Share This Info:  

4 Essential Facts For Coin Laundry Buyers Seeking To Buy A Laundromat


4 Essential Facts For Coin Laundry Buyers

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.

4. The best coin laundries are the ones with the most machines. A business with 35 machines is bound to be producing fifty percent more revenue than one with 22 machines.

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 Contributor, Buying A Business, How To Buy A Business

Contributor:

Peter Siegel, MBA
Areas Served: All Of California
Phone:  925-785-3118 Cell, 925-785-3118 Text
Founder & President Of BizBen.com (since 1994) & BizBenNetwork.com. I am the Lead Facilitator for the ProSell & ProBuy Programs on both websites. I consult daily with buyers, sellers, and intermediaries daily about buying and selling businesses. Call 925-785-3118.






  Helpful Resources To Assist In Selling And Buying California Businesses
Brad Steinberg, Business Broker: Laundromat Specialist

PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department.

Elizabeth McGovern: Escrow Services - San Francisco Bay Area

McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.

Larry Larsen: Laundry Consulting, Brokerage, Insurance

I have over forty years of experience in the sales, ownership, management, and construction of coin laundries. He is a licensed broker active in the sale of coin laundries, a licensed insurance agent specializing in coin laundry insurance. Phone me at 714-630-9274 or 714-630-Wash.

Helen Yoo, New Century Escrow - Escrow Services In Southern California

New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.

Mike Hurrell, Broker: Laundry Specialist - Southern California

Providencia Properties Inc in association with Golden State Laundry Systems is a full service Coin Laundry Real Estate Broker. At GSLS you will receive personalized attention from our professional staff of coin laundry experts. To sell or buy a Southern CA laundromat call Mike at 310-223-2240 X209.

Chuck Post: Laundry Buyer Representation, Consulting, Due Diligence

I have 32 years experience in the laundry industry, specializing in assisting laundry buyers with buying or starting up, building, re-tooling, laundries in Southern CA. Laundry buyer representation, consulting, due-diligence, lease negotiations, laundry valuations. Call 619-227-5711 (Cell).

Steve Erlinger: Laundry Broker, Consultant - Southern California

I specialize in the laundry industry broker and consultant in Southern California. I assist buyers navigate the many facets of finding, evaluating, and operating a laundry business. I also help current laundry owners find additional stores, sell, evaluate an existing laundromat. Call 949-500-5893.

Peter Siegel, MBA, BizBen Founder, ProBuy, ProSell Programs

Founder & President Of BizBen.com (since 1994) & BizBenNetwork.com. I am the Lead Facilitator for the ProSell & ProBuy Programs on both websites. I consult daily with buyers, sellers, and intermediaries daily about buying and selling businesses. Call 925-785-3118.


  Related Articles, Events, Blog Posts, Discussions, Videos, Interviews
4 Essential Facts For Coin, Card Laundry Buyers Seeking To Buy A Laundromat

Many Californians want to buy a coin laundry because it's a business that doesn't require full time owner attention and because, as an all cash business, the owner is always paid before the service is provided. Peter Siegel at BizBen explores these issues in his latest artcle/blog post on BizBen.

Investing In A Laundry Small Business: Two Methods For Buyers Of Laundromats

When investing in a laundry business, there are two methods. One is preferred, but the other is far more common. If you are considering entering into a new industry, like most now entering the laundry industry, you want to have a good understanding of both opportunities. Chuck Post explores both.

5 Myths About Selling A California Business: Best Tips For Sellers & Brokers

Peter Siegel, MBA (at 925-785-3118) - BizBen Director discusses myths associated with the process of selling a business and some of them can actually cause deals to fall through. Don't let your sale be comprised, be aware of these common misconceptions related to the process of selling a business.

I am Buying A Business: Should I Buy The Property As Well? A Good Decision?

There are advantages and disadvantages to owning commercial property. Here are a few questions to ask when it comes to deciding whether or not to buy the property along with the business. Peter Siegel, MBA with the BizBen ProSell Program reviews this issue with potential sellers and intermediaries.

What Is The Typical Business Broker Fee For Sellers And Buyers? Who Pays It?

Was just asked the question from a business owner what the "typical commission" amount is for a broker or agent and if upfront fees are common? Thought this might be a great Discussion topic on BizBen for both business owner/sellers and potentially for business buyers (buyer representation).

The Bottomline: What Exactly Is Adjusted Net Income, SDC, And Cash Flow?

The use of add backs & adjusted net income is common among sellers of businesses when showing their financial information/performance. But buyers are cautioned to review financials and tax returns/documents closely. Peter Siegel, MBA with BizBen (ProBuy & ProSell Advisor, Lead Facilitator) explains.

Absentee Run Businesses - A Myth Or Reality When Buying A Small CA Business?

Some buyers search for an absentee business to own, wanting to collect profits generated by a successful enterprise without having to stand at the sales counter or cash register, without having to cook, operate equipment or talk to customers. Here's some insight about finding such a business.

Why Isn't My Business Selling? 6 Great Questions To Ask Yourself For Answers

It can take months, sometimes longer to sell a small business. Here are 6 questions from Peter Siegel, MBA (Business Purchase Financing Expert, ProSell Program Advisor with BizBen) at 925-785-3118 to ask yourself to help you determine why your small to mid-sized California business isn't selling.


Escrow Services Diane Boudreau-Tschetter
Michael Brewer, ABC License Consultant
Willard Michlin Due Diligence Services
Chuck Post Laundromat Industry Expert
Facebook
Twitter
Linkedin
Vlogs and Podcasts
New Postings Reports On BizBen Sign Up
Business For Sale California Stats
BizBen ProSell Program
BizBen ProBuy Program
BizBen Blogs And Articles

BizBen - Where California Deals Get Done! 888-212-4747
7172 Regional Street #364 · Dublin, CA. 94568
BizBen · Copyright © 1994 - 2019, All Rights Reserved



Clost Login


Please confirm your registration by clicking the link we've sent to .

If you can't see it, please check your junk mail folder.

If you have any problems registering, or need assistance with your new BizBen User Account please phone BizBen Customer Support at 888-212-4747.



First Name:*
Last Name:*
Email Address:*
Confirm Email:*
Create Password:*
Confirm Password:*
Phone:
(   
 


You Are A:
Individual
 
Intermediary
 

Email Address:
Password:
 

500 New & Refreshed Detailed Postings Daily
Over 2500 Resources Available On BizBen
Since 1994. Where California Deals Get Done!
Investing In A Laundry Small Business: Two Methods For Buyers Of Laundro...
Read More News
4 Essential Facts For Coin, Card Laundry Buyers Seeking To Buy A Laundro...
Read More News