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A
Today's episode is a deep dive into a type of business you've probably seen on Biz Buy Sell, but scrolled right past nail salons. Truck Nguyen grew up around nail salons. She is Vietnamese and like many immigrant communities in America, hers carved out a niche for itself in a particular industry, nails. So part of Truck's motivation to become an entrepreneur in the nail industry was a desire to reconnect with her culture and her history. But that alone wouldn't be enough. Nail salons also had to be good businesses. Truck knew that they could be, and you might be surprised. One thing about nail salons is that they sell for very low multiples.
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We're talking 1.5x.
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So if you can marry low entry price with operational improvements that grow EBITDA in a highly fragmented industry with dozens of targets in every market across the US Then execute that playbook programmatically, well, that starts to look like a compelling opportunity. Not to mention the business buyer fit here. Truck is a Harvard educated Vietnamese immigrant, seemingly the perfect person to engineer a consolidation while also relating to the owners and technicians who predominate in the industry. See what you think here is Truck Win, Owner of TTN Ventures
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in case
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A
you missed it, earlier this week, Team Acquiring Minds released something that we're really excited about the ETA Database. The ETA Database is a searchable, filterable archive of every Acquiring minds episode, over 450 episodes of acquiring Minds, cataloged and filterable by industry, by acquisition model, by geography, and more. So many of you have asked over the years whether there's a way to search the episode back catalog by industry or deal type or other criteria, and there hasn't been. Well, now there finally is the ETA Database. Check it out@eta database.com Attorneys Bill Barlow and James David Williams return for an office hour session focused on negotiating working capital. Bill and James David will cover tips to get over common negotiating deadlocks on this topic, as well as common constructs for unique working capital situations like long term projects, subscription based revenue, and how to do all of this while staying
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in compliance with SBA guidelines.
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A
The webinar is Negotiating Working Capital and it is this coming Tuesday, May 26th noon Eastern. Link to register is right at the top of this episode's show notes or on the Acquiring Minds homepage.
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Acquiring Minds Co.
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A
Welcome to Acquiring Minds, a podcast about buying businesses.
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B
My name is Will Smith.
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A
Acquiring an existing business is an awesome opportunity for many entrepreneurs and on this podcast I talk to the people who do it. If you ask owners in the ETA and search community which insurance broker provides highest quality work, great outcomes and has a practice dedicated to searchers and acquisition entrepreneurs.
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B
One name comes up again and again.
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Oberle. Oberle Risk Strategies has worked with hundreds of searchers over nearly a decade and is in fact led by a two time successful searcher, August Felker, which makes Oberle a specialty insurance brokerage for searchers by a former searcher. And if you've got a business under Loi, Oberle will provide complimentary due diligence on that business's insurance and benefits program. An easy no risk way to get
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B
to know August and the team at
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A
Oberle to take advantage. Check out oberly-risk.com that's o b e r l e-risk.com link in the notes
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B
Trukuyn welcome to Acquiring Minds.
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C
Thank you for having me Truck you
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are two acquisitions in to a nail
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B
salon roll up Nail salons are seen for sale on Biz Buy Sell. I I feel like I've seen a lot of those listings but they're not commonly pursued by acquisition entrepreneurs like you. We are going to unpack your project here. I find it very interesting. Let's begin with some background on you please.
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C
Truk yes, thank you Will for having me. Once again. So my name is Truk Nguyen. I am currently located in Austin, Texas doing a roll up of nail salons. So a little bit of background about myself. So my family migrated to the US when I was 14 so I went to high school, college and grad school here in the us. My background is in finance and corporate strategy so I spent a lot of my early career years working with different companies through my consulting background to look after their strategy and then prior to that I did finance for both banks and then a corporate company hp. So after working in corporate a few years as well as getting my mba, I figured that there was a time for me to pursue my own journey and I thought about doing a startup versus doing a search which is this concept that a lot of my friends and my professor have talked about. But I figured that a search will be an interesting journey to pursue because of my personality and what I'm interested in. So I love B2C. I like to see my impact immediately. So for me going after something that provide a product or service to consumer is something that I'm very interested in. So after thinking about okay let's do search, let's do something that's surrounding consumer I decided that maybe looking into a small business that provide a service would be interesting. And with my background being a Vietnamese Immigrant. As you know, many Vietnamese when they first came to the US Doing nails was actually one of the opportunities that they could pursue to provide a good income for their families. So throughout the last five, six decades of Vietnamese community and Vietnamese immigrant in the US Nail salon was a big thing. So for me, going after that was a little bit of like going back to my roots, kind of thinking about like, how do I do this but involve a little bit of my cultural identity. So that's how I arrived at doing a nail salon roll up in Austin, Texas.
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B
Okay, great, I love it. Truck.
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A
And when you said that something in
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B
your personality was a good fit for search versus starting something from scratch. Say more about that.
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C
Yeah, sure. I am a good executioner. You give me an idea, I can take that and run with it and make it good and better. I don't necessarily have a lot of ideas about what would be a new product or a new type of service to put out there in the market. So zero to one is not what I'm strong at. Throughout my career working in corporate America, I'm better at, okay, you have something here, you want me to make it better, I will look at it, put together a strategy and then go execute. So that for me was something that I have realized about myself. So that's the reason why I think search at that point in life when I started thinking about what do I do next, that's why I decided to pursue this.
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B
And could you also say more about your personal connection to or your cultural connection to nail salons? And let me just also, because nail salons are not very search friendly businesses. And what I mean by that is the kind of typical criteria that we're told to look for in an acquisition. Recurring revenue, non consumer. And they are neither of those things. They're probably assumed to be not very good businesses, not very profitable businesses, operationally intense businesses. I said at the top how they're not pursued by acquisition entrepreneurs because they, they seem to violate a couple of the rule, the quote unquote rules that we have in this space. How did you think about that going in? You were obviously attracted to it for personal reasons, but as a business. And what did you, how did you rectify that?
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C
Yeah, so I'll address it for first talking about my personal cultural connection and then we'll, we'll tackle the, the business point of view. So growing up in my family, a lot of my relatives told my aunts, uncle, parents, like a lot of them are involved in the nail space. Right. Either from running their own nail Salon or working in nail salon or you know, running the nail supply store. So it is big part of the Vietnamese experience in the US when they first came here, there's not that many jobs available for people who only have labor skills without being able to speak English. But they needed to provide for the family. So that was kind of how a lot of Vietnamese immigrant built a life here in America. And I grew up seeing that being a big part of my family and people around me too in the community. Okay, so now let's talk about why I decided to go after nail salons. Right. So it is not a good business on paper because it is people intensive. It is, there's no assets involved. At the end of the day it's literally just a group of people providing a service for customers. But when you really look at how it runs, most customers, once they find a nail salon nail technician that they like, they will keep coming back. Very similar to finding your favorite hairstylist or barber. Right. So there is a group of core customers that will keep coming back and that is your recurring revenue. And people like to get the nails done very consistently every two weeks. They come not only just themselves, but they bring their friends, their family, their children, their mom and their dad. Right. So it's a, it's a business that built from a group of core customer that also help to refer it to because it's a very relationship driven business. So for me that is a pretty strong foundation of having that core revenue recurring group of people. Then on the other aspect, I think why people think it's not a good business is because it labor intensive. They don't think it is something that you can replicate easily. But I disagree. I think if you come up with a good enough process so that everyone perform the task uniformly, you can kind of replicate things so that make sure that the experience is consistent and it could be copy day after day, location after location. One of the reason why I believe searchers don't go after services like nail salon or hair salon is how much cash is involved in the transaction. So it is a little bit harder to do due diligence. So you really need to understand how this industry is run in order to kind of look at the numbers and kind of think through, okay, exactly how much cash was involved and how the different transaction took place so that you can actually do a good due diligence on it. And I have that, I guess insider knowledge because I grew up around it. So I was able to look at the nail salon on paper and in reality know exactly whether or not it's a good business. So I think for me that was a unique advantage that provide me the comfort to go in and say, okay, I, I believe that nail salon is a good business to go after. And another thing is a little bit obvious to me is a lot of my Vietnamese relatives, they were able to raise their kids and send their children to college and have a really comfortable life doing nails. So inherently it is a good business and I saw that firsthand and I know it firsthand. So you just need to dig a little bit and understand how this industry run to believe that it's a good business. And I have that unique advantage.
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A
The team at Pioneer Capital Advisory has started offering peripassu debt for SBA business buyers. That means they can help unlock up to $3 million of conventional debt on top of the $5 million limit of SBA 7 loans. So Pioneer can structure larger, more complex acquisitions. Listen to our story with Anika John from one of their clients who did just that, buying a $10 million business. As a first time self funded searcher, the Pioneer team has closed more than 100 SBA loans averaging timelines well below industry standards. Founder and owner Matthias Smith and COO Valerie Stash bring over two decades of SBA lending experience. Matthias and Valerie have a full bench of analysts and associates who work your deals with them. A true deal team.
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Not just a single point of contact.
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Visit pioneercap.com or click the link in the notes.
