Friday, March 20, 2009

Where do you start? Buying a Laundromat

How to buy a Laundromat

I decided to share with everyone the information you need to buy your own Laundromat business. Why? why not. Mostly because I don't feel that giving away the information will affect me and my business at all, and having other people with the right information in the Laundromat business will only make it better. There are a lot of lessons to learn with a coin laundry service, but they also apply to any small business venture. The coin operated laundry business is fairly simple and if well managed can produce a very good income for anyone.

This industry is a self-serve industry, also known as a coin-operated laundry service. The great thing about laundry is that it never stops... it's not weather dependent, it has no high or low season, it does not rely on tourists either. Ok, a bit of a lie, it is somewhat weather affected... meaning, the worse the weather and the dirtier it is outside, the more clothes people have to wash. They have to wash them somewhere. Once setup, you will find that you spend most of your time collecting and counting all those coins.

Finding a location and a willing seller is probably the hardest part. This business is such a profitable and easy business to manage, that many people don't give up the easy income. There are still many cases where some people have either not managed it properly or have run into other circumstances that require them to sell their Laundromat business.

Once you have found a location and seller there are many things that need to be done. First and most obvious is a purchase price for the business. Complete and LOI, which is a Letter Of Intent. This letter documents your desire to purchase and the sellers desire to sell. Remember that this letter is not a legally binding document to sell, rather like a promise, if you want to call it that. You need to also clearly list all the assets and other stuff that will transfer with the sale of the Laundromat business. Once of the key features of the LOI is that is prohibits the seller from discussing or pursuing other potential buyers. Do not rush this process, make sure that you establish the sellers intentions and document a standard 90 day evaluation period in the LOI. This period will allow you to determine if the selling price and other clauses in your negotiation are a fair to you. You can also use this time to understand every facet of the sale, especially if this is your venture into owning your own business. You must also spend the time to determine the actual value of the business.

Get yourself a good lawyer to review your contract. Either to review or draw up the contract and terms of the sale. An experienced and skilled contract lawyer will save you time, money and prevent you from getting into a deal that is not beneficial to you. Ensure that both the seller and buyer have their own lawyers, this will prevent any conflicts or bias any one lawyer could have.

Determining the value of the Laundromat is similar to evaluating any business really. Review the last year of the books and determine the cash flow, expenses, debts, taxes, etc. Find the property value and property taxes. Equipment, leased or owned by the business? does any need replacing? if so, negotiate that into the purchase price or conditions. What is your competition? What are the employees like and how long have they been with the business? What is the community feel with the business? You should also check any local business associations like the better business bureau for complaints or other filled paperwork regarding the Laundromat in question.

There are some points you need to consider before you buy a Laundromat. The business itself , as well as many others, has it's share of dis-honest people. You need to take all precautions to prevent being taken to the cleaners ( if you know what I mean ). Coin operated Laundromats are very appealing to investors, such as yourself because they are profitable and fairly easy to manage. They are not always transparent in the operating costs, you need to take the following steps to ensure you are evaluating the business as it is represented. Have an analysis done by verifying the gross sales with the water and fuel usage. By doing a detailed analysis of the water and fuel usage you should be able to see if the claims by the seller are accurate or exaggerated.

If you are not fully comfortable with doing the evaluation and analysis on your own, hire an expert. Look for someone experienced in the coin laundry business, they will be able to identify all the pros and cons with the Laundromat you have selected or intended to buy. Remember that the seller or broker will almost never tell you about any problems the Laundromat is facing and in most cases will try to hide or re-direct you from them. A contract lawyer is not going to do this, at best they can evaluate the business in general, but will not be able to give you an accurate evaluation of the coin operated Laundromat business.

Ok, now that you have determined all the legal and financial stuff, there is still more you need to consider. Maintenance and service can be a large cost, if you are able to maintain and service the equipment yourself, you will save a large amount of money. Many of the newer equipment and machines require very little maintenance and are designed to be heavy duty, long lasting items. However, with any coin-operated laundry machine, something can always happen.

Building instead of Buying a Laundromat Business.

Building a Laundromat in a new location still requires the same, if not more commitment and research. There are many laundry equipment distributors that have experience with building and setting up a new Laundromat. Inquire with a distributor in your area first, they will often offer a full service and build everything for you. Acquire a proposal from the distributors in your area, as well as a review of the demographics, locations and competition, then consult your coin laundry expert.

All the other research applies , but without buying an existing business you will have to determine your startup and running costs with an expert in the coin laundry business. If you don't you might be getting in over your head and have to sell. This is the type of business you actually want to buy, from someone who did get in over their head and must sell the business at a loss, don't be that guy.

This article was posted as a supplement to your research and is not intended to be a guide. This information should not be regarded as comprehensive.

I wish you well in your search for buying a Laundromat and may you find exactly what you are looking for.

2 comments:

  1. leslie_beam@yahoo.comOctober 1, 2009 at 3:46 PM

    Ryan,
    Thanks for the tips.
    Question: On buying a coin laundry mat that is already up and running, how do you calculate the used-machines and equipment? The seller lists about $65,000 and has been in business over 15 years.

    ReplyDelete
  2. Chrismac95@yahoo.com

    Ryan,
    Thanks for the great website, I am learning alot from it. Question: When creating a business plan for a laundromat, how can you account for the income statement portion, if you don't have a laundromat?? Also, do you have a sample of a business plan that you can post/email??? That's would be great.

    ReplyDelete

Note: Only a member of this blog may post a comment.