Health and beauty is a booming business worldwide and Canadians are among the most health-conscious of nationalities.
Health and beauty businesses for sale comprise a broad range of sectors so your first decision as a business buyer is what industry you want to zero in on – unless you’re open-minded about how you tap into a growing demand for health and beauty products and services.
Your skillset and background should certainly inform your decision, as well as the pros and cons of each sector. If you have experience in retail environments then there are drug stores and cosmetics stores to consider.
Health food shops are another retail option, one that excels in relatively affluent locales with high footfall areas a boon too. You might alternatively target health and beauty suppliers if you have experience working in supply and distribution.
Hair and beauty salons, meanwhile, offer plentiful repeat custom and are, generally, relatively inexpensive.
Gyms and health and fitness clubs are usually rather pricier, on account of the space and equipment involved. However, it’s a flourishing sector with even greater levels of repeat custom, with members often committing to year-round contracts.
Tanning salons, meanwhile, offer a simple business model, while spas can be lucrative for someone with experience in the beauty or leisure markets.
Financing a health and beauty business
The business buying process is fairly consistent regardless of sector, and this category is, as we’ve said, wide-ranging in any case.
Most buyers need a bank loan but you’ll need to put down collateral – usually around 10-25% of the sale price – so the amount you are able and willing to contribute will also narrow down the search. However, it’s worth noting that some vendors might accept a portion of the sale price in instalments – known as vendor finance – which helps your budget stretch further.
Business brokers
It’s worth appointing a business broker to help you navigate the business buying process, as they can help you approach and negotiate with vendors, conduct an independent business valuation, request relevant paperwork and agree on the right price and terms of any deal.
Ideally, they’ll have relevant experience, but this needn’t necessarily be in health and beauty per se. It could be in overseeing the sale of retailers if you’re after a drug store or cosmetics store, for instance, or in buying grocery stores if it’s a health food shop you’re seeking.
Negotiating terms
If there’s a gap between the vendor’s valuation of the business and yours, then you need to thrash out a compromise. If the vendor sweetens the deal with terms favourable to you, such as vendor finance or agreeing to certain warranties and indemnities, it might persuade you to move closer to the vendor’s price.
Once agreed, the price and terms are set out in a letter of intent – a non-binding agreement which is subject to change based on what information comes to light during due diligence.
Due diligence
Due diligence is a comprehensive process by which you investigate all aspects of the business. This includes information about finances, business structure and operations, contracts, customer databases, employees, intellectual property, physical assets and real estate, and so on.
It’s also a chance to dig deeper into local trading conditions, including demographics, competition and whether any redevelopment plans are on the horizon that could impact trade. It’s a complex process so again, the help of a solicitor or business broker is invaluable if you’re to secure the right deal.
Completing the purchase
Depending on how the due diligence process unfolds, you can commit to the original terms, seek to renegotiate or even walk away from the deal altogether.
The latter option might seem drastic after investing so much time and energy. However, if something makes you feel uncomfortable or the vendor isn’t willing to budge on one of your red lines, then it’s often better to cut your losses now than risk making a very expensive mistake.
Once a final price and terms are agreed, you can draft and sign a final purchase agreement – at which point the business is yours as long as you pay the price according to the agreed terms.
