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how much are grooming salons worth to buy?

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how much are grooming salons worth to buy?

Post by Kenmich on Thu May 09, 2013 10:00 pm

How much would a one person grooming salon be worth in a country town, $5,000 worth of assets, makes a good wage for one and pays the bills but little to no profit. My accountant says a business that makes a wage but little to no profit has no goodwill.

Kenmich

Location : SA
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Re: how much are grooming salons worth to buy?

Post by Kenmich on Thu May 09, 2013 10:00 pm

Also grooming only, no sales products.

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Location : SA
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Re: how much are grooming salons worth to buy?

Post by Kenmich on Fri May 10, 2013 4:50 pm

Also grooming only, no sales products.

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Location : SA
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Re: how much are grooming salons worth to buy?

Post by Chris on Fri May 10, 2013 7:55 pm

interested to know what the formula is to work out the value.
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Re: how much are grooming salons worth to buy?

Post by Kenmich on Fri May 10, 2013 8:11 pm

Yes well if anyone does know a formula.......

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Location : SA
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Re: how much are grooming salons worth to buy?

Post by Kenmich on Sat May 11, 2013 12:46 pm

Anyone that has bought something similar or do most people just start there own???

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Re: how much are grooming salons worth to buy?

Post by Tail's a Waggin' on Sat May 11, 2013 3:11 pm

Something to consider about buying a salon is you'd be paying for that good will. The salon may have many established clients however you must be able to continue servicing them to the same standard or better. Just a thought....Smile
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Re: how much are grooming salons worth to buy?

Post by Kenmich on Sat May 11, 2013 3:25 pm

My accountant is telling me that any business that brings in a wage and no real profit has no good will and that some business' can only charge low amounts for good will because the good will does not always transfer to the buyer, people are going to that salon because of that groomer. So that is def a problem. Has anyone bought a small salon and paid good will?? I'm being advised against paying ANY good will.

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Re: how much are grooming salons worth to buy?

Post by puddles on Wed May 15, 2013 8:17 pm

Interesting. I don't get the wage/ profit/goodwill thing. If you're not buying the goodwill, are you only buying the equipment? Do you pay for the client list or are they not considered worthwhile because they may leave you? If the shop is leased, do you pay more or less for taking on the lease?

If buying the clients, goodwill and so on is not worth it, why buy the business at all? You'd be better off starting from scratch. Everyone who buys a business changes it, but surely starting with regular clients is worth something. Frankly, I reckon most clients are too lazy to leave anyway!

I spoke to an agent about selling my mobile business a while ago. He estimated a fair price for the business - equipment/ clients/ bookings etc at 1 years takings (sales, not profit). Didn't mention goodwill.

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Location : Vic
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Re: how much are grooming salons worth to buy?

Post by puddles on Wed May 15, 2013 8:21 pm

Also, regarding working out a price... I used to work for a second hand bookshop. That sold at a price based on 1 years takings (er, just slightly, or muchly, inflated as it happens) plus stock.
I think that's fairly normal? Or is it only for an actual shop?

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Re: how much are grooming salons worth to buy?

Post by Kenmich on Wed May 15, 2013 8:49 pm

Dont know but my accountant said a business that makes a wage but no profit cant ask for goodwill, so the value is the equipment plus stock,i googled it and lots of sites agreed. Goodwill is apparently the amount of profit that the business makes, it doesnt sound right to me either, and yes business that the clients go there for a service provided by a person who then wont be there, less goodwill again. I dont get it either.

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Location : SA
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Re: how much are grooming salons worth to buy?

Post by UNM on Thu May 16, 2013 1:18 pm

Any one selling anything can ask for what they want, and justify the price in many ways.
Most grooming businesses will ask something for goodwill.

I think your accountant is either FOS or over simplifying, hopefully the latter

E.g. my business has forward bookings and a history over nine years of an ongoing casual booking rate. Even if a new operator managed to upset every client and get zero repeat bookings, they would have revenue and some profit after deducting COGS (Cost Of Goods Sold) for around three to six months. That has value.

I don't draw a wage as such, so my business is profitable. If I choose to draw wage equal to the profit, does that immediately cancel goodwill?


Typically, businesses that employ staff who are expected to remain after a change in ownership will have a higher value than those dependent on asingle person or family that will all quit when it changes hands, that is common sense - no matter how good the new owner, some people will start looking at alternatives because change makes most people somewhat uncomfortable.

