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So I found a business I like...

Discussion in 'Business Models, Niches, Industries' started by yveskleinsky, Sep 19, 2007.

  1. yveskleinsky
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    yveskleinsky Bronze Contributor Speedway Pass

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    I found a business that I like. It is a tanning salon that rents space to a massage therapist. There are a total of 3 employees who do a great job running the place. I am told that the owners are never there as they have another business and three children. The asking price is $140k which includes everything including the building. According to the owner they have over 600 customers and net $1600/month. I figure if all things are equal, my new debt service would be around $1000/month. ...I have bounced around a lot trying to figure out where to start and what to focus on and I like the idea of building a business that supports my RE. Any thoughts?
     
  2. MJ DeMarco
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    MJ DeMarco Raving Lunatic Staff Member Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    Admin Post
    Z5 Films has owned (or still may) own tanning salons. You should talk to him.
     
  3. yveskleinsky
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    yveskleinsky Bronze Contributor Speedway Pass

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    Damn MJ- you have cat-like reflexes! I just hit submit like 2 minutes ago!
     
  4. MJ DeMarco
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    MJ DeMarco Raving Lunatic Staff Member Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    My default speed is 200mph....:fastlane:
     
  5. yveskleinsky
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    yveskleinsky Bronze Contributor Speedway Pass

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    ...How do I find him? :smx4:
     
  6. Russ H
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    Russ H Gold Contributor Read Millionaire Fastlane Speedway Pass

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    Go to one of the posts he's posted to (like "show us your mug!", click on his name, and PM him.

    -Russ H.
     
  7. Diane Kennedy
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    Diane Kennedy Bronze Contributor

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    Please take this as a kind observation, that's the intent behind what I'm about to say. There is no judgement. I just see a very talented person who is letting something precious slip away.

    Focus. Focus. Focus.

    Find one thing. Period. You don't have to marry it. It doesn't have to be forever. But, choose as soon as you can. I'd prefer if you read this post, responded within 5 minutes with a "Okay, I'm going to do ****" The *** can be business or real estate.

    Then, for just this amount of time, ONLY focus on that.

    To get you started - do you need passive cash flow OR net worth? If you say "both" then the answer is net worth. Do not try to find any passive cash flow deals until you have your net worth built.

    That will immediately limit what you're looking at to things that you can use forced appreciation on.

    Next question: Is it going to be a business or real estate that you'll use forced appreciation on?

    If it's cash flow (because your net worth is big enough), the next questions will be more about how to free up your net worth and how to invest it to get the highest R Score.

    Let me know how it goes and if you're okay with forming an accountability group around that. Knowing some of the very caring posters on this forum, you'll have people who can help you keep that focus. We just need to know what you want....and what you need.

    :)
     
  8. yveskleinsky
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    yveskleinsky Bronze Contributor Speedway Pass

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    Diane-
    I greatly respect everyone on this forum and all the advice I receive. ...Even if it is hard to hear. The fact that total strangers go out on a limb to tell me (and others) the truth- especially when it is hard digest, never ceases to amaze me. That level of honesty is rare and really appreciated.

    I have been doing a lot of thinking when it comes to focus and what I want to focus on. I want to focus on building an "S" business that is run like a "B". The reason for this is because my risk level is still low as is my willingness to commit to large levels of debt. I believe that I need some of the basics down before I can responsibly handle larger deals (RE or business). So...for the next 4 months I will devote myself to improving my small cabin business as well as potentially looking for another business- tanning salon?

    Is that focused enough? ...I'm starting to wonder if I even know what true focus looks like!
     
  9. Russ H
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    Russ H Gold Contributor Read Millionaire Fastlane Speedway Pass

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    Diane-

    As of last night, I think that's what she's doing.

    Yveskleinsky told us she'd start working on "How to Develop your PLAN":

    http://thefastlanetomillions.com/showthread.php?t=544

    Let's see what happens! :)

    -Russ H.

    (I must be channeling you, Diane. As I was reading through this thread the first time, all I kept muttering to myself was "Focus, focus, focus . . ." :smxA:)
     
  10. Sid23
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    Sid23 Bronze Contributor

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    I think what everyone is saying, Yves, is PICK ONE. Either spend the next 4 months improving your small cabin business OR find another business. Not both. :)
     
  11. yveskleinsky
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    yveskleinsky Bronze Contributor Speedway Pass

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    When you ask if I need cash flow or net worth, what exactly do you mean? ...I was evaulating this business based on it's CF. ...I will go dig up your previous post about the R score.
     
