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Episode 17 - How to Prep Your Salon or Spa for Sale
51 Plays5 months ago
How to Prep Your Salon or Spa for Sale
Episode 17 of the Business of Style Podcast
Presented by BeautyCouncil and hosted by Greg Robins
If selling your salon or spa has crossed your mind, you’re not alone. There are many reasons why a beauty business owner might consider a sale. Maybe you’re ready to retire, relocate, or follow a new passion. Whatever your reason, the key is to be prepared well in advance.
The biggest mistake? Waiting until the last minute to organize everything. When you’re well-prepared, you can ensure a smooth process, increase the value of your business, and make it more appealing to buyers. Here’s how to set yourself up for success when selling your salon or spa.
1. Build a Strong Foundation
First things first, know who you are as a business. Define your mission, vision, and values. Potential buyers want a business with clear identity and direction. A strong foundation also includes well-documented processes and systems. When your salon or spa runs smoothly without you, it becomes more attractive to a buyer.
2. Financial Fitness
Get your financials in shape. Buyers will want to see clean and organized financial records, including profit and loss statements. The more organized your numbers are, the better position you're in to demand a higher sale price. Review your business’s profitability, and focus on tightening up any areas that look messy.
3. Success Framework
Think of this as your business's "manual." Document your processes, responsibilities, and day-to-day operations so that the buyer can easily take over. This includes everything from managing staff to handling client bookings. A buyer will feel more confident if they know exactly how to run the business with minimal guidance from you.
Understand the Value of Your Business
The value of your business is often calculated as a multiple of your profits. The stronger your business structure, the higher the multiple. For example, if your salon is well-organized with solid financials and operational systems in place, you may be able to sell for two or three times your yearly profit. On the other hand, if your business is less structured, the multiple could be lower.
Types of Sales: Assets vs. Shares
When selling, you can either sell the entire business (including its name, contracts, and corporate structure) or just the assets (such as equipment and inventory). Sellers often prefer selling the entire company, while buyers might lean towards an asset sale to avoid taking on past liabilities. Understanding which route works best for you will help you plan and negotiate better.
Final Thoughts
Whether you plan to sell soon or years down the road, a business worth selling is one worth keeping. So, why not start building that foundation today? The stronger your business, the more enjoyable it is to own — and when the time comes, the easier it will be to sell.
This episode features Caylee Auge, Owner of award-winning Hype Hair Studio from 2009-2019. Caylee has a lot of hype around her name! She is a Certified John Maxwell Team Trainer/Coach, L’Oréal Professional Business Trainer/Coach, Course Creator with Inspiring Champions, and Winner of Canada’s Best Beauty Talent. Since 1998, Caylee has shared her 25 years of beauty industry experience with salon owners worldwide. Her passion is empowering salon owners to take charge of their life and business through virtual coaching and training, like her signature program The Future of Your Salon.
If you’d like support with preparing your salon or spa for sale, reach out for a free evaluation call to discuss your goals and next steps.
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Transcript
Introduction to Selling Salons
00:00:01
Speaker
Are you thinking about selling your salon spa or barbershop? Well, this is the perfect episode for you. Today, we talked to Kaylee Ajay about what's involved, what to think about, and how to get ready. My name's Greg Robbins. This is the Business of Style. Let's get on with the show.
Why and When to Sell a Salon?
00:00:26
Speaker
Welcome back, Kaylee. It's so great to connect with you once again. Thanks Greg, ah happy to be back. I'm so glad you're providing all this amazing information for our industry to boost the game. Yeah, no, we love doing that. That's what we do over here at the beauty council is we help people succeed in their business and have a successful career. So it's wonderful to partner up with you on this one. So today we're talking about something really interesting and we are chatting with our members about this as well. So definitely a hot topic and that is selling your salon or spa. Let's just jump right into it. You're an expert in the financial side of things or at least the numbers. Give us an idea of of like an overall picture of what it means to sell your salon and and why you'd want to do it and some of the reasons for selling.
