It's an expired lease, good landlord, if they owned the building and I could buy in for 51 percent at 20 k, even after all the taxes were done I'd leverage the 51 percent to close the doors and sell the building for a profit, if I we're A a dick and B didn't know their lawyer would smack them if they were dumping a building that far under value and talk sense into them.
I do know that the operational expense in rent, insurance, and utilities is around 1700 a month, though I suspect they're well underinsured, which would change immediately. (the old lady pays her liability insurance for herself and it's only about 5 dollars less than they're paying for their business) If all 5 chairs, 2 nail tables, massage room and facial room were rented, that alone would be 3k in "revenue" thats not including two tanning beds, a spray tanning booth, two pedicure chairs, and the other weird stuff women get done with wax and horse hair. most of the other salons in the area have no open chairs from when the chickadee was looking at her options, but, like any rental property, which these essentially are, what they could be making has nothing to do with what they are making. But the reason the chairs are empty is primarily because of the experienced cosmologists being knowledgeable of the internal squabbles, and the coup that took place. "under new management" carries with it some weight. Believe me, when everything hit the fan last year there, that was in my mind, buying everything at auction. But the drawback to this industry is the same as the wireless industry, a poorly managed company can be milked for a long time bleeding customers that by the time it gets liquidated, there's little of value left due to neglect and with no existing customers of substance, just starting fresh with a new set of infrastructure and try to recapture the market. I'm not arguing, btw, just thinking out loud, yours was one of the sage advices I was hoping for, that and a verbal beat down from Patrick Leary. On Feb 23, 2016 7:09 PM, "Chuck McCown" <[email protected]> wrote: > To me, “financials” mean income statements and balance sheets. Monthly if > they can produce them for as far back as they can produce them. > Tax returns too, K1s etc. Anything and everything you can get your hands > on. > > Who owns the building, is there a lease? Why not make a deal with the > owner of the building to take over the lease when the thing fails. Buy it > out of bankruptcy or after a trustees sale. I would not jump at the chance > to do a turn-around unless I was an expert in that business and I still > probably would not. Especially with the debt situation. > > Seems that time is on your side. The longer you take/wait the more > desperate they will become. > They certainly would need to take a haircut (ha ha ha) on the debt. > > *From:* That One Guy /sarcasm <[email protected]> > *Sent:* Tuesday, February 23, 2016 5:57 PM > *To:* [email protected] > *Subject:* [AFMUG] Ot buying a salon > > > 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 >
