My wife is a hairstylist and rents a chair at a hair salon. She’s worked there a few years and the owner has begun hinting that she wants out. Owner is near retirement age. My wife is getting a bit antsy at some of the business decisions being made, and what she would do different. She’s thinking about asking the owner for her price to buy the place out. How does that work? How does that process start (aside from bringing up the conversation).
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Start by asking what the current owner is willing to sell it for… you may find out new details about the situation that will help you decide on the value of the current situation like the lease term or if other chairs are being vacated etc. things that you may find less favourable or more favourable.
With salons, the majority of the value is in the assets (chairs/mirrors/Lease hold improvements), current stylists renting chairs, and if the salon is well known, the name brand.
Understanding the monthly costs of rent, insurance, supplies, cleaning as well as what you can rent a chair to a stylists in your market is important to build out a forecasted monthly profit and loss. This will also help you decide if you want to do it, if it’s worth it.
If the salon is currently in a S Corp or LLC you don’t want to buy that legal entity. You would form your own before buying but this is like step 5 or 6.
Get as much info as you can and if you don’t have any background in finance, talk to a CPA to help you roughly establish some idea of value.
Once you know sellers $ and have some idea of profitability and value, you would start a dance of negotiating…
Also, spending on these services is down right now compared to last few years so keep that in mind and understand value is down now compared to anytime over last 5 years.
I am a CPA and my sister in law bough a salon this time last year.
A rental salon is not worth much if you don’t own the building. The only thing you’re buying is the initial build out and goodwill of clients. As a stylist, if you leave the clients leave with you. So goodwill is not even for sale. Don’t pay very much if there’s no real estate.
Without the current owner collecting a % of revenue or commission from stylists, the only revenue that should consider for valuing the business is only chair rental revenue.
You mentioned this is a family business. With consideration that clients “belong” to the stylist, how many stylists are family members and who may be at risk of leaving and taking their clients?
Does the current owner lease the space or own it?
I agree that a partnership with the current owner is an awful idea. So would a partnership with practically anyone.
This could work out really well for you and your wife. You may want to pay for a consult with a business broker in your locale to get an idea of a fair price. As another poster noted, some businesses basically have no value, so be sure not to overpay just because it seems like a great opportunity. Good luck!
Sometimes a business is worth nothing. Sometimes there is something better……look around to see what the alternatives are and then make sure that the current deal is better than that.
Are clients attracted to the building or the people in it? How important is location. Being fixed location means more clients less time……moving around is more money, lots of travel, less clients.
I know of several hairdressers, beauticians, stylists, make up specialists, minor cosmetic surgery etc who have set up their own personal salon in a summer house, spare bedroom etc
Look at all the options and consider carefully what the clients would do or want.