Why you should buy out a salon business instead of starting out one

  • March 31, 2022
  • SME Businesses

Entrepreneurship is good, its beautiful and rewarding but only if your financial ducks are well aligned and your books of accounts elicit smiles to whoever manages to take a sneak preview of them. Many people always dream of trying their hands in entrepreneurship. Guided by their own visions of looking to create change, satisfy a market demand or a pure case of seeking independence out of energy draining formal employment. The beauty industry is one of the most promising sectors to consider starting a business targeting it. Its increasing growth trajectory fueled by an ever-increasing market base of young and sophisticated consumers who are keen to try trends from all over the globe courtesy of social media, affirms the concept that the “beauty industry cake” is still too big even for late comers to enjoy a piece of it. As such, businesses such as Salons, Spas and barbershop make prime candidates offering avenues for meeting the demands of this ever-growing market.

However, owning a successful business boils down to a number of multiple factors ranging from pure luck to proper research, planning and execution. When considering venturing into a salon business, you have an option of either starting out from the scratch or buying out an existing business. However, just like buying an already built home rather than building one from the ground by yourself, its apparent that the advantages of buying out an existing salon business will far outweigh the advantages of building one from the ground. Having said that, you may want to explore reasons as to why buying out an existing salon business would be more ideal rather than building one from scratch. Here are a few of the most compelling reasons:

1. To reduce the hassles and headaches involved in starting up a business

Starting a salon business and holding a hot sweet potato with bare hands share similar traits. Either you dance on your feet literally while tossing the potato from one hand to the other with the hope that it cools faster or you “burn” your hands. The analogy applies to starting a salon business in the sense that there will be multiple things you would need to handle at the same time, like business registration, getting all the necessary legal compliance documents, reaching out to customers and building a client base that is just enough to cover your crucial expenses or your business “burns out”. However, with buying an existing salon business, many of these start-up tasks would have already been taken care off. Moreover, if you intend to target niche clientele with your salon services, then purchasing an established business already servicing that clientele makes more sense than trying to build one from the ground up.

2. It lessens your risks

A salon business with demonstrated operation history definitely removes some operations risks compared to a salon business you plan to start from scratch. Even though no investment is a sure thing unless you are playing monopoly with all the cheat codes at the back of your hand, an already established salon business should significantly lower the risk involved in a start up. In addition, a salon business with an operating history will always have past financial statements which you can use to make more accurate financial forecasts than what you can with a new salon venture with zero operation history.

3. Increase profits by adding value

Owners who decide to call it quits in their salon business many a times don’t see the potential for growth perhaps because of burn out, poor business management skills or in ability to attract sustainable customers. However, as a potential buyer, you may see opportunities of improving the business by perhaps rolling out differentiated services or targeting some niche clientele and if you have the time and patience, your efforts will definitely pay off.  However, don’t be tempted to pay a high acquisition price based on your expectations of being able to add your perceived value. Doing this is like starting to run around in a farm full of sleeping crocodiles instead of tiptoeing out; you will certainly get bitten.

4. Establish cash flow

One of the biggest challenges with starting a salon business from scratch is estimating the new business’ cash flow. Cash is king and any business that cannot generate enough cash to sustain it runs a risk of running aground. Therefore, when starting a salon business, you will always be confronted by multiple questions: Will the salon generate more cash quickly? Will it take a painful long time? How much do you need to invest in fixed assets like equipment such as dryers, salon seats ? e.t.c. How fast will your sales be established? If you are establishing your salon from scratch, these figures at best will be near guesses. However, if you are buying a salon, the track record of the previous owner will answer precisely most of these questions. In addition, borrowing money from saccos and banks is often easier to do when you buy a business as compared to starting up.

5. Inherit an established customer base

Even though the beauty sector is quite promising, there exist a cutthroat competition for customers and customers tend to stick to one service provider for at least 3 years before switching. This means if you are starting up, you will have to invest a lot in terms of wooing in customers and building your customer base of repeat clients. However, if you are buying an existing salon business, you inherit a ready-built stable of customers that you don’t have to recruit them yourself giving you a chance to quickly focus on taking your salon business through a path to profitability.

In summary, buying out a salon business will offer you more pros than cons but again you need to exercise caution before making that decision by analyzing the business carefully and determining the core reasons as to why the previous owner wants to sell the business in the first place. Factors like poor location that hinders ability to attract new customers may be hard to resolve. We hope these insights will help you understand the benefits of buying out a business instead of starting up one from scratch.

Photo by Atikah Akhtar on Unsplash

Follow weridi on

About The Author