Sell Your Beauty and Personal Care Business

Whether you’re selling a hair salon, barbershop, nail salon, massage business, or spa, the process for finding your business’s fair market value, attracting buyers, and closing the sale involves five phases that we will cover in this guide.

1. Determine the Value of Your Beauty and Personal Care Business

Beauty and personal care businesses cater to diverse market segments with their products and services. Valuation is the first step an owner will take to prepare a business for sale. Evaluating the worth of a beauty and personal care business involves both its past financial metrics and its potential to generate future earnings. The success of a beauty and personal care business relies heavily on its unique atmosphere, making it an important factor to consider in its valuation.

There are many methods for valuing a business, with income, asset, and market-based valuations being the most common. Choosing the right valuation method will depend on various factors, such as the business’ structure, age, financial history, and unique characteristics. That said, almost all beauty and personal care business owners and buyers will use a market-based approach to determine the value and asking price of the business.

Market-Based Valuations and Pricing Multiples

Market-based valuations compare businesses to similar companies that have recently sold. By relying on industry-specific cash flow and revenue multiples, business owners, brokers, and buyers in the beauty sector can calculate what a business is worth relative to recent sale prices. This method of valuation is most appropriate for profitable ongoing businesses. The metrics used to calculate multiples are earnings (cash flow) and revenue (gross sales). The cash flow metric for owner earnings below $1 million is seller's discretionary earnings (SDE) which shows the full financial benefit a business generates for its owner(s).

Beauty and Personal Care Business Valuation Multiples

Average earnings and revenue multiples for beauty and personal care businesses sold on BizBuySell

Beauty and Personal Care Category	Cash Flow / Earnings	Sales / Revenue
All Beauty and Personal Care Businesses	2.21	0.53
Hair Salons and Barber Shops	2.25	0.50
Massage Businesses	2.19	0.45
Nail Salons	1.81	0.36
Spas	2.31	0.68
Tanning Salons	2.01	0.50
Other Beauty and Personal Care Businesses	2.40	0.69

Source: BizBuySell Insight Data
Industry Benchmark Reports:

Select an industry... Health & Beauty Spas Hair Salons & Barber Shops Nail Salons

Beauty and Personal Care Business Earnings Multiples

While business valuations fall within a certain range, the value of each individual business is unique and depends on several factors, including the local market, specific financials, and business operations. For beauty and personal care businesses, the average cash flow multiple is around 2.21, but an individual business may sell for more or less, depending on its performance relative to its peers.

Using the average multiple, a beauty business with annual owner earnings of $100,000 could be worth over $221,000 on the open market.

Valuations Based on Sales or Revenue

When assessing the value of a beauty or personal care business, most business owners, buyers, and brokers rely on cash flow or earnings multiples. However, there are instances when revenue-based valuations can be valuable. Revenue-based valuations provide additional insight into how a company compares to industry standards. The average beauty business revenue multiple is 0.53, so a beauty and personal care business might sell for over 50% of annual revenue.

Documents Needed to Value Your Beauty and Personal Care Business

There are a variety of documents that you’ll need to gather, and you’ll want to have records going back three years. Showing potential buyers organized financial data will demonstrate your business’s past success and future potential. Among the many documents you’ll want to gather are:

• Profit and loss statements
• Current balance sheets
• Cash flow statements
• Statement of SDE
• Tax returns for the business

2. Hire the Necessary Professionals

In order to achieve the best possible outcome for your business sale, you may want to hire professional help. Getting help with valuation, marketing, and negotiations allows the business to run smoothly while it’s on the market. In general, you will want to consider retaining an accountant, attorney, and a business broker.

An Accountant

An accountant will organize your financials to help demonstrate the value of your business based on its past performance. During the due diligence phase, buyers will scrutinize your financials, so it’s important to have a CPA to verify their accuracy. From tax advice and recasting financial statements to asset allocation, having a CPA on board is helpful not only for determining value but also to ensure compliance with tax laws and regulations.

