Posted by Ryan on February 02, 2006 at 13:17:48:
I have been researching a Tanning Salon business for quite some time. The business has been on the market for approx. 6 months and was originally listed at $279,900, then reduced to $199,900, Then reduced to the current price of $149,900. In questioning the realtor of the urgency to sell, I had found out that the owner was having legal trouble. I researched it and found that the owner is currently in prison for sexual offenses. The Partner is running the business now and they want to sell the business. I originally researched buying a building and renovating but the cost was greater than we wanted to spend. The lease option will give me the opportunity to start small in an established business with clientele and equipment and should I prosper, then I would look to buy and renovate.
I did not get the Tax returns yet because I wanted to do preliminary numbers and if we felt I still wanted to proceed we would request further financials and a review of the lease. The following are the numbers:
Total of 12 tanning rooms, 3 rooms are vacant (no tanning beds) and there are 9 rooms with beds in them that are currently used.
- Lease amount for business space - $2883.52 including taxes, cam, maint, W&S
- Electric is $400.00 in slow months (average) and $1000.00 in busy months (average)
- Insurance is $2,100.00 per year - 3mil. Liability.
- Told that they have over 1,100 clients…at this point that is irrelevant
- includes 9 tanning beds and all furnishings…i.e…counter, computer system, bed management system for time sessions, Bathroom, tanning supplies, etc.
The business was started Thanksgiving of 2004 with a projected gross of $440,000 but that again is irrelevant at this point. 60% of the business is March, April, May and the following earnings are only thru an 8 month period when they put it on the market. It is currently running and talking with the partner the 2005 earnings are over $100,000. The numbers I received are:
Month Sessions Lotions Total Monthly Sales
January $4,581.60 $825.75 $5,407.35
February $6,412.10 $586.50 $6,998.60
March $12,761.87 $1,578.05 $14,339.92
April $19,290.38 $3,246.05 $22,536.43
May $15,854.01 $2,681.48 $18,535.49
June $9,873.74 $2,305.75 $12,179.49
July $4,466.50 $792.00 $5,358.50
August $3,558.45 $661.00 $4,219.45
Total sessions $76,898.65
Lotions $12,676.58
Total 8 month sales $89,575.23
Taking a monthly average: ($89,575.23 / 8 = $11,196.90)*12 MONTHS = $134.362.83 Gross yrly earnings
Potential for sub-leasing 3 vacant rooms for massage or body wrap - $500.00 mnth each = $1,500.00 Total
Per month Gross Revenue: $12,696.90
Direct Costs Associated
Rent - $2883.52 monthly
Electric - $745.53 monthly average
Telephone - $180.94 monthly average
Gas - $57.12 monthly average
Security - $49.00 monthly average
Bulb Replacement - $529.00 monthly average
Taxes - 200 monthly average
Total Monthly: $4,445.11
Projected Costs Associated
Trash - $80.00 monthly average
Equipment Maintenance - $150.00 monthly average
Lotion/Accessories - $210.00 monthly average
Laundry - $50.00 monthly average
MasterCard fees - $30.00 monthly average
Advertising - $600.00 monthly average
Part time Labor - $640.00 monthly average
Website - $30.00 monthly average
Misc. / Maintenance internal - $200.00 monthly Average
Total Monthly: $1,990.00
Initial Start Up Costs - Projected
Website & association fees - $500 initial fee
Resale License - $2,000.00 initial fee
Total Yearly: $2,500.00
One Time Fee
LLC cost - $1,000.00 Initial fee
Total First Year Cost: $9,935.11
Mortgage Breakdown:
Asking Price - $150,000
Annual % - 8% Amortized over 20years
P&I Total mnthly: $1,254.66
Gross Expenditures: $11,189.77
Loan fees: Origination fees of approx. $3,200.00 - not included in total below
Mics fees $200.00 - not included in total below
Gross Monthly Revenue: $12,696.90
Gross Monthly Expenditures: $11,189.77
Gross Monthly Profit: $1,507.13
Rental Breakdown
Cam Recovery : $544.02
Insurance Recovery : $29.69
Real Estate Taxes : $181.28
A/P Reserve Major Repair $5.83
Rent Base : $2,100.00
Water/Sewer : $22.70
Total :$2,883.52
The business has greater potential…i.e…selling a swim suit line, body products, etc. Please let me know your thoughts and any things I may have over looked. If anyone may have a suggestion of how to structure a feasable offer I would appreciate any feedback on this matter.
Ryan