By Kym Krey
Even if the thought of selling your salon has not crossed your mind yet, one day it might. The steps you take to make it ready for sale will make your salon much more valuable to keep, so the effort is always worth it.
However, most salon owners leave this far too late. In fact, most advisors will tell you that you should be preparing for the day you sell from the moment you actually start your business! Begin with the end in mind.
It can take several years to put the necessary steps in place to attract a great price and this is the very reason so many salon owners are disappointed, if not devastated, when they leave it to the last minute. They have a dollar figure in mind and when they find out what it’s really worth, they get a very rude shock. They either hang on to the salon far longer than they wanted, or sell for much less than they expected.
The trick is to look at your salon from a buyer’s perspective.
When it comes to buying a salon, there is one general rule:
- You either pay big bucks for one that’s already built; (all the hard work is done – you’ve paid for someone else to build it for you), or
- you pay a smaller amount for a less successful business (or start from scratch) and have to do the hard yards yourself.
The more attractive your salon is to a buyer, the more they are likely to pay for it.
What makes a salon attractive to a buyer?
The factor that will mostly influence your sale price is gross profit. Even if your salon looks great, has a great reputation and seems busy, if it’s not making money, a buyer won’t pay big dollars for it. Without a healthy profit, you are relying on selling your shop-fit. Remember, clients are fickle; if they’re not comfortable with the sale of the salon or a new owner coming in, they can leave in droves and crush your turnover. Your buyers are very aware of this. They’re looking for a guarantee of income.
A general rule of thumb when valuing a salon is between 1-3 times its gross profit. What determines whether it’s closer to 1 or to 3 times is what else is included in the sale:
- Cost and quality of the fit-out. If it’s beautifully presented, modern, computerized, in a great location etc., it will command a higher price. If the fit-out is in need of repair or refurbishment, the buyer needs to spend money and usually wants to pay less to allow for this.
- Does it rely on YOU (and therefore your buyer) working constantly in the salon to be profitable or does it run smoothly without you? Do you have written policies, procedures and systems which your staff are completely familiar with? This is so if you were not there, the salon would continue to run well and maintain quality and turnover. How well trained are your team? Will it all fall over without YOU?
- Is there a manager or competent person to run the salon if the buyer chooses not to work in it? This is more attractive to an investor or non-hairdressing buyer.
- The size and accuracy of your database. Do you have the full contact details of your clients on a database & are they up to date? A new owner needs to market strongly to secure as many of your clients as possible, and with no database, your salon becomes more of a risk and therefore, less valuable. Your database is GOLD.
Buyers willing to pay higher amounts generally require a salon where all the structure is in place & the hard work is done. They’ll value your business skills & acumen.
What should I focus on?
- Gross profit – increase turnover and manage costs well.
- Does your fit-out need an update?
- Is your database up to date and accurate?
- Are your systems in place and monitored constantly?
- Are each of your staff well skilled, productive and working well under management?
- Do you need to get an independent valuation of your salon to show the current market value, so you know what to expect? Then you’ll know what you need to do to get the price you want.
Kym Krey is a salon business coach, supporting salon owners to develop real business skills and highly profitable salons. She is available for individual coaching and can be contacted on 0403 042 312; kym@yourcoach.net.au or at www.yourcoach.net.au or www.kymkrey.com.au.
About Kym Krey
Kym is a dynamic and passionate person with a wealth of business and management experience spanning over 24 years.
She has been involved in all facets of salon business management from individual salons to large multi-site operations and franchising; with a particular emphasis on building strong team culture and developing leadership.
She is an excellent business educator with a ‘knack’ for making the complicated sound simple.
She has held national roles with responsibility for over 60 outlets, educating franchisees and managers in effective business practice, financial management, goal setting and achievement and coaching their staff to peak performance.
Her systems have consistently achieved significant increases in not only areas of profitability but also in developing team spirit and accountability, building healthy business relationships and honest, effective communication.
She regularly presents workshops to guide managers and business owners through the often ‘sticky’ areas of managing team behaviour, setting boundaries and approaching those ‘difficult’ but critical conversations, inspiring them to reach beyond current perceived restrictions and achieve goals and results which were never previously possible.
A particular favourite of hers is working with young, emerging managers, assisting, developing and empowering them to become tomorrow’s leaders.
Kym is passionate about all aspects of business management and enjoys sharing her energy and enthusiasm for excellence. She was the winner of both the 2002 Australian Micro Business Awards; Qld /NT; ‘Woman in Business’ and ‘Established Businesses’ categories as well as an ABIA finalist. She is the current NSAA 2008 “Speaker Idol” winner 2008-Qld.
She is a vibrant coach, trainer and presenter with an infectious style that really gets the message across whether in one on one coaching or group training sessions.
Kym is available for business coaching and team strategy sessions, document creation, training, workshops and presentations.
Helping you build your dream business …… TODAY!
0403 042 312