ETS Corporate sell Spaghetti Tree Spa, now known as Eden House
Sue operated a successful business but wanted to spend more time with her husband and prioritise her life over the business. She had created a turnkey operation but wanted to sell to let go. She had been in the beauty industry for over 30 years but became caught up in the success of the business. She and her family believed it was time to sell and to spend more time with the family.
She decided that if she didn’t sell, she would have had to continue running the business whilst trying to juggle her life and the business would have suffered. In her words, she “had managed to get it managed but still had the responsibility of the business.”
Sue wanted a personal service because it was her first business sale. She wanted someone who was able to be there for her and be able to guide her through the business sales process.
Sue was a member of the NHF (National Hairdressers Federation) so she was happy to use their recommendation. She saw a webinar for their members that had been produced by Zach and had also studied our "Guide to Selling a Salon" authored by Zach. This is available free of charge from our website.
Sue first Instructed ETS on 8th January 2019, and the business was placed on the market 2 weeks later. Despite a complex legal process, the sale was completed on 1st June 2019 and the full asking price of £130,000 was achieved.
Sue said of Zach:
“You made the process straightforward. You were there when I needed you and the process went through smoothly”
Zach's philosophy is and always has been:
“When I take on a project, I start from understanding the business and who will buy it. I then try to reverse engineer the process and to deal with as many obstacles in advance."
Key issues such as staffing, the landlord, collating relevant documents, weaknesses in the business are all considered upfront. This will then lead to a smooth transaction.
Firefighting, of course produces the opposite effect. There is a Quote by Benjamin Franklin:
“By failing to prepare, you are preparing to fail.”
Spaghetti Tree Spa was established in 2011 and consisted of 2 properties; 9 Cambridge Road TN34 1DJ and 51 b/c Robertson Street TN34 1HL.
They had an excellent local reputation, with no competition for the specialist services offered. Around 70% of turnover was repeat business with new clients being attracted largely by referrals, social media and the business website: http://www.spaghetti-tree.com/. There were 2250 Facebook followers.
The two properties are charged a rental of £16,000 pa, and the market rental for just one of the units has been assessed at £15,000.
The unique selling points of the business were:
Great reputation within the local area
Tried and tested therapies
Excellent landlord and lease
Based in an area with plenty of potential for continued growth
Established core business and further services can be added (hair styling and other therapies, and a cafe)
Strong and established client base made up of regular customers
Opportunity to also introduce retail products.
Client base in excess of 10,000.
The business was operated by 2 full time and 2 part time therapists as well as the Owner when required, although her role was largely management.
The turnover of the business during the financial year was £185,000, with an operating profit of £65,000 prior to any wages for the Owner.
There is a video of the premises at https://www.youtube.com/watch?v=qznIe8RM23Q
The basement area was used as a preparation area for the coffee shop and storage.
On the first floor there is a toilet and storeroom for the coffee shop. This area can be self-contained. There is a door to a Nail Room leading to reception and a relaxation area with another treatment room and another toilet. There are stairs down to main entrance of the Spa and stairs up to 2nd floor.
The second floor has 2 luxury therapy rooms and a room dedicated to IPL and waxing etc plus another toilet to the right. Going up ½
floor there are 2 more luxury treatment rooms, one of which is a dual treatment room plus a kitchenette and a staircase leading to the 3rd floor (yet to be refurbished, although it has had new windows already).
The third floor was formerly a 3-bedroom apartment, in need of total refurbishment but had already had new double-glazed windows put in. In total, there are 3 nail stations, and 7 therapy rooms.
Number of workstations in total: 3 nail stations
Number of therapy rooms: 7 rooms
The latest lease had 20 years left and the rent is £16,000 pa with low business rates.
Sue wanted a confidential sale at a fair commercial deal for her business. She wanted a swift sale so that she could spend more time with her family. She also wanted someone to represent her who was able to be there for her and be able to guide her through the process. Zach is also a specialist in the hair and beauty industry and ETS Corporate are members of the NHF and came well recomme
The very first step in the process was to agree a market price. The eventual market price agreed upon by Zach was then comfortable for him to justify.
We then 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. 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. We involve the Client at each and every part of the process, putting them firmly in control and advising them each step of the way.
We were on the market within days of agreeing terms. We also placed a video of the business and photos. We activated the business on the 21st January after she signed up with us on the 8th January 2019. This time was taken information gathering and Sue was very diligent in this process.
We understood that this opportunity would probably attract a private investor or an 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 13 interested parties from over 400 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.
By advertising the business and giving it national exposure, we were able to create many buyers leads. Even though Sue had had previous dealings with the eventual buyer, because the business was on the market, it created more buyer competition and ultimately a better price and deal.
Once a party had expressed an interest, they were sent a very comprehensive Non-disclosure agreement to sign which protected the businesses’ identity, client base and staff.
It is important to know the buyer as well as possible and ensure they are a good fit and would be acceptable by the landlord. In this case, the buyer had a credible background and references despite being a first-time buyer.
A deal was agreed on 22nd February 2019, and the Heads of Terms were drafted by Zach and the matter then proceeded to the solicitors.
The process was handled by Zach who had to liaise with the landlord, the buyer and their various advisors including accountants and solicitors. Even after heads of terms had been agreed there were issues to be resolved and Zach was on hand to deal with these.
A detailed head of terms is important as it then leaves less for lawyers to negotiate later.
Head of terms includes such key issues as:
What happens to staff
The landlord’s legal costs
Agreed completion date
Terms of the sales agreement
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.
ETS Corporate were able to sell the business confidentially for the right price and deal for Sue. She was very happy with the outcome.
Book your free consultation with the author of this post Zach Dogar. Zach, has over 20 years experience as a business broker and has helped hundreds of business owners prepare and sell their businesses.