Purchasing An Existing Salon Can Be Smart Investment

[Stephen Underhill]

A quicker less expensive way of getting into the indoor tanning industry is to purchase an existing salon. However you must be cautious because there are many potential pit falls.

90% of all tanning salons are struggling or failing, typically if a salon is for sale it falls into this category. This alarming statistic is not due to a week industry, instead it is a result of new salon owners not being properly educated and prepared for success.

When evaluating the purchase of an existing salon you must approach it as though you are opening a new salon from the ground up. You must first determine the potential of the salon by evaluating the demographics. If the demographics are good you can now evaluate the salon further. Always look at the parking situation and how easy it is to access the location. You should determine all of the changes that must be made to create a successful salon. To do this you must again have the information and knowledge required to be successful. You must determine the cost associated with making these changes.

You must determine the value of the salon by asking a number of very important questions. Net profit of the salon, equipment value or a combination of both will determine the value.

Very old salons can be a problem because the rooms are typically too small. With proper evaluation, a proven plan for success that the previous owner did not have and the proper funding to make the appropriate changes will allow you to own and operate a successful salon saving a great deal of money over opening a new salon from the ground up. Major mistakes made by people that purchase failing salons: Paying more than the salon is worth, not being any more qualified to operate a successful salon than the previous owner, not identifying or making the changes necessary to create a successful salon, not being properly funded. It is just as easy to succeed as it is to fail, knowledge is power. Get qualified assistance or become a part of an alarming statistic.

[Glowtanning530]

I bought existing and I am glad I did. It gave me money to work with and clientele to work with all I had to do was improve upon areas I saw needed to be changed. It also allowd me to upgrade equipment as iI went along

[Brian Oshman]

90% of all tanning salons are struggling or failing,

There is no way that number is right. So I guess that the only ones that are succeeding are the ones you consulted?

Wait, I gotta pack the pipe.

[Brian Oshman]

[TonyG]

Originally Posted by Brian Oshman

There is no way that number is right. So I guess that the only ones that are succeeding are the ones you consulted?

Wait, I gotta pack the pipe.

You could construe the 90% to be: 80% struggling and 10% failing, which I would bet is not to far off the money. If you have to dump money into a business to keep it afloat for a few months of the year, that is definitely a struggle!!

[brownsuze]

Originally Posted by TonyG

You could construe the 90% to be: 80% struggling and 10% failing, which I would bet is not to far off the money. If you have to dump money into a business to keep it afloat for a few months of the year, that is definitely a struggle!!

What percentage of salons do you think have to do that????

[Brian Oshman]

You could construe the 90% to be: 80% struggling and 10% failing, which I would bet is not to far off the money. If you have to dump money into a business to keep it afloat for a few months of the year, that is definitely a struggle!!

Looking at it in that perspective is a little more reasonable. 10% failing is more like it but I don't think 80% are struggling. I would say 40% are successful and the other 40% are struggling and the other 10% are already closed.

The ones that are struggling are the ones that need to close too. They need to be liquidated, not sold and re-opened.

[Stephen Underhill]

Originally Posted by Brian Oshman

There is no way that number is right. So I guess that the only ones that are succeeding are the ones you consulted?

Wait, I gotta pack the pipe.

Brian' I am simply pointing out that the alarming number of salons that are not doing well and not likely to improve are as a result of not being prepared. This is why so many salon owners feel that the marketed is over saturated. This belief is based on so many salons struggling and everyone assumes that the struggle is caused by saturation. In reality it is caused by the lack of knowledge.

[dbl-a]

Don't know about the percentage, but the three salons that I actually considered buying and checked their books out were failing miserably. Losing there asses! The others I didn't bother to check out that deep as they wanted a ridiculous amount of $ for a old store with crap beds. Therefore I am starting fresh, kinda.

[JustTans23]

I bought an existing salon, it was struggling when I got it but only because the owner had an outrageous payroll. She had a sick child so wasn't able to do anything for the salon basically. So she had me the manager who worked 40 hrs a week. Then about 5 employees. I bought it, cut the employees to 2 and work most of the shifts, elimitated a huge chunk of payroll. Plus in the summer she would have us do stupid things like leave the AC on all night so its cool in the morning, so the electric bill was outrageous also. She just didn't care. I've only had it since December and we're already doing alot better.

[BigLeo]

I was reading in Looking Fit that 30% of salons opened in the last year or two went out of business in 2007. That's up from 20% the year before. A case could be made that at least twice that number, or 60%, are experiencing financial difficulties or close to it. The tanning salon industry is without any doubt, undergoing structural changes affecting not just tanning salons, but tanning bed manufacturers and distributors. Several manufacturers have gone out of business, others have merged, and some distributors have closed down or been acquired. These are very difficult times for tanning salons, so my advice is don't buy any tanning salon unless you can afford to lose your investment. Buy the equipment at 20 cents on the dollar, if you really need that equipment, not because you think you will need it. There is simply too much capacity in the tanning salon industry, and the number of salons that are for sale has skyrocketed. That is a trend that is certainly not good. When so many owners want to get out, that says volumes.

Leo

[Editor-in-Chief]

The ITA and others continue to repeat that there are 25,000 tanning salons in the country. That number must be exaggerated now.

I don't think anybody, including Looking Fit knows the actual size of the pie. If the size of the pie isn't known, the slices can't be measured.

[springboktanning]

i would consider buying a salon in my area,but the equipment needs upgraded and making 2-3 amonth now is not worth the headache. the funny thing is he thinks his salon is worth so much more and some poor newbie will see it as a gold mine after a broker reminds him that this is a goldmine you cant not invest in.Its amazing what some salon owners thinktheir salon is worth??

[Ezliving_Jim]

I've read that the most sophisticated and successful research operation for buying land on which to site a successful business is McDonald’s. The corporation has developed highly sophisticated matrixes and algorithms based on traffic patterns and population demographics, so when a McDonald’s open up, the franchisee is virtually guaranteed a money machine.

The second-most successful site research is done by Burger King, although a bit less sophisticated than McDonald’s.

Burger King watches McDonald’s, and opens up close by.

The tanning salon I bought is near McDonald's with no other competitive tanning salon nearby.

[daredvl_edm]

That is surprising numbers there. I find it sad that in the USA that the tanning industry is doing so poorly. In Canada, our economy is very strong and we are having salons pop up all over the place. I don't see or hear of any that are going under. People sell for sure, however, people get tired of running the same company for a number of years. Some positive enforcement is needed in this part of the form. Buying an existing business is not a bad thing. A risk is a risk whether it be new or existing.

:-)

[Stephen Underhill]

Just like opening a new salon, the same procedure should be followed when purchasing an existing salon

[Stephen Underhill]

If you are interested in purchasing an existing salon, first evaluate the demographics. Many salons open in bad locations.