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Discussions > What Are Some Tips For Buying A Beauty Salon?
What Are Some Tips For Buying A Beauty Salon?
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Posted By: Joe Ranieri 
What should you look out for when buying a beauty salon business? Buyers kept asking us so I decided to go over the basics plus a bit more and discuss items like: independent contractors vs employees, inventory considerations, licensing issues, escrow considerations, and of course valuation ranges.
Topics: Buying A Business Tags: buying a business, due diligence
What should you look out for when buying a beauty salon business? Buyers kept asking us so I decided to go over the basics plus a bit more and discuss items like: independent contractors vs employees, inventory considerations, licensing issues, escrow considerations, and of course valuation ranges.
Topics: Buying A Business Tags: buying a business, due diligence
Whether we are in an upswing or downturn economy, people will always cut and or color their hair, in fact it's often thought of as a recession proof business. Per the Professional Beauty Association, "The salon and spa industry is a vibrant and growing component of the U.S. economy, with more than 1.1 million total establishments and annual sales of more than $44 billion."
Most salons are classified as non-employer establishments, which means either the owner works there alone or also has independent contractors who work there. A buyer should investigate if the people there either work on commission or if they rent their space.
When looking to buy, don't forget to consider the amount of inventory needed to be purchased on top of the asking price, and investigate how much the salon does in sales. Selling conditioner and shampoo is a great way for a business owner to increase their bottom line.
A buyer should verify that the people who work there have their cosmetology license, and try to retain them after taking possession of the business. A buyer can include in the sales price the business' client list, but should be aware that many clients will follow a hair dresser where ever they go. I have sold some salons where the seller was tired of running the business and just wanted to be an independent contractor at the same location. A buyer may want to include in the contract a non-complete clause, so the owner can’t take their business and reputation across the street, although the vast majority of buyers also have their cosmetology license and cut hair at their own establishment bringing with them their own client list.
Before the close of escrow, the buyer should inspect that everything in the store is in working condition, and that all of the chairs are in working condition. The buyer should also verify that all permits and business licenses are up to date.
Sales prices of many salons range from 2-3 times the annual net income. A buyer should take into consideration that renting chairs is a great way to offset business costs/rent.
Most salons are classified as non-employer establishments, which means either the owner works there alone or also has independent contractors who work there. A buyer should investigate if the people there either work on commission or if they rent their space.
When looking to buy, don't forget to consider the amount of inventory needed to be purchased on top of the asking price, and investigate how much the salon does in sales. Selling conditioner and shampoo is a great way for a business owner to increase their bottom line.
A buyer should verify that the people who work there have their cosmetology license, and try to retain them after taking possession of the business. A buyer can include in the sales price the business' client list, but should be aware that many clients will follow a hair dresser where ever they go. I have sold some salons where the seller was tired of running the business and just wanted to be an independent contractor at the same location. A buyer may want to include in the contract a non-complete clause, so the owner can’t take their business and reputation across the street, although the vast majority of buyers also have their cosmetology license and cut hair at their own establishment bringing with them their own client list.
Before the close of escrow, the buyer should inspect that everything in the store is in working condition, and that all of the chairs are in working condition. The buyer should also verify that all permits and business licenses are up to date.
Sales prices of many salons range from 2-3 times the annual net income. A buyer should take into consideration that renting chairs is a great way to offset business costs/rent.
| Helpful Resources To Assist In Selling And Buying California Businesses |
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George Lanza, Business Broker, At Plethora Business Sales Plethora Businesses, a division of A Premier In Services, Inc., is a Business Intermediary Consulting Firm headquartered in Orange, California. Plethora specializes in the listing and sale of small and medium sized private businesses. |
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Peter Siegel, MBA - SBA Loans, Non SBA Financing Assistance For over 25 years I have provided niche business purchase financial advisory and loan placement services with SBA and Non-SBA Loans, Retirement Plan Conversions, Private Investors, etc. Financing amounts available: $20K to $7MM. Call today to get pre-qualified or receive financing: 866-270-6278. |
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Michael Davidson, Business Broker - Southern California Los Angeles Business Broker providing M&A quality services for Small Business Owners. We leverage our technology and expertise to Simplify & Expedite the Business Sales Process. Matching the right buyer with the right business is how we define success. |
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William Park, Business Broker - Southern California Highest Volume Broker in California, Simply Check our HUNDREDS of Listings! Over 25 Associates, Speaking Dozen Languages, Helping Buyers and Sellers of Small Business since 1982, Centrally Located between Los Angeles and Orange Counties, while Riverside & San Bernardino Counties are Very Accessible. |
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Bob Baumgarten, Business Broker: Orange, LA Counties National Business Brokerage is a full service brokerage company that has been serving buyers and sellers of Southern California businesses since 1994. We are dedicated to providing the highest standards of professional service for our clients. Phone Bob direct at 949-588-8727. |
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Lee Petsas, Business Broker - Orange, San Diego Counties, Inland Empire UBI Business Brokers has been successfully selling businesses in Southern California since 1965. Our Agents have over 100 years of experience in selling small to medium size businesses throughout Southern California. We service Orange County, Inland Empire, San Diego. Phone Lee at 714-363-0440. |
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Christina Lazuric, CBI, Business Broker - Orange County California's Premier Brokerage for Selling Orange County Service Based Businesses since 2005! C.B.B. provides a step by step approach to Business Brokerage, Mergers & Acquisitions, Business Consulting and Valuations. We work on creating the best possible presentation for your business! |
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Jack Oh, Business Broker - LA, Orange Counties Business broker and real estate services in the Los Angeles and Orange County areas. 10 years experience with great negotiating skills. To sell a business or buy a business in the LA or Orange County Areas phone Jack and his team at 562-787-4989. |
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