  12. yveskleinsky
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    yveskleinsky Bronze Contributor Speedway Pass

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    :blush: ...Before I post anymore, I will finish Russ' goal post...and then post it.:)
     
  13. Diane Kennedy
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    Diane Kennedy Bronze Contributor

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    Your willingness to hear this is fantastic. You are courageous. Not too many people can hear what other people are saying...too busy making excuses about it or going on the attack.

    I like the suggestion of either "build your current business" or "get another one."

    On the idea of net worth or cash flow, one problem I see again and again is people going to passive cash flow too quickly. Fact is you need to either put money or time into a deal. If you don't have the money, you need the time..but that's against everything we've been told. That's being an active L2 business. So, people keep trying to find that one investment/business that doesn't take money or time....and except for the lottery, inheriting or divorcing well (and often), I don't know that anyone ever finds that.

    So, let's say you can get a 10% R Score. (Your passive income divided by your net worth) You want to get to $100,000 passive income per year. That means you need $1 mill net worth.

    MJ uses highly leveraged forced appreciation to turn URLs into cash machines which have a value. SteveO, I think, is doing the same thing with commercial properties. (Buying right, making changes to make the value go up) At some point, it could be that both guys (and me too) will just invest the net worth from these into very passive activities, giving up some of the return in exchange for not having to worry about anything.

    My guess is that net worth will be the most important thing for you right now. Get your current biz on auto-pilot and THEN go look for a forced appreciation deal. But you've got to get the current biz to the point where you're spending less one day per week on it, or you'll be stretched too thin to do both it and the new project well.

    The problem you face is not lack of opportunities, it's choking on opportunities.
     
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  14. Russ H
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    Russ H Gold Contributor Read Millionaire Fastlane Speedway Pass

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    Amen to that.

    It's almost like drowning.

    The more you learn, the more opportunities present themselves.

    For us, we've had to really focus.

    Otherwise, we'd be in over our heads, gasping for breath.

    -Russ H.
     
  15. SteveO
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    SteveO Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    There was a post on another forum that was discussing cashflow or networth. People were very opinionated and passionate about which was best. I was one of the few that argued the point that networth is the most important. It can easily be turned into cashflow.


    I have over 400 units in three properties that have become "locked in". They have been refinanced on 10 year money at rates under 6%. The plan of rapid turns to improve operations and sell will continue on other properties but, these three are locked into the passive cashflow cycle.

    Great post Diane.
     
  16. bflbob
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    bflbob Bronze Contributor Read Millionaire Fastlane Speedway Pass

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    Oh, man!

    Do I ever need to visit this forum more.
    This is a BIG problem for me.

    SFH's, multi's, rehabs, holds, stocks, house building, work, volunteering, moderating RDPD.
    Too many things.
    Not enough focus!

    Probably my biggest problem is that I need to do it all myself.
    Not a great "systems" guy, although I love to study it.

    Next project (yeh, I know, one more thing) is "letting go".
     
  17. andviv
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    andviv Gold Contributor Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass Summit Attendee

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    Just wanted to say I just rated this thread with 5 stars. I've made comments about this before in other threads. Great advice from many real experts.
     
  18. yveskleinsky
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    yveskleinsky Bronze Contributor Speedway Pass

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    Friggin genius. I combed all the other boards, didn't even think of the intro board. Thanks! :smx4:
     
  19. yveskleinsky
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    yveskleinsky Bronze Contributor Speedway Pass

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    ...I spend about a total of 3 hours a week on my cabin business. It is pretty automated. Could be more so, and it will be- as I make the money to pay for the automation.
     
  20. Bilgefisher
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    Bilgefisher Bronze Contributor Read Millionaire Fastlane

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    Its amazing how you can speak to the audience while focusing on the person on stage. Thank Diane. Very good advice.
     
