Trying to buy a business - getting a bit stressed!

EddScott · 19 Dec 2009 at 12:42

For the last few months we've been trying to buy the hair salon where my wife works.

The current owners haven't really looked after it very well this year and its lost clients and profits are down. My wife has pretty much run the place for the last 6 months as the owner went off to have a baby and can't cope with baby and salon.

We've got the money from the bank but we are not prepared to pay the price the current owners are asking. We have offered a 1/3 of the asking price for all manner of reasons - lack of investment, lack of client bank improvement, no one else is going to offer the money.

Whats bothering me is that I made the offer on Tuesday and although I expected it to be rejected I said feel free to come back with a counter offer. From what I understood of their situation they wanted to sell ASAP and would be prepared to discuss the price. As yet they've not come back to us and I'm wondering if I've made a mistake by not offering more.

We can start our own place easy enough with the money we have but on day 1 there would not be many clients. Another thing that surprises me is that the owner only works part time and my wife will have to give notice and wait 6 months before she can open her own place. Given that my wife is not prepared to lie to her clients when they ask to rebook, I can't see the owners allowing her to work her notice. This then means there is no one working there full time. The owners are in a bit of a bind yet seem uninterested in wanting to discuss terms.

Its playing on my mind more than the wifes. On the one hand I just want to give them what they want just to get it over with and on the other hand I'm trying to bide my time and see what happens.

I'm thinking that if I hear nothing by 24th, I'll give them a quick call just to see if they are still thinking of selling and would they like to think over the xmas and new year if they can come up with a figure closer to ours?

Apologies for the ramble

Disco Boy · 19 Dec 2009 at 12:45

They probably think you're a joke, offering 1/3 of the asking price (whether you are the one who is being realistic or not)

She has to give 6 months notice, at a hair salon? That's ridiculous.

If I were you I'd open up my own place.

regulus · 19 Dec 2009 at 12:46

Just checking that I understand this correctly. She aren't allowed to open her own place because .. why? It's not like hair salons are multimillion pound global businesses where employees sign non-competes. Can't you just open the place under your name and employ her? Also, 6 month notice? LMFAO. Tell the owner to take a hike. Sounds like an idiot anyway.

JBuk · 19 Dec 2009 at 12:47

you offered a third of the asking or 1 3rd off the asking?

djohn · 19 Dec 2009 at 12:51

Regarding informing clients. We owned a small hotel some years back and it is correct that once you have decided to move or as in our case sell the business we were not allowed to poach clients by telling them where we would be moving to or passing on any details of any kind once we had started the sale through the agents or solicitors., we could before signing the contract to sell let them know we would be moving and even give them our new address - phone number.

As to the offer of 1/3 asking price. I would think from what you have said about the condition of the business its a good starting point. You can always discuss offering more as talks progress but not offer less.

[Edit] to add a couple of words.

regulus · 19 Dec 2009 at 12:53

Nobody here needs explaining to that you always go in ridiculously low and NEVER with your final price. However, if you think that it's only worth 1/3 of asking then it's in within your moral right to do so. I still can't see why you just don't open a new place and send out a few introductory letters/offers to the local area.

blueboy2001 · 19 Dec 2009 at 12:56

I think the fact you've offered a third of the asking price is part of the issue.

They may have made plans on the basis of being able to sell for around the asking price and your offer has caused them to rethink their plans. Did you just say "I'll give you x grand", or did you provide a written offer with some justification of your valuation? If not, perhaps putting something in writing, including the line you are willing to negotiate.

Perhaps they want to seek an alternative valuation? Would it be worth them holding on to it and putting a full time manager in, perhaps with a view to her coming back when the children are older? Some people are also not comfortable negotitating and they may be avoiding that.

The other thing is, it's Christmas and they may just want to park it until next year now. I'd give them a courteous phone call Tuesday or Wednesday next week, not Christmas Eve, and just ask what the position is and if there is anything you can do to help.

NickK · 19 Dec 2009 at 12:56

Poaching clients is probably the big contractual gotcha, I have 1 year clause in mine.

If you get some employment lawyer advice then they may give you some pointers on that - ie it's if you go after clients, if they move on their own then that's not your fault etc.

Don't forget it's also christmas week, probably the last thing on people's minds at the moment..

djohn · 19 Dec 2009 at 13:06

To add to my post above and what nickK has said about clients. Our Hotel was/is in Blackpool along with approx some 3,500 hotels/guest-houses. We bought and sold sveral over a period of 8 years owning one at a time.

In each contract we signed it was, 'No opening of a fresh, same or similar business within 1 mile for 1 year, after 1 year we could open another hotel next door if we wanted to, or we could open a new hotel after 3 months if it was more than 1 mile away from the one we had just sold.

EddScott · 19 Dec 2009 at 13:07

Sorry chaps, I meant I knocked a third of the price off the deal. Actually a little bit less than a third.

They know we have more than what was offered but I said we'd need that for working capital (we don't really).

The 6 months is a restriction of trade that is in her contract which she did sign and I don't want court case to deal with. 6 months is nothing and if we start our own place we can take our time getting it just right - the house is run on my income so my wife can take a 6 month break and do a bit of mobile on the side. The restriction is poaching and setting up new or even employed within .5 of a mile. If after 6 months we open and people follow my wife theres nothing they can do.

With leaving there and then, the owners may well want her to carry on booking the people in even though she won't be there after a certain date.

The owner works part time and my wife is the only full time stylist. Without her there the owner will have to work full time and she hasn't been coping very well with part time. My wife has averaged a 4X end of day takings compared to the owner!.

The owner isn't very bright (at 26 she only just realised Mince pies don't contain Minced Meat) so her BF and co-owner deals with the finances and he is who I've bene dealing with. He is working 7 days a week, looks knackered and has this weight of the salon on his shoulders. I actually quite like the lad and his parents are in business and I'm amazed they haven't said anything to them in as much as anything is better than nothing???

They have a minimum amount they want the business loan paid off - now, I know they have money in the business accounts and I know they have other "takings" amounting to several ££££ so they aren't skint.

I think the BF has said to her get a grip and run the place but I can't see her just flicking a switch a being able to cope. She hasn't worked a full week for months and they don't seem to realise how dependent the business has become on my wife. They tried to get new stylists but they only want to pay minimum wage - my wife is on a smidge above min wage and has run the place since June really.

We had our eye on a shop that used to be a salon. It was where my wife trained and all the electrics and plumbing is still in place. Sadly the place has been taken. Obviously there are other places. One down side of opening a new salon is the saturation in the town of salons - theres about 7 and its only a small place.

EDIT - just to pick up on what BlueBoy said - I did suggest at the start of all this why not pay my wife a proper wage and she'll manage the place for you. I almost said it again on Tuesday but I thought I'll end up talking him out of selling. To be honest though, at this stage we want to start up or buy. Running for someone else when they pocket the winnings isn't what we want now.