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Sales Rookie Group

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Theodore Baker
Theodore Baker

How To Buy A Coin Laundry Business

In short, you need to verify the income. There are a few tried and true ways to do this, including a coin count with a water meter reading, a water calculation, bank deposit statements, and tax returns. The more of these you can utilize the fuller the picture you will get of the actual income of the laundromat.

how to buy a coin laundry business

While you are conducting your due diligence, it can greatly benefit you to look for ways to increase the value of the laundromat when you take over. This will lead to increased cash flow for you and more equity in the business adding to your net worth. Be sure to download our FREE value-add checklist on our resources page to help you identify potential areas to increase the business. No email is required!

In economic terms, the demand for washing clothes is inelastic. There will always be a need to clean garments no matter the situation. Not everyone owns their own house or their own washing machines, so the need to frequent a laundromat is a reality for many Americans. Laundromat owners usually operate facilities that are primarily self-service oriented. Laundromats for sale often include coin-operated washers and dryers of varying sizes. Managers should service the machines and manage the use of coin machines on premises. Sometimes these facilities include vending machines that offer detergents, fabric softeners and snacks. Some creative entrepreneurs have begun hybrid operations that combine laundry services with food, retail and alcohol service.

Coin laundry businesses for sale come in a variety of places, but location is of paramount importance. The success or failure of a laundry business depends on many location variables. Some things to consider in terms of location for your laundromat include the following:

It's not surprising that a number of Californians looking into purchasing a small business decide they want to buy a coin laundry. The business can operate and produce money without needing constant owner involvement. In fact, a typical owner may work only an hour or two a day in the coin laundry business. And because it is an enterprise that deals only in cash, there is no need to carry receivables or to provide the service without getting paid. In fact, payment is made before the service is provided.What is surprising is the number of potential buyers who are misinformed about a few important facts regarding the business and as a consequence are at risk of making an error when deciding to buy a specific business at a certain price, or when failing to recognize a good offering and neglecting to make an effort to buy it.Even some business brokers who are not well informed about how to evaluate and buy a coin laundry are misinformed about critical aspects of the business and may give clients bad advice.Four of the most common misconceptions held by many buyers and some business sales professionals are:1. There's no worry about getting a lease for the property where the business is located. It's almost sure that the landlord doesn't want to change the use of the space where the coin laundry is located. It is too expensive and involved to remove all of the plumbing and convert a coin laundry property for some other use. Besides, if the business premises is part of a property with other retail businesses, the landowner wants to keep the coin laundry operating. That's because it will attract customers, while their clothes are in the machines, to the surrounding businesses. And that's an amenity that will cause other businesses to want to locate near the property. In other words, having a laundry in, for example, a strip mall, will help the landowner attract other commercial tenants. As the saying goes, once a coin laundry (at a location) always a coin laundry.The Fact: I know of at least six cases in which buyers purchased a coin laundry with five years or less remaining on the lease, after they were convinced they would be able to renew once the lease expired. In one situation the landlord sold the property containing the laundry and other businesses to a developer who waited for the leases to expire, then knocked down the structures and built an apartment complex. Another landlord decided he wanted to be in the coin laundry business. At the end of the tenant's lease, the landowner refused to extend the lease and then offered to purchase the equipment from the former tenant, but at a fraction of the equipment value.2. You can figure out the coin laundry's gross income by analyzing the water bills paid during the past several months. That's a way the buyer can verify the revenue figure and not have to rely on the seller's claims. The formula is fairly simple. It's starts with determining the amount of water purchased by the business over a period of time, say a month. Calculate the average amount of water used per wash by the washing machines, and divide that figure into the total water usage (the total usually is expressed in cubic feet on the water bill, but with simple math can be converted to gallons--about 7.5 gallons per cubic foot). The result of that division represents the number of washes sold in the month. Multiply that figure by the average cost per wash, to get the total amount collected from the washing machines during that period of time. A fairly useful rule of thumb is that the dryers generate one-third the sum produced by the washing machines. Some potential buyers, having done that exercise, discovered that the real sales volume was lower than the figure quoted by the seller.The Fact: This seems like a clever way to figure out how much revenue the seller really has received, were it not for the fact that water meter measurements in many parts of the state - many parts of the U.S. for that matter - are extremely inaccurate. Another problem with this approach is that some sellers, knowing prospective buyers will do that math, simply run up their water usage - perhaps by leaving the spigot open in a wash tub or a bathroom sink - before they put the business on the market. Smart entrepreneurs who want to buy a coin laundry and feel it's helpful to analyze water usage, ask to see water bills going back a few years. And they become suspicious if the seller can't produce older records, or if the records indicate the water usage suddenly jumped a few months ago - about the time the owner decided to sell.

3. To determine the amount of adjusted net earnings collected by the owner of a coin laundry, simply count up add backs and include them in the total. The biggest add back may be depreciation, which is a non-cash expense.

The Fact: The fallacy in this approach is simply that much or all of the sum designated as depreciation may actually be needed to replace the equipment. And that is, technically, the purpose of depreciation. In some businesses, you can add back depreciation when determining seller's cash flow. That idea is not as accurate when dealing with a coin laundry.

The Fact: An important trend in the coin laundry business is to replace many of the smaller machines with a few larger ones. The typical coin laundry that is popular with customers will have a few 20 lb. machines for the bachelor who wants to wash a few garments and towels with a single load or the customer wanting to wash a bed spread or other large item. It is the 40 and 55 lb. machines, however, that are the most popular among customers and will keep them coming back. People like the ability to handle a week's worth of clothing, towels, linen and so forth with one wash in a machine that will accommodate a bigger load. Customers figure they will save money that way, and they'll definitely save time. Look at the mix of machines rather than the number to determine how well the coin laundry business is attracting customers and generating revenue. It's better to have the 22 machines that are busy all of the time than a larger space and more machines to run and repair than will be used on a constant basis.By understanding the truth behind some of the most common - not always accurate - assumptions regarding the laundromat business, a business buyer will be able to make wiser choices when deciding what to buy and how much to pay. Categories: BizBen Blog ContributorBuying A BusinessHow To Buy A Business

I can think of at least three deals in the last couple of months that have come from third-party connections. Our mastermind members frequently reach out to these connections to find acquisition deals. This works really well in coin laundry deals.

We are typically looking at valuations anywhere from 3X to 6X SDE for most laundromats. The multiple depends on a handful of factors. Laundromats are similar to many service businesses we are looking for a multiple of annual owner benefits to create cash flow.

Owning a coin laundry business certainly has many benefits, but, like any business, building and running a successful laundromat will require time, skill, and monetary investment. The amount and ratio of these elements (time, skill, investment) will depend on the type and number of stores you plan to open.

Coin laundry businesses come in many shapes and sizes, and in future blog posts, we will look at the benefits of the different types of stores. In particular, we will explore the growing trend of hybrid laundry cafes and laundry-bars. But in general, laundromats will fall into two broad categories: the fully-staffed/full-service store and the unattended/self-service store.

If you like the idea of employing staff and providing a range of laundry services, a staffed laundromat may be right for you. This type of store typically provides different sizes of coin-operated washer and dryers and a range of specialty services like wash & fold, dry cleaning, and delivery services that support the laundry needs of their customers.

If you want a simple, hassle-free business that only offers one type of laundry service, owning an unattended, self-serve coin laundry business could be right for you. This type of store is popular in high-density areas like city centers and university campuses. 041b061a72


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