Selling Your Salon: What You Need to Know First

It's February the 6th, maybe you've just had the worst January you can remember, and you were Googling how to sell my salon business at one o'clock this morning. But before you run towards a business broker, here are five questions to help you get a bit of clarity on whether it's time for you to sell or not. Hello, hello, hello my salon friends, Phil Jackson here, your queen of salons, coming all over the internet with a big glob of my Wise Owl wisdom. How on earth are you? Achingly well, I hope, as we march through February. So how are we doing? Now, lots of people out there are facing the reality of a not terribly impressive January, and maybe some white space in February too. I'm not going to make light of the fact that for lots of people out there, times are a little bit tough. And one of the answers to that might well be running through your mind that maybe it's time for you to sell your business. And for some, selling might absolutely be the correct option. But a lot of salon owners thinking about selling are actually asking, how can I stop this business feeling so bloody hard? And the problem is, you can't sell a struggling business for what you think it's worth anyway. If your business isn't doing terribly well, you're not going to get an awful lot for it. So even if selling is the right option for you, fixing it first is going to get you a lot more money. And maybe fixing it first is going to take away a bit of the overwhelm, some of those gloomy feelings. So I've got a few points, five little questions, five pointers, if you like, to help you figure out which is the right path ahead for you. So question number one is, are you selling your business or are you running away from a problem? So selling your business is a strategic move. Maybe it's been on your goals for the last five years, ten years. Perhaps it was always the idea that you sell the business. Perhaps when you set it up, you had that in mind. And that's absolutely fine, perfectly valid, absolutely the way forward for you. But if you're selling just because you're exhausted or you're burnt out or you're starting to resent your business, that's a you problem, not a business problem. So if you're working 60 hours a week, that means that you've got your pricing wrong or your capacity, your systems are wrong. They're not unfixable. Maybe your team is driving you absolutely nuts. That's a recruitment, a management issue, a performance management issue. Again, not unfixable. Maybe you're just not making the profits that you think you ought to be. Well, that's a pricing problem, a cost control problem, not unfixable.

And the test is if someone bought your business tomorrow, could they fix it with better systems? If they could, you're running away from a business that's perfectly fixable and maybe selling is not quite the right option for you. So write down the reasons that you want to sell. Circle those things that are business problems and those things that are you problems. And let's have a little acid test, shall we? Question number two is do you actually have a business at all? And this is a bit of a bitter pill to swallow because most salon owners hugely overestimate the value of their business. And to be honest with you, these days, unless you've got something extraordinary going along like a business freehold or maybe you've got a hands off business. But generally, as a rule of thumb, you'd be lucky these days to get two to three times your annual net profit. Profit, not turnover. Profit, not turnover. The problem, of course, is that in lots of our businesses, some, well, let's say most salon owners have been trying to minimise their tax liability. So they haven't been declaring huge profits. So when it comes to sell, you haven't got very much on paper that you're actually producing at all. The truth is that most people will be quite happy to buy a profitable business. They don't want to buy a really hard work job. If they see that you're working 60 odd hours making very little profit, who on earth is going to sign up to buy that? If you're not making profit, basically you're selling fixtures and fittings, a bit of stock and some goodwill, and you're not going to get very much for it at all. If you've taken loans to keep your business afloat, you may not even have enough from the sale of your business to clear those debts. So before you sell, make sure you get a proper valuation, not just from one business broker. Bear in mind, they want to get you on the books and get that business up for sale. They may well be inflating the value of what they think they ought to be getting for you. Also, shop around a little bit. Sometimes a general business broker has wider reach and wider potential. Sometimes the specialist business brokers do struggle to, even though they might get you a better price, they do struggle to get businesses sold. So my advice would be, either way, start fixing some of the problems we talked about in stage one, because that's going to get you more in the sale price ultimately anyway. Question number three is, what are you going to do when you sell and what's going to happen for your income?