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B
Okay Truck. Well we're going to return to talking about nail salons broadly. But before we do, let's get back to the story itself. Your first acquisition, your first nail salon. Tell us about where you found it, how you bought it.
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C
Yes. So I moved back to Austin, Texas to embark on this journey and I was very specific and focused. Okay, I want to do nail salon in the Austin area. So I kept an eye out looking at different things like bis, by sell, even Facebook group. And I actually befriend the owner of a nail supply store here locally. So this business provides supplies for the majority of the nail salons here in the Austin area. So she has knowledge of businesses that being sold. The reason why they selling, they tend to gossip quite a bit whenever they go buying supplies. So she has a lot of knowledge of which one they selling, why they selling as well as give me a really good understanding of what the revenue just based on how much stuff they purchase from the supplier. So she became one of my deal sources. Right. So through her I learned of the things different businesses that came up for sale. And the first one that I decided to go after, it came up in the location in South Austin, which is where I'm located. So it's relatively closer to home for me. It was the right size that I wanted to go after, as well as the purchase price that I'm comfortable with. So that's why I decided to reach out to the seller. There was a couple in their late 30s, so they have a personal reason they needed to sell. So when I went and visited the locate, the salon is. It's nice. It ha. And then when I look at, you know, first glance at the tax filing for the previous year, the numbers look right. So I decided to give them, hey, hey, let's. Let's pursue this. So send them a letter of intent. And then really got the paperwork to go through the numbers and then apply.
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B
Let me. Let me stop you there. So you found this business on biz by sell or via your contact at the nail supply store.
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C
She told you it came up on Facebook first. One of the thing that I have told many people is there are so many different Facebook groups for everything. Right. So small business owner in every kind of industry will have these Facebook groups. So I join a lot of them, and then they constantly post questions or seeking advice. You know, they want to share about the industry, but once in a while they will post like, hey, I'm looking to sell. So this one came up on Facebook group, and then I validated that with my friend who is this owner of the nail supply store. And she's like, yeah, like they told me they look in the cell, and this is the reason why. So that's what. That's when I decided to go visit in person. And once that happened, it looked good. Just my first impression of the salon. It looks nice. It has a lot of potential. Location was great. So that's when we decided to enter the loi and truck.
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B
Tell us about. So the kind of bullet points of a salon. Size Chair. Chairs. Right. Number of chairs. And then, of course, the typical financial metrics. How do you evaluate other than the esthetics you walk in? It's n. How do you evaluate a salon? What are the metrics? And what did this one have?
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C
Yeah, so I actually went back and forth a lot on the size question. So when I first started thinking about it, I. I wanted to go a little bit smaller because I wanted to roll them up. So I said, okay, maybe managing multiple smaller ones. So when I say small, it would be anytime from six to ten pedicure chairs. Right. So that we're looking at the size, the physical size is probably 1000-1200 square feet. So that considers smaller and a lot of nail salon that fall in this size, they still make really good money. But what I realized is that it makes a lot of good money because the owners also work there daily. The owners are typical most of the time. Also one of the nail technicians. So they, they doing the nail work and they manage the salon. Right. So their labor is their profit. Right. But that's not what I want to be like. I don't look, I'm not looking to become a nail technician. I want to manage. So I needed to build my management cost into the financial model. But at the same time, a key learning that I realized as I started thinking and talking to people is because the owners are so much they involved in the day to day, I need to quantify exactly how much revenue they generate just for that business to sustain. So when I really thought, okay, I need to remove the revenue that generated from the owner, but add in my cost as a manager, then I quickly came to the realization that the size I need to look at is medium to largest size. So 14 chairs and more not smaller ones. Right. So that kind of what I use. Okay, like how big is it? 14 chairs minimum 1500 square feet. Right. Something like used typically is a retail size space here in Texas. And then from a kind of quick math calculation like anywhere from they can generate between $800,000 in revenue to 1.2, 1.5. If you're looking at the this size like medium sized business, every state is different. Texas, this is like the right range, about 800k up to 1.5. Some of the larger one that has like 30 chairs, 40 chairs. These massive mega nail salons that now actually is a Trend can generate 2 million-plus in revenue easily a year.
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B
And what did this one have in terms of square footage, chairs, revenue, et cetera.
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C
So 14 chairs, perfect. Your threshold, 1500 square feet. And then it was generating around 900k to a million in revenue, reported revenue. So it actually fall perfectly within the range of what I wanted to get for my first one. And that's why I entered the loi because it fit a lot of the numbers that I set for myself.
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B
So let's talk about. So you said 900 to 900,000?
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C
900,000 to 1.1 million. Yes.
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B
Revenue for this one. Okay. And so let's talk about how good a business it is, the profitability and to your, the point that you just made that in Many cases the a manager, there is no manager or the owner is the manager. And they're. So they're managing and they're doing nails. So they're actually doing some of the revenue generation, all of that. How do you. I guess first what were the earnings of this business? The sde and then how. How did you really think about that after taking out the fact that, you know, you don't want to be the one, you know, that they were generating revenue and you're not going to be doing that.
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C
And I would say roughly 25% margin was. Is kind of what a nail. Like a profit margin for a nail salon. So a 900,000 revenue. So for this one specifically. Right. Like in the previous year reporting, we were looking at around 22% profit margin. So I mean, I said profit margin but like fte. But what key. The key things that I brought up earlier is reported income doesn't necessarily have the cash that was cash transaction. So there is a piece of the business that is done by cash. The largest salons now have moved away from cash payments. So it's probably less than 10% of the revenue is in cash. Right. So. So you can kind of feel, and this is one of the interesting learning is that the larger the salon, the larger the business, they were more careful with how much they take care of their paperwork. Right. There's a lot more record. There was bank statements, there was POS statement so I could quickly validate. Okay, this is the reported income. And because this is a larger business, they afraid that if they don't report much of their cash income, then you know, there'll be trouble. So there's a little bit of comfort in knowing that yes, there is cash, but it's not that much cash that was under the table. Right. So I was able to quickly understand that. Okay. Like whatever they reported on their tax income is the majority of the revenue.
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B
Um, so in your ca. In this, the case of this salon though, this is not a big salon. This is a. Not a small one.
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C
Yeah, it's a medium size. Yeah.
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B
So the 900,000 to a million dollars of revenue you thought was maybe there was an additional 10% of cash?
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C
Probably. Yeah, less than 10. I would say maybe like, okay, 5, 7% cash. Right. A lot of them, the smaller one has a lot more in cash because they do things like cash discounts. Okay. They want customer to pay in cash. With the largest salon, they don't do that anymore because it's harder to manage cash. So the management doesn't want to Manage that much cash income anyways.
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B
And when the seller is claiming that they have $100,000 in cash a year, are they expecting you to pay for that, the earnings that comes from that? Because in other words, like a lender, you know, an SBA lender, a banker is not going to underwrite that cash. They're just going to act like it doesn't count.
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C
Exactly.
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B
But do, do, do sellers understand that or do they expect to get credit for that?
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C
No, they understand that too. They don't expect you.
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B
They do.
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C
They don't expect me to pay for it, but I use that number as kind of like a washed out for how much they generate for the income. So I just say like, okay, like, okay, let's don't count this. So I would just in my head calculate this as what you bring into the business by actually doing nails. Right. So for me, removing the cash from the conversation by understanding, you know, what the average industry usually see in term of cash, I would kind of, I use that as like, okay, this is how much the owner is usually generate by doing nails. A lot of time. They don't do nails like 100% of time, but they step in when the store become too busy or they only work on customers who have been their customer for years and years. Right. Okay, so for me, that's kind of like a washout in term of, okay, there's this cash now and then there is this revenue that usually the owners would generate themselves. For me, just to keep it a bit simpler, just kind of wash them out. Right? Just this is a net zero number because like you say, SBA loan is not going to underwrite that cash amount.
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B
Okay, but so the revenue that, the revenue that they're generating, you have now kind of canceled out. You're not worried about that as much. You cancel it out with the cash, the cash side. So those two things cancel out. But still you do need to take into account the fact that they're the management. So, so you don't. Because you don't. Maybe initially you'll be the manager of one of your acquisitions, but obviously for this to scale, you need to have new managers for all the locations. And in general, these owner operators are managing them. So how did, so, so the earnings of this business, the one, your first salon, were what, what were they? What were the earnings?
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C
Oh, you. Okay, so I said revenue like it was fluctuating between the years, but let's just say on average $950,000 a year. Their reported SDEs was around 220 and
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B
so 220 of SDE here. So how did you arrive at the kind of the adjusted EBITDA number with a manager in there? Walk us through how you how you thought about those numbers.
