The Laundry BizThe Laundry Biz
Laundromat For Sale

By The Laundry Biz

Find A Laundromat For Sale? What To Do Next

You’ve been researching the laundry business now for some time. You’ve decided that the laundry business is right for you. You’re sure that you’re ready to invest in a laundromat. And now you’ve found a laundromat for sale! Well… now what?

That Laundromat For Sale… Is It A Good Deal?

To really find out if it is a good deal, you will have to dig deep and do proper due diligence. That of course takes time and effort. But when you see a laundromat for sale, you will need to decide quickly if it looks like a fair deal. Laundromats usually sell pretty quickly, and many never even make it to a business listing site. This means you can’t waste time. We have seen many laundromats go off the market the same day they are listed.

The simplest and most common evaluation method is to calculate the net profit multiplier. In its simplest form, this is [net profit of business] X [sector multiplier] = Value. While useful for getting an approximate value, there are many calculations and considerations necessary to get the proper numbers. This article explains all the factors that can affect this seemingly simple equation. All that being said, it is still the quickest way to get an approximate valuation.

When you find a listing for a laundromat for sale, look for the asking price and the listed net profit. This might also be listed as “gross profit” or “cash flow”. Divide the asking price by the profit to get the multiple. Laundromats generally sell for 2.5 to 4 times the annual profit, but we’ve seen them go for as much as 7X!

Other Price Considerations

There are many, many factors which will affect the value of a laundromat for sale. The quality of the location, area demographics, sales trends, age of the machines, nearby competition, and condition of the store are just an example of these factors. A new, growing store with modern equipment in a great location might fetch twice the price as an older store in a bad spot, even if the net profits are the same.

Time To Make The Offer

You’ve done a quick evaluation and decided that the laundromat you are looking at is at least priced reasonably. You’re sure you want to try and buy it, so it’s time to make an offer. The next step will be to contact the owner and express your interest (and make sure it is still available).

If the seller is ready to go, you want to get the laundromat under contract as soon as you can. This initial contract is fairly informal… generally this is done with a Letter of Intent (LOI). The primary purpose is that the buyer and seller are committed to each other and that you have a reasonable due diligence period.

The due diligence is where you will collect detailed information from the owner in order to prove the income and other details about the business. If details about the income or expenses don’t match up, you will be able to come back and negotiate the price appropriately. With a proper LOI, you will be able to back out of the deal without penalty if it doesn’t meet your expectations.

Not Sure About That Laundromat For Sale?

We can help you in any stage of the buying (or selling) process. We offer store evaluation and laundromat consulting as part of our services, and even help bring buyers and sellers together. Make sure to check out our comprehensive online courses which cover all the important details about getting into the laundry business.

And if you haven’t already done so, subscribe to receive our articles and also get a free laundromat business plan template.

By The Laundry Biz

Laundromat Business Plan: Don’t Start Without One!

Having a plan is always helpful. Whether going on a road-trip or saving for retirement, having a plan can make a big impact on the outcome. For a small business, having a business plan is critical. Whether buying an existing laundromat or building a new one, make sure you have a solid laundromat business plan ready to go.

It Is A Roadmap For Success

A comprehensive laundromat business plan is great for finding potential opportunity. While researching the details for a business plan, you will uncover things that will lead to new ideas. Info about customer demographics will help in deciding if a location has potential. Research on competitors might uncover new ideas for business operations, signage, or new services to offer. It can also identify weaknesses in the competition that could be turned to your advantage.

A well-rounded laundromat business plan will also include current laundry industry trends. These could be things like cash-less laundromats, 24-hour laundries, or the phasing out of top-loading washers. You might learn about new amenities or income-generators to add to the laundromat.

Most importantly, a good laundromat business plan will include the financial details needed to determine if the business is even worth buying or building. A Profit and Loss statement might also identify where money could be saved on expenses. We have seen plenty of laundromat profit and loss statements where the issues were blatantly obvious. These factors can lead to an buying opportunity when an owner is selling a business that they could have turned around. Sometimes, a mediocre business just needs a fresh set of eyes to see what is going on.

A Laundromat Business Plan Can Help Identify Problems

Identifying potential issues is even more important than finding opportunities. We have run across many red flags when putting together business plans. One time we discovered a lease announcement for a new competitor that was being built a half-mile away while researching the lease-space for a current laundromat. We have discovered trends in city records where a neighborhood demographic was changing, or a new development was planned which would fundamentally change the customers’ access to an existing laundromat.

You might discover that a store is over-staffed or under-staffed when doing an analysis, . Or you could find out that another laundromat has a similar name that customers are confusing with your location. Yes, we’ve seen that before. And when the other location has a 2-star Yelp rating, it can really hurt your own business.

Crucial For Bank And Investor Loans

Many people are saying that business plans are a thing of the past, but don’t tell that to a lender. Almost every lender will ask for your laundromat business plan, whether it’s simple or something more comprehensive. A well thought out plan will tell the lender a few important things:

  • The laundromat is financially healthy
  • There is either stability or opportunity for growth
  • An overview of the competition
  • You are serious enough to have researched the business

Some lenders will go through your entire plan… others might just flip to the financials. Either way, a comprehensive plan will convey the message that you have thoroughly researched a business in detail and are serious about making it a success.