00:01:13
Speaker
Awesome. Yeah. I think there's so many reasons that you may want to sell and sometimes um you might just want to think about it for a really long time and that's okay too. A lot of times people are maybe waiting too long to sell. So some of the things that might be going through your mind is when do I want to retire or maybe I want to move cities or maybe I just want to pursue a different passion. You know, maybe I just have lost some passion for it. So many reasons why you may want to sell your business.
00:01:43
Speaker
And the idea that we want to share with you today is that we don't want to wait until we're in a pinch to sell our business. We want to start preparing these pieces way in advance. I mean, the longer runway you have to think about these things better, you can set yourself up for a really good successful sale. Yeah, totally. There's nothing worse than, you know, scrambling around. It's like moving. yeah You want to be sure that you've got, you don't want to do it all all on the last day. You want to have your financials in order. You want to be able to sort of dictate the terms of ah the sale on your terms, not the terms of of the buyer. Ultimately, give us maybe a background. You've got some experience in, in selling. Maybe just give us a little bit of a background on your own experience before we dive in.
00:02:24
Speaker
Yeah. Well, I went through the same kind of, it's a really emotional journey really. And I do get a lot of people asking me about that. And I know people are pondering that salon owners that are thinking like, how do I ever get out of this thing? And I had the same experience. And I remember hearing someone say like, sell while you're on top. Don't wait until.
00:02:43
Speaker
things are going down in your business. And for me, it was really just, I don't know, I had these like red blinking signs going off in my mind saying it was time to sell. And I didn't listen then I ended up selling about two years later. And in hindsight, looking back when I had those blinking signs going off in my my mind, right, our subconscious kind of knows things before we we do, we realize that that's what we should be doing. I look back and I realized that I would have been in a much stronger position had I done it at that time or started preparing it at that time. And so in my story I have a lot of regrets. It ended up being a really good sale. I found a great buyer but it was really down to the pinch and really down to the last minute.
00:03:26
Speaker
And that's just stressful. So you want to make sure that you've got the right infrastructures in place that are attractive to a buyer. You want to make sure that you're in a great position to keep it as well. If it doesn't sell, I always say a business worth selling is a business worth keeping. Um, so why not? Even if you're listening to this and you're not thinking of selling right now, you're just interested in the idea. Why not set it up?
00:03:51
Speaker
to be appealing to a buyer because that's going to make it more appealing for you to own at the same time. That is such a great point. Very often we sort of get things ready for sale just before we sell it as opposed to actually getting it ready well in advance so that we can enjoy working there and have smooth days and easy financials and simple year ends. It's a great story that you just related to us. So thanks for that. let's Let's look at it from the perspective of a buyer, maybe from that side.
Preparing Your Business for Sale
00:04:21
Speaker
What would make an appealing purchase for a typical buyer? What are buyers looking for when they purchase a salon or spa?
00:04:30
Speaker
Yeah, most buyers are gonna look for a salon that is already turnkey, right? If you're kind of a savvy buyer and you wanna go in and acquire a business, you're gonna want something that already has a lot of infrastructure in and that you know is gonna continue running in the way that it did. Too much ah of the weight is on the owner already and that buyer knows, well, the owner's leaving, the whole thing's gonna fall apart, then that doesn't make it very attractive to the buyer.
00:04:58
Speaker
and so when you put in these infrastructures to make your business more turnkey, it takes a lot of weight off you, which is why it makes it more exciting to own it too. And maybe you'd even decide after doing that that you don't need to sell it because you've got a lot less weight on you. So for the same reason somebody would want to buy it, um you would want to continue owning it.
00:05:19
Speaker
Makes sense. So you use the word infrastructure. um We tend to think of like roads and bridges and stuff like that when we talk about infrastructure. But what what is it? Can you just define what infrastructure is in a little bit more detail? Yeah, infrastructure to me is all of those foundation pieces that build that bridge exactly like They build that concrete foundation. They build ah you know the sturdy walls and what that would look like in a business. I kind of break it down into three stages. And the first stage is really knowing who you are as a business, knowing who you serve, who you market is. That's you know what we would call your vision, mission, values, and just knowing what sets you apart and having everything else built off of that.