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C
Yeah, so for me when I think about the manager, right. So I kind of spent a lot of time also looking after posting on indeed on Facebook Marketplace and there's different publication in Vietnamese publication that post job site for looking for nail techs and managers. So there is a kind of like an average salary usually people who looking for like an assistant manager or like a receptionist but but most of the time they kind of act as like a assistant manager slash managers. There's roughly about you looking at paying people between 6,000 to $8,000 a month. Right. Depending on the skill set they bring to the table. Right. So roughly I call us calculate okay. To pay a manager I need to budget 80 to $85,000 a year to have a manager who is good and can run the salon once I set up the process and all of the different system that I want to implement. So yeah I would say 80 to 85% was what I use as a manager slash a receptionist management salary for my budget and then I need to be able to pay myself too right. Like that this business need to generate enough income for me because I was quitting a relatively high paying job. So I need to sustain myself as well. So I built the manager salary and my salary. I use the same for me too like the same number bait that into that calculation. So 220 plus another 150 to 160. So around 370. Right. For me is what I would say is it need to generate in order for me to be able to pay in order for me to comfortably have another manager and then pay myself like a steady income of.
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B
Of also 85,000. 80 to 85,000.
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C
Yeah. Yeah.
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B
Wait, but I'm sorry, why are you adding that number to the 220? You should be subtracting it. So if there's 220 then you take away 80. Call it 80. So you're at 140. Yeah, that's for the manager and take away another 80. That's for you. So you're at 60.
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C
You right. Like that's where we at. Right. And it was more than enough to generate that 60. But a little bit of what I was trying to thinking long term is I need to be able to roll the profit of this first one into like my roll up plan. So I've always. Yeah, so I Try to make sure that this business can generate enough SDE for me to pay the manager myself, half enough of leftover so that I can within three or six months think about the next acquisition.
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B
So use the cash from this one.
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C
Yes.
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B
The earnings from this one to buy the next business or to at least. Ah, okay.
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C
Put down the down payment for the next one. Right, I see. Because doing just one nail salon versus like going after like a three to five million dollars business is very different. Right. So I need to quickly think about one is not enough. So we need to think about like do I can I generate enough profit that I could use it to roll it into the next one.
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B
So when you looked at the earnings of this business, the220, what you you weren't looking. Typically searchers will look at that number and say I'll pay myself out of that, I'll pay the manager out of that. No, you were saying what I need to, I need to grow this business so that it generates new earnings to cover me and a manager. Because the earning, the existing earnings I want to put toward the next acquisition.
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C
That's right, yes. Thank you for summarizing that. But yes. So for me it needed to generate more than what it need because of my long term plan.
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B
Yes. And, and then what about debt? We haven't talked about debt. Usually a big part of the earnings is going to paying down debt. What does it look like? What are the. Yeah, what is the debt piece of this? What do you buy the business for? How do you structure it?
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C
Yeah, so I bought the business for 380, so just a little bit more than 1x 1.5x. So not very expensive. Right. At all. And then I used SBA loan. So I put down 10% payment plus closing costs and all of the other due diligence costs that was involved throughout the whole process. So I reached out to a few banks that have historically do SBA loans. But what I ran into actually was that they turned me down because the ticket was too small. So a lot of the as big like banks are going after probably like check size a million plus. So something that is 800k, 300k. Right. Like for them they were too small. So I had to kind of like talk to different banks that was willing to buy a size that is much smaller than what they usually do. So I found Cadence Bank. They came up doing my search on searchfunder.com website and then we talked and then when I reached out to the banker, we quickly talked about this high level, what the numbers look like, what's the revenue, what's the earnings, what's the purchase price look like? And they were surprised, right? Like through our first conversation, they really, they just did a quick math and they realized that, oh, it is cheap. They were selling it for very low multiple and they were willing to go through the due diligence process. And I think because I understood the nail industry well, I could explain, explain to them a lot of this stuff. And then they know my background coming from finance, right. So I think when the banker look at the deal and me as a buyer, they were okay, like, she's not crazy. And the size was a bit smaller than what they used to, but the risk is not that big. So they were willing to give me, approve me for the loan. So. But the interest rate was a little bit higher than I would say out of SBA loan. But I was willing to accept it. It was only like 25 pesos basic point higher than what my research have shown. But I was fine with that because it's not that big of a deal in the grand scheme of things for me to be able to pull off
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B
the first purchase and the multiple here. Why is it so low in. Was it just in this case or is that something that you see in the category broadly?
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C
I think it is broadly. How that is broadly how it is in the nail space. And I think a lot of it come back to some of the points we've been talking of its owner operator. There's very few assets involved. A lot of time when the owner, the seller walk away, they take away a big chunk of the potential revenue that was baked into the calculation. And it's relatively, it's run by immigrants. And I'm, I'm sad to say, but many of them are not financially savvy. Right. For them, this business have generated a lot of good income for them over the year. So when they do decide to sell, it's not because they needed the money a lot of time they retiring or they have a personal reason that they need to sell because they're moving to different states. So they not looking what we in the search space think as like an exit strategy, right? Like they don't think about selling the business in the sense that we think about it, oh, this is an exit. I need to make good money for them. A lot of time this business have made, have generated over the years really comfortable earnings and now it's. They need to sell because they have a personal reason too. So they, they're not savvy enough to, to Kind of think, okay, 2x or 3x is what I need to.
- [38:42]
B
On the other hand though, the, the. They are very small, very fragile businesses and so they, they, it would probably be hard for them to. Any business that is small and fragile like this with deep, deep owner involvement and operational complexity. The language piece of this, the cultural piece of this which we are going to talk about, it's actually probably hard. There probably aren't that many good buyers for this business. So in, in some ways there, they, they, there should be a, a discount if you will. You could argue that that discount is, is, is, is the market, you know, a natural price that they would find in the market for the realities of the transaction.
- [39:29]
C
Yeah, I mean you are correct in the sense that most of the time when they do sell, they sell it to a nail tech who are ready to become a business owner. They probably sell it to another Vietnamese person. So, so that's why they price it. I mean the business is priced a bit lower just so just to make that transaction a little bit faster. However though, I have now seen many more deals that are leaning toward the 3x side, the 3.5x multiple. But we are talking about much larger nail salons here, right? Like the large scale. I don't know if you've seen these 30 to 50 pedicure chair, salon, right. Like they operate like an actual mini enterprise. And these are going for, you know what you would see 3x4x because most of the time these bigger businesses have already built that into the system. They have a manager, they have probably two or three receptionists. The owners are no longer doing the nails, they're running the business now. So it's a little bit more sophisticated business model now. So that is that get built into the price. Whereas the small size and the mid size is kind of in this weird space of okay, like it's a business but it's still a mom and pop run business. So it's. So there's a little bit of like okay, you need to discount it like you say a little bit so that someone else is willing to put in the work by, by buying this business and continue to operate it.
- [41:13]
A
Buying a small business sounds simple. Find a company, due diligence, get a loan close. In reality you wear every hat just to get the deal done. And then the moment you close, you have to throw those deal making skills out the window and learn how to operate. You shouldn't have to rebuild this infrastructure from scratch and you definitely shouldn't do it alone. That's why Walker Deibel created Acquisition Lab. What started as an accelerator has expanded into a complete ecosystem for acquisition entrepreneurs. Over six years, the lab's 1200 members have acquired over a billion dollars in businesses. The Lab puts everything under one roof. An active community, deal reviews, post close services, and a dedicated fund helping experienced operators buy larger businesses. If you're serious about buying a business, come see why Lab members have a 40% success rate. Learn more in the show notes or@accentlab.com acquiringminds
- [42:29]
B
okay, Truc, great. So that was the first business. Why don't we. While we're talking about the acquisitions, let's just hear also about your second acquisition and then we will circle back to all of the unpacking the business of nail salons in general. So the second one please.
- [42:46]
C
Yeah, the second one is though I looked at it about probably seven months after I closed out my first acquisition. The second one, again, I felt like that was the right size for me. I felt comfortable with that. So again, similar 1500 square feet located in Austin, South Austin a little bit. It's like 15, 20 minutes away from my first location. So that it's manageable for me to go between the two. And at this point in time I have a good manager in place at my first salon. So looking at the second, the second one I looked at, the number was a little bit different. They were not doing as well. They was generating about, I would say 500k in revenue and the SDE was around 90 to 100k. So I was like, I think it was, remember like 95,000 was the SDE and I paid $90,000 for it. And this one was, this one was quick and this one was because of the price was so low, I paid it all. I did not involve an SBA loan. So I was able to use my savings and the earnings from my first location to kind of buy it outright for my second one. But the reason why this one was so much cheaper was because the owner was not in like he, he didn't care about the business it has. It was located in a really good location. It's, it's in this really busy commercial centers with businesses around it that generate a lot of traffic. But the, the seller, the previous business owner didn't really care much about the business anymore. They were ready to move on to the next business idea. So they were looking for someone else to just quickly buy it so that they could move on to the next thing. So yeah, I was able. And then this one, I found it because of the nail supplier owner she told me about it. She said, hey, like this one located really close to you, it's the size that you want. They not generate a lot of revenue, but they have a lot of potential because of the location. And they have good staff. Like, they have a strong team that was willing to.
- [45:22]
B
And what was the size in terms of chairs, square footage?
- [45:26]
C
1600 square foot. So about roughly the same size chair was 10 pedicure chairs, but more manicure tables. So on average, it's about the same square footage and the same kind of like, station. But it was built in a way that there was enough empty space for me to add in more pedicure chairs if I wanted to. So currently it's 10, but there was enough space for me to make that either 12 or 14, or adding things like waxing services, doing facial services. Right. So, like, the space was there even though it has fewer chairs, but the space was there for me to put in more services. Yeah.
- [46:13]
B
And so you. So the potential here was similar to the other one? Yes, fully. Fully actualized. And was it also Vietnamese owners? Yes, these disinterested owners were Vietnamese. Okay.
- [46:24]
C
Yes.
- [46:24]
B
Okay. Okay. And so what have you done with both? Okay, let's go back to the first one. You. You've. You've actually have, in fact, grown both. The first one, reminder to everybody, it was about nine. Call it $950,000. The year before you bought it, what is it after your first year of ownership?
- [46:49]
C
After first year? We closed out last year as 1.25. So. Yeah, so after the. The first year. Yeah, 1.25. So I.
- [47:02]
B
So that's 30, 33% growth in the first year.
- [47:05]
C
Yes.
- [47:05]
B
That's great.
- [47:06]
C
Yeah, yeah. So I was very, very happy with how that turned out, but it was a lot of work. So go back to your question. What did I do? Right. So the first two, three months, I didn't change anything. I was. But I was there every day. I was manning the front desk, answering the phone, taking appointments, talking to the technicians, meeting the customers. So the first two and a half months, I did not change anything. But by month three, that's when I started to implement new CRM. So. And then a new POS system that was a little bit more mainstream and fit all my needs in terms of keeping track of customer visit, technicians, history, technician earning. So I was able to find a software that give me what I need, and then I standardize all the services. So, for example, pedicure. Each type of pedicure, I type up a documentation of what are all of the different steps involved and how much time should be spent on each step. Because of this, no matter which technician a customer gets, they are guaranteed that they will get a similar service and you can't cheat them out of anything. Right. So it's very standardized. Yes. Obviously a customer will then have a personal preference for some technician because of personality or personal connections. But as a whole, the process is standardized and that to also keep the technician accountable too. Right. So in order for me to trust that they will do a service that is high quality and provide the best experience for the customer, there is this documentation that everyone has, everyone knows. Similarly, I spend a lot of time on hiring and retention because turnover is really high in the nail industry. So when someone want to join our team, I spend some time with them just to set the expectation from a personal and like interpersonal standpoint. Like, hey, like this is what I'm looking for, someone who is willing to learn. You don't necessarily need to be the best technician as long as you're willing to improve, as long as you're willing to put in the work and stay with me a long time. Also, here are the policy. I write everything out, like what time you need to be at work. No argument between a technician or if you have any kind of trouble, you go to me or the manager. So have all the policy that I could possibly think of. Like things that I observed over the first two and a half months sitting there, I typed everything up and make it into a policy document that all the technicians see and have for the record. And then because of implementing things like that, I was able to put in even if I'm not there. Like my receptionist know what to do. And then later when I hire the manager, he also know exactly what, what needs to be done. If someone push back, we can quickly point at the documentation and say, hey, look, this was clear from the very beginning. So things like this when I was working in corporate America, right? Like sop, that concept didn't exist for the nail salon that I bought. But I was thinking like, hey, I used to do this for my client. I should do the same thing for my own business now. And that has helped a lot.
- [51:12]
B
And how understanding the value. Understand that there's a lot of value to professionalizing a business like this, but it doesn't necessarily lead to revenue growth. So what was it that you, that you did to grow revenue by 30, 33%.
- [51:27]
C
So because we were able to standardize all of our services, the customer now every time they come back and visit is the Same high quality that they receive no matter what technician they see. So because of that I was comfortable with asking them for like hey, leave us a Google review or refer us to your friends and your co workers. Right. So the customer now see that, oh, this is great. A lot of things have changed. They're doing a lot better. I like the service more. So a lot of our referrals now coming from a customer who now know that every time they come back the quality will be consistent. Then the second piece was actually came from hiring as well. Because now I create a workplace where people can come and work and there's no drama. There's no argument. Right. So I can hire a really good technician and guarantee them like, hey, like work with me. We'll be able to have this. We'll be able to build a long term relationship because of the customer referrals. Having better tech that helped to drive a lot of new customer and which
- [52:45]
B
lead to higher customers as well.
- [52:48]
C
Yes. Recurring revenue into the store. Yeah.
- [52:51]
B
So actually professionalization in a business like this is b. Basically leads to a better customer experience. A better customer experience is perceived is. Is. Is the same thing as better service and better service leads to more business. And so people come back and so it's a great. In fact there is a direct correlation between professionalization and. And more revenue. Okay. And then the second business, the salon number two, which you only closed on seven months ago. Right. So it has not been a full year yet.
- [53:22]
C
No, no. Seven months. Yep. Not full year.
- [53:26]
B
And you're. Are you projecting to be able to have grown it as well?
- [53:30]
C
So it's been seven months since the second salon and I do plan on growing it and we've seen growth over the last, I would say quarter. Right. So similarly, the first two, three months was really about observing, kind of figuring out what needs to be changed and then applying all of the learnings from my first location to the second one. So we have seen growth in the last quarter. Right. So in the second quarter that I have the business. Yes. But I think for this one my plan also kind of think about implementing additional services. Like earlier I mentioned there is physical space to add in things like doing eyelashes, doing facial. So growing it by adding more services and other kind of things I'm looking at to how to grow and.
- [54:25]
B
And now that you're inside this business, do you feel like it could. That it had the potential that you saw from the outside that was unrealized because the owner really didn't want to be in the business? That's Coming to fruition. It is showing potential, this one.
- [54:43]
C
Yes, I think so. I think it is working out a way that I think it would work out by professionalize the services, using learning from one location to apply to the next one and kind of speed up that process of improving the store from a financial perspective. I learned a lot from my first one in term of how much things costs and how much revenue you can generate per chair, per technician. So all of that learning really helped me with thinking about the number two. And now maybe I'll read I'm ready for number three soon. And as a whole, yeah, like, the. The profit margin is around what I was thinking of a little bit less because I spend a lot of money now to. To making the space looks nicer. Right. From a capex investment to like buying new pedicure chairs, remodeling this shop. But it still fall within the profit margin of what I'm comfortable with. So. Yeah.
- [55:54]
B
So these, these two stores or. Or salons. Excuse me. What do you fully realized if you know, in a number of years when you've gotten them to their fullest potential, what do you think total revenue could look like in total earnings to you?
- [56:10]
C
I would say with 14 pedicure chairs and like, the size that I'm going after, I think fully realized it could be 1.5 to 1.8 million, like in revenue per year for each of these locations. Yes.
- [56:27]
B
So $3 million in total revenue.
- [56:29]
C
Yeah. Yes.
- [56:30]
B
And 20%. And the margins?
- [56:32]
C
I would say 18 to 20. Yes.
- [56:35]
B
So half a million to $600,000 of earnings.
- [56:39]
C
Yeah. Yes. And.
- [56:41]
B
And, and that's with managers in both locations. That's taking into account.
- [56:45]
C
Yes. Yeah.
- [56:46]
B
The expense of each place run by a manager.
- [56:48]
C
Yes. Yeah. Yeah. I think it is Definitely doable with 1.5 million per store. 18 to 20% margin with a manager in store. But I think the beauty of it is, like, as the store get, the bigger the revenue get higher, the profit margin will be a little bit higher. Will be higher. Because this whole thing can run on scale. You can scale a lot of things just by generating a lot more income. Is similar to a restaurant. Right. Like, the more customer you get in that chair, you. You turn them. You optimizing the usage of your square footage. So, But.
- [57:35]
B
But also similar to a restaurant, you. There is a ceiling to the revenue. I mean, there's only so many chairs and, and so many. I mean, you can do some quick, quick math to figure out how many turns a day there. The whole place can surf. Yeah.
- [57:49]
C
Yeah. I Mean, like, there's also just. There's only so many technicians I can hire to fit into a 1500 square footage location. Right? Like, sure, yeah. You can't. You. You can't have too many people in that space at any given time.
- [58:05]
B
And so the key kind of metric in this world is. Is revenue per chair. Is that what it is? Essentially? And so. Or how do you think about it? How should, how should this audience think about it?
- [58:20]
C
I would say it's. I would say yes, roughly. I think it's. The math is. Yeah, you can roughly think about revenue per chair. I think the maximum in my head that you can go is $100,000 per year per chair in terms of revenue.
- [58:38]
B
Okay.
- [58:39]
C
If you run it really well and really lean. But I think most of the time what we're seeing now is probably like 50,000 revenue per share per year. 50,000, right. 50,000 to about 70,000 just to kind of keep it as like a quick napkin. Math for me is how I think about it, but there's a lot more to enviro because not only you do pedicure in the chair, you also do like manicue services. But that's like a rough benchmark mark that I use to kind of think through the number.
- [59:17]
B
So would you say it's going well then?
- [59:19]
C
Truck?
- [59:20]
B
Are you, are you. Do you feel like your, your roll up is well underway and you're learning and it's. You're going to continue with it? How do you feel about this entire project at the moment?
