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What Factors Contribute To Coin And Card Laundry Business Valuations?

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Comments & Replies: 1     Views: 5754     Posted By: Chuck Post  Chuck Post: Laundry Specialist, Consultant, Due-Diligence

We are finding that many laundry buyers and investors are not being given true light to selected elements of value or there are inconsistencies in the interpretation of these elements of value. This common error needs to be addressed. In this BizBen Discussion we address many of those factors.

Topics: Business Valuation, Buying A Business     Tags: business valuation, buying a business, selling a business



We are finding that many laundry buyers and investors are not being given true light to selected elements of value or there are inconsistencies in the interpretation of these elements of value. This common error needs to be addressed. It is important to realize that it is not so much the history of the business that establishes its value; but rather the confidence in the ability of the business to continue to perform over time; sufficiently for the anticipated return of investment.

These can be costly errors to all parties. First is the cost to the New Investor, who may understand these things and then not find a good laundry or may overpay for the laundry, causing problems in keeping up the business profitably going forward. This is also bad for the Broker, because of failed escrows resulting in loss of income, wasted time and efforts. It is certainly bad for the equipment companies and the lenders. When the investor purchases with these misunderstandings, the consequences result in a bad investment leading to a resistance to re-invest into the laundry. This means lower income, poorly run laundries and in the end possibly a loss of a part or all of the original investment. This is very costly and is also counterproductive as to the forward advancements of the industry.

Please consider:

The true value of a laundry is not based on its history but rather its ability to continue performing into the future. The laundry is a time-lined business. The Equipment and the Lease both age, deteriorate and/or expire. The elements just have to be there to make the whole thing work. In general, the Laundry is an Investment Business. In stating that, I qualify the term "Investment Business" as a business that relies largely on your Capitol Infusion rather than on your time invested into the business. It is true that if a proper model is put into place that a laundry can be well operated with as little as/or less than 6 hours of the investors physical time weekly.

The variable issues that are important for the Broker, Buyer, Seller, Landlord and Lender to understand in evaluation of the laundry or taking a listing are:

1. The Lease. Consider this, if one is unable to return the original investment plus a reasonable return throughout the investment within the agreed lease period, the investment risk is greatly increased and the selling price should reflect it.

2. The Ancillary Business, such as, Fluff & Fold, Agency, Mini Markets, games and especially those games that are closely related to gambling, do not carry the same weight as the Wash & Dry income. These should be evaluated on their individual merits.

As a norm, For Vending and Games (any), it is reasonable to assume a level of about 4% of Wash & Dry as normal income in this category. Higher levels need to be looked at differently. Again, the anticipated long-term capabilities of the ancillary are essential.

3. Payroll and Janitorial is an area that needs to be made sense of. In some cases a janitor and security person may be paid as an independent contractor at very low rate. Assuming that person is legal and the hours and expense are properly accounted for, that should be acceptable in the valuation. However, if there are questions or pay systems that are contrary to the norm they need to be closely looked at. The question is, if a Buyer can operate the laundry as it is now operated with the same results long term with the stated costs then the valuation would reflect that. Remember, if the owner and family are working in the laundry (excepting up to 6-8 hours), it is a payroll item and needs to be accounted for.

These issues are in addition to the more traditional elements of value such as: the equipment age & condition, the areas of competition, the demographics and the condition and perceived longevity of the building, and so on.

The high multipliers used in the valuation of the laundry are justified by the cost of its infrastructure, length of lease, and the anticipated long-term use of the equipment. At a minimum, a Business Buyer should have confidence that the income number, leasehold terms and equipment would hold for at least as many months as it would take to recover the anticipated investment.

Comments are appreciated ...


  Helpful Resources To Assist In Selling And Buying California Businesses
Brad Steinberg, Broker - Laundromat Specialists

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.

Diane Boudreau-Tschetter: Escrow And Bulk Sale Services - California

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.

Joe Sandbank, Esq: Legal Services For Buyers, Sellers, Brokers - Throughout California

I have provided legal counsel to business buyers, sellers and brokers for over 17 years. With prior experience as a business broker and SBA loan officer, Joe brings both a practical and legal approach to all aspects of the business acquisition process. Please phone 916-672-8018 for more info.

Larry Larsen: Laundry Consulting, Brokerage, Insurance - Southern California

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.

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.

Janet Carrera: Escrow & Bulk Sale Services - San Francisco Bay Area

Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.

Chuck Post: Laundry Buyer Representation, Consulting, Due Diligence - California

Chuck Post has 32 years experience in the laundry industry, specializing in assisting laundry buyers (and entrepreneurs) with buying or starting up, building, re-tooling, laundries throughout California. Laundry buyer representation, consulting, due-diligence, lease negotiations, laundry valuations.


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