BUT, it can happen that someone sells a business and key staff then quit, taking customers with them.


A negotiated transition period can sometimes be useful if the business has a lot of personal loyalty between owner and customers (as long as you trust the outgoing owner).

One very important thing is a restraint of trade clause in the sale, so the seller doesn't turn around and set up in direct competition as soon as they have your money, although anyone who buys a business without professional legal advice deserves everything they get.

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Re: how much are grooming salons worth to buy?

Post by Kenmich on Thu May 16, 2013 3:37 pm

This business only had the one person who was selling it.
Mmm I got accounting advice and all it did was confuse me Smile

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Location : SA
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Re: how much are grooming salons worth to buy?

Post by puddles on Sat May 18, 2013 2:35 pm

What's the deal with making a good wage for the operator, but not having extra profit, being not good?
Isn't the idea of running your own small business to make a wage for yourself? I mean, how much is wage and how much is profit?
If my business makes say 50,000 after expenses, do I have a wage of $50000, or maybe a wage of $25000 and 25000 profit? Does it matter if it all goes to me anyway?

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Re: how much are grooming salons worth to buy?

Post by Tail's a Waggin' on Sat May 18, 2013 6:12 pm

Surprised


Last edited by Tail's a Waggin' on Sun May 26, 2013 12:39 pm; edited 1 time in total
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Re: how much are grooming salons worth to buy?

Post by Kenmich on Sun May 19, 2013 9:22 am

Wage is what you want to pay yourself per hour, if you want to work 50 hours a week and pay yourself $10 an hour and call the rest profit thats fine but that's going to be a hard sell if you want to sell the business.

If I buy a business for $40,000 and that is what it makes a year after operating expenses, then its paying the owner a decent wage but it makes no profit, then I as the new owner now have a debt of $40,000 and a business that makes no profit, how do I pay the debt off, how do I grow the business with no profit?? It is expected that a business can pay a owner a wage and then the debt for buying the business should be payed for with the profit, if there is no profit I'm paying for buying the business from my wage. Thats why a business that makes a profit is important because otherwise the new owner is stuck with debt they can't afford unless they pay themselves a low wage until its paid for, so the new owner out of there wage has to pay for the business loan and grow there business out of there wage, so how much are they now paying themselves in a wage, stuff all!!!

If you start a business you expect to pay for equipment and stock and grow from there but why should a new owner pay for goodwill when there is no profit, goodwill is profit that has been built up, if its just a client list that may or may not stay with the new owner then sell it as such but don't call it goodwill, google it they all say the same.

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Location : SA
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Re: how much are grooming salons worth to buy?

Post by puddles on Sun May 19, 2013 2:03 pm

Kenmich, that actually makes perfect sense! A very simple explanation.

So it would seem (for a small business) that you would be better off setting up from scratch, paying less than you would buy a going business for. You can quickly build up clientele and reach a profitable stage quicker.

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Re: how much are grooming salons worth to buy?

Post by UNM on Wed May 22, 2013 6:08 pm

puddles wrote:Kenmich, that actually makes perfect sense! A very simple explanation.

So it would seem (for a small business) that you would be better off setting up from scratch, paying less than you would buy a going business for. You can quickly build up clientele and reach a profitable stage quicker.

Actually no, in many cases.

You start your business, but have no clients, so no income stream to service the debt and pay you a salary. The debt therefore increases initially, so you must take that into account when calculating which is better. Possibly the clientele will never grow due to poor selection of premises or marketing. Whether that debt comes from the bank, or your pocket, it is still a debt owed by the business

You can't just say that you 'will quickly build up clientele' and have it come true unless you are really lucky. You have to plan how you will build that client base.

What kenmich says about someone making $10/hr is true, but what if they are taking $45/hr - is that business worth the same as the $10 one? I agree with the general point that you should be able to buy the business with a loan, pay interest on the loan and employ someone (yourself probably) a fair wage, with something left over to use as you see fit.

Personally, I believe you are better to buy an existing business. By all means use the arguments above to negotiate price down, but don't kid yourself into thinking that starting from scratch is always better. Remember if you start from scratch, you will most likely fail - nothing personal, most businesses do fail and generally not due to lack of effort from the owner.

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