A Free Laundromat Business Plan Template

We have seen some pretty simple business plans in the deals we’ve done. There are also deals that can be finalized with no written plan at all. It can take a fair amount of time to write out a detailed laundromat business plan. However, you will discover most of the important information anyway while you perform the due diligence for the business. If you already have the details, it only makes sense to put them into a good laundromat business plan.

We have put together a sample laundromat business plan that you can download for free. This is a format we have used many times, and is a good example of what a typical laundromat business plan looks like. You are welcome to use it for your own purposes. Just swap out the sample information with the details for your particular deal. Add your own unique photos and personal information and you are done.

If you would like to receive a copy of our laundromat business plan template, simply go to our homepage and subscribe.

Laundry Business Right For You

By The Laundry Biz

The Laundry Business: Is It Right For You?

Industries go through up and down periods of popularity among investors. The laundry business is no different. Laundromats have long been an attractive business model for investors who were looking for their first business purchase, or perhaps a venture where they could keep their day job. Because of that popularity, the competition to buy existing laundromats has been on the increase. More than ever, people in a laundry business need to do their homework and get their questions answered.

Is A Laundry Business Really A Passive Model?

We have heard MANY times from potential laundry business investors about how they dream of owning a laundromat because there is little work involved other than collecting the cash. It is true that a successful and well-run laundromat can mean more freedom for the owner, and we have seen many owners who spend less than 10 hours per week in their store. As far as brick & mortar businesses go, laundromats are a good bet.

Most times, however, that owner has put in a lot of work to get to that point. You need a great store, a great system, and great employees. In the early stages of ownership, there will be many late nights or weekends with your arm in a clogged drain or trying to figure out why dryer #13 won’t heat up. Having someone to help who has experience can make things go more smoothly.

Can You Keep Your Day Job?

The easy answer is ABSOLUTELY. More than half the owners we have worked with kept their regular jobs through the first year of laundromat ownership. For this to work you need well-trained employees and an emergency plan for things like AC failures or plumbing disasters. You will get a call or a message that something has gone wrong, usually at inconvenient times. You will have to take an occasional personal day or sick day to take care of an issue. It is just a matter of managing the mini-crises and overcoming the big ones.

Will A Laundry Business Really Buy You Freedom?

It certainly can, and that is the goal for the majority of clients that we help. When your operation is running smoothly, you will be making money every hour it is open. When you are at home, at a concert, at the beach… there will be customers in the store dropping off their laundry or putting money into a machine. You will need trustworthy and reliable employees for this to work, but it is certainly achievable and probably the most appealing aspect of owning a laundry business.

Does It Cost A Fortune?

Laundromats aren’t necessarily cheap. A new location has a huge initial capital investment cost and can easily get past $500,000. Existing locations are almost always the best bet for new investors. The used equipment is discounted and the customer base already established.

A general rule of thumb is that businesses without real-estate tend to sell for 2-3 times their annual net income. A business netting $100,000 per year might sell for $200-$300k. A laundry business however will sometimes fetch as much as 3-5 times the net, and we’ve seen them go as high as 7x! This means a laundromat making $100k per year might sell between $300-$500k.

What does this mean for you? If you are an all-cash buyer who has a lot of capital to invest, it means you can get into a relatively simple business to run with a good return. If not, you will need financing.

You can expect a bank to require 20-30% down for a business loan. There are always alternative options to lessen the initial impact, such as SBA loan programs or seller-financing. We have seen just about every combination of loans, financing, and creative solutions for clients getting into the laundry business.

Is A Laundry Business Risky?

EVERY business is risky anytime you have customers, employees, a building, equipment, etc. People slip and fall, employees get injured, and any combinations of plumbing, electrical, and gas can have occasional mishaps. We have seen or heard just about every crazy story from laundromat owners, but that is the reality with any physical business. Having the right insurance coverage for your laundry business is critical to lowering risk and giving you piece of mind. But that is true of any business.

On the flip side, laundromats are some of the least risky businesses from a financial standpoint. The laundry business is a fairly steady industry, one that usually INCREASES during a recession. People always need to clean their clothes, and they can’t do it online (at least not yet!). Drop-off laundry services are increasing as more young professionals look for ways to make their lives a little less hectic. Income and expenses are typically pretty regular throughout the year with some slight seasonal ups and downs. There really are no market corrections, crashes, or drop-offs that affect the laundry business.

 

Are You Ready For A Laundry Business?

You probably already know the answer to this question if you’ve made it this far! As with any venture, it is important to learn as much as you can about what you are getting into. Read through the articles, do research, ask questions. Check out the online courses, packed with hours of important information and details about getting into the business and also running a successful operation. We offer lots of solutions to help newcomers and current store owners alike.

 

If you haven’t already done so, subscribe to our email list to receive our laundry business articles and also a free sample Laundromat Business Plan Template.

Laundromat For Sale
Find A Laundromat For Sale? What To Do Next
Laundromat Business Plan: Don’t Start Without One!
Laundry Business Right For You
The Laundry Business: Is It Right For You?