Your comments welcome – see below.
When I sold my first salon business, I got a fat six figures for it.
Now, for most owners of a typical hair or beauty salon, that seems like an awful lot of money to ask. And it is, but I was able to get it because I’d uncovered some hidden value that your garden-variety business broker or accountant wouldn’t even think to look for.
Let alone your well-meaning friends and family.
I was reminded of this when I took a phone call from one of our Members the other day.
“I’m going to put my salon on the market,” she said. “I’ve worked hard for five years, it’s time to start a family.”
So, I asked, is the business ready for sale?
“I think so. I take a good salary, we have great products, lots of regular clients, and the salon looks wonderful and it’s in a great location…”
But when I started asking questions, I could tell from the tone of her replies that this was going to be a disappointing conversation for her.
And that’s because there’s a gaping difference between what the owner of a business thinks has value, and what an astute prospective buyer thinks is valuable.
(And I use the word ‘astute’ with caution. With stars in their eyes, many a beauty therapist or stylist on the hunt for their own business will fall in love with the ‘pretty’ surface and fail to look at what really matters.)
First, the ‘standard’ way to value a business.
An accountant will look at a business the way accountants do, with a calculator, analysing past performance, profit and loss, assets and liabilities, and come up with a ‘valuation’ for you based on those bare essentials.
Valid, certainly, but extremely limited, and limiting. Past performance is only half of the story.
Stock, fixtures and fittings and shop lease (again, obviously)
Yes, they may have some value. But have you ever tried to sell second-hand furniture? It’s worth next to nothing. Retail products?
You’ll need to be a very good salesperson to get anything like what you paid for it. And an astute buyer will screw you down on the remaining term of the shop lease, knowing you’re legally obliged unless they’re prepared to have the lease assigned to them.
Then there’s that hoary old chestnut,
It’s just air. Business vendors will, usually on the advice of their accountant/broker/business coach, attempt to ascribe a dollar value to that most intangible of intangibles, the ‘goodwill’ or loyalty of the customers to the business.
These days, there is little or no loyalty. And buyers know it. Don’t even think about trying to pull that one over them.
Now to the stuff you haven’t thought about, and certainly your accountant hasn’t….
By far the most valuable, most measurable part of your business is your list.
Your list of clients, customers and prospective customers held in an orderly, well-maintained electronic database containing not only their full contact details (name, email address, phone number, and most importantly, physical mailing address) but their spending habits and booking frequency.
This is the gold. This is the thing that a buyer can look at and determine with reasonable accuracy the current health of the business, and its potential, given a more robust and refined marketing program.
If you software program is set up correctly, a prospective buyer will also be able to determine what marketing information you’ve been sending out to that database, and its responsiveness.
Your list has a strategic value in and of itself. If I were buying a salon, it’s the first thing I’d look at, not the financials of the business. I’d then put that list alongside the financials, and try to find cause and effect.
Then I’d take a very close look at the thing that really matters…
It shows that this salon received 74 phone calls in the last 30 days from people who had Googled a beauty salon in Port Pirie and called the business using the ‘click to call’ function provided by Google.
In addition, the salon received 67 clicks through to its website from the Google Plus listing in search results, which would have produced another raft of phone calls.
Here’s what Amber Clayton, the owner of that salon, says about the value of her local search ranking: