100% Absentee-Owned 13 Yr. Old Luxurious Ultra-Stylish Salon and Spa

Denver, CO (Denver County)

Seller Financing Available
100% Absentee-Owned 13 Yr. Old Luxurious Ultra-Stylish Salon and Spa
Contact Seller

Asking Price: $1,100,000

Cash Flow: $650,000

Gross Revenue: $3,800,000

EBITDA: $650,000

FF&E: $575,000

Inventory: $100,000

Established: 2006

100% Absentee-Owned 13 Yr. Old Luxurious Ultra-Stylish Salon and Spa

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Business Description

Cash Flows $675K on $3.8M in Sales, $575K in Assets Debt Free, 100% Absentee-Own

North Metro Denver. 100% Absentee-Owned 13 Yr. Old Luxurious Ultra-Stylish Salon and Spa (North Denver), Cash flows of $650,000 on over $3,737,509 in sales (2018). See why this company is now a license to “print money” going forward. A fun and glamorous business to own!

Cash Flow –
2018 was Cash Flow was $571,881 on sales of $3,737,509
2017 Cash Flow was $675,803 on sales of $4,147,237
2016 Cash Flow was $646,210 on sales of $3,574,200

Let us know if you want the actual sales packet which includes the link in the data room with all company financial information and a comprehensive video interview detailing every aspect of the business and full site walk-through. The video interview is critical to watch to fully understand this offering. In the data room is last 5 years of income statements, balance sheets, tax returns, equipment list etc. Everything required for due diligence.

Sales Price and Deal Structure: The sales price is 1,100,000, with 700,000 of that sales price paid at closing. The seller will carry up to $400,000 paid over 4-5 years from a qualified buyer. Obviously, the seller is confident in the future prospects of the business since he is carrying about 40% of the sales price. The buyer will put down $700K at closing and get about $500K in assets plus another $100K in inventory completely debt free. The buyer MUST HAVE no less than $300K of their OWN funds to put down on this deal with a net worth of over $1,500,000 for the SBA to do the deal.
It needs to be made clear from the beginning that the business is nothing short of A+ perfect in every respect as the seller has gone to great lengths and spent a great deal of money on the finest state-of-the-art equipment, and the highest quality $200K tenant finish. The business has an excellent image, reputation, branding, with the best people, in an incredible working environment. Everything is here to take the business right to $6M/yr. in sales and well-over $800K in cash flow. However, in order to do so, the company will require a more “hands-on “operating ownership and leadership and possibly fresh initiative to reach the opportunities mentioned. It would benefit tremendously from an on-site owner who is going to train and lead our people in efforts to increase sales through proactive sales and marketing efforts.

A business valuation of $1.79M was completed in May 2015, Wells Fargo Required SBA Loan Biz Appraisal. Very conservative valuation at $1.79M, AND the gross sales and cash flow is actually greater today, so obviously, the business is worth more today. Plus the seller invested ANOTHER $550K since this was completed.

Reason for sale: The seller is aged 62 and his wife is 55. The owners bought this 12-year-old company 5 years ago from the original owners. Five years ago, the buyer took out an SBA loan for $900,000 and added another $800,000 of his own cash and paid $1,700,000 for the business. In addition to that, he invested another $500,000 (for a total $2.2M investment) in new equipment and facility upgrades to make it a state-of-the-art salon and spa. The original intent was to have his wife work there at least part time or manage the business remotely full time. Since the purchase of the business, the owner and his wife have played virtually no role in managing the business and left it to a $150,000/yr. general manager for the last several years to represent their best interest in managing the business, but that hasn’t quite happened.
Going forward, the seller is trying to recover about 1/2 of his money and find a buyer who will move to Colorado and run the business on a more full-time basis to drive it forward. The business is in great shape and has everything needed to grow to $6M/yr. with at least $900K in cash flow, but it is clear to him that he is not the person to do this because he simply has no interest, lives 70 miles away from the facility and only lives in Colorado about 1/3rd of the time, which is a recipe for waste, complacency and low cash flow. We have completed a comprehensive cash flow analysis that identifies all areas for improvement or immediate cost-cutting and sales increase, which will cash flow over $900K on $6M in sales starting immediately.

About Us: We are an ultra-stylish, luxurious interior space preps clients for the pampering that awaits them. This nearly 9,000 square foot space boasts 24 hair stations, a 3 chair, full-service barbershop, two manicure stations, three luxurious pedicure chairs, and seven medi-spa treatment rooms, ensuring that no one needs to wait long for a soothing hot-stone massage, elegant updo, trendy cut and color or age-defying Botox treatment.

We offer the most comprehensive salon and spa services in a 40-mile radius. We offer haircuts, customized hair color, deep conditioning, and hair extensions. We use the highest quality products to maintain and enhance the health of your hair. Our Medi-Spa team is dedicated to putting you first. Our aspiration is for you to be your best self. We provide the highest level of aesthetic and wellness treatments ranging from facials and massage to manicures and pedicures. We also offer a wide range of injectable and laser treatments customized to meet the needs of our clients. The Grooming Lounge here is where you will find classic men’s barbering services such as haircuts and fades as well as modern barbering trends and straight razor shaves.

WE are ONLY Making 1/2 the Cash Flow that We Should Be: Let’s be clear, our business SHOULD BE in the business of making money, however for a variety of reasons including 100% absentee ownership, the business has only cash flowed between $300K- $500/yr. for the last 5 years or so. However, it should have cash flowed well-over $800,000/yr. given the level of sales, the location, image, and local market demand. The purpose of this sales packet and cash flow analysis is to clearly articulate that for a variety of reasons from the very beginning of the seller’s ownership, the business incurred a great deal of waste and mismanagement and never really had anyone in there with a direct interest or vision for growing the business to $6M+ in sales, where it clearly should be.

It is noteworthy that the seller has a $10M net worth and makes over $800K/yr. in other income. He purchased the business 5 years ago for his wife as more of a “pet project”. As stated above. the owner paid over $2.2M including $500K in the most advanced spa and esthetician equipment in the industry. Unfortunately, from the start, his wife never showed any interest or got involved in the day-to-day operations to cut waste and drive the business forward and remained 100% hands off/absentee during the entire period. Her visits to the salon and spa were few and far between and typically to enjoy services for herself. Due to the owner’s high net worth and financial strength, he didn’t really care if the business made much money. The seller is 100% confident that if the new owner were an on-site owner and had any level of financial savvy and was more aggressive, the business would be whipped into shape in less than 6 months in cash flowing at least $800K.
In 2016 we had a major upgrade and expansion of an additional 3000 SF, which added our medi-spa capabilities, and provided a new and incredible entrance to spa. The medi-spa business did almost $500K in 2016, over $800K in 2017 and continues to grow. We have added a new medical director, and a very well-known plastic surgeon so we can now offer many new high-end and sought after procedures. There are exceptional cross-selling opportunities between the salon and spa, as most of our clients are very high-end. The medi-spa has 2 very sophisticated (and expensive) lasers, and 2 new CoolSculpting machines. Finally, we are top-tier status for both L'Oreal (as we are one of the largest L'Oreal salons in the country) and Allergan (as we are one of fastest growing medi-spas in country).

The new owner needs no specific industry experience: This is big business, not some small mom-and-pop hair and nail salon and it needs to be run like a BIG business, with much bigger profits. The new owner needs no specific salon and spa industry experience. In fact, the seller strongly feels that a “tradesperson” who has been a stylist for instance, probably would not do half as well as someone who has a business acumen with some form of direct sales and marketing experience. It would be great if the new owner has managed people before and knows how to improve efficiencies, someone with a strong financial background, and who is more aggressive and willing to shake things up a little bit. All of the workers know that the business needs an on-site owner and they are excited at the prospect of someone “grabbing the reins” and driving the business forward.