  21. nomadjanet
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    nomadjanet Contributor

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    I've been reading the 4 hour work week. The juest of the book is that you can put everything that takes up your time on auto pilot, or batch it to save time, or out source it to someone whoes time you can buy for less than your time is worth to you. It is really inspiring me. I don't forsee myself flying all over the world, climbing mountains like this guy but I do see many things that could apply to almost any business or even to your personal life. BTW 3 hours a week is great.
    Janet
     
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  22. JesseO
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    JesseO Contributor

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    I use people whose time is (by the hour) worth more than my own presently, but they do the work in half the time that I could, if I could do it at all. I love having profesionals work for me, and they love working for me as well. Very good point, Janet.
     
  23. Z5 FILMS
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    Z5 FILMS Contributor

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    You got PM.

    One thing that throws up a red flag is the time of year you're facing. Summer is "THE" time of year to own a salon. That's when you make all your money. Winter time is D-E-A-D unless you have a special location, like next to a gym or soemthing.

    Being that Summer is pretty much over, there's a good chance if you bought it, you would be paying a lot of money out of pocket until April, or May when things pick up. And if it does pick up, will you be able to recoupe the money you just lost in the Winter? If you can't you might never catch up. I would look into this.

    $1,600/month is not a lot even for a small salon. You have 5 beds. They probably have a minumum of about 20 bulbs in each bed. Average bed probably has about 35. Two of my beds had 50 bulbs (or "lamps" as they are called in the industry).

    We will go with a minimum approach..

    5 beds, 20 lamps each. Good lamps cost about $20 each. So, to relamp all your beds you're looking at minimum $2000.00. Lamps last about 600 hours. Ask the seller when the last time the beds were relamped and how many hours they have. This can tell you if you're going to have to pay another $2,000 the second you sign on the line. Depending on how busy, you will have to relamp around 3 times a year. So you're looking at $6,000 and a mimimum of three months of profit getting chewed up in just annual relamping expenses.

    Keep those lamp costs in mind. It's not cheap.

    I could go on and on about tanning. So I just sent you a PM and some info on a site where you can get good info.

    I like the massage therapist idea. I'm guessing with the small size it does not have a Mystic Tan booth. That's the "spray-on" booth. They cost as much as $50K, are high maintanance and the results are POOR. I have seen more than one bride on the alter with what's known as "tiger stripes" on them. When that stuff dries, there's no fixing it, you're stuck with it for a week. I see lots of people with lines across their forehead from wearing the shower cap too low in a "Mystic" booth. They look funny. And you have to get your girlfriend to put makeup on your forehead to cover it up. LOL

    A great alternative is HVLP (High Volume Low Pressure) tanning, otherwise known as "airbrush". You see the girls on that show "Sunset Tan" using them. The results are 100x better than Mystic if you get sprayed by someone with even half a brain. Plus they take up no room and you can spray people in an empty room or a bathroom and the machine is portable and cost only like $1,500 and you charge more than a "Mystic".

    I just dont see the need for Mystic Tan Booths for anything other than privacy. And you just hire someone or trail some hottie to do them on an appointment basis. You could train the therapist to do them, you set the appointments and then just take a %.

    Good luck.
     
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  24. yveskleinsky
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    yveskleinsky Bronze Contributor Speedway Pass

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    Thanks Z5 for all the info, and for the great PM. I checked out that other site and got a great list of questions for the owner. ...I don't know if the $1600/month is for the off season or what. On that tan forum, they said that to value a tanning business, you multiple 2-2.5% of the net profit and that is what the business is worth. Any thoughts on this? ...I have a meeting with them on Tues, so I'll see what they say. ...My goal is to either take over or create a business that does not require me. So maybe I would be better off storing one of the beds and developing the place into a massage/skin care "salon". (Basically I could just take a percentage of sales or charge room rental.)
     
  25. Z5 FILMS
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    Z5 FILMS Contributor

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    I think 3x annual net is probably a decent way to value one. I have seen higher, I have seen less.

    I think emptying out one of the rooms and renting it out on appointment basis or maybe even monthly is a great idea. It especially won't hurt at all in the winter. That opens up some opportunities for additional revenue streams. As mentioned you could do the massage/skin care type stuff. One of my clients moms did weight loss "body wraps". Some type of deal where they wrap you up in what looks like bandages and you "sweat off" the pounds. She asked me a few times if she could rent a room on a monthly basis to do them there, but the landlord would not approve it. That's another thing you could look at.

    Looks at that other website and did up some ideas and what service you could provide to help out the winters.
     

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