going to buy a distressed salon

[SandiGirl]

And to add to JustTans...can you afford to be there an not pay yourself much if that's the case?

[sunsally]

At 22K by April 16, assuming that is accurate, it is on pace to make maybe 60K for the year.

Rent at $650/mo = 8K

Payroll at $7/hr = 36K (yes - you can work 75 hrs/week for free by yourself and not pay taxes etc, but as an INVESTMENT, assume $36K/year)

Electric = $6K at this level of activity (should be busier, and hence higher)

Bank fees = 2% of sales or about $1K at this pace

Advertising = if you actually want to get any business, plan on 5-10% of gross or about $3-6K

And so on.....

Upfront, if you can keep the equipment for now, plan on having to relamp everything (doesn't sound like it has been maintained) - probably $2-3K


The bottom line is the place is doing very poorly right now.......BUT........the rent is dirt cheap. SO -- if you really think you can turn it into something that is attracting customers AND you have some $$ to put into it AND you can afford to jump in and work the place without having to take a lot out of it for payroll for yourself AND they aren't trying to strap you into a long term deal AND they are going to carry the terms for the first year and basically let you make some money......

why not?


The key to this is the low rent, low upfront investment, and short lease term. However, if it DOES make $$, you want to make sure you can sign a new lease at similar low rent terms.

All that said -- you sound unprepared to take on this sort of a project in terms of knowing much about the industry. Make sure you are willing to LOSE anything and everything you put into it -- including 75 hrs/week of your time and energy over the next year along with your money. If you are going to try to build this into something it is going to take QUITE a bit of your effort, building up relationships with clients, reaching out to the community, getting the reputation turned around (it can't be good after all the changes and how it has been run) etc.

[hiii98]

They are using the "tan track" software. And the current reputation of the salon isnt bad, its more of a dissapointment that it isnt hitting its potential. All utilities are free i think i can get around 650 a month in rent, and with only 5k down ...seems like a win win situation. I've ran 5 other successful businesses in the past, i know how to dedicate myself to becoming obsessively involved in my businesses and have no fear of no pay and long hours... thats what it takes to make the big money

[hiii98]

being that it is using Tan Tracks, neither the landlord nor myself is familiar with the software, and he doesnt want to tip off the employees to a buyout.

[SandiGirl]

Well guess who uses Tantrack? MEEEEE! So only the employees know how to run reports? How does he know how much he made? Then tell him you'll meet him there after hours to go through some reports.

Now we need to know what beds.

[SandiGirl]

And if he's dumb and not paying attention to this biz, GUARANTEED those girls are skimming...the good news for you in that, is those are profits you will get when you run it, that aren't accounted for and looks bad on paper.

[SandiGirl]

I would tell him that you're not in the market to fail, and with his lack of knowledge, you don't have all the correct and current facts about this business until you get your hands on it....and you don't want to pay that amount to find out it won't be as profitable as he thinks. So you can pay him the rent, and take it off his hands for $5K. The benefit being, a long term tenant and not an empty space for him to fill.

This is all after we run the reports of course.

[Tanning Queen]

All utilities are FREE"?????? HUH????? How can that be? If your rent is only going to be $650 your electric alone would be that much if not more. NO WAY a landlord would toss that in for free, especially not for $650 a month.

Now, you also have to think about other things. How much electric is in the salon now? Is there enough AC to keep it cool? If you need to add, is there enough electric to do that? If you needed to add better beds, can you do that with the electric there? Is there room in the salon for bigger rooms or more rooms? What are the exact terms of the lease?

[SandiGirl]

You guys must have really high electricity because I don't think I've had one month be $375, even at my busiest. Our bills are every 2 months and I think the most was $750.

[Tanning Queen]

Mine was higher than that at my lowest.

[Tanning Queen]

Poopity poop poop!