00:06:04
Speaker
And the the next stage, I call that like unshakable foundations, right? You've got these roots in there. You know who you are and you're building something really special and different from what else exists in the market already. And then the stage number two is that financial fitness, right? You know all your data points, you know your numbers, you can present it to a buyer. um You know exactly, um you know, what are the indicators that can help them grow the business and sell the business and um You know how to bring in more money when you need to and you know how to tighten it back when you need to. um So we call that financial fitness. It's really getting to know all of the salons, indicators, metrics, data, all of this stuff, which doesn't sound very sexy when you say it. But the part about that that is sexy is that it empowers you and you get to make really
00:06:55
Speaker
Great decisions about your business and you can make your business look really great on paper. So a lot of businesses on paper just look really messy, which isn't really attractive to a buyer. And then from there, another piece of the infrastructure I like to call um success framework. And that is all of your processes. And again, doesn't sound super sexy, but the outcome of it is the outcome of it allows you to travel. The outcome of it lets the business not rest solely on the owner's shoulder or solely on one ah manager. It's how we do everything and how it's set up so that
00:07:34
Speaker
The duties are spread out. We know who's responsible for what we have everything documented. We have really refined everything so that everybody in the business knows how to run it. Basically, basically, if I was a buyer, I'd like it. If you handed me a manual that.
00:07:49
Speaker
told me everything I need to know about the business and I never needed to call you again, right? And that would be a business that's packaged up really well. You can be like, here's the manual. It will answer all your questions. You can skip town to the Caribbean and forget you ever had a business.
00:08:04
Speaker
Probably in most situations, that's not what happens. The the person who purchased it has a lot of questions and there's probably a big transition period. So that would be the gap between what not to do and what would make it really clean for the person. um So that when I say infrastructure, I'm talking about, you know, having all of those things in place to make it really easy to change hands and almost for you to disappear unnoticed. Imagine that.
00:08:30
Speaker
I love these three pieces, the unshakable foundation, the financial fitness, and the success framework, all three really good corners of ah of a solid foundation, like you say. And ultimately, I mean, the sale of a salon or spa doesn't really need to be sexy if I'm not mistaken. It should really be tucked in and buttoned up so that people like lawyers and bankers and anyone who's loaning money for this purchase isn't asking a bunch of questions and feels confident. Am I right?
00:08:59
Speaker
Yeah, you're exactly right. And I love to just add that frame for salon owners. We're creative. We want to make things fun. And so, you know, if we can just have fun in the process while we're buttoning everything up for those more serious people out there, then, you know, that's the way I like to look at it.
00:09:16
Speaker
Yeah, absolutely. I mean, it's true. and And you can actually, I always say you can have more fun when you're not worried about things that you're not sure of. So if if your operation is smooth and running, and there are no huge surprises, then you can actually focus on the more creative.
00:09:31
Speaker
aspects of your work, whether that be, I don't know, a photo shoot, some some new education or experimenting with some new products and styles or techniques and services, then I think that makes for a great workday. So let's transition over to the whole idea of what are people selling. So there's something, a little terminology here called you you you can sell on a multiple of profits. Can you unpack that for us and just ah describe it?
Understanding the Sale Process
00:09:58
Speaker
who Well, a lot of salon owners don't really know what kind of value they have in their business and they don't even know what they would ask for the sale price or what somebody would pay. And so the idea of a multiple of profit is um it's just a really kind of known way to value a business. And so maybe a buyer will look at your profit and loss. So that's why we want to have those numbers all in check. And there's ways we can increase that profit.
00:10:26
Speaker
um you know We can really make a lot of the profit fall to that number that they're going to be looking at um just in the way we organize things. And they're going to say, I'm going to pay a multiple of this. And so maybe a multiple times one. um So they're just going to pay what the profit was for that year, or times two, or times three, and um you know so on and so on. And so each multiple would be Based on what we just talked about, Greg, like the infrastructure, right? The more infrastructure you have in place, the more multiples. So if you have a manual, if you have contracts, if you have, um, you know, a bigger client list with phone numbers and emails and all of these things, then that's going to demand a higher multiple of your profit number. Um, then if you didn't have any of those,
00:11:17
Speaker
you would be more likely to get just that one multiple of it. That's actually a really good point. You are really ultimately selling structure and simplicity. People are going to walk into this operation and there's a whole bunch of work to do. Anyways, just the transition and the management of people in in the place um and and whatever else is going to happen. So yeah, definitely ah if those pieces are in, you can command a higherre higher price.
