Buying an existing beauty business can be a great way to hit the ground running. However, it is imperative that you do your due diligence and research so that you don’t end up throwing your hard-earned money into a bottomless pit. At Alliant, our team recognizes the importance of helping buyers find businesses they are comfortable with.
Benefits of Buying Existing Business
When starting a salon or spa from scratch, it takes time (think 3 months to 3 years!) to become established as a reliable service provider in the local community. Depending on the existing competition and overall market in your area, it can be a tremendous risk. Buying an existing salon or spa greatly reduces risk because you begin with a base clientele. You may also retain valuable and experienced staff that can help ease the transition of ownership for customers. Buying an existing establishment usually includes the necessary equipment and furniture of the salon or spa (unless otherwise agreed upon during negotiation).
What to Look For
It’s important not to jump head-first into buying an existing spa or salon without taking the necessary time to properly evaluate it. Let’s look at some of the considerations you should factor into your decision.
Is the Salon/Spa Worth the Price?
The current business owner will give you an amount they are interested in receiving in exchange for the establishment but this doesn’t mean that you should sign a contract and shake hands then and there. Have a professional business broker or accountant look into the business’s reported income over the past few years and use those numbers to create a realistic forecast of how much you expect to improve on those figures.
Consider the equipment that comes along with the business and the depreciation they stand to accrue over the next five years. Will you need to replace expensive appliances or other fixtures and furniture? You shouldn’t be paying full price for something that will soon need to be upgraded.
Are There Any External Factors You Need to Consider?
Demographics and population trends are important for salons and spas. Even though such businesses can cater to many different people, areas that are experiencing growth due to positive economic trends are better candidates than towns that are on a financial downturn. Consider the business’s location and whether any significant changes are coming with regards to infrastructure or the presence of other businesses in the vicinity.
Choosing Between Franchised and Independently Owned
Each type of business can have its advantages and disadvantages. Namely, a franchise can offer significant support with know-how and marketing but restrain your capacity to make choices about basic marketing or operation decisions. On the other hand, an independently owned salon will give you ultimate control while leaving you without a safety net.
Does the Business Meet Future Plans You May Have?
If you have plans of expanding the specific business or opening a second location, your flexibility in making decisions may be limited by factors you didn’t weigh in your initial decision. For instance, you will need to know if there are any restrictions on modifying the space or are there stipulations in the building rental agreement that can impact your business.
Consulting a Business Broker
Using a business broker is helpful for those that shy away from the important yet tedious details of facilitating the purchase of an existing business. An experienced business broker will walk you through the process, will negotiate on your behalf, and complete the necessary paperwork for the change of hands. At Alliant, we will also show you how the evaluation was performed, how to understand the financials, and how to prepare an offer.
Want to see what salons/spas we currently have available? Contact us today to learn more about our existing business listings and how we can help you buy the right one!