5 minute read
The Who, What, When and Why of Selling Your Business
from The Link Issue 43
by The AHLC
By Sara Lou Manning, Custom Design Hair, Rogers, Arkansas
I started Custom Design Hair in 2012. I had realized there were a lot of people who would like to have great hair but just couldn’t grow it. I started in a one-room private location and have always worked by appointment only. I thought this gave me the privacy I needed but I soon came to realize I needed more rooms and someone to work with me who would be interested in buying the business one day.
Not all employees are candidates to be good owners but I knew I had a friend and former employee who might just be a great person. Amanda Wambold had worked with me as a hairstylist 20 years ago, and we had always kept a good relationship even though she had moved on and away from hairstyling. Amanda served as my assistant for a few days so she could see what hair replacement was all about.
I had a lot of questions about how to sell my business. I had been busy building my business but the idea of how to sell it was new to me. Here are the questions I felt I had to answer.
When do you sell your business?
Everyone’s answer is going to be different. The two things that made it become evident to me were how many birthdays I had and then COVID-19. I recovered from COVID but I knew it was time to sell.
To whom do you sell?
I wanted someone who had a heart for the business and a heart for people and helping them look good. I wanted someone who was knowledgeable and trainable.
Amanda and I have a close relationship and I knew this would be great for her. Hair replacement is a great business and custom design was doing very well. I knew that she would be good for Custom Design Hair and I knew that Custom Design Hair would take care of her and her family‘s needs.
How do you train the next owner?
The beginning of our time together was during COVID. We took advantage of online training and read The Link magazine. She
assisted me in everything I did. She helped me in my everyday work with clients as well as ordering new systems and paying bills.
I tried to be transparent with all the business of Custom Design Hair. I had always worked with my vendors, bank, and credit card companies to be up-to-date and in good standing. I have no debt and I didn’t want to have any debt. I wanted Amanda to be able to see in all my records that I know how to run a debt-free business.
The year 2021 was our big for education. We took a road trip to Chicago to visit Leslie Robinson at Mane Image for a day. She taught us so many little things and showed us so much about her business.
From there we flew to New York and visited Flora Fuentes at Unique Hair Concepts. Flora taught us about customer relations, consultation, and business. There is no end to what these two ladies know and they tried to pour it into our heads.
Flora has been in my studio several times while she was the U.S. leader for CRLAB. She could talk to me about Custom Design Hair in a way that no one else could. It was all beneficial.
Amanda and I also attended the American Hair Loss Council conference. I introduced her to people who would be good leaders for her and mentors. I wanted her to meet the best in the industry so that she had a bank of people to call on.
We finished off 2021 by adding tricologist Andrea Smith to our team and we also had in-house training for all of us with Jodie and Danielle from CRLab.
I knew that whatever price I put on the business it was only going to be as valuable as the staff and leadership of the business. I knew I was going to be fading away as Amanda stepped forward. I wanted her to know all she could.
How do you determine the price for your business?
The first people I talked to about this were my accountant and attorney. I trust both of them. I called on Leslie and Flora as well as others in our industry to help gather my thoughts around price. It seems the general consensus was that a fair price is based on your total revenue for one year. I looked at three years and average them. I also looked at what would be taken away from the bottom line if I was not there. My inventory is important but it’s only important if the people working there know how to turn that inventory into profit.
It became easy for Amanda and me to decide how she would purchase the business. We did owner financing. I could sell it to her at a fair but lower price because I would be being paid the interest instead of the lending institution. I gave her an incentive of $20,000 if she pays the debt in less than five years.
When I was asked to write this article, Amanda and I visited about it. I want you to know her take on how to buy an existing business. Amanda said one of the biggest things was honest communication between her and me. She had the freedom to look at my bank statements and anything financial that I had. She didn’t want to be buying something that had a headache attached to it. With client after client, I showed her little details because I wanted her to know what was going on. But more than anything I wanted the client to feel as though Amanda would have their best interest at heart and would carry on. We needed to keep the customer base intact.
Amanda and I have kept an honest relationship. There are times that I have done things that she didn’t understand. She had to understand my reason and I had to be able to explain that to her. Sometimes the questioning can become uncomfortable. We do not allow any hurt feelings to interfere with our moving forward.
How do I exit?
We signed our papers on Dec. 30 so that we started off Jan. 1 with Amanda in charge. I still continue to work on extra days or odd hours. I also want to be an assistant to both Amanda and Andrea as they continue to grow in their knowledge of hair replacement and scalp treatments. I call myself “the extra girl.” I’m the one who shows up when they have to be away from the studio or it’s a crazy day and they need more help. I want to be there, but I’m having to learn how to let go.
