Family Salon with 27% Profit Margin
An exciting atmosphere with entertaining distractions for kids and services for parents too, make this Omaha salon a unique experience. Focused on making haircuts easier on kids and parents, the salon is bright and inviting, with lots of electronic entertainment and kid-friendly chairs. Opened in 2007, over 16 customers/hour and 200-350 customers/week are treated to fun and style by the 8 stylists.
While children are treated to haircuts and games, parents may also receive manicures/pedicures, waxing and color. Each kid station is outfitted with a car-shaped chair and a TV with DVD and gaming capabilities. There is also a fun waiting area with baseball-shaped chairs and a large TV. Girls are invited to check out the many costumes on display, and can choose from Nebraska’s largest bow selection.
Many customers have voiced their desire for a location closer to them. The seller has seen interest from people coming from Lincoln, Council Bluffs, and Papillion. With the current customer base in Omaha, the owner has profited over 19% each of the last two years. At the proposed purchase price, a buyer can expect a first year’s profit of $61,148 after all debts paid. This represents a 293% return on 10% ($20,800) down.
- Year Established: 2007
- Demographics: average income nearby is $98,383 with 86,713 households; daily car count average is 58,570
- Number of Clients: 16 Customers per Hour with Staff of 4, Range of 200 to 350 Customers per Week
- Lease: 2,000 sq. ft. for $3,360/month
- Reason for selling: Family health concerns
- Services: cuts, colors, waxes, party packages
- Employees: 1 Full-time, 8 Part-time; Stylists are responsible for opening and closing and provide services such as cut, color, etc. Receptionists check customers in and help with maintaining a clean area
- Hours: Mon through Fri 10am – 7pm, Sat 9am – 5pm
- Growth Opportunities: Expand party room options, open more salons – business is unique and has growth potential with expansion
- Current Owner’s Responsibilities: Staffing and Maintaining Salon, Ordering products and supplies
- List Price: $208,000 (business valued at $237,017, but price reduced as sellers need to move out of state)
- 2016 Gross Sales of $340,088
- 2016 Net Income of $35,219 – a 78% increase from 2015 (note: this comparison comes from Profit & Loss statements from 2015 and 2016)
- 2015 Cash Flow of $82,374
- 27% Profit Margin in 2016
- $46,000 worth of assets included in the purchase:
- 6 Hydraulic Chairs, 6 hydraulic car chairs, 6 hydraulic chairs, massage table, dual warmer wax machine, 15 TV’s, stereo system, 8 DVD players, 7 gaming systems (XBOX, Wii, PS3), movies and video games, 3 tables, microwave, refrigerator, stacked washer and dryer, computer with Salon Iris
- Intangible Assets: attractive, fun environment; positive social media reviews; unique product
*amounts may vary
Cash Flow Analysis
|Description of Financial Statement||Tax Return||Tax Return||Tax Return||Tax Return||Notes|
|Net Income Shown on Financial Statement||$20,157||$9,149||$24,537||$30,913|
|Compensation to Owner||$49,339||$46,984||$34,660||$30,334|
|11% Tax on total W2 Salaries||$5,427||$5,168||$3,813||$3,337|
|Interest||$0||$0||$0||$672||Non-onward going expense|
|Auto-Personal Use||$14,290||$10,085||$12,154||$5,462||Personal auto use unrelated to business|
|Insurance Premiums for Owners: Life and Dental||$1,813||$2,253||$1,019||$915||Non-ongoing expense|
|Contract Labor||$680||$2,233||$2,247||$2,140||Babysitters, etc.|
|Seller's Cash Flow = Total Addbacks + Net Income||$94,807||$78,974||$81,765||$77,340|
|Profit Margin||27.88 %||19.70 %||23.48 %||23.69 %|
- 27% profit margin
- 54% increase in net income between 2015 and 2016
Monthly Profit & Loss - January through July 2016
- Highest income of $33,307 in March