- [59:33]
C
Most day, I feel it's going well. But some days are really hard. And I will give you an example of why it's been really hard is this. Last February, one of my nail salons had a huge plumbing problem. One of our water pipes that was underground got busted. And what that means is I had to close for almost three weeks to break through the concrete slab to find a leak and fix the plumbing. And that was a huge expense and a huge loss in revenue as well.
- [60:17]
B
Yeah.
- [60:17]
C
So that I guess, you know, a lot of people have told me like, hey, like, business ownership is not easy. There's a lot of fire and emergency that happened out of nowhere and you don't really plan for any of this. So that was a little bit of a setback for Q1 of 2026 for me. So that was a little bit hard. But I try to see it as a learning experience. I learned how to deal with emergency and think about how to get contractors in to fix it and how to deal with customers. So that I don't lose them to other salon because people still need to get their nails done.
- [60:58]
B
Yeah.
- [60:59]
C
So yeah, it was hard, but I'm glad I'm doing this right now. I think it is still a learning experience. And for me personally, I believe that any kind of career, any kind of job has its own challenges. This is just my own set of challenges because this is the path that I'm pursuing. So for now I'm happy that I decided to do this and I plan on continuing, continue to doing this for a few more years. And that was also my plan at the beginning too. Like I was gonna dedicate three to five years to do this right. If it does well, then we'll do five years. And if it doesn't, then, you know, like next year will be year three. And then I can decide what to do with. With the two or three stores that I have at that point. For now, what the next plan is to really grow number two a little bit more, stabilize number one again, because that's when. That's where the pipe bust happened with salon number one. So it takes a little bit now of like what I say redo just to make sure that all the customer come back to us, making sure that my financial look right again to cover for this huge expense that I needed to spend to fix everything. And then probably another three or four months and I'll look at another one. So in. To be honest with you, my plan get delayed a little bit now because of this Thai bust that happened.
- [62:25]
B
Yeah. Yeah.
- [62:26]
C
So did the plan detail a little bit. But I don't think it's not deterring me from doing what I plan on doing.
- [62:36]
B
And overall the kind of business thesis that you can acquire these and grow. Grow revenue and make professionalize them, make them much more efficient, makes them. Make them better user experiences. It sounds like all of that, all of is is playing out is intact. That just strictly from a business perspective, the plan is working.
- [62:58]
C
Yeah. And the part about like the people aspect of it too is actually the more that I do it, I realize that I'm good at this. Like I'm. I'm a very extroverted person. And spending a lot of time interacting with customers is actually not very tiring for me. I enjoy it too. So that's another aspect of why I am liking what I'm doing is the piece of interacting with my technician and meeting customers. And that actually makes me pretty happy. So I, I don't.
- [63:37]
B
But it sounds like there is, it sounds like there is doubt in here. Though, like you're, you're not fully committed to taking this to five years and
- [63:45]
C
beyond, I think, because we talking at the time when I just went through such a hard.
- [63:51]
B
Yeah.
- [63:52]
C
Problem to solve in one of my salons. Right. So it's giving me a little pause, but I don't, like, I say, like I'm, it's delaying my plan a little bit. I need to rethink my financials and my next step. Like, exactly. When we look at the next one. And I think the doubt comes from a little bit of an internally too. So is this big enough for me? I am coming up to my five year reunion with my MBA cohort. So we're going to have to go back to school and talk about what we have accomplished over the last five years. And then there's this.
- [64:34]
B
And by the way, your, your business school was Harvard.
- [64:38]
C
Yes. Yeah. Yes.
- [64:40]
B
So no one, no one likes to go to, to an HBS reunion. The most ambitious people in the world. And you have to go back and everybody's like, what have you accomplished? Are you president yet? Yes. I can imagine that that would be uncomfortable.
- [64:54]
C
Are you a C suite executive yet? Right. So, yeah. So there's a little bit of, I guess internal kind of like hesitation. I, I don't, I don't think it is a doubt, but it is something that I keep coming back to is like, am I big enough yet? Like, why is it not growing as fast as I wanted it to? Why am I not already, you know, on number three and number four and number five? Right. So I think a lot of this is internal of myself trying to push it. But what I've learned over the last almost two years now of doing this is that everything takes time. And especially when it comes to services, businesses like this, when a lot of people are involved, I need to put in the work. The technicians need to see that I'm there all the time, that I'm also willing to put in the time and the effort. And it's not something that you can buy and kind of forget about it and just let people do the work for you. So this is kind of like the two sides of me trying to battle it out like this. This is internal hesitation versus, in reality, things take time. So that's where I am, to be honest with you. Yeah.
- [66:10]
B
How, how big would it need to be for you to stroll back into Harvard Yard with confidence that you've built something, you know, substantial?
- [66:18]
C
Maybe the next union would be what, 10 years or five years from now? Maybe revenue is somewhere like 15, $20 million in revenue. Right? Okay, yeah, something like that. Because right now a lot of my friends are doing AI startup and they like, oh, we a unicorn. We have $1 billion valuation. Right. So there's a little bit of this but pressure, but trying to keep my myself grounded here. Yeah, yeah, yeah.
- [66:51]
B
Well, thank you for your honesty and transparency on that truck. Let's do talk directly about scaling this. It's taking longer than you thought. We're hearing that you're interacting with customers, we're hearing that you're interacting with technicians. We're hearing that you actually like that. So I'm getting a picture of somebody, you very in the business and that, that actually for your psyche, that hasn't been a bad thing. You, you actually enjoy it. But it's not, it's not scalable. If scale is your goal, there's only one truck and if you want to buy five and 15 of these, it's got. So how, how do you think about that? How much of your own personal involvement is necessary in the current businesses that you have and what does that look like to buy? 3, 4 and 5?
- [67:42]
C
So for every single salon that I purchased, I dedicated for a few months just to being there the majority of time, right. Because I needed to. One is the staff. The technician need to see that I'm also in it with them. I think that's really important to retain people just so that the technicians see that you don't come in you in it with them. So for me, I spend a lot of time at the beginning building relationship with the technician and then with the business, AKA the customers. Just kind of start thinking about like who are the customer, why they come to this salon versus the other so that I can improve on the things that they like and then remove the little friction that exists in the current operations. So right now I work in the business quite a bit. And even when, you know, if I, if, if a receptionist can't come to work because they have a test or whatever, then I'm the one that needs to cover the front desk, which is not ideal if I'm looking to scale. Right. So for me is that I need to be able to get to the point where the revenue is strong enough where I can have a manager and they work five days a week. The salon opens seven days a week. Those two extra days or like on the weekend when the traffic of customer is really high, you need the manager and the receptionist. So just need to make sure that the revenue is generated enough so that I have that comfortable Salary for the management layer. So that is something that I want to get to for each and every single location. I try to think about them individually for now because I don't think I'm at the point where I can kind of think of them as like a, like a branch of like a holding company just yet. Like this had to be exist. It has to survive, it has to generate enough money on its own before I can think about, all right, removing myself. Can it run? If it's yes, then great, then I can focus on the next one. And when I have, I think when I get to number three and number four, number five, then I can start to remove a lot more responsibility from myself. So right now I don't do the day to day workforce salon number one, but I do payroll. But I, but I do finance because that's my background. So I'm not giving up that piece just yet. Right. Inventory management. I do that now because I want to know where my money goes. But as I get bigger then I start thinking about, okay, like I can't hire one inventory manager for every single location, but I can hire one for all five. So that's kind of how I think about the eventual structure of what I'm trying to build. Several location that can run by itself with enough profit margin that can sustain a regional management layer. Yeah. So that's kind of where my head is at. Why I'm trying to spend a lot of my time building a strong enough operational structure so that I can walk away whenever I want.
- [71:20]
B
Yes, yes. And at that point you can buy more and continue to plug them in or not. You, you have a business that's generating a lot of cash and you can do something else. I don't want to use the P word passive, but it could be something semi passive and you could devote your energies to something else and you have a lot of optionality at that point. It sounds like you're working toward that. It doesn't sound like you're necessari running hard toward an exit.
- [71:52]
C
No, exit is not what I have in mind right now because I'm not there yet. Because I, I don't think I'm even at the scale where I can exit and sell this off as like what I want, what I picture it to be because I entered this journey with a roll up model in mind and I'm not there yet.
- [72:17]
B
Yeah.
- [72:18]
C
So I'm going to accomplish that roll up models first and then think about what's the next step. And for now it, like you say, it's not passive. It's not a passive income thing on the side because of how much involvement from like a unique personal involvement in this kind of business. Because like customers actually will ask oh, where's Chuck? I haven't seen her lately. It's a very, very personal relationship too. So want to make sure that we maintaining that because I think customer will not like it when they realize that the nail salon is now run like a PE backed venture.
- [73:04]
B
So it's not just the technicians who want to see you putting in the work. It's the customers who want to see your involvement as well.
- [73:10]
C
Yeah.
- [73:10]
B
Which is, which is natural because as. As customers as a customer myself of local businesses. Yeah. I like to the more independent the business is, the more I like it.
