How to Sell a Hair Salon?

Selling your hair salon is a daunting decision for any owner. We take the guesswork out of the sales process so you can go into the process with confidence. Yes, it is a process.

A Comprehensive Guide on How to Successfully Sell Your Hair Salon

Selling your hair salon can be a significant and life-changing decision. It’s not just about finding the right buyer but also ensuring that the transition is smooth and profitable. In this article, we’ll walk you through the essential steps to make the process a success. From delegating salon management and having clean financial records to finding the right buyer and getting the sale of your hair salon to completion, we’ve got you covered.

Remove Yourself from Behind the Chair: One of the crucial steps in preparing your hair salon for sale is to remove yourself, as much as possible, from the day-to-day client work. If you are the main stylist in your business, it will raise question marks in the mind of the buyer whether your clients will be happy getting their cut or colour from your other staff. Moving your clients to other stylists early on will demonstrate your clients are loyal to the salon and not just you. This shift allows you to demonstrate the business’s capacity to operate independently, making it more appealing to potential buyers. However, if you are willing to stay behind as an employee or a self-employed contractor for at least a few years that will also give the buyer confidence to proceed with the purchase.

Appoint a Competent Salon Manager: Consider appointing a manager who can efficiently oversee the salon’s daily operations. Ideally, this should be someone who is not a stylist, as it demonstrates the business’s self-sufficiency. Training your manager for autonomy to reduce their dependence on your presence will pay dividends in the future. Potential buyers are always seeking businesses with established management teams especially if the business has grown with them taking charge.

Maintaining Clean Financial Accounts: To attract serious buyers, you’ll need to ensure your financial accounts are transparent and well-organised. If the salon books are in a mess, a buyer will not be able to understand what is for sale. You can hire an accountant to help you clean up your financial records and provide a clear picture of your salon’s financial health. Separate any personal expenses that may be run through the salon’s books and ensure all business expenses are recorded in the company’s records. Clean financial records make your salon more attractive to buyers.

Property: Is the premises leased or do you own it? If you have a landlord then ensure you speak to them before the sale and make them aware of your intentions. If the lease is in your personal name but you have a limited company, transfer the lease in the name of the business. This will save you and the buyer a lot of time and money during the sales process. We have seen many sales fall through because the landlord was taking too long to issue transfer documents. If you are the freeholder, do you want to sell the property or just the business? Freehold sales are more attractive to property investors, but they will ordinarily not want the business. Leasehold sales are the norm in hair salon sales.

Finding the Right Buyer: Identifying the right buyer can make all the difference. Look for someone who has prior experience in running salons. If they have prior acquisition experience that is a plus point which will save you time and money. Not only have they a proven track record in operating a salon but they also have a proven ability to complete a purchase. Brighter Beauty Group are experienced buyers so contact us below if you are serious about selling your hair salon.

Setting a Realistic Valuation and Deal Structure: Determining the value of your salon and structuring the deal properly is crucial. It’s important to be realistic to attract genuine interest. The industry average valuation of a hair salon is between 1.5 X and 3 X the operating profit. Whether the value is two times or three times the operating profit depends on the assets, cash flow, team size and market conditions.

Example:

Operating Profit £50,000 x 2 = £100,000

Operating Profit £100,000 x 3 = £300,000

Consider Financing Options: Explore different financing methods, such as seller financing, to make the deal more attractive. Seller financing is offered in 90% of small to medium size business sales. It is where part or all of the sale price of the business is paid over time. It is a great way for owners to produce an income for themselves for years after the sale of the business. You get paid from the hair salon without owning or running a business.

Commit to the Sale Process: Selling a business is a significant commitment. Be sure you want to sell before you start the process as it can be time-consuming. Pulling out midway can result in financial costs that may have to be paid to lawyers and accountants.

Embrace the Journey: Selling your hair salon can set you free from your business and provide you with income for years to come. Embrace the journey and stay committed to the process to get it to completion.

Selling your hair salon is a major decision, but with careful planning and execution, it can lead to a profitable and fulfilling transition. By delegating salon management, maintaining clean financial accounts, finding the right buyer, setting a realistic valuation, and committing to the sale process, you can ensure a successful sale that sets you free from your business and secures your financial future.

If you want to have a confidential conversation about selling your business contact us below.