We have 60 total employees including 30 hair stylist, 3 nail technicians 3 massage therapist, 5 estheticians, 4 managers, 15 guest services employees, 1 registered nurse, 1 medical doctor and a few other employees. It is clear that our employees ARE excellent in their respective capacities in which they work, however, the main and substantial area of weakness is that these people do not work nearly as hard or as affectively as they could simply because the business has never had an on-site owner and therefore it is “rudderless”. There has never been any emotional or financial incentive for these people to do any more than what they are currently doing because they all get a fixed wage regardless of performance. In short, there is no one to push them and it’s been that way since the owner bought the business 5 years ago.

The husband/owner had absolutely no industry experience and had no intentions from the beginning of playing any active role in the company, his wife only goes to the shop 1-2 X’s/mo. ONLY to get personal work done such as treatments, etc. Therefore, with no oversight or owner-involvement whatsoever, it’s no wonder the business doesn’t cash flow 20% of gross sales like it should.

There is so much to say here in terms of wasted capital on excessive payroll. We have 30 hairstylists that earn between $12 and $20/hr. on a fixed basis. However, up to 50% of their time is completely idle, meaning an empty chair. See our 2018 income statement for instance, we spend $1.1M/yr. in just stylists’ wages alone. This is way too much, 30%-40% above market given our sales, and we pay too high a base salary. We need to shift more of this compensation from fixed wages, to commissions, where the stylist is paid based upon production. This alone would either cut $300K in annual wages or force an increase of about $500K in sales, or a combo of both. This is a no-brainer, but we can’t keep paying $1.1M/yr. fixed and have the chairs empty 40%-50% of the time – ludicrous.

In addition to that we have up to another 15-20 employees on the “guest services” team who greet customers at the front desk and do other small activities, which is frankly excessive – it should be 3-4 max. These are NOT money-making positions such as nail techs, or stylists, so by cutting this workforce down to say 8 employees here would save over $150K/yr. to the bottom line without any impact on operations. As the business broker selling this business I grilled the owner about the wisdom of having this many workers and why there has been this much waste, and the owner simply stated that he always knew there was a bloated workforce and no expectations for measured performance or accountability for the workers for anything, including sales and marketing efforts.

The new owners should immediately reduce this category and also obligate the remaining workers to dramatically increase their efforts of proactive selling to increase sales. Of course, there are many easy-to-employ ideas on how to do this, but they’ve never been implemented. What may be observed overtime is that with imposed accountability and goal-meeting incentives, employees will take pride in their achievements and a good/ more positive work-culture is formed.

Separately, we have an excessive number of stylists because the 30 we have only have clients in the chairs about 50% of the time. We are not so much suggesting that there be a substantial cut in stylist’s payroll here, but it is clear that once the new owner employs more aggressive sales and marketing efforts to get more customers in the door the “idle chair time” will go down and the stylists will produce more volume.
The Stylist is always the best sales rep: As one would instinctively think, the best salesperson is the person who cuts your hair or does hair treatments since they have the closest connection and relationship with the customer by far. If you think about it there is often an intimate and long-standing personal relationship between the stylist and the customer with all of the conversation and relationship-building that has taken place over time. Logically, the customer would almost always follow recommendations blindly for retail sales suggestions for hair products, facial creams, and other peripheral services they can be up-sold. It is easy and natural for the stylist to make these suggestions which would receive a high percentage of action on the customers part, versus a complete stranger at the front desk making the same suggestion who doesn’t know the client intimately. This may sound obvious now that you think about it, but it’s clearly NOT happening since as you can see our retail sales are less than $500K/yr. on sales of almost $4M/yr. (10%). Industry experts know that retail sales should be at least 15% - 20% of gross sales if your people are effectively selling. Overall, our entire team needs to be trained, pushed and compensated to increase efforts in selling other services within the umbrella of what we provide, simply by talking up the other services in our shop. This is so easy, but simple sales training skills to our staff has never been a focus.

