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Is this a good price for soap making business?


nantes

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I don't have all of the details yet, but I am looking at buying a soap business from my friend. She is selling all of her inventory, accounting material, equipment (she has 4 54 pound soap molds), website, barcode material, displays for markets and packaging materials for the soaps and for larger orders too. I know this isn't very detailed, but I will be meeting with her again in August to get more info - they are gone on vacation. She did say she has over $15,000 invested in just the soap making equipment.

She had her business going pretty well, but had to quit due to her health. She hasn't been doing any soapmaking for the past couple of years. So, I don't think that I can count her clientelle or anything, because I would basically have to start from scratch on that. Plus, I want to come up with my own names and logo. Her stock of already made soap would probably be for my own use also, as I don't think I want to start out selling soap that was made at least 2 years ago - or doesn't that matter?

She is asking $10,000 and I am just wondering if this is a reasonable price or not. She also said she would sell just the equipment for $5900. Again, I have only just started talking with her and I don't have many of the details - including what income she was able to make while she was working the business.

My question is mostly if this is a good price and what other questions I should ask. She makes all natural CP soaps with essential oils. We use only her soap now, so I know her recipe is a good one. I have done some hobby soap making, so I know there is going to be a period of my making soaps before I would actually attempt to sell them. I have made candles in the past, so I also know about insurance etc.

Any input would be very helpful. Thanks in advance.

Nantes

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Just MHO but I would not pay that price unless you got a LOT of stuff you are not mentioning--and especially in today's market. I find that I can develop my own formulations with newer ingredients much cheaper than what some people price their businesses at. And I have been burned very badly by purchasing people's bath n body stuff AND fragrance/essential oils (even on this board!)....which has gone bad. I have purchased many businesses, and tend to stick with purchasing the equipment, only if it is a "steal"....If it is a "pricey" piece, then perhaps buying new w/ warranty would be better. I also don't buy any oils or essential oils or body items from classies or other businesses....as these items tend to be dated and can go bad (and often do when businesses "sit" for awhile.) Again just my opinion. You need to decide what works best for you and your situation. Good luck. you will know when you figure it out!

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That is to much money , imho for 2 year old oils and eo's. These items have a shelf life.

A good soap recipe is not hard to create. If you are handy or know someone who is , molds are very reasonable to make yourself.

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I agree with the others. If she hasn't been doing much business in the past 2 years, then it's not like you're paying extra for her wholesale or retail client list... so really you're paying for a bunch of used equipment. And I thought I saw that you weren't really planning on making soap... so seems like a lot of stuff you wouldn't need. Unless her website has been getting a lot of action... without her filling orders?? Which doesn't make sense... then I wouldn't pay even half that for not even getting the kind of company you want.

hahahaha. I'm so sorry. My mind is kind of all over the place today... and that reply was perfect evidence.

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If it were me, I'd only purchase the recipes, equipment and displays (possibly packaging). If she hasn't made soap in 2 years, her website and name (client list etc) aren't really worth that much. If she has any ingredient inventory, it may not be good anymore. And I agree...would you want to buy and sell someone else's soap that is 2 years old? Seems like she would have been using it for her own use all this time, so shouldn't have much left anyway.

Get a list of her equipment and then do some research on how much it would cost you to purchase new. Then discount it for wear and tear. Same with displays. Have her give you a price for the recipes. What do you think her recipes are worth? Worth it or can you do just as well researching recipe ideas online for free?

Trudi

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JMHO... I'd never buy someone elses soap OR candle business.. because its something you just have to learn and do for yourself. Thats just my opinion, so take that witha grain of salt.. but if I ever decided to stop I would sell items off, not the business as a whole. Thats ALOT of money.. for that, you could buy everything you need to start a VERY sucessful soap making business. Two year old oils arent a good deal even if they are thrown in for free, imo.

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Thank you for all the replies. I have a lot more researching to do and a lot of thinking. I agree that the price is high. I may have to talk to her about just buying the equipment. I have made candles and know enough about soaps to know the soap makings may no longer be any good. I am looking for something I can do that will be creative but bring me some income too.

Thanks again - I have lots to think about.

nantes

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You also need to look to see how long it will take to recoup the cost of the equipment. At $5900 for the equipment, selling soap with a $3.00 profit, you will have to sell 1,966 bars of soap.

If it were me, I would take the time with smaller molds till I built a clientele to justify the purchase.

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Unless you have a market for large amounts of soap already in place, I would think it would be more economical to start small with manageable size molds and build your own business. That is what many soapmakers do. I started several years ago as a hobby which expanded but I did not need a bunch of high priced equipment to get started. I use plastic buckets for lye solution and SS stock pots to mix in. Wooden molds with silicon liners and a rolling rack from Sam's (less than $100) for curing. Labels from my home computer and laser printer and I paid as I went so my business is debt free.

If she had wholesale accounts in place with large orders rolling in every month that would be a different story.

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Personally even $5900 is a lot in today's economy. It would be much cheaper to buy her recipe (if you insist on using it) and then buying fresh oils, molds and going from there. You might be able to use some of her packaging but even that has to be in good shape.

Are any of her customer contacts worthwhile? Is she still doing business or are these all old clients? A wholesale account or two would make this more appealing but if you basically procuring your own clients, then why not start fresh. $5900 can buy alot. Be careful with your money.

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I don't think that $15,000 is a lot to ask for an established business...I have more than that in supply and equipment...all that can get extremely expensive.

Here you would be getting a recipe, a web site, name recognition instead of starting from nothing in a hard economy.

The customers list may not be worthless even if she hasn't done any business in the last few years you still have a starting point and potential customers.

However I think that you need to know how much she was making in sales.

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Except I don't consider it an established business if she has not been active in two years. If I quit for 2 years, I am sure all of my customers would have long since found a new soapmaker.

If the business was up and running then $15,000 would not be out of line but for a dormant business in soap area, not worth near as much.

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I disagree I stopped for a year and a half when we moved and when I started again I contacted my "old customers" and many came back...customers are fickle and if they really like the product you offer they will come back.

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But she can't guarantee customers will come back. Also keep in mind a biz restarting with new management will automatically lose at least some customers even when there is no time gap. But with the time lapse and changing management you will surely lose a significant customer base.

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