An Attorney

A business attorney is essential for navigating the legal aspects of selling your beauty or personal care business. Attorneys typically work on a flat fee basis and will offer advice on legal issues throughout the process. They’ll also draft NDAs and buy-sell agreements, as well as reviewing incoming offers and letters of intent. Lawyers will help streamline the process and ensure the terms of the deal are favorable while protecting your interests.

A Business Broker

Business brokers act as intermediaries and advisors throughout the process of selling your business. It’s important to select a broker with experience and specialized knowledge of the beauty and personal care space, as they can offer specific advice for maximizing value. Brokers work on commission, typically 10-15% of the final sale price, and offer a wide range of services. From valuation and determining an asking price to marketing the business for sale and closing the deal—business brokers are especially beneficial for hard-to-price businesses.

3. Plan Your Exit

Many factors influence the timeline for selling a business—expect the process to last between six months to a year. For business sales, 2024 saw 377 beauty and personal care businesses sold on BizBuySell, with a median of 171 days on the market. Key factors to consider when assessing how long selling your business will take are purchase price, industry and type of business, buyer type, location, structure, among others.

Impacts on Business Multiples

In order to make your beauty or personal care business more appealing to a potential buyer, take some time to evaluate it and pinpoint any areas that need to be improved. Now’s the time to identify individuals who can take on more responsibilities and provide training to team members, if necessary. Careful evaluation and implementation of modifications to your business can result in a boost in its market value.

4. Find Buyers

There are a variety of options available when it comes to thinking about potential buyers for your beauty or personal care business. Consider whether or not you want to sell your business to family members, employees, or place it on the open market. In order to get the best price, your objective is to find enough interested buyers to generate multiple offers for your business.

Most business owners prefer to maintain confidentiality during this sale process. Maintaining confidentiality is key to protecting the value of the sale, and working with a business broker can ensure that inquiries from prospective buyers are handled discreetly. They will market your business for sale and create a “blind listing” on business-for-sale marketplaces. They will also have an NDA prepared for anyone interested in reviewing the details of your business. There are instances, however, that publicly announcing the sale to a few trusted advisors and competitors may be beneficial to see if they are interested in an acquisition.

When creating a listing on business-for-sale marketplaces, it’s vital to create an impactful listing. It may be the first impression for potential buyers, so it’s important to take the time to create a comprehensive and compelling listing. The top five components of a successful listing are:

1. Include key financials: Along with the asking price and cash flow, include information on revenue, EBITDA, FF&E, inventory, and the year the business was established.
2. Provide geographic information: While maintaining confidentiality is important in most sales, include as much geographic information as possible, include at least the state and county details.
3. Write a headline: Create a headline that will pique interest and motivate buyers to learn more about the opportunity.
4. Select multiple categories: When listing a business for sale on sites like BizBuySell and BizQuest, sellers have the option of listing a business under more than one category. Take advantage of a secondary category option to maximize exposure.
5. Include photographs: Include descriptive photos of the business or use stock photography to keep the listing confidential.

5. Negotiate Terms & Close

The final steps when selling your beauty or personal care business come down to negotiating the terms and closing the deal. Depending on the complexity of the deal, the due diligence phase can take a few weeks to a few months. The buyer will want to review your financials, operations, contracts and liabilities, customer data, employee information, legal issues, and physical assets. It’s not uncommon for issues to surface, so be prepared to negotiate. Making minor changes to the price or financing terms can alleviate several issues.

Once final terms of the deal have been agreed upon, it’s time to close the deal. At the closing, the business owner(s), buyers, attorneys, and brokers will gather to review and sign all necessary documentation to complete the transaction. After the sale is complete, it’s time to transfer the business operations to the new owner. Your attorney and broker will assist in the final post-closing process.

By understanding the value of your business and the workings of the business-for-sale market, selling a beauty or personal care business can be a much simpler process. This will allow you to put a process into place that will attract the best opportunities.