We have never had any expertise in this area and we have no systems in place to ensure that people are promoting our services. It would be an absolute layup to grow from $4M to $6M in sales in the next 2 years simply by taking a hard look at all these things and having a new owner come in and implement some of the greatest and easiest ideas first and as workers start to accept them and employ them in their daily efforts, other things would be incorporated. The seller acknowledges that he knows what to do to grow sales at least to some extent, but he just has no inspiration to implement these obvious money-making efforts, but the new owner can, and should.
This has sounded largely negative, but it’s really an opportunity for the new owner: It has to be made clear here that the business has absolutely everything to cash flow at least $1Myr. on sales of $5-$6M/yr. starting next year - No BS: We have the absolutely perfect A+ location, the perfect complement of services mentioned above, the best retail supplies, and of course 40+ excellent workers who are absolutely great at their trade, they just lack drive and have performed no proactive sales and marketing efforts to bring more business in. We have an excellent name and reputation for quality work. However, the biggest asset that the new owner will benefit from is our 50,000 customers and client retention. Our documented long-standing client list of which the large majority come back to us month after month, year after year and are completely loyal to our services and team.

Our Loyal and Long-Standing Customers and Database of Information is Priceless for the new owner who knows has to tap into it: One of the greatest things about the salon and spa industry is that once you build a large customer base you have steady and predictable recurring revenue each year. Most businesses have to start out each January 1st wondering how that next year is going to turn out. This is not the case with us because it is well documented that more than 70% of our customers have come to enjoy the same services multiple times a year for at least 1-2 years which means we have them hooked at that point. Once you get a rhythm going with a customer or in our case over 25,000 steady customers, it becomes a predictable stream of income with basically the same services whether it be hair treatments, spa treatments, Botox or whatever the professional service may be. There is a steady and predictable likelihood that the same customer will come back over and over as long as they’re treated well.

The point here is that there is an enormous wealth of information in this database if it’s properly taken advantage of. We have over 50,000 documented customers containing names, cell phones, emails, and addressed, as well as a history of the services they had and the frequency in which they came. No one has yet thought to utilize this information with regular emails and text messages that can be sent on a periodic basis to encourage new services, convey discounts, or other proactive sales and marketing promotions. There are millions and millions of dollars of additional revenue potential that could be garnered from this database simply by leveraging this information which would include the front desk people texting or making periodic phone calls to reach out to people to get them in the door again since they haven’t been in for a while etc. It has been long- known in the industry that just a phone call to a customer goes a long way to get them to set an appointment, and we have NOT done anything like this to date. Simply put, we need to work our customer list, and use the data to our benefit – that’s why we build it.

Even more good news. Because we are in a relatively small city as compare to Denver or Colorado Springs for instance, we are the only game in town within a 20 - 30-mile radius for the array of services we provide and the advanced equipment we have. In fact, we have a formal exclusive agreement with the landlord of our large mall that no other spa or salon can be opened while we are a tenant. We are very proud of the fact that more than 20% of our customers come from far outside of our radius/market… In fact, some of them drive as far as 70 miles away for regular service treatments and some people even drive from as far as Greeley, Denver, Ft. Collins, and even Wyoming. This speaks volumes about the quality of our service, how they feel about our employees, and the overall experience.

We Have the Greatest Reputation and Internet Reviews on All Renown Sites:

There Are No Negative Disclosable Items: The company is in excellent standing. There are “no” ghosts in this closet”! As stated above, after serving over 200,000 happy customers we have NOT had 1 complaint for unsatisfactory work that we did not immediately fix on our watch and our dime, we have never failed a customer. We have always had an excellent safety record with virtually no injuries for at least the past 7-10 years. In fact, we have a workmen’s comp modifier rate of “.81”, which means we enjoy a 20% discount on our insurance which a new owner will benefit from for many years to come. We take worker safety very seriously and the seller is 100% committed to sign for Reps and Warranties that provides for a solid protection of the buyer in these areas.

Licenses and Permits: Initially, the new owner needs no specific licensing or permits in Colorado, the company has all licenses needed to operate going forward.

Please email if you have any specific question(s), path forward, or have a potential interest in a phone all or face-to-face meeting with the owner/seller.

Detailed Information

Location:
Denver, CO
Inventory:
Included in asking price
Employees:
60
Furniture, Fixtures, & Equipment (FF&E):
Included in asking price
Financing:
seller will carry up to $350,000
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Paul Olsen

Business Listed By:
Paul Olsen

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