- [73:22]
C
Yeah.
- [73:22]
B
Yeah.
- [73:23]
C
And you're right. So like how do I balance that with the goal of rolling this up and having it run by itself? Right. So that's, that's a piece that I'm still trying to balance is yes I should be involved because that's what the customer prefer. But I can't do that if my plan is to have five or six or seven or 10. Right. So that's a little bit different of this. I think this is the unique trait of this a service business nail salon in specifically. But I think a lot of service businesses is. Is like this.
- [74:07]
B
Yes. Yes.
- [74:08]
C
Yeah. Yeah.
- [74:09]
B
And what about the whole circling back to the kind of cultural affinity that you have for this business and that many technicians owners but also technicians are Vietnamese. Is that is, is that that is the case? It sounds like in both of these, in both of these salons. So putting yourself in the shoes of the audience is this something that you feel like you your Vietnamese niss and speaking Vietnamese means you can do, but some a listener couldn't do if they're not Vietnamese. How much of that your Vietnamese language and culture has been important to your success?
- [74:53]
C
Yeah, I think it is a big part of why I have an advantage compared to other searcher but I don't think it is absolutely is a deal breaker if you're not Vietnamese. And there's a few reasons why. First now there is a trend where a lot more technicians are now non Vietnamese technicians. We have a lot of Hispanic, we have a lot of like Korean Chinese. Right. So now the, the industry made up of a lot more than just what used to be mostly a Vietnamese nail technicians. That's no longer the case. But I also see a development in the younger generation of Vietnamese immigrants. So people who were born here now they are also Entering the nail salon space not as like a searcher, but just this is like your family business and how you're going to continue to run it. They putting in a lot of like the, what we call like professionalize this industry now. Right. Like all of these massive nail salons locations are being run by younger Vietnamese American and they put, then they hire non Vietnamese receptionists and non Vietnamese manager to run them. Because not only do you need to connect to your technician, you also need to connect to your customers as well. Yeah, so I see a lot more people involved in this space who are non Vietnamese. So I, I don't think because you're not Vietnamese, you should not do this. I think you will have a little bit of a more difficult time. But it's not, it doesn't mean that you can't do it. And I now also are hiring people, Vietnamese, non Vietnamese technicians because I have a lot of, in Texas there's a lot of customers who are Hispanics and that was one of the things that we struggle with because I didn't speak Spanish and no one else in my shop spoke Spanish. So now we hiring more, more Hispanic technician so that we can have a closer relationship with Spanish speaking customers.
- [77:14]
B
And so how do you deal with the issue that the customers and the technicians might not be able to understand each other? The white woman with the Vietnamese technician who doesn't maybe and they don't speak each other's language or the Vietnamese technician next to the Latina technician and they don't speak each other's language, etc.
- [77:38]
C
Yeah, there's a, there's a lot of like three way or four way translation going on. Sometimes a lot of time the technician will help each other. Like one will speak better English than others. Right. So if there's, if the manager and myself are not, we're not there, then the technician that will help each other will help to translate. So that kind of organically will happen anyways. And then with the say like a Vietnamese and a Latina technicians, right. Like they speak broken English so they can communicate. And also one of those things where when you work at your job there's like a hundred vocabularies that you know of things that you need to say and you need to understand. Right. So like they understand the majority of what the customer wants and what the other technicians looking for so they could understand each other. Where I can help to develop a deeper relationship that's on me is to bring them out to team dinner or we have team retreat because that's like Just underneath, just the day to day, here's the vocabularies that you need to know. Need to develop a little bit of a deeper relationship then that's on me and my manager to help facilitate that closeness. For the technician. It used to be easier because everyone spoke Vietnamese but now we have non Vietnamese speak technicians then. But we still want to foster that relationship with each other. So yeah, there's a lot of multi way translation but I think it's doable, you can work through all of that because at the end of the day everyone, all the technicians are spending 10 hours a day, five or six days a week with each other. So they do want to get close to each other and you just need to help facilitate that outside of work a little bit.
- [79:50]
B
And what about a man being the owner or manager of a salon?
- [79:54]
C
Oh, you'd be surprised. Most of them are men actually.
- [79:57]
B
Oh yeah, okay. Yeah, actually so no problem there for 95% of my audience who are men.
- [80:03]
C
Yeah, actually if you look at the individual nail salon is usually owned by a husband and a wife and the husband usually takes on more of the, I would say the official paperwork or that aspect like customer dealing, customer facing aspect of it. And then usually the women are mostly handling the interpersonal relationship with the technician and maybe with the customers. So usually have both. But I also have seen managers who met like my manager, he's, he's been in this space for a long time. He has a lot of experience. But yeah, so he, he has been a great help to me running the salon. So it's not a female dominated industry when it comes to that management layer. Yeah, yeah.
- [81:04]
B
And truck. I'm, I'm reminded of an episode that I did early on, probably first 50 with a friend of mine, actually Sarah Romer, who bought a salon in Austin actually, but a hair salon and one. And it was a very challenging few years for her as owner of the salon. And one of the key challenges was, was her interactions with the. I don't know if they're called technicians in the hairspace, but with the technicians motivating them and just working with them, meeting their expectations, big personalities, artists. Is it the same, is it the same dynamic or the same sort of type of person? If you could generalize that. Are your technicians or technicians in the nail space?
- [81:55]
C
Yes, the answer is yes. The technicians are all of them. Most of them are commission based. Right. So they work on commission. So if they really good and they have a following of customers, they in a very strong position to negotiate with the owner. AKA me and your friend in, in that in her experience they can be very demanding. They are divas. Right. So because they have such a good following of customers that I need as well. So all of the really good technicians is they are in a strong position to negotiate. So I do have to cater to the needs a lot of times.
- [82:49]
B
And what they negotiate is benefits. But the commission, I assume there's a split. You agree with them to a split? Yes, is what it is.
- [82:58]
C
Yeah. And if they, and if they really good then they will negotiate a higher split of the commission. Right.
- [83:04]
B
And because you need to retain them in your. Because they're your revenue generator.
- [83:08]
C
Yep, they are. And then they negotiate other things. They'd be like, oh, you open at 9am I'll come to work at 11. Right. Because again they 1099 contractor. I can't tell them like you need to work 95. So they. A lot of time they set their own schedule. And then I have two.
- [83:30]
B
But then, but that means that you're like the 2F of 9 to 11. That chair is going to be unutilized and wasted.
- [83:39]
C
Yes.
- [83:39]
B
Those two hours that that chair could be generating revenue.
- [83:42]
C
So then I have to think about like I need to hire more technician to help cover the time that that empty spot. Right. So thinking about balancing getting more new technicians in so that I can still optimize the usage of my space.
- [84:03]
B
Yeah.
- [84:04]
C
And then, but again like what can I say? Like if I disagreed I was like, okay fine, I'll go work somewhere else. Right. So it create like another layer of okay, now I need to figure out, okay, I need to keep her happy, but at the same time covering this gap.
- [84:23]
B
Right.
- [84:23]
C
In. In the service that I need.
- [84:27]
B
Right.
- [84:28]
C
Yeah. So I empathize with your friend. It. It is a. And it's not unique. This is very, this is very common in nails and in hair, in massages. Yeah.
- [84:44]
B
So. And it is difficult. So for people listening, this is, this is a, a core feature of the experience of owning this business.
- [84:50]
C
Yes. Yeah. And I think it's because it's service. They are the one that generate the revenue and they, they will have a following of customers that I need.
- [85:04]
B
Yeah.
- [85:05]
C
So you do have to play to. To their demand. But there also is a limit though. Right. For me, I will cater to your needs. But when it gets to the point when I think it's detrimental to my own business, then the relationship doesn't work anymore. And that has happened. I have had let people go just because you want to show up at work at 11 doesn't mean that that's the right thing to do as a business owner for me to accept that. Right? So it sure there's a limit to everything. And that is something that I'm constantly learning. It's like, okay, like how far do we push this until when it become not beneficial to me and to my customers and to my business as a whole truck.
- [85:56]
B
I want to see if we can look at a listing on Biz by Sell for a currently for sale salon in my neighborhood and see and get your thoughts on it. I thought that might be fun. Before we do that and before we do that, is there anything else to say about your story or just the theme of buying salons overall for our listeners or have we covered it all?
- [86:21]
C
I think one of the things that I want to say as I've been on this journey for two years now is like, if you want to do search, you want to go buy a business. I think don't, don't get distracted by like the mainstream consensus of what would be a good business to buy, right? Like if you truly have a, you think a unique advantage in a space that no one else have thought about and just go after this, right? Because you don't want to be following everyone else. And if you are as a searcher think that you can bring the benefit because you have insider understanding of what that space is, just go after it. I truly believe that because that's what I did. And so far I've worked out right. Nail Salon was not a target. But I will tell you that over the last year, so many people have already reached out to me asking to check because they want to do the same thing. So things are changing, the industry is changing. I think that is applicable to other spaces as well. So one of the things that I wanted to put out there is yes, there will be businesses that everyone want to go after because it's so obvious that it's a good business to buy. But there are champs. There's a little spaces out there that could be really, really good business target to buy. So I, I would say dig into those and take a risk, like take a chance. So that's kind of what one thing I want to brought up.
