The coin laundry is an All-Cash, Necessity of Life service business. What could be better? Yet, understanding how the business justifies such a high purchase price is baffling. In fact, many times the value is so misunderstood that it results in investors over-paying. Sometimes grossly over-paying.
First, you must understand that the coin laundry is a business of longevity. Its value is sustainable for generations; given the right conditions. It is this sustainable value that justifies the large price. But many laundries are not positioned correctly in order to accomplish this sustainable position. To their misfortune, many investors only look at the current income to establish the value. This is like marrying a one-night stand. You are taking a big risk.
The value is not found in any one place. Not in the equipment, service, layout, amenities or even in the demographics. It is in the combination of matching the needs of the community with the service you are offering; and developing a long-term business model that will benefit both the community and your reasonable return on and of the investment. So remember, each market area is as different as the people that live there. The community coin laundry is a place for your customers to come to do one of their least desirable weekly chores. It is a home away from home for a short period of time. Once the laundry is operating properly, it must be continuously sustained.
Over the years, I have been to more laundries than I can even believe, throughout California. I've seen some beautiful and well-run laundries. But, I've seen a lot more that are literally disgusting. The owners treat their business more like a quarter-factory than a service-oriented business. Many laundries continue to earn good profits for a long time, operating this way. Not taking good care, or replacing equipment when needed. They fail to regularly modify their business model to meet the demands of the changing community and often their customers begin to feel dissatisfied and even unsafe.
Unfortunately, the laundry owner can get away with this for quite some time. They tell their friends how easy it is to operate and how much they earn. Then, when the business model starts to fail and their mistakes result in a declining return, they sell it. They often sell it at a price based on the then, net return and without consideration for the re-investment costs necessary to sustain the business long enough for the new owner to return the purchase price.
By then the new investment required to bring the business model up to date is just too much to justify, after paying the price they paid. So, the laundry continues on this downward spiral. This is the danger of purchasing on the Net Multiplier. Much more needs to be considered.
Today, many of these bad investment decisions are resulting in a large number of laundries being made available for sale at too-high numbers. Be careful in purchasing these. While there are pearls, there are many more that may just stink. These are avoidable mistakes. When you purchase a laundry, look at the total investment required. This includes the purchase price and the re-development of the business model; if needed.
Also, please Remember, that if you purchase and operate a laundry, while you may not to need to be physically on site at all times, you do need to maintain the business in a manner that will keep it moving forward for generations.