Your Exit Plan: Selling Your Barbershop
What is your exit plan?
I talked to a barbershop owner who had been in the game for over 40 years. He was nearing retirement and wanted to sell his barbershop.
I asked: “How much are you going to sell it for?”
He replied: “ I don’t know.”
I followed up: “Well, how much do you think it’s worth?”
He said: “I have no idea.”
Meanwhile, a yoga studio is selling their business for $260,000, a pilates studio for $299,000 and a spin studio for $325,000. Our neighbors in the fitness industry have a clear understanding of the worth of their business. What is the problem?
After 40 years of business, this barbershop owner had no idea what his business was worth and had no idea how to figure it out. To be honest, it was really sad. I could hear the desperation in the tone of his voice. He felt lost. He had no idea what he was going to do.
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“Begin with the end in mind”. This is habit number 2 in the famous book The 7 Habits of Highly Effective People by Stephen Covey. At the end of the day, barbering is a business. It is worth something. At the end of your career, someone may want to buy your business. What will you say?
You will need to know how to calculate the value of your business. So, how do you do this? To start, you need to know your numbers.
Net income = the amount of money you have after expenses. (Income - expenses = net income)
Income = money made. .
Expenses = operating costs of doing business. Examples: rent, products, tools (clippers, shears, capes etc.), booking app subscription, continuing education etc.
Take your Net Income and multiply it by 2 and then take your Net Income and multiply it by 3. The value of your shop is often somewhere in between those two numbers. (Formula from The Boutique Fitness Broker).
As a barber aka a business owner, you need to become familiar with business and financial phrases like: net income, income vs expenses, revenue etc.
I respect the OGs, but this is where the walk-in, cash only shops make me nervous. In 40 years, this barbershop owner probably served thousands of clients, but he had no record of it. No paper trail. No email list. No proof of how busy his shop was. I'm not sure if he had an accountant. Not sure if he knew his profit-loss. With all that cash, he was probably under reporting his income. When he sells his shop, he might sell it for $25,000 if he’s lucky, when he maybe could have got $250,000.
This is why having an accountant matters. This is why your profit and loss statements matter. This is why your revenue report in your booking app matters. This is why knowing how many clients you have and what their average spend per visit matters. You can’t valuate your business if you don’t know your numbers.
As OG barbers near retirement, I’m really curious to see what buying shops will look like. Every city likely has the OG shop with a barber in their 70s that is coming to the end of their career. Buying an existing shop from one of these retiring owners can be a great opportunity for the next generation to step into ownership. It can also be a great opportunity for an established shop to expand their brand and add more locations.
Unfortunately for the OGs, but fortunate for the younger generation, I think barbershops will sell for a steal because the shop owner will have no idea the true value of their shop. In other words, it will sell for a fraction of what it is truly worth. If you’re looking to own or expand, keep your eye out.
If you've been struggling with knowing how much money you make as a barber ... I made this 21 day challenge for you. Sign up now and figure out how much money you actually make.
Do you find value in this type of content on financial management? I have some more blogs and podcast episodes that you’d probably enjoy.
Written by Matthew Mendoza
Licensed barber, educator and consultant based in California. He is passionate about helping barbers pass their barber exam, develop their business and diversify their income. He hosts a podcast, writes a weekly newsletter and offers 1-on-1 consulting.
