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Hey Reader,

"Barbers just aren't professional like that."

This quote has been echoing in my head for the last couple days.

On Friday, I dropped by the barbershop for a haircut and we talked about a topic that isn't talked about much. Buying and selling barbershops.

I've been pretty transparent with my story of buying a barbershop but if you're new to the newsletter, here's a recap.

One year ago, I was on bizbuysell and saw a local 30 year old barbershop for sale. It was being sold for $10,000. The owner had passed away and his children decided to sell it.

Long story short, I was selected out of 10 applications to buy the shop. It's officially been one year of ownership. If you want the long story, I recommend reading my blog 'I bought a barber shop' or listening to my podcast episode 'Barber shop for sale'. The episode is an expansion of thoughts from my featured column in BarberEVO.

So I was in the shop and the barbers asked me how owning the shop was going. To be honest, it's been tough for various reasons. They asked if I was considering selling it and that led into this conversation about the value of a shop.

The booth rent challenge

At one point in the conversation, we talked about a big challenge for booth rental barbershop owners. In many cases, the barbershop owner has no idea how much money each barber makes.

Since each barber is technically running their own business at their booth, they aren't really required to report their income to the shop owner. And if they did report their income, would it even be accurate?

At this point of the conversation, the barber chimed in with that quote 'Yeah, barbers just aren't professional like that. You know how we are.' He was referring to the common trend of underreporting income.

From the owner's POV, this makes it difficult to evaluate the value of the barbershop. They don't know the total number of sales the shop generates, leaving them to rely more on the profit from booth rent as their valuation variable.

For a commission shop or corporate franchise, this isn't the case. They know exactly the total number of sales the shop generates.

Buying the 'assets'

So how much would you buy a booth rental barbershop for though?

As we talked through the topic, most of the barbers agreed that they would only pay for assets: the barber chairs, stations, waiting chairs etc. They talked about how they can't guarantee that the clients will keep coming back and so wouldn't pay more then just the assets.

Depending on the shop, those assets could put the price somewhere between $5k to $10k. Which is right in the ballpark for what I paid.

Imagine starting a business, investing all that hard work into it for 30 years and then selling it for $10,000. That's tough, but is that just the way it is in our industry?

A different POV

Meanwhile, Sports Clips quotes around $288k to open a new location.

This juxtaposition is wild. Let's explore the 3 models real quick.

The booth rental barbershop model is where the owner primarily makes profits off of booth rent. To make more money the owner needs to add more stations, find barbers to rent those stations and/or increase the rent.

Commission shop model is where the owner makes profit off of every transaction. The transaction could be services and/or product sales. 70/30 on services is where 70% goes to the barber and 30% goes to the shop owner. For product sales, it might be a 10/90 split where 10% goes to the barber who sold the product and 90% to the shop owner. To make more money, the owner needs the barbers to make more sales.

Corporate franchise model is similar to the commission shop model but instead of a commission split it's a flat hourly rate. There may be bonuses and other incentives worked into the model for the employee to increase pay. These businesses typically offer health insurance, paid time-off and maybe even a 401k.

The best business choice?

Most business professionals plan with the end in mind. The end could mean 'selling the business'. If you were trying to own a business that would eventually sell for the most amount of money, which model would you choose?

Like most industries, when you follow the money, you start to uncover the heart beat of an industry. And when it comes to the booth rental barbershop model, following the money reveals shop owners who aren't really in it for the money. On one hand I feel confused, but also encouraged at the same time?

Is it refreshing to know that these business owners are genuinely not in it for a money grab, or is it financial mismanagement? Honestly, I'm not sure.

Is it that our industry's history of underreporting taxes has such a stronghold that shops will forever be worth the price of the chairs and stations?

With all this business of barbering content trending across social platforms, I wonder if this topic will bubble its way to the surface.

Alright, finished with No.104. See you next week!

SLCKR Presents: Stay Awhile A 2-day event that will bring barbershop culture together through education, creativity, and community. ​ Early bird tickets are live now in limited quantities. Prices go up 9/12. Get yours before they’re gone Buy a ticket

Headline across the industry

The homies over at SLCKR are hosting a special event on October 5th and 6th. Details are above!

Alright, finished with No.104. See you next week!

Written by: Matthew Mendoza​​
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