How to Buy a Beauty Salon

Posted by Anonymous , 9/4/2007 Tags:BuyBeautySalon
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How to Buy a Beauty Salon

Introduction

Purchasing an existing beauty salon is one way to save the start-up costs that accompany a new business venture. Not only do you purchase the existing client base, the business should already have cash flow. Once you have found the beauty salon you want to buy, you need to complete the sale.

Instructions

Difficulty: Moderately Challenging

Steps

1

Step One

Provide a letter of intent. This is a non-binding agreement that allows you to have access to confidential information such as the business financials. It should include the proposed purchase price, the terms of the sale and the initial items to be included in the sale. Be sure to add a disclaimer that either party may quit the sale at any time for any reason.
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Step Two

Sign a confidentiality agreement. This legally binding agreement guarantees that you will not disclose the details of the sale, the location or the name of the beauty salon until the purchase is complete.
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Step Three

Review financial statements. The financial statements should include three to five years of history. Make sure the financials are being provided by a CPA and not by the business owner. Typical financial documents should include profit and loss calculations, current inventory listing, valuation and tax returns.
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Step Four

Determine what contracts and leases exist with the business. You may need to assume a lease or negotiate a new lease with the current landlord. Find out if there are any contracts that you will be liable to complete after the sale.
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Step Five

Apply for licenses and permits. It is your responsibility to know what legal items are needed for you to own and operate a business. For a beauty salon, you may need to register the salon with the state. Typically, any stylist working for you will also be required to have their own licenses. Talk with an attorney if you have any questions about due diligence.
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Step Six

Secure financing. Before you buy the beauty salon you will need to have the funding secured. If you are financing the salon through a bank, the bank will provide you with the documentation necessary to close the sale. You will need a cashier's check from your bank if you plan to buy the business without financing.
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Step Seven

Attend the closing. The sale of the beauty salon is complete when all the closing documents have been signed by all parties involved. This is usually scheduled by a broker or closing attorney.

Tips & Warnings

  • Have your own CPA review all financial documents.
  • Have an attorney review all closing documents.
  • Expect to have transition with the clients and stylists.
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