Sale of Hair and Beauty Salon in Northampton
Updated: Feb 28
Case Study - Confidential sale of a hair and beauty salon in Northampton
The owner carefully grew her hair and beauty salon for over 9 years to become one of the premier salons in the area. She was, however, tired and becoming increasingly frustrated with not finding the right work /family balance and realised she did not have the time, energy or skillset to take the business to the next level.
She has a family of 3 young children and wished to spend more time with them. She felt she had taken the business as far as she could and that it had further growth potential in the right hands. She lacked the energy to drive the business forward and had to prioritise her time with her family. She realised her team needed to continue its success with a new owner. She did have the staff to run the business for her, but felt the business needed to grow, so knew the only option was to sell.
The owner had appointments with a few agents but decided on ETS Corporate for various reasons.
She was happy that we had the appropriate experience within the industry to handle the sale. She liked the added credibility that ETS Corporate were recommended by the NHF (National Hairdressers Federation) and also prepared a webinar for their members that were considering selling their salon. She also liked the fee structure and the fact that ETS Corporate do not charge upfront fees like a lot of other agents and charged only on a successful sale.
“I spoke to a few different agents and I think you really understood me and the business and how I wanted the business to be moving forward, to be a success. It wasn’t just a case of selling and go, it was actually to benefit the people in the salon and moving forward the salon being an even bigger success than I could drive it and you really understood that for me”, said the owner.
She was very nervous and had no experience in selling a business. Part of the sales process was for ETS to attend all meetings with serious buyers on-site on Sundays when the salon was shut, and also to attend a final meeting to ensure completion went smoothly. We also had to be on the end of a phone at all times as the owner was a natural worrier and often needed guidance and re-assurance.
She did not want staff finding out, so we helped her time the announcement of a new acquirer, so that it had minimal impact on the business, and once the deal was done.
She was happy to be involved in an earn-out and stay on in the business as an employee for 3 months and then offer consultancy for the one-year earn-out period.
She first instructed ETS Corporate on the 27th July 2017, and the business was taken off the market on 29th June 2018 after an offer was accepted. The offer involved an earn-out, which meant that the owner would stay involved in the business for a year, which suited her, as she wanted to be a part of its growth and success. She also wanted to make sure that the staff were happy with the new owner and deal with any issues firsthand during the transition period. This left the buyer to focus on building the brand and introducing new treatments. She used a recommended solicitor who has worked with Zach for almost 20 years on many deals and she was able to complete the sale despite some testing moments and an elongated legal process. The deal completed finally on the 1st February 2019.
The salon is situated in a popular area in Northampton and prides itself on its 5-star service and skill and top professional products to ensure quality and consistency in their services.
This long-established salon and was started nine years ago by the seller and has grown to become the premier salon in the area. It was fully staff-run and managed with 8 stylists and 3 beauty therapists. In-house training was provided for all new recruits, and the salon believed in nurturing homegrown talent. Although the beauty side was introduced three years ago, it was steadily growing, although around 70-80% of turnover was still hair styling. The salon stocks Schwartzkopf Professional products.
The salon provided hairdressing and all related services for both men and women, hair extensions, an array of beauty treatments, nails and massage. There was an online booking system, and the business was completely computerised. Most of turnover was through repeat business and new clients were gained through referral and social media, including Facebook. Although there was some social media exposure, marketing was an area with potential, which attracted the eventual buyer.
Buyers will always look for ways they can improve the business, and this is a major buying point, especially through marketing and introducing new treatments.
In this case, there was huge potential in the beauty side, which was still establishing itself.
The salon consisted of 3 units built into one with 18 work stations, 3 beauty rooms, 2 nail stations and 6 back wash areas. The premises were very large and well-presented. On the last recorded accounts, the turnover of the business was over £300,000. Although the net profit was low, ETS did a calculation of the adjusted profits, as the owner was enjoying various “benefits” from the salon, and this calculation was key in understanding “true profits”. This then, in turn, affected the value; the adjusted profit (including EBITDA) for the business came to over £52,000.
