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Owner of Monet Salon and Spa, buffeted by illness and recession, seeking a buyer

March 7, 2010

By Jondi Gumz - Santa Cruz Sentinel

Julie Monet has put her heart into her career as a hair stylist and owner of her own business, developing a loyal following. Now 50, she's facing an uncertain future.

In 2007, she was diagnosed with degenerative disk disease, a condition accompanied by acute neck pain, and advised by her doctor to give up her salon and spa.

She put the business on the market, but the economy slid downward and the price scared buyers. In January, she underwent surgery, hoping for a medical miracle, and returned to work with her staff of 10.

The result: More pain.

Unless a buyer comes forward, she plans to close Monet Salon and Spa April 3.

"It's a good business opportunity for someone who wants to step in," she said. "Everything's ready to go."

She opened with a partner in 2002, while the last recession was hanging on, after running a smaller salon on her own in Los Gatos. The partners took out a U.S. Small Business Administration loan, and got space next to Starbucks in the recently renovated Graham Plaza shopping center on Mount Hermon Road, one of the busiest streets in the county.

Their specialty: Products from Aveda, a company committed to environmental sustainability.

Four years later, Monet bought out her partner with a 10-year SBA loan from Santa Cruz County Bank.

She owes $170,000. The loan with an interest rate of 5.75 percent is assumable, but prospects have been unwilling to take the risk, given the tough economy.

When her doctor told her she should quit doing what she loves, Monet was devastated.

"I've been a stylist for 25 years," she said.

Her talent allowed her to charge higher prices and stay almost fully booked.

It helped pay the bills while she was raising her children, Jenny Weaver, 24, who runs an Aveda Experience Center in Concord, and Chris Weaver, 22, who wants to follow in his dad's footsteps and become a firefighter.

Now she's come to grip with the fact that her life is going to change.

"After being in pain for two years, I didn't have an option," she said.

She hopes to go back to school and train for another career.

A loyal customer

"Julie works as hard as any 10 people I know," said Debby Dodds, one of her regular customers. "She's on her feet all day. She's really talented in color and style. She's incredibly philanthropic. But that's not enough right now."

Because of the recession, which has brought furloughs, pay cuts, and layoffs, people are "buying down," cutting back on salon and spa visits and choosing less expensive products.

Dodds remains loyal because of what Monet offers.

"I believe in Aveda," she said, "It's easy to offshore something cheaper. Aveda has taken products off the shelf because they didn't have sustainable ingredients."

Seth Dunn of Farmers Insurance Group in Scotts Valley recalls when Monet was healthier, hosting a chamber mixer and helping promote other new businesses, like Elliot Stone's Elite Academy.

"She has a bubbly personality and a good spirit," Dunn said.

Fellow Scotts Valley salon owner Daryl Stevens is sympathetic.

"I feel for Julie and I wish the best for her," he said.

Spas are squeezed

The economy is so difficult for spas and salons that the Day Spa Association, a trade group, produced a recession guide with tips on how to cut expenses to keep the doors open.

Sanctuary Day Spa in Aptos closed without warning Jan. 1, leaving employees in the lurch.

Bob Norton of California Coast Business Brokerage in Aptos said he has a seen "a few sales" of salons to employees -- at discounted prices.

The rule of thumb generally is to value a salon at 1.2 times discretionary cash flow, Norton said, or four times monthly sales as a secondary method.

"We are getting bank financing for businesses as long as they have established, substantiated cash flow," he added, noting Santa Cruz Community Credit Union approved a loan last week for a local business sale.

Bank willing to lend

"When business slumps, debt is your enemy," said David Heald, president and chief executive officer at Santa Cruz County Bank, which holds Monet's SBA loan.

He encouraged borrowers in difficulty to talk with their banker.

"It's in everybody's best interest to keep the business open, to keep people employed," Heald said. "We have to face realities too."

While the SBA does not allow the loan amount to be reduced, it does allow payments to be deferred for up to six months, which can give a business owner cash flow for paying employees and restocking inventory while waiting for a recovery.

In Heald's experience, about half the borrowers who take that route are able to rebound, while the other half still struggle.

If a borrower makes interest-only payments, the unpaid balance is added to the end of the loan.

"We have to work with the landlord, too," said Heald. "He knows the difficulties of getting another tenant."

His bank has plenty of money to lend, he noted, adding, "It's matter of trying to get people to ask."

Asked if anyone wanting to buy Monet Salon had approached the bank, SBA lending specialist Sue Chandler said, "No."

Landlord Doug Kaplan of Lomak Property Group in Capitola said he has been working with Monet to help her keep the salon afloat.

"She has helped make Graham Plaza what it is and we owe her a lot," he said.

On Friday afternoon, he met with a couple interested in the salon.

"There's hope," Kaplan said, although a deal has not been reached. "We will rebuild this country one salon at a time."

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