /CEO//, PacketFlux Technologies, Inc./
Tel: 406-449-3345 | Address: 3577 Countryside Road,
Helena, MT 59602
forre...@imach.com <mailto:forre...@imach.com> |
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--
If you only see yourself as part of the team but you don't see
your team as part of yourself you have already failed as part of
the team.
