In this episode, Brett walks through the key benefits and risks of seller financing the sale of your hair salon business.
For most of us, the decision to sell our small business can be one of the most difficult choices we will ever have to make. But leaving your hair salon is inevitable. That’s why every hair salon owner needs an exit plan.
Unfortunately, there’s no guarantee you’ll ever find a buyer with a ready supply of cash in hand. As a result, many hair salon owners offer seller financing to increase the likelihood of a successful sale.
What in the world is seller financing?
In any type of traditional business sale, buyers must come up with their own funding. Often, buyers will use a combination of cash and third-party financing to cover the purchase price.
This is no different than buying a car or a home. Seller financing, also called owner financing or seller carryback, removes the middleman—typically a bank or other lender.
Instead, the seller and buyer come up with their own funding deal. In many cases, the seller offers a loan to the buyer that covers a portion of the sale price. The buyer then makes an upfront payment in cash and repays the seller financed portion in installments with interest.
Since seller financing can be mutually beneficial for the buyer and seller, exiting hair salon owners employ this strategy frequently. In fact, 60-90% of all small business purchases involve seller financing, according to Guidant Financial.
Yet while seller financing has its advantages, there are also potential risks involved. Understanding the pros and cons of seller financing the sale of your hair salon business can help you determine if it’s the right exit path for you.
[03:01] Boosting your overall payout.
[04:13] Expanding your pool of potential buyers.
[04:51] Communicating confidence in your business by offering seller financing.
[05:28] Closing the sale of your hair salon faster by offering seller financing.
[06:13] Why seller financing ties you to the ongoing performance of the salon.
[07:17] Assuming the credit risk of the buyer in a seller financed deal.
[08:32] Why seller financing gives you less cash up front.
[09:09] The complexities of seller financing your hair salon sale.
Looking for more tips on how to grow, scale, and ultimately sell your hair salon business? Check out our other Unchained From the Chair podcast episodes.