- Highest cost of goods was in February – income from product sales trickled into March
- Steady growth in income and profit, with a 15% increase between 2014 and 2015
Assets - $46,000
|6 rolling carts||6 hydraulic chairs|
|Curling irons||Massage/wax tables|
|Flat irons||Dual warmer wax machine with wax/waxing products|
|6 hydraulic car chairs|
|5 shelving units||Microwave|
|4 wicker shelves||Fridge|
|10 chairs||3-shelf cabinets|
|4 sport ottomans||15 displays|
|Armoire of costumes||Thousands of hooks|
Electronics & Toys
|Stereo system & speakers||Wii|
|Disco ball laser lights||Playstation 3|
|5 Xbox machines||Karaoke machine|
|60-inch TV||Barbie Dream House|
|23-inch TV’s – 4||Train table|
|15-inch TV’s – 10||Kids art table|
|2 princess TV’s|
- Children’s Haircut (18 and under) - $17.95
- Adult Haircut - $19.95
- Bang Trim - $6.95
- Buzz Cut - $12.95
- Boys Quick Style and Spray - $5
- Clarifying Treatment - $12.95
- Add a Shampoo - $3
- Style – $19.95 +
- Updo - $39.95 +
- For every 10 min - $10
- Straighten - $34.95
- Ear Piercing
- Ear Piercing - $30 + tax
- Cubic Zirconia - $40
- Girl’s Fun
- Kid’s Manicure - $10.95
- Kid’s Pedicure - $15.95
- Facial - $40.95
- Children’s Facial - $12.95
- Makeup Application - $18.95
- Makeup Lesson - $18.95
- Little Girl’s Makeup - $6.95
- Feather - $10
- Chemical Services
- Full Foil Highlight/Lowlight - $75.95
- Front Top Highlights - $25.95
- Single Application Color - $55.95 +
- Color Retouch - $45.95 +
- Color Design (Multi) - $85.95 +
- Corrective Color Consultation – FREE
- Corrective Color - $85.95 +
- Gloss - $30.95
- Perm - $45.95 +
- Anti-Aging Peel - $50.95
- Acne Peel - $45.95
- Acne Spot Treatment - $20.95
- Wax Chin or Lip - $8.95
- Wax Eyebrow - $9.95
- Wax Sideburns/Cheeks - $12
- Whole Fax Waxing - $36.95
All parties are 2 hours long and include Karaoke, use of the dance floor, and for the boys, their hair colored and spiked. Party time slots are Monday – Friday 6 – 8pm, and Saturday 5 – 7pm. The last 15-20 minutes of the part are set aside for anything you bring, such as cake, ice cream, pizza and opening presents.
Pop Star Diva - $215
It’s your big day so get ready for the spotlight! Let’s rock the house, but first you need to get ready for all your cheering fans. Pick a pop star or any outfit of your choice and our stylist will make you look amazing with a manicure, pedicure, updo and makeup. Then each girl has fun being a popstar singing on the karaoke, dancing on the dance floor and playing games.
Night at the Spa - $195
Every girl needs to be pampered once in a while. So let us pamper you like you never have before with all your girlfriends. First, get cozy in comfy robes. Second, just sit back and enjoy a manicure, pedicure and mini facial. Last, dance away with your friends and enjoy fun games and karaoke.
Pampered Princess - $185
All dressed up for the princess ball.Each girl picks out a beautiful dress then they receive the royal treatment with a manicure, updo and makeup. Next have fun with all your girlfriends singing karaoke, fun games and dancing on the dance floor. Then at the end each girl is announced on stage and crowned princess.
Princess Party - $155
Let’s get ready to go to the ball.The princess ball that is. Get dressed up in your favorite princess outfit and let’s start with updo’s and manicures. Next have fun singing karaoke and dancing on the dance floor to your favorite songs. Then enjoy fun games until it’s time to crown the princess.
Fun for Everyone - $120
Face painting for everyone.Then have your hair colored and spiked. We turn the salon into an arcade with eleven stations to play the latest video games on including Xbox 360 and Wii game systems. Dance away with your friends and enjoy fun games. (This party is generally a coed or boy's party.)