- [88:10]
B
That's a great message. I love that message truck. But I, I, I will say though that that that does kind of also reinforce the sense that a lot of listeners are going to have is that that you did that you're doing this successfully because of the Vietnamese angle. And you know, for, for somebody else, it's going to be harder to, to pull it off. Now I, I, I've heard you that it does seem like the sound like the industry is becoming frankly less Vietnamese and so so the trend, the trend is, is in the direction of people more people getting involved who might not have that, you know, have, have nail salons in their, in their DNA actually as you do.
- [88:53]
C
Yeah, I mean but nail salon or I'm saying like maybe a different business type that no right not been what the, the literature tell you to go after.
- [89:05]
B
Right.
- [89:05]
C
Like if you kind of find your own little piece of of sector that makes sense to who you are as a person and who you are as a business. Business owner didn't go after it.
- [89:16]
B
Yeah, yeah. No right. Thank you for the clarification. You weren't saying that everyone should go after nail salons. Although I do want to underline here. People have already heard it. But just some of the things that do make nail salons in particular pretty interesting that they are more profitable than we they can be a successful well run nail salon above a certain size, you know call it 14 chairs can be businesses that generate a couple hundred thousand, 300,000, maybe even a little bit more of true earnings. True adjusted EBITDA every year with a manager in place. And there are a lot of them. So every you know, small town has multiple of them, let alone a big city. So it is a space where you could if you were wanted to do a roll up or have sort of a programmatic acquisition idea. It, it seems to lend itself very well to that just because there are so many and then the, then they're available for, for cheap. Frankly the multiples are really low. Except, except the big ones that you keep talking about these big sophisticated mega salons or 1 1/2 2x. And so that, that is not only appealing from a financial returns perspective but it's also appealing from a risk mitigation perspective. You can make some mistakes in a business where the, the, the debt that you have on it is not so burdensome because you didn't have to pay so much to buy the business. So all pretty interesting. Anything to add to that?
- [91:01]
C
No, I think we got a lot of this stuff. Cover good.
- [91:06]
B
Okay. Truck we're going to, we're going to look at a live listing here that is right in my area. Maybe I'll go buy this nail salon. Okay so here it is on biz by sell. We're both looking at it. Headline is turnkey nail salon profitable. Prime location. Great growth potential. It's asking 395. Call it $400,000 with cash flow of 270. So there's those incredible multiples you've told us about. It's a Young Salon, 2022. So it's less than four years old probably. And it claims revenue of a million dollars. Exactly a million dollars which is always a bit of an eyebrow raise when the number, when the numbers are too round. Exactly a million dollars in revenue. And here's the description. Three year old beautifully designed profitable salon serving a mixed residential office neighborhood of young high income prod professionals. Modern bright ambiance. M manager and staff will stay for a seamless handoff. That's appealing.
- [92:09]
A
Why this salon?
- [92:10]
B
Very profitable established and fast growing area with steady walk ins and loyal regulars. Great rent and low overhead. No advertising to date. We love that. Big upside for a new owner to market. Annual revenue of $1 million verifiable in parentheses. So that million dollars they. They feel confident in claiming that. Excellent reviews and repeat clientele. Tasteful build out and relaxing vibe. This one won't last. I want to. This is me talking now tease you know the brokers of, of how salesy this is.
- [92:48]
A
But this, but it's actually a very
- [92:50]
B
well written and compelling description. So good, good on you broker. This is a good, a great, a great pitch for this business. Then there are a couple other fields here I won't.
- [93:03]
A
Oh no.
- [93:04]
B
Let's talk about. So the facilities. 8001800 square feet. So a little bigger than yours. Nine pedicure chairs, ten manicure tables, one wax room, three massage facial room. Facial rooms, free on site parking, base rent of 6700. Triple net of another 1100. Two years remaining on current lease with with option for five more years Metro station which is of course our subway a block away. I'll stop there. What are your, what are your impressions of this one truck?
- [93:43]
C
Wow. It's kind of like the size that I typically look at too. So this is an interesting find. But as you can see I think one thing we want to point out is the asking price is roughly like 1.5. Like it's not.
- [93:58]
B
Yeah.
- [93:58]
C
The multiple slow low which is very standard for the space. Again Revenue SDE 20 27% like what they say here. My first impression though like my, my quick math. Okay. All the number kind of makes sense. Like it's not like there's no obvious red flag. A few things that jump out immediately for me. 1800 square feet but they only have nine pedicure chairs. Would that go off on my. In my head is way to waste space. You can add more chairs to utilize your space better. Interesting that they have more massage and facial room. So what I would do if I was looking at this is then really dig into what the split between your typical nail services versus facial and massages. Right. Because they have very different profit margin for those services. I think rent is high, but this again in Virginia. So I, I don't like compared to Texas, I think this rent's a little bit high, but I have no comparison. I don't know the Arlington market well to say whether or not that's price.
- [95:20]
B
Yep.
- [95:21]
C
Yeah. So like I would say just first glance, no red flag in terms of the number and what they list here.
- [95:33]
B
Can I ask you some questions?
- [95:34]
C
Sure.
- [95:36]
B
The no marketing has ever been done claim is that a big needle mover in this world. We heard you say that you did kind of a good reviews campaign where you started, you improved the business and then you started asking customers to review you and that led to new business. So do you feel like that this is a lever to pull, a viable lever to pull in one of these businesses?
- [96:05]
C
Yeah, I didn't go into detail of terms of like what involved with getting the good Google review. But yes, marketing was a big spend that I put into the business. Because if you think about as a customer, when you look for a business, right, you go on Google Maps. So a lot of people, what they do is they go on Google Maps and say nail salon near me. And what I wanted to do is one, I need to be one of the top results when the customer search for this. And that's where my campaign of good review come in. Because you want to be the top few search results but you also want to be highly ranked. Right. Because as a customer you think about how you behave is you look for things and then you look at the review. You would rather go to a business that have higher reviews with a lot of number of review as well. Right. So it's a little bit of both. You want people to see who you are, but then also be able to have like a good rating so they give you a chance. So that's how you get new. That's how I got new customers to get into my store. And then once they get into the store, that's when that consistent experience, that high quality service come into play so that you can convince them, hey, that was a great experience. Let's come back. Right. So that, yeah. So marketing I think is a, it's a important lever to do. But again, a lot of small business owner have not thought about marketing spend historically. So I actually was talking to a publisher of a local magazine and she say the same thing. Like when she talked to local business owner and she asked a very simple question like hey, what is your marketing budget? And a lot of them would be like wait, what? Right? So it's one of those things that is a little bit obvious for. For people who have the experience in this space. But for a lot of people it's not obvious. So I can see why they put that in the description as one of the lover to put pool in term of getting more customers in. But I really want to know exactly how they came to a million dollar revenue without doing any kind of marketing whatsoever. Because that's what is implied.
- [98:38]
B
Yeah, yeah, yeah. Great.
- [98:41]
A
And what about this?
- [98:44]
B
The fact that the manager, that it has a manager.
- [98:47]
C
No, that's great. I think that's just a really good bonus. So this is one of the question to bring up during the first meeting is who's the manager? How much they involve with how much is the Sally and how much they involved with the day to day operations. But that is a huge for me for what I want to do. That would be a really good, good. Like it's like a green flag, right?
- [99:20]
B
Yeah.
- [99:20]
C
That I want to dig into. Because a lot of time when people say there's a manager in this space that I've noticed it could be their. The cousin or it could be you know, someone like the in law or something like someone in the family that is acting in the capacity as a manager. So they need to kind of really understand exactly who this person is if they stay or for how long they staying. Right?
- [99:51]
B
And truck, we didn't actually talk about labor here. How hard is it to hire managers? How hard is it? How hard is it to hire technicians? Answer both. So hard for managers, huh?
- [100:04]
C
It was hard for me to find a manager. And the reason why is someone that can understand what it means to run a business. Right? Like things like customer service, things like interpersonal relationship with the customer and with the technicians. Those are not obvious skills for a lot of people. And then the unique situation I was in is I need someone who also understand nails. So a lot of people who come who work in the nail space, most of them are nail technicians. They either want to be nail technician for a long term or they're gonna come off, go off and open their own nail salon there. There's very small percentage of them will want to step into the manager role. And then so I have to be willing to find that person and then willing to pay good salary too. Manager makes good money just to help run this business. So for me that was hard. Someone is reliable and understand customer service and understand nails. The trend.
- [101:32]
B
Can you hire somebody that doesn't understand nails that comes from outside of beauty? Maybe they come from hospitality or maybe they come from retail and they can learn nails or do they need to have come from the nail space?
- [101:43]
C
I actually was looking for people with hospitality background was my first thought. I was not able to find anyone because I don't think anyone was looking to switch. At least in Austin, Texas. I was putting out all these job posting looking for people with hospitality background who want to work in a beauty service spa and didn't have any luck there. But I think, yes, I think people coming from that background can easily step into this because nails. Right. That, that is something that they can pick it up.