Let's say you sell your business for 30,000. Well, that sounds great until you realize, firstly, you've got to pay tax on that. And secondly, that may not even be six months of the salary that you're currently not paying yourself properly anyway. And then what? Have you got another job lined up? Are you going to have to live on savings while you figure it all out? If you sold the business, remember, you're probably not going to be able to take very many of your clients with you, at least not legitimately. Or are you going to go and work for someone else? I mean, realistically, are you even employable these days? I know that there have been times when I have wanted to throw my business aside, but honestly, I don't think I'm employable anymore. I don't think after working for myself for 25 years plus, I don't think I could work for anybody else. I don't think I could take management from anybody else anymore. So selling might feel like the escape, but sometimes you just need to make sure you're paying yourself properly in your business. Fix the business, like we said in stage one, that might be better for you than selling it. Question number four and related to question number two, actually, is what actually are you selling? Are you selling your client database? That's only valuable if those clients are retained in the business. And most people who buy a salon business know that when the owner leaves, if they're an owner operator, a lot of that business is going to leave with them. So the database itself is not hugely valuable unless they're retained in the business. There's something keeping them in the business. And generally, they're being serviced by staff that will be passed on with the business as well. If they're your personal clients, most of the time people won't take that into account when they're looking at the value of a business. Are we selling the equipment, the fixtures, the fittings? That depreciates really fast. Have a little look around. Jump on eBay. Have a look at some of those beautiful, expensive beauty machines that you've all been investing in for the last few years. Have a look at how quickly they depreciate, how much they're actually worth. It's a lot less than you think. Maybe you think you're selling your brand or your reputation. Again, if it's not transferable, if you are the business, if you are the brand, that's not going to be worth very much at all. Sometimes people think they're selling the lease and that has a value to it. Most of the time, unless you've got a good five to ten years plus on your lease, that's classed as a liability, not an asset. And commercial property these days, not worth what it was a few years back. Or perhaps you think you're selling your business with your team.

Well, only if they'll stay and you've got to make sure that your contracts are watertight because a lot of your team may well take the opportunity when you leave to jump ship, set up on their own or go and work for someone else as well. So the reality is most salon businesses sell for a lot less than the owners expect because the value walks out the door when you do. So before you sell, you need to make the business less dependent on you. That means getting your systems, your processes in place. It means making sure your team is running beautifully and the team is loyal to the business, not just to you. And making sure the marketing is beyond just your face so that we've actually got a brand that we can salon. And the final question is, have you actually tried to fix it? And this does not mean jumping into an industry group on Facebook, wringing your hands and saying, Oh God, it's so quiet this January. It's so quiet. Is anyone else really, really quiet? And that's why I don't go in industry groups. I hate that normalization of subpar results. I think it's really unhealthy for our industry. Have you had proper business planning? Have you had proper coaching? And of course I would say that as a business coach, have you had proper pricing strategy in place? Until you've tried all those things, I don't think you can say that the business is not worth saving that you have to sell it on. If you've been winging it, hoping for the best, don't tell yourself that you've tried everything. Just reading a few blogs, watching some YouTube videos and maybe buying a self-study course is not the same as intensive strategic work on what's actually wrong in your business. Can you hand on your heart say that you've done everything possible to fix this? If not, try fixing it first. The wonderful thing is part of that fixing will be getting your pricing strategy right, getting your systems and processes right, making sure that you're building something that runs without you, perhaps diversifying your income streams. If then you decide to sell it, well, guess what? You've got something more valuable to be selling in the end anyway. So either way, either path, whether you fix it and keep it or fix it and sell it, you're going to be in a better position. So let's get work on the business done first and then revisit those five questions, figure out whether they confirm that selling is the right path for you.

Great. Then you can go and get that valuation, maximize the sale price and exit with your head high. Or path number two, those questions show that you've still got fixable problems and it's time to stay in the business. The wonderful thing is if you're at your lowest ebb, my darlings, this is Uncle Phil putting his empathetic hat on now. We've all been there, I promise you. If you're at your lowest ebb, two things. Firstly, there's nowhere lower for you to go. That means that the only way is up, but also it means that we can start to have some fun with your business because if you're at your lowest ebb, guess what? You've got nothing to lose. You can be bold with your marketing. You can be bold with your strategy. You can be bold with your pricing because what's the worst that can happen? If you're at your lowest ebb, it can't get any worse. Also, do bear in mind, particularly here in the UK, we've had what feels like six months of rain. It feels like winter has been dragging on and on forever. This is not the busiest, buzziest time of year in anybody's salons. Stick with it. Hold on for the sunnier days. Hold on for the longer, longer days and the shorter nights. Maybe you're just in a bit of a funk generally and that's really reflected on how you're looking at your business. Maybe we can start fixing some of the things that I've talked about. If you would like my help, of course, your Uncle Phil's here to help guide you. I'm not going to help you sell your business, but I'll help you build a better one. Have a look in the description box. I'd love to jump on a quick call with you and see whether one-to-one coaching is the right way forward for you in your salon business. Just a few short days until I'm coming all over the internet again with another dose of my Wise Owl wisdom. In the meantime, what have I missed? Reach out and let me know. My email address, scrolling at the bottom of the screen, phil at buildyoursalon.com Also, a quick shout out to Vivi. Just been noticing, looking at myself on camera, what an amazing job she's been doing with my Botox. If you're watching on YouTube, I hope you're appreciating my creaseless forehead too. Until next time, my darlings, please take care. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye.