By John Kasapi | Founder, Salon for Sale

I’ve met plenty of salon owners who have built incredible businesses.

The appointment book is full. The team is flat out. They’ve got loyal clients who’ve been coming back for years, and the salon is turning over more money than it ever has.

Then we sit down to talk about selling.

And sometimes, the number they have in their head is very different from what a buyer is likely to pay.

That’s not necessarily because the salon is a bad business. In fact, some of these salons are fantastic businesses.

It’s because running a successful salon and owning a business someone else can successfully take over are two different things.

After years of selling salons across Australia, I reckon that’s one of the biggest misunderstandings owners have when it comes to valuing their business.

Let me explain what I mean.

Turnover is impressive. Profit is what gets the conversation moving.

If somebody tells me their salon turns over $800,000 a year, that’s great.

But it doesn’t tell me what the business is worth.

I want to know what it costs to generate that revenue, how much is left over, and whether the new owner could reasonably expect similar results.

Two salons can have exactly the same turnover and completely different earning potential.

One might have excellent margins, a stable team and reasonable rent.

The other might be spending heavily on wages, carrying an expensive lease and relying on the owner to generate a large percentage of sales.

From the outside, both businesses might look equally successful.

From a buyer’s perspective, they’re very different propositions.

And this is where it gets interesting.

Are you making money, or are you earning a wage?

Here’s a question I often want to explore with salon owners.

How much of the business’s financial performance comes from the business itself, and how much comes from you personally?

Imagine a salon generating $800,000 in annual turnover.

Its accounts show $150,000 in operating profit before allowing for the owner’s working salary.

Sounds pretty good.

But the owner is also working four or five days a week, looking after clients, managing staff, handling suppliers and keeping the whole place running.

Now imagine the buyer is an investor who doesn’t cut hair and doesn’t want to manage the salon personally.

They’ll need someone to replace that work.

If replacing the owner’s operational role costs approximately $100,000 a year, including employment on-costs, the $150,000 suddenly looks very different.

In this simplified example, that leaves approximately $50,000 before other relevant adjustments, finance costs and tax.

That’s a substantial difference.

I’m not suggesting these figures represent a typical salon, or that every business should be valued using this exact calculation. They’re illustrative.

The point is that a buyer needs to understand what the business earns after allowing for the work needed to keep it running.

Importantly, if the owner’s salary is already included in the operating expenses, it shouldn’t simply be deducted again. The accounts need to be reviewed properly so we compare businesses on a consistent basis.

An owner-operator might assess the same opportunity differently from a passive investor. That’s another reason why identifying the right buyer matters.

Here’s another question. What happens to the salon when you leave?

I’ve seen owners who are absolutely brilliant at what they do.

Their clients love them. The staff rely on them. They’re the face of the business.

That’s a wonderful achievement.

But when it comes time to sell, it creates a question.

Will the clients keep coming?

There’s a difference between a client who loves your salon and a client who only comes because of you.

If the owner personally services a large part of the client base, a buyer is going to want to understand how those relationships can be transferred.

They might ask:

• How much revenue does the owner personally generate?
• Which team members have their own established clientele?
• What percentage of clients regularly rebook?
• How long have key employees been with the business?
• Who manages the salon when the owner is away?

These aren’t criticisms of the business.

They’re reasonable questions from someone considering putting their own money into it.

And the better we can answer them, the easier it is to build buyer confidence.

Your appointment book can tell us more than you think

Most salon owners know their weekly takings.

Fewer have spent much time looking at what those takings tell us about the strength of the business.

For example, there’s a difference between a salon that constantly needs to attract new customers and one that has a reliable base of returning clients.

When I’m looking at a salon, I’m interested in how the bookings are generated.

Are clients rebooking before they leave? Are they returning consistently? Is revenue shared across the team, or concentrated around one or two people?

Does the salon have a strong retail component? Are certain services more profitable than others? Are the busiest days actually producing good margins?

A full appointment book doesn’t automatically mean healthy profitability.

Sometimes, when we dig into the numbers, a salon discovers that its most popular services aren’t necessarily its most profitable.

That doesn’t mean the business can’t be sold. It means we need to understand its operating model rather than relying on appearances.

Buyers aren’t all looking for the same thing

This is something I wish more salon owners understood.

There isn’t one single type of salon buyer.

Some buyers are experienced hairdressers who want to own their first business.

Others already operate several salons and want to expand.

Then you’ve got investors who may never intend to stand behind a chair.

Each buyer looks at the opportunity differently.

An experienced hairdresser might see potential in a salon that needs a hands-on owner.

An investor might place greater value on a management team, documented procedures and predictable earnings.

I’ve worked with buyers who’ve purchased multiple salons over the years. Once you understand what they’re looking for, you start to recognise why one business appeals to them and another doesn’t.

It’s not always about the biggest turnover or the fanciest fit-out.

It’s about whether the business suits how they intend to own and operate it.

A well-matched buyer can sometimes see value that another buyer simply doesn’t.

Don’t forget the things that can hold a sale together, or pull it apart

Financial performance is important, but it isn’t the whole story.

The lease matters.

Staff arrangements matter.

The condition of the equipment matters.

So does the quality of the financial information you can provide.

I’ve seen sales become far more complicated than they needed to be because owners didn’t have a complete picture of these things before going to market.

If the lease is close to expiry, the buyer will want to know what happens next.

If the financials need explaining, they’ll want evidence.

If the business is heavily dependent on one stylist, they’ll want reassurance that the business can continue performing.

None of these issues automatically makes a salon unsaleable.

What matters is identifying them early, being realistic about their impact, and deciding how to deal with them.

For a useful independent overview, Business Queensland’s guide to valuing a business explains the different approaches to valuing businesses, including earnings, comparable sales, assets and goodwill.

What I’d do if I were thinking of selling in the next 12 months

I wouldn’t rush to put the business on the market.

I’d start by getting a clear picture of where it stands today.

I’d want properly prepared financials, an understanding of what the owner actually does, details of the team and a review of the lease.

Then I’d look at the things that could make the business more appealing to a buyer.

Could we reduce the owner’s day-to-day involvement? Improve the reliability of financial reporting? Document key processes? Address an outstanding lease issue?

Not every improvement requires spending a fortune.

Sometimes the most valuable thing you can do is simply make the business easier for somebody else to understand and operate.

And remember, an appraisal isn’t a promise that a buyer will pay a particular figure. It’s a way of understanding what the available evidence suggests and what may influence the eventual sale.

So, what’s your salon actually worth?

The answer depends on the business.

Not just its turnover, not just its fit-out, and certainly not just the amount of work you’ve put into it over the years.

It’s about the earnings, the risks, the people, the systems, the lease, the goodwill and the buyers who might want to own it.

And sometimes, a salon is worth more than the owner expects.

Sometimes, it’s worth less.

Either way, I’d rather have an honest conversation about it before you decide to sell than have you find out halfway through the process.

Thinking about selling your salon?

I’m John Kasapi, founder of Salon for Sale. I help owners across Australia understand their business, prepare for sale and find suitable buyers.

You don’t have to be ready to sell tomorrow to start the conversation.

Find out what your salon may be worth and request a confidential appraisal.