Fancy Party - $300
Get ready for an enchanted evening with hostesses extraordinaire.Each girl gets to choose and keep their own tutu, boas, tiara and jewelry ($30 value per child). Then get pampered with a glamorous updo and a dazzling manicure and a brilliant makeup application. This party is perfect for your exquisite little girl and her friends’ joie de vivre (which is a fancy phrase for having lots of fun).
- 9 - 1 full-time employee, 8 part-time employees
- the stylists open and close, and do services such as cut, color, etc.
- stylists can handle 4-16 customers per hour
- receptionists help check people in and out, and help sweep and clean
- the receptionists also help with manicures/pedicures, makeup and parties or pampering the kids
- the stylists open and close, and do services such as cut, color, etc.
Competitive Edge & Growth Opportunities
- One-of-a-kind full family salon specializing in kids
- Particular with whom hire, making sure the staff is clean cut
- When people walk in, it’s a “wow factor”
- Very large with lots to offer.
- Girls love the selection of bows
- Monthly sales of bows average $5,000
- Family friendly - parents are able to receive services and kids are entertained.
- Staff that loves working with children and play with them
- Make sure their experience is fun and stress free.
- Expand the party packages by doing more with the party room
- Open other salons in Lincoln, Council Bluffs and Papillion
- People are begging for a closer salon
The Firm Business Brokerage used a Cash Flow Valuation methodology to determine the Purchase Price of the business.
The formula used is as follows:
Cash Flow x Prescribed Multiple = Fair Market Value
Cash Flow is the sum of business net income plus any owner perks and any non-onward going expenses.
A multiple is prescribed by a 20 question, 100-point parameter ranking system that is used to analyze the current business health. Each question is based on a scale from 1 to 5: 1 being low, 2 below average, 3 average, 4 above average, 5 high. The average of the responses sum is the business’ prescribed multiple.
With this information, the computation is as follows:
$94,807 x 2.5 = $237,017
The Fair Market Value found above positions the business List Price at $237,000, but the price is reduced to $208,000 to suit the sellers’ need to move out of state.
Purchase Price: $208,000
10%Buyer Down Payment: $20,800
15%Seller Financing: $31,200
75%Bank Loan: $156,000
Seller Financing 5-year term at a rate of 4.50% equals a monthly loan payment of $582.
Bank Loan 7-year term at a rate of 5.25% equals a monthly loan payment of $2,223.
After business expenses and annual loan payments of $33,659, a buyer would retain a profit of $61,148. A 10% down payment of $20,800 results in a 293% return on investment in the first year!
A lender is required to have a minimum 1.5 coverage ratio for any business loans extended. At a proposed Purchase Price of $208,000 with the terms listed above, the coverage ratio is 2.82. Please note that the decision of whether to extend a loan on any particular sale belongs to the bank, and this document does not guarantee specific terms or verify that financing is available.
Offer Price: $
% Buyer Cash Down at Closing: $
% Seller Carry Back via Promissory Note: $
year term at a rate of %
% of Purchase Price secured by Buyer and Seller
Total Bank Loan Need: $
% of Purchase Price
Desired Loan Type:
Desired Bank Terms: year term at a rate of %
Total Business Assets, Inventory, and A/R: $
Total Undercollateralized Loan: $
|Monthly Payment to Bank:||$|
|Yearly Payment to Bank:||$|
|Monthly Payment to Seller:||$|
|Yearly Payment to Seller:||$|
|Total Monthly Debt Service:||$|
|Total Yearly Debt Service:||$|
Fixed Charge Coverage Ratio
The bank will require a minimum ratio of 1.5 to be lendable.
2016 Cash Flow
|Annual Debt Service:||$|
Buyer's Net Operating Income (NOI)
The amount of money the Buyer will retain as profit.
2016 Cash Flow
|Annual Debt Service:||-$|
Buyer's Return on Investment (ROI)
The rate of return on the Buyer's down payment.
|Document Title / Description|
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