00:11:42
Speaker
um In terms of multiples, I should just add too, the idea of a multiple helps a purchaser understand how they would pay back the money they paid for. the purchase. So if if they look at it and go, all right, if I know ah I'm going to make this amount of profit per year, then if it's a one-time multiple, then after one year, I've essentially paid back my purchase price. If it's a two-time multiple, essentially after two years, I can earn that money back. So it helps in that sense. Is that correct? Did I get that right? You got that. Exactly.
00:12:17
Speaker
So real quick, ah this is kind of a nerdy geeky part, but it's important for people to understand assets versus shares. Let's just quickly talk around like what the two types of sales structure is in both of those cases.
00:12:30
Speaker
So yeah, there's two different ways you can sell. So you can sell your entire company. So that selling your name and your website and everything that goes along with your company is even down to um the corporate structure. You're going to send that, you know, the number of your corporation that's going to all sell with the business and you're just going to walk away. Right. um So as a seller, it's most desirable for you to sell it as a company.
00:12:58
Speaker
Um, because you get to just walk away from it and it's all done. Um, alternatively, you can sell the assets, which means you're selling everything within the business or whatever the buyer wants to buy. So maybe they're going to buy all your inventory and all your chairs and they're going to maybe even pay you for some goodwill, but they're not actually taking over your company. And so in that case, the person who's selling is going to have to go and close the company. Um, they're going to have to make sure there's no outstanding filings.
00:13:25
Speaker
um So they're going to have a little bit more ah ripple effect of some work they need to do to really exit that business. So I always think, ah you know, as a seller, it's more desirable to sell your company. As a buyer, often it's more desirable to buy assets because you're not taking on any liabilities of that company or any past things that can creep up on you and you're starting fresh with your own company so there's a lot of different pros and cons there's different tax advantages but you need to decide you know how you want to set that up too and what kind of sale you're going to be going into so that you can clearly state that to the buyer and you don't have to get stuck
00:14:01
Speaker
with the buyer demanding things that you haven't thought through yet. I think it's also important for people to predict or try and determine in advance which type of sale they're going to
Shares vs. Assets: Pros and Cons
00:14:12
Speaker
do. If you're selling shares, yeah you've you've got some tax implications to your favor or maybe not depending if you've done that before.
00:14:20
Speaker
um But also, you're selling all the skeletons in that closet, so you need to be absolutely certain that everything is is clean, and especially when it comes from you know the perspective of, let's say, taxes or GST or contracts, that sort of thing.
00:14:36
Speaker
then assets is a simpler sale, and and it may make for an easier sale in some respects, but there is a tax disadvantage again, depending on your particular situation. So kind of works both ways pros and cons either side. And ah but it's it's good to think of that in advance, right?
00:14:53
Speaker
Exactly. And just what we started with, a business worth selling is a business worth keeping, right? We don't want all that mess for ourselves either. We don't want like tax payable and we don't want to have all these debts. And so the more you can clean it up for yourself, the easier it's going to be that day you do decide you want to sell.
00:15:13
Speaker
That's such a great point. Kaylee, there is so much more to explore. This is a very big topic and certainly one that we would love to have our members succeed in because there's nothing more graceful than a great exit, right? And a great entrance and ah and ah and an even better exit. So let's just give the people here a little heads
Conclusion and Free Advice
00:15:31
Speaker
up. How can people get ahold of you? How can they contact you and reach out to learn more about how you can help?
00:15:37
Speaker
ah Thanks, Greg. Well, the easiest way to find me is probably on Instagram at KayleeOJ. We can pop that link in whenever you share this. And ah we do offer a free evaluation call to see if you're ready and wanting to set up all those infrastructures that we talked about today. So I'd love to chat with you and find out your goals and your dreams and just see if you want any additional support. That would be all up to you. Thanks, Kaylee. I really appreciate it. Talk to you soon. Talk to you next time.
00:16:06
Speaker
Thanks so much, Greg. Thanks for having me back.