- [102:21]
B
Okay.
- [102:21]
C
Yeah.
- [102:22]
B
Okay. Technicians. Hiring technicians.
- [102:26]
C
Hiring technician is easy, but keeping them is very hard because everyone is commission. I would say not everyone, but the majority of technicians are commission based contractors. So it's very easy for them to switch if they want to. And the technicians are driven by income. So any place they go to there have to be enough income for them to stay. If not, they'll switch to a nail salon down the street. Right. So it's one of those classic conundrum that I have is I need to bring in enough technicians so that I can build up customers so I can start marketing and get people in the door. But what that means is there might be days where I just have a lot of technicians sitting without having any customers to work on. Or it's the opposite problem that I can spend all this money on marketing and have all of these customer walk through the door, but don't have enough technician to serve them. That's also not great. So it's like a little bit of a balancing act. So I would say hiring a lot of people will call it, hey, I'll come and try it out. They bring their tools, they stay, and then after one week if they don't see enough income, they'll leave. That happened quite a bit. And that's the scenario that I try to minimize. I don't want that. So I try to set up a lot of like set the expectation up front of like, hey, like this is the, the environment that I'm trying to cultivate. This is the kind of standard I'm trying to look for. If you agree, then yeah, then come in and try. I'm not one of Those just like, oh, you looking for a job? Sure, come on in. Right. There's a little bit of like a filtering process at the beginning, but then if they come for one week, I can kind of quickly think about the skill set and then start thinking, okay, want to keep them. Then also guarantee pay. So there's a minimum pay that you will get no matter how many customers you serve. Right. So that only comes if the technician is very good. But. And I'm willing to do that because those are the people that I need good technicians. So you want to keep them very quickly once you realize that they are good. So I say hiring moves really quick, but retaining the technician is. Is harder. Retaining good technician is harder. Yeah.
- [105:07]
B
Okay. Truck. Last thing on this listing that we're looking at, they talk about the shop being closed on Sundays. So I imagine the weekends are the among the most busy days. How do we think through the opportunity to just open on Sunday and grow revenue a lot? Is it as easy as that?
- [105:25]
C
Yes. So one thing I didn't say my second location, it was open six days a week. Now it's seven days a week because I decided to open on Sunday. Which actually give the technician a little bit more flexibility because they get to choose what day they want to take off. Right. So some people, some of the older technicians, they actually like to work on the weekends so that they. Because they don't need to take care of their kids, they don't have. So like a lot of technicians who are younger with children, they want to have the weekends off so they can spend time with their family. Then you have a separate group of older technician who really don't care. Okay. I like to work on the weekends because there's a lot of customer that I can make a lot more income. So they will need to work the weekend and take maybe Monday and Tuesday off to go see the doctor or run the errands. Right. So actually open seven days a week was not as big of a challenge. Like a lot of technician was like, great. Love that. More opportunity to.
- [106:34]
B
But what about the managers? The managers is the hard.
- [106:38]
C
The manager doesn't work on Sunday. So that's when I hire receptionists to. To kind of take over that front desk. Right. So I have college students that work on the weekend on. So they help to like. So we have two people on the weekend when things really busy and on Sunday when the manager is off, then the receptionist is on her own. But because we only open for like five or six hours on Sundays anyway. Right. The. The hours are Shorter on Sunday. So you. It's okay if the receptionist is by themselves? Yeah, yeah. Okay. Yeah.
- [107:21]
B
Anything else that jumps out at, jumps out at you about this listing.
- [107:25]
C
When I say that the seller is willing to help during a transition, I would, I would really dig into that conversation with the seller because that has not been my experience or from the conversation I had with other salon owners. It's a lot of time when they literally will close the business at 8am By 10am they gone. So I would really question this whether or not it's true or just a marketing things that they put in this listing because that's not typical. Yeah.
- [108:02]
B
And I just noticed here truck that the business broker's last name is your last name and so he's Vietnamese. So we'll assume the seller in the business is. Is pretty Vietnamese.
- [108:13]
C
That was the first thing I noticed too. Yes. So I think like another thing that I, if I was the person looking at this listing, question to ask when it come to the staff is how many technicians are currently working? Right. So they have nine pedicure chairs and 10 manicure chairs. So they need to have at least 10 technicians working full time. Just kind of as a quick math. So need to understand, they just say staff. They don't know exactly, they don't say exactly how many. And then another thing that was, it was a big learning for me is it's important to understand at the beginning is who are the staff that generate the most income so that you quickly build a relationship with those technicians and make sure that they stay. And then on the flip side, also understand the staff who are the troublemakers so that you know what to do with them when you take over.
- [109:18]
B
Great. And finally, last question for you on this truck and then we'll wrap up. The business was established in 2022, so it's not a very old business. But maybe that matters less in nail salon land. How do you react to a three, four year old business? Is that fine or is that a flag?
- [109:38]
C
No, I think that's fine.
- [109:40]
B
Okay,
- [109:42]
C
I think it's fine then. Now the next thing is look at the surrounding area, right? What are the other nail salons, how long they've been around, just as a comparison, but I think three years old is it's used. It's not. So in the past this is not normal. But I would say over the last five, seven years this has become more normal where new salons keep getting open. So for me it's not a red flag, it's just something to keep an eye out in terms of what are the competitors are doing, how long they've been around, etc. Yeah. Because if this one is built in 2022, more than likely there's another nail salon that is newer close by. Yeah.
- [110:36]
B
And, and, and so is competition, stiff competition also a feature of this industry? Very. A bad feature.
- [110:44]
C
It's a, it's a highly competitive space if you think about it. Well, right. Like, but by where you live, how many nail salons are there within your three or five miles radius? Right. So it's a lot. So once.
- [111:01]
B
But it is like once you do, you can see how. I mean, I get my hair cut right. As a man and, and there are probably a lot of places for me to get my haircut, but once I found my guy, I go back again and again to the same guy. I suspect. And you've kind of already touched on this, but I suspect that once you find your nail person, consumers don't want to shop and reshap and reshop for the same service. So as long as you can keep them happy, they'll stick with you. Even if there are all these other nail salons cropping up all over the place. Yes.
- [111:33]
C
And that's why it's so important to keep the technicians happy. Technicians, because you go to this barbershop, not necessarily so much the actual shop, but it's the barber himself or herself, just hairstyle. Right. So it's a little bit of. I mean, I think the core is you like how this person do your nails or do your hair. And then the customer service that come with it, the environment, those are extra on top that help make the experience even better. But I have seen that when a technician leave, and most of the time they don't really go that far. And because they are 1099, it's not like you can put in an employment contract that you can't walk for a competitor that is within one mile. Usually when technician leave, they go down the street. And I have seen customer follow the technician.
- [112:31]
B
Sure, sure.
- [112:33]
C
Yeah.
- [112:33]
B
No, I imagine that that's exactly what happens if you. And it's a really important dynamic to understand in the industry. The customers are loyal to their technician. They're not loyal to the business. It's not like a restaurant. It's about the person.
- [112:48]
C
Yes, yes. Yeah. And then also now customers are more sophisticated in this. So when I talk to my relatives, they say like 10, 15 years ago, a customer would just be like, oh, I want the color blue, I want the color red. Right. But now customers, because of TikTok and Instagram and Pinterest. They come in and they know exactly what the design they want. And they've seen these videos of nail services. They actually correct technicians sometimes they say, oh, that's not how you do it because I've seen videos. Right. So customers are now more demanding and more sophisticated in terms of what they know about nails and what they want for their nails and what they want for the experience. Now we not only compete on the actual service, but we compete on what I call the vibe as well. Right. We provide complimentary drinks when the customer walk in. It has to be a relaxing environment, it has to be bright, it has to be clean, it has to be modern looking. Customers now demand a lot more because there are just so many choices out there. So you just kind of have to stay on top of the trend and what customer wants so that they'll keep coming back.
- [114:16]
B
Great Truck. A fascinating deep dive into this industry that's all around us, but few of us, at least in this audience, know much about it. Really fun to get an acquisition entrepreneur to pull back the curtain and talk about her roll up. So we'll be really eager to see what you build over the next few years. Truck Win, thanks for joining us.
- [114:38]
C
Thank you so much for having me. That was really interesting to kind of pause and reflect on the journey day after day. Sometimes I just do, do, do. So it's great to stop and think about the journey a little bit and kind of refocus on how far I've come and where I want to go next. So thank you for the opportunity.
- [115:00]
A
Hope you enjoyed that interview. Don't forget to subscribe to the Acquiring Minds newsletter. We send an email for every episode with an introduction to the interview, a link to the video version on YouTube, and soon key takeaways, numbers and more essentials from the interview. For those of you who don't have time to listen or watch it, subscribe at acquiringminds.co. you'll also find all our webinars there
- [115:28]
B
on the website, both those we have
- [115:30]
A
coming up and recordings of past webinars. At this point, There are over 30 webinar recordings, a wealth of information on all the technical nitty gritty of buying a business.
- [115:42]
B
Acquiring Minds Co.