You might be on to something...
----- Original Message -----
From: Adam Moffett
To: [email protected]
Sent: Thursday, February 25, 2016 11:58 AM
Subject: Re: [AFMUG] Ot buying a salon
Some people call their towers "money trees"
On 2/25/2016 12:21 PM, CBB - Jay Fuller wrote:
i highly recommend money trees.
----- Original Message -----
From: That One Guy /sarcasm
To: [email protected]
Sent: Thursday, February 25, 2016 8:36 AM
Subject: Re: [AFMUG] Ot buying a salon
Well, I got the financials last night.
Im assuming you guys who said to walk away had an expectation of what
those would look like
I expected to see negative numbers, just not that many of them
Im still going to complete the process to see what the final numbers are
on the table for the experience. But aside from a miracle 40k falling from the
sky, I dont see how anything could be turned around. Just fyi though, if
anybody has an extra 40k laying around they were planning on throwing away, im
not opposed to helping you to get rid of it
I really doo appreciate all the wisdom, Ill apply it next dumb idea i have
On Wed, Feb 24, 2016 at 12:04 PM, That One Guy /sarcasm
<[email protected]> wrote:
I do enjoy the advice guys, thank you.
Now heres a new twist, I called the primary today to get the full
financials together. They are willing to maintain the debt under contract
directly to me essentially finance me and maintain an interest rate there is no
way I could get . It boils down to, in the simplest of terms, she just want out
and does not want to be asked for any more money.
I cant find any way this is a good idea
On Wed, Feb 24, 2016 at 11:59 AM, That One Guy /sarcasm
<[email protected]> wrote:
This is actually part of the original 3-5 year plan. John and Jerry,
the two shaky ear cutting barbers both passed on some time ago. I want the
barber pole from one of the two businesses. And I will buy them if i were to do
this. There is only one barber in town, he is part of the team that pulled the
coup here, while i dont like seeing a startup fail, they led in part to this
disaster in the shop, the rent they owed alone when they skipped was
substantial and still some of it is owed, im not nice like the current owners,
one of the first orders of business is collecting that debt in court, their
salon is already failing, hes moonlighting cutting hair at the walmart.
but that still is due to poor management on this salons part. He was
offered a room to have a dedicated barber shop, but another poor business
decision was that that room would have a much steeper rental cost than the
chair, no motivation.
This particular building has no restrictions on moving walls, its all
open space, there are four entrances. I would build a dedicated barber room
with its own exterior entrance and glass to the interior, that rent would
potentially be even discounted because of the value added service that
currently is not offered in the near area. This is a long term thing though
because a consideration would be sponsoring the tuition to send a candidate
through the program under contract, that even could potentially be a transition
to an on staff employee because of its potential. But not in the current state,
or the near term. But as long as the "barber shop" feel was maintained, that
independent contractor would have plenty of leeway.
I lucked out with my boy, John was still lingering on, and I got him
up for one of the last crooked ear bleeding cuts from the last of a dying breed
for his first hair cut, so he has the mark on his ear.
On Wed, Feb 24, 2016 at 11:36 AM, Ken Hohhof <[email protected]> wrote:
Years ago, I got my hair cut at a place where the owner was a
barber with one chair in the back of the building with a separate entrance, the
front was a salon like you describe. In the back the waiting room had sofas
and Playboys and booze. Probably not a bad idea, except if a guy gets his hair
cut while he’s waiting for his wife or girlfriend, he probably still has an
hour to kill. Need to add a sports bar next door. Or do the guys get
mani-pedis and waxings now? <shudder>
From: That One Guy /sarcasm
Sent: Wednesday, February 24, 2016 11:23 AM
To: [email protected]
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 <[email protected]>
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
<[email protected]> 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)
<[email protected]> 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
<[email protected]> 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
[email protected] | http://www.packetflux.com
--
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.
--
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.
--
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.
--
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.