The owner wanted a confidential sale at a fair commercial deal for her business. She knew she had to sell because the salon needed to grow, and she could not realise its full potential. She wanted ETS Corporate to find the right type of buyer that would also look after her carefully selected, nurtured and successful team.
“The staff were a big thing for me, making sure they got looked after and obviously the clients.” said the owner.
The very first step in the process was to agree a market price. To test the market, the original asking price was maximised and was reduced once we had market feedback. The eventual market price agreed upon by Zach was then comfortable for him to justify.
We ensured we had all documents available before we went to market and had undertaken much of the due diligence on the business early on.
"In our experience, if you are not fully prepared then a sale can be delayed and any potential issues that may hinder a sale are dealt with in advance" - said Zach
Our business questionnaire is designed to extract important and comprehensive details of the business including a SWOT analysis to help formulate an effective marketing strategy designed to maximise price. A comprehensive Information Memorandum was prepared, so that when an interested party did come along, the whole process would happen very swiftly and there would not be any delays, even when the file was handed over to solicitors.
We also had to agree a marketing memorandum to place on websites and to send to competitors which maintained confidentiality but at the same time was able to attract buyers.
Zach continues: "We always involve our clients at each and every part of the process, putting them firmly in control and advising them each step of the way."
We understood that this opportunity would probably attract a private investor from the hair and beauty industry or acquisition by another competitor. The business was discretely exposed via the internet using our website www.ets-corporate.com, www.businessesforsale.com and www.daltonsbusiness.com. The marketing efforts on the internet alone produced 30 interested parties from over 620 views of the advert.
Our market research team approached appropriate chains and exposed the opportunity to various other salons within the industry, both local and national. We have access to market intelligence software which helps us identify the right financial profiles of potential acquirers.
Once a party had expressed an interest, we sent them a very comprehensive Non-disclosure agreement to sign which protected the businesse's identity, client base and staff.
We were very flexible in our approach. The owner wanted to initially test the market, and the business was taken off the market on 29th June 2018 after an offer was accepted. The offer involved an earn-out, which meant that she would stay involved in the business for a year, which suited her as she wanted to be part of its growth and success. She also wanted to make sure that the staff were happy with the new owner and deal with any issues first hand during the transition period. This left the buyer to focus on building the brand and introducing new treatments.
The Heads of Terms (HOT) were drafted by Zach and the matter then proceeded to the solicitors.
We then had to work very carefully with the seller to ensure her interests were looked after. In a sale involving a leasehold property, the Landlord and his Solicitor are also involved in the process, so this stage can be very complex and has to be carefully managed. Each stage of the negotiating and due diligence process was keenly negotiated by all parties. Often, there was a breakdown of negotiations between the parties, and Zach had to intervene to ensure that all parties were comfortable moving forward.
In total the due diligence and legal stage took almost 8 months and in particular the following points of contention existed, which we were able to help overcome:
The terms of the lease and the rental payments, including deposit negotiations
The valuation of the business
Terms of the sales agreement including payment terms and earn out arrangement terms and payments
Negotiating the handover period and employment for Kelly and consultancy period
Maintaining confidentiality throughout the whole process, protecting staff and clients
ETS Corporate were able to sell the business confidentially for the right price and deal for the seller. She was happy with the New Owner and that the future of the business was secure, and her team would be happy.
After the sale the owner said she was feeling “exhausted but excited about the future” and “It’s all worked out fantastic”
Of ETS Corporate she said:
“Brilliant! Whenever there has been an issue, which there has been a few, you have been at the end of a phone, you have rung me lots of times, querying things and emails were always responded, just help and advice with the process because obviously it’s something that I’ve never done before and you have helped me every step of the way. I would totally recommend you for your honest opinions and advice.”
Zach Dogar has over 20 years’ experience as a business broker and has helped hundreds of business owners sell their business.
Book your free consultation today to discuss your exit strategy.