Buying a business you have no previous connection with...

[velocicaur]

Hey guys,

As the title states: Does anyone have any experience with buying a business that you had no previous connection with in the sense that you're not tied to it by family, you haven't worked there before, etc. You are basically going in "blind" if you will.

To take it one step further, has anyone bought a business that they had little to no experience in the field?

How has it worked out for you?

I have come across an opportunity to buy a salon. I have absolutely no experience in the field and neither does my family. However, the financials are solid (even with Covid) and the price is reasonable given the numbers. It wouldn't be a "huge" risk as the asking price isn't crazy - we're talking about 20k down or so with seller financing so there would be no bank loans. I would be focusing on day to day management, marketing, etc. I would not be doing any of the work myself. One huge selling point, actually the whole reason why I am even considering it, is that the owner wants to stay on in the business but only do the salon work/cut back on her hours. This would give me the opportunity to learn directly from the owner so in that sense I would be going in blind but I would have a helping hand right from the start.

Backstory: I work in landscaping and other manual labor jobs. I'm not interested in doing that anymore. I dropped out of college as a senior. Needless to say, my employment prospects are not ideal. This would provide a starting point in life as I look toward other things.

Positives:
1) Seller is staying on.
2) Low risk in the scheme of things (20k) - at least to get started. Further money would be invested in marketing, etc.
3) Good financials with covid - even being shut down for 3 months during lock down. They obviously took a drastic hit but are slowly recovering.
4) Upside is good assuming things get back to normal over the next year or two.
5) Really nice "side" income assuming I can get the business up to snuff and having the owner on site will really help kick this off. I think I could become an absentee owner in a few years assuming my marketing efforts are successful and I can hire a good manager, etc.

Negatives:
1) Know nothing about the business.
2) I would be the only guy in a female dominated field. All the employees are female. Clients are female. This isn't a bad thing per say but I'm not sure what kind of reception I would have as a dude jumping into this field. This might not be a non issue for most but it's a self confidence/perception thing for me. I'm not sure if it is warranted or not. Any thoughts on this?

Am I crazy?

Any thoughts?

Thanks.

 

[lOOKnGO]

Wow! Funny coincidence. I had good friend and his wife that had the same opportunity. He was even a landscaper. They bought it, made some serious bank. Long story short.....they got a divorce, she still runs it, he sells real estate in the Outer Banks NC and still gets residuals from the salon. Do it!

 

[FIVEHOE]

So much info missing here.

what’s the overall purchase price?
How much debt does the company carry?
How many employees?
You mentioned salon, do they sell seats to people who bring in clients themselves, or are they direct hires and they rely on you to bring in clients?
What is the average spend per customer?
Profit per customer?
Cost of operating per month.

in my opinion, there’s no way in **** I would buy a business blind. At a minimum I would be on the frontlines seeing how things work on a day to day basis for at least a month before I pulled the trigger. Maybe you know the questions to the above, but it sounds like you’re incredibly inexperienced in the field, and will struggle for at least a period of time to get a grasp on how to make it more successful. There’s a reason the owner wants out and wants to remain a regular employee...

 

[BrunotheBoxer]

Not for nothing but my father and I sold our business three years ago this May.

Under contract we would be staying on and receive a fair salary and work there as employees to help with the transition.

I lasted tree weeks. My dad lasted four.
Of course the scamdemic didn’t help the guy at all but me and my dad hit the fookin lottery.

I wouldn’t own any business right now if they gave it back to me for free and I needed money.

Take this for what it’s worth. Just my story.

 

[coposrv]

If you can manage a business you can usually keep afloat any business or at least not be the cause of its death lol.

Fortune favors the bold. Do your due diligence and roll the dice.


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[MG0h3]

As mentioned, I’d be concerned if the owner were to pop smoke.

Is there a lead there that can help you?

Really scrutinize the financials.

I’d put a clause in the purchase contract about minimum time the owner stays on.




