What is your Salon business worth and how to value it.
Are you thinking about selling your salon? Here are some tips and tricks on valuing your salon and the risks and benefits that come with it. It can be difficult to find the true value of a salon and to try to decide how much you could sell your Salon for. There are many important factors that you need to consider in any business sale, which can lead to prices rocketing or crashing. The rule of thumb for valuing a salon is 10 times your weekly takings. However, this is often not enough for most Salon Owners as it is not enough, especially if they have owned the salon for a long time.
The reason as to why Salons are valued at low prices are because of the risks involved with a new owner coming in. Top performing salons are reliant on what the stylist team are earning however they can leave at any time. For instance, if a salon has two full-time stylists as well as the owner, and is up for sale, the staffs earnings could dip by one third overnight or potentially even two thirds if any of the other stylists decide they don’t want to stay or would like more money, as they feel they can negotiate with the new salon owner. Therefore, the risk that the salon now has is that previously the salon was taking £4500 per week and is now only taking £1500 per week. This happens as stylists grow a customer base personal to them and when they leave many of their clients could follow them to another salon. Although people do not want this to happen, this is the reason why salons are valued so low compared to other businesses.
We use a slightly more advanced formula when we value salons which is as follows:
Using a Broker
Using a Broker could potentially help put buyers and sellers together, they are experts at valuing businesses, with some even specifically specialising in certain business types. A broker might charge you a set fee or a percentage of the selling price, however, for peace of mind and a second opinion, this could be something that you keep in mind. Business brokers are easy to find online, contact them for a consultation and get the ball rolling with your valuation.
Factors that could affect valuation
Competition in the area may affect what your salon is worth, the more competitors you have in your area, the less your establishment may be worth, location may also affect your valuation price, if your salon is based in an older community, then a younger more trendy salon then you might not be able to benefit from this.
Taking all of these factors and risks into account, the value of your salon will overall be based on your cash flow and your profits. If the valuation you get is not enough for you then perhaps you might need to take into consideration that some things may need to be changed in order for your salon to be valued at more of a reasonable price for you.
If any of these points interest you and you want to speak to us about the possibility of selling your salon please let us know as we can put you in touch with interested buyers.
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