[JustTans23]

Well no wonder the business is doing so poorly if the landlord is running it and he is someone that is willing to give you the electricity for free. My rent is dirt cheap too. And I put up with a lot of crap from the landlord to get the cheap rent. Sometimes it isn't worth it.

Definitly get in there. Tell him you want to work a few days in there, at least. Sandi will help you run the reports you will need to get more accurate info on cash flow and all that.

You will definitly need to sink some time and money into this place. Not to mention hire all new employees. Sandi makes a good point in that the current ones are probably skimming. They are used to a non existant owner, they'll resent you for coming in and wanting to actually run the place.

I think you're first steps need to be to get in there and run some reports and work the place. Let us know what beds are in there. And start doing research on the industry so you are more knowledgable about what your getting into.

[hiii98]

Give him 5k , offer to sign long term lease?

Might be able to do this without the additional 20k...

Originally Posted by SandiGirl

I would tell him that you're not in the market to fail, and with his lack of knowledge, you don't have all the correct and current facts about this business until you get your hands on it....and you don't want to pay that amount to find out it won't be as profitable as he thinks. So you can pay him the rent, and take it off his hands for $5K. The benefit being, a long term tenant and not an empty space for him to fill.

This is all after we run the reports of course.

[hiii98]

" How much electric is in the salon now? Is there enough AC to keep it cool? If you need to add, is there enough electric to do that? If you needed to add better beds, can you do that with the electric there? Is there room in the salon for bigger rooms or more rooms? What are the exact terms of the lease?"

Electric is free as all units are tied into one in that building, it is included in rent and no way of knowing. Dunno about the AC, the place is HOT hot hot.. There is room to expand and we've already discussed that. Not sure what the lease entails.

[SandiGirl]

The a/c could be a big problem for him then. If it's shared, then you may not have enough (obviously sounds that way) for you need in the busy times. You need AT LEAST 1/2 - 3/4 ton for each bed.

[Tanning Queen]

Yep, AC is a major issue. Not only is it needed for the comfort of the client, but the equipment needs to maintain a certain temp for it to run properly. Overheated units will break down faster, including lamps.

Well you cant expand or add better beds or more AC if you dont have enough electric to do it.

Honestly, the whole thing sounds too shady. I wouldnt even waste any more time on this place. It aint worth even $5k with the way they have thing running.

[eyecandytanning]

Since he got the place for free, can you just offer to take it off his hands. Apparently he is not interested in running it and eventually he will run it out of business. If he just hands it to you then he will at least have a chance of a long term tenant.

[hiii98]

yeah i really want to make a go of it. I'm pretty excited and with the saved money i think i can make it profitable. Wish i had pictures. How do you guys survive in the summer months? He mentioned that i should have extra cash reserves (i do) to survive the slow season. Isnt there something i can do to actually draw more business during this period? Or offer additional services?

[SandiGirl]

Originally Posted by Tanning Queen

Yep, AC is a major issue. Not only is it needed for the comfort of the client, but the equipment needs to maintain a certain temp for it to run properly. Overheated units will break down faster, including lamps.

Well you cant expand or add better beds or more AC if you dont have enough electric to do it.

Honestly, the whole thing sounds too shady. I wouldnt even waste any more time on this place. It aint worth even $5k with the way they have thing running.

Well I'm the optimist I guess.

I don't think it's shadey, I think the landlord is lazy and cheap. I don't think the a/c is for his unit...so the upgrade may be the landlord having to do it for the whole place. Since when do individual units not have their own electric? Sounds ever old school.

It's just another bargaining tool...

[hiii98]

the building itself is only 6 years old (if that), and yeah i think they are lazy and cheap, especially when it came to having individual water/electric to each unit.

Boy the cheapest lowball offer i could make is to give him $5,000.00 as a DEPOSIT for a 3 year rental agreement or even better have it (the 5k) pay off my first 7 months... or i could offer to prepay a year in advance, plus a 3 year lease. Wow lots of options i had not thought of prior to entering this forum!