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[lOOKnGO]

An established salon has already done the hard work of establishing a name. Women will crawl over dead bodies to get pampered and brag about it. Come hell or high water certain women won't be caught ungroomed. The couple I referred to bought a business in one of the top 10 wealthiest counties in America. They had no employees and all stylists rented their space from them. It was nothing for a woman to drop $400 on a basic visit along with product purchases. Just check out the cash flow and witness for yourself for a couple weeks, before you pull the trigger.

 

[velocicaur]

Thanks for the responses so far.

It is definitely a strange situation. I am in the beginning stages of looking at it so I don't know how much they make per client, etc. I only have a basic financial report for the last 4 years from the broker. I have to dig deeper but I wanted some opinions on the whole thing before I take the next step. I would need some guarantee that the owner would stay on for a while. I would like to take it one step further and keep her on as partner to begin with at ~80/20 so she still has some skin in the game - added incentive if you will. The fact that she is offering seller financing makes me feel good about it. She has faith in her business or she wouldn't consider that?

It's been in business for ~20 years now and has great reviews on google. The owner has created a really successful business - no debt, etc. She has worked 6 days a week for many years now and is looking to step back. The rent is low and there are 4 employees that are 1099 and work on commission so there is little risk there too. It really does look like a great little business from what I know now.

Any more input would be appreciated.

 

[carrrnuttt]

An established salon has already done the hard work of establishing a name. Women will crawl over dead bodies to get pampered and brag about it. Come hell or high water certain women won't be caught ungroomed. The couple I referred to bought a business in one of the top 10 wealthiest counties in America. They had no employees and all stylists rented their space from them. It was nothing for a woman to drop $400 on a basic visit along with product purchases. Just check out the cash flow and witness for yourself for a couple weeks, before you pull the trigger.

I know nothing about the salon business and I can't offer any advice to the OP but I'll tell you this:

My buddy has his own shop and more than a number of towards-the-high-end cars I've personally seen at his shop, including Audi R8s, late-model Mercedes AMGs, and R35 GTRs were owned by either a salon-owner, or a salon contractor.

I just remember thinking: "How do I get into this racket?"

 

[jeffh81]

Are you the Zohan?

 

[Blown 89]

Myself and my family have been doing exactly that for 40+ years. We've known nothing about any of the fields we enter in to, all of which were infinitely harder than working in a salon. Do your due diligence and you'll be fine.

UNDER NO CIRCUMSTANCES WOULD I KEEP THE OWNER ON AS A PARTNER! Contract her to stay on for a month to train you then let her leave and take the business in your direction.

Fwiw, a local woman started a blow-drying and hair doing business. No cutting or anything, just wash, blow, and style. She's worth millions now.

 

[03cobra#694]

My daughter started her own hair business a few years ago after working at a high end salon in Atlanta. She makes a killing. I think it helped she had a great following and they came over to her when she opened.

 

[93Cobra#2771]

I would have an accountant to go over the books and look a liabilities, cash flow and all the other good stuff.

I would actually be concerned about your marketing plans as you have no idea about the business. Would take some serious research to figure out how the salon has been marketing and then how to build upon that success.

The owner finance thing is also interesting to me, makes me wonder if they have the business valued more than it’s worth.

It would be a HUGE transition from managing a landscaping crew to a hair salon. It’s a lot different dealing with a salon full of women.

I would definitely proceed with caution.


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[JJackson515]

Sounds like I'm the only one that would walk the other way. As a business owner that has built something from the ground up, I could not walk into something I know nothing about, and don't have any passion for just to potentially make some money. Now there are always exceptions to the rules such as being the financer behind it and trusting a partner to run it. But with what information was given, NOPE.

 

[wizbangdoodle]

Would you have to become gay?

J/k


I'd make sure there's a non compete clause. Just in case the previous owner doesn't enjoy retirement as much as she thought she would.

I challenge Jay Inslee to a bare knuckles fight. if I win, he opens the state and renounces masks.