Thinking of retiring to that Greek island some time this year? Before you pack up your equipment, stop to consider how much hard work has gone into building you reputation and your clientele. You may not realize it, but you are sitting on a small gold mine.
When the time comes to say goodbye to your nail business, for whatever reason, you don’t have to walk away with nothing but fond memories. While many nail techs understand that their equipment can be liquidated, oftentimes they don’t realize that the real value in this service industry is the goodwill and client base that they have built over the years.
“Often nail techs just give their clients away to other technicians working in the shop. They don’t realize that each client represents a stable value,” says Trisha Trackman, president of the Illinois Nail Technicians Association and a salon owner herself. Trackman points out that nail techs are creative, artistic types who are not accustomed to handling business transactions. “Instead of feeling like you are letting down your clients, take a step back and remember that you are in business, and business is about making a profit. Rather than give your clients away, why not sell them to one of the colleagues in your salon who you feel best reflects your personal style and workmanship standards?” advises Trackman.
Before you put you clientele or nail salon up for sale, get your ducks in a row. Make sure that your books are in good shape. Get your past appointment books together. Be certain that client files are up to date and completely filled out. Be able to produce records for the last three years including a simple-to-read profit and loss statement and IRS materials (tax returns, employment records, etc.).
Trackman suggests that an easy way to price your business is to take the gross for one year and multiply it by 33%. For instance, a nail practice grossing $75,000 in one year would roughly be worth $25,000 [$75,000 x .33]. Many brokers set a price for a business at three times its annual net (revenue minus expense). Some brokers, however, feel that it is really up to the market to decide the value of a service-related business.
Setting your nail clientele will require patience and flexibility. An interested buyer might only want your clientele list and not your equipment, for example. Perhaps a building is a part of the sale. Don’t lock yourself into the neat picture-perfect concept that you have come to fancy as to how the sale will play out. Expect to wait six months to a year to make the sale and along the way be open-minded.
Finding a Buyer
You can utilize the services of a business broker, but be aware that she probably will know how to sell business in general, not necessarily a unique salon business. You may be more qualified to market your business yourself through networking with coworkers, booth renters, and other salon owners. Targeted, demographically specific mailing to other salon owners, who may be potential buyers, are well worth the postage. Contact your local state board for a list of licensed nail technicians in your area. Attractive ads posted with beauty distributors are another way to attract a buyer. Advertising in the local paper, in an industry association publication, or on industry websites is also an excellent way to get the word out.
Technicians who are particularly concerned about resigning their clientele to a new nail technician can control the situation by handpicking a nail tech in the general vicinity of her old site who has similar hours, work habits, and personality. You may even want to go to a prospective buyer’s salon and have a simple manicure to determine if she is the right fit for your type of clientele. Keep in mind though that you are selling a client list, not client loyalty. Ultimately, the client will decide for herself.
Easing the Transition
For the sale of a clientele to be successful, there must be a good working agreement between the buyer and the seller. Ideally there will be a one or two month period where the retiring nail technician introduces her clients individually to the tech or salon owner purchasing the client list. This sort of transition ensures that the purchaser is awarded the credibility that clients have bestowed on the tech who is selling. That trust is at the root of the client/tech relationship. This handing over of the client is a much more gentle and personal way of letting the patron know that she will still be taken care of in the way she has come to expect.
Larry Oskin of Marketing Solutions in Fairfax, Va., offers this advice to buyers: “The most crucial aspect of buying a client list is getting to know your future customers. Likes and dislikes of the clientele are the most important aspects of the transaction. If you don’t know what the client is expecting, you could blow the first encounter and lose the client forever, making your investment worthless,” says Oskin. “If you’re the buyer, offer an introductory gift or discount to new clients. Add value to the services they have already been receiving. Throw a party or have a new client appreciation event. Make your new clients feel welcomed.” Nail tech Cyndi Telles recently sold her clientele list by sending out informational flyers. Telles originally wanted to sell her entire business, a booth rental in a salon, but ran out of time to organize a complete sale. “A manicurist contacted me when I first put the business up for sale. She just wanted to purchase my client list so she wouldn’t have to move her business. I told her that I would keep her in mind,” she says. When Telles’ business didn’t sell, she contacted the interested manicurist and got almost $800 for her client list and some of her equipment. “It was kind of risky because I only did natural nails and the purchaser does acrylics. I think some of my clients are trying her, but they might not stay because they don’t like the smell of acrylic,” comments Telles.
Get It in Writing
Once you have found an arrangement for sale or purchase of a clientele, get an agreement in writing. You can go to an attorney to have the contact made up, but it will cost $1,500-$3,000 on average. If you decide to draw up on your own contract, begin by making a list of the crucial elements of the sale. What exactly is being sold? List it in detail (i.e., two nail tables, 50 bottles of opened polish, one manicurist chair, and detailed client cards of 378 customers). What are the terms of the sale? This is where you agree that there will be a month-long transfer of clients where the seller will introduce the buyer to her new customers. This section will also list the terms of payment (such as installments or a one-time payment in full). A statement that the salon is final and assets are “as is” will protect both the buyer and the seller.
Ultimately for the sale of a client list or a nail salon to work, both parties have to be committed to a brief relationship that will result in a win-win situation. Having realistic expectations at the outset is important, as is communicating exactly what both parties expect from the deal. If this teamwork is not present, the buyer will be throwing away the capitol invested in the deal and the seller will be letting her customers down.
[Sidebar] Tips for the Buyer
1. “Test drive” the business. Watch the workings of the technician who is selling her clientele or business. Spend a day interacting with her clients. See if the relationship with her customers is easily transferred to your individual style and work habits.
2. Pore over the clientele cards that are being sold, look at the bookings, and analyze the financial data. How many fills, full sets, pedicures, and natural manicures does the selling technician do per day? Is this what you are accustomed to? How much does her airbrushing cost? Is this acceptable to you? Pretend that you have adopted this new clientele. Will you be happy with them and they with you?
3. Evaluate yourself. Do you really want to work the three extra days a week that having the new clientele will probably demand? Are you willing to invest in the equipment to do gels that the purchased customer list is accustomed to? How much will the purchase of the list enhance your business over the next year? Can you arrange financing if required?
[Sidebar] Seven Things to Do Before Selling Your Nail Business
1. Get your client list organized. The preferred format is computerized, detailed, easy-to-understand data, including the client’s complete name, address, contact information (work and home), products used, preferred colors, and likes and dislikes. Purge clients who have moved or who you haven’t seen in the last 12 months.
2. Make a list of exactly what is being sold. A detailed list down to the last cuticle pusher and nail file is important to clarify the scope of the sale.
3. Get your financial record in order. Be able to show your bookings in a neat and orderly fashion for the last two to three years. Have records of bank deposits, tax statements, expenses, and daily register logs available as well.
4. Map out a budget for marketing the business or clientele. List the ways you plan to advertise and assess costs of each method. Narrow down the list to the most effective methods of marketing for your particular situation.
5. Assign a price for the sale, or don’t. You don’t have to have a set price, but at least have an idea of what you would like to get for the list and any equipment involved in the sale. If you still have a loan pending, this could also affect your minimum price.
6. Draw up a single contract that can be adjusted to the particular terms of the eventual sale. Seek out the advice of an attorney if you so desire.
7. Type out a simple non-disclosure agreement. In a one-page statement, list the terms of opening up your records to the potential buyer. Include protective measures such as: the potential will not phone your current clients, she will not appear at the business without prior notice, she will not share the financial aspects of your business with others, etc. This simple contract will prevent the potential purchaser from doing you harm while the deal is being hashed out.