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Discussions > When Buying A Laundry Why You Should Have An Exit Strategy When You Buy
When Buying A Laundry Why You Should Have An Exit Strategy When You Buy
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Posted By: Chuck Post 
Chuck Post a laundry consultant, specialty broker, buyer representative & due diligence advisor starts this discussion on why it's important to have an exit strategy in mind while buying a laundromat! He & others explain why this concept is so important for buyers especially in the laundry business.
Topics: Buying A Business, Deal Structures, Selling A Business Tags: buying a business, deal structures, selling a business
Chuck Post a laundry consultant, specialty broker, buyer representative & due diligence advisor starts this discussion on why it's important to have an exit strategy in mind while buying a laundromat! He & others explain why this concept is so important for buyers especially in the laundry business.
Topics: Buying A Business, Deal Structures, Selling A Business Tags: buying a business, deal structures, selling a business
While my point of reference comes mostly from my experience in the vended laundry business, I believe it is also good practice for all entering a new business to have a well thought out exit strategy.
In many small businesses, you can purchase it; build it up with your wit and sweat. Then, when you want out it s likely worth much more than you originally paid for it. If your lease fails, you can probably move the business to a new and maybe even better location. You likely will have plenty of time to consider the right move.
A laundry business investment is different. First consider that the size of investment required for a vended laundry is substantial. A basic laundry earning a $10,000 monthly cash flow (Discretionary Income) may cost in the $600,000.00 range. Most of this investment is in the ground; owned permanently by the landlord. The equipment value of the “In Place Equipment” is much greater than the liquid value, if you desired selling it off, making recouping your investment by selling the equipment pretty unlikely. So, you need to look at how you will sustain or grow the value of this business in a manner that maximizes the end game as well. It will take very careful planning, a thorough and well-understood due diligence and a strong understanding of the laundry model, of the store in question and a plan going forward, including equipment replacement, operation modifications and all other elements of the laundries value.
The laundry business is an investment business. Designed to be easy on your time and relatively easy to operate. It is a also high cap business and if run properly a very enjoyable business to own. Worth mentioning, it is an all cash - necessity of life – service business that is also pretty easy to operate. The challenge is keeping up with the changes, deterioration and model management. Fortunately for laundry buyers and unfortunately for many owner-operators, this is not typically done. So there are many disadvantaged laundries available for sale. Some are diamonds in the rough and others you just want to stay away from. Just have your eyes wide open when reviewing the value of the laundromat. Be sure to look at everything carefully.
Be assured, that growth is potentially very good for laundries. With a majority of your investment being dependent on the value of two critical elements, you just have to enter this business with a good and realistic plan. Things need to add up. It’s better to deal with all of these issues on the buy in.
In a nutshell, if you are cash flowing 20% on a $600K investment ($10,000 Monthly) and have sufficient time on the lease and equipment to return your investment plus a return for your valuable time (not so much here), and consider what the value is of what you will have to sell at the end. Does it add up? What are the challenges to get them to?
Remember, that 20% cash flow is dependent on your ability to have it returned. If not that 20% may end up very low.
In many small businesses, you can purchase it; build it up with your wit and sweat. Then, when you want out it s likely worth much more than you originally paid for it. If your lease fails, you can probably move the business to a new and maybe even better location. You likely will have plenty of time to consider the right move.
A laundry business investment is different. First consider that the size of investment required for a vended laundry is substantial. A basic laundry earning a $10,000 monthly cash flow (Discretionary Income) may cost in the $600,000.00 range. Most of this investment is in the ground; owned permanently by the landlord. The equipment value of the “In Place Equipment” is much greater than the liquid value, if you desired selling it off, making recouping your investment by selling the equipment pretty unlikely. So, you need to look at how you will sustain or grow the value of this business in a manner that maximizes the end game as well. It will take very careful planning, a thorough and well-understood due diligence and a strong understanding of the laundry model, of the store in question and a plan going forward, including equipment replacement, operation modifications and all other elements of the laundries value.
The laundry business is an investment business. Designed to be easy on your time and relatively easy to operate. It is a also high cap business and if run properly a very enjoyable business to own. Worth mentioning, it is an all cash - necessity of life – service business that is also pretty easy to operate. The challenge is keeping up with the changes, deterioration and model management. Fortunately for laundry buyers and unfortunately for many owner-operators, this is not typically done. So there are many disadvantaged laundries available for sale. Some are diamonds in the rough and others you just want to stay away from. Just have your eyes wide open when reviewing the value of the laundromat. Be sure to look at everything carefully.
Be assured, that growth is potentially very good for laundries. With a majority of your investment being dependent on the value of two critical elements, you just have to enter this business with a good and realistic plan. Things need to add up. It’s better to deal with all of these issues on the buy in.
In a nutshell, if you are cash flowing 20% on a $600K investment ($10,000 Monthly) and have sufficient time on the lease and equipment to return your investment plus a return for your valuable time (not so much here), and consider what the value is of what you will have to sell at the end. Does it add up? What are the challenges to get them to?
Remember, that 20% cash flow is dependent on your ability to have it returned. If not that 20% may end up very low.
Contributor: Rob Hartman, Business Broker, SF Bay Area
I think its important not only to have an exit strategy but to have an entire strategy for the business. Just because laundromats are peculiar in operation and investment, it is still essentially a business. With any business you should have a strong business plan, marketing strategy, customer acquisition and retention processes and more. Included in your business plan would be an exit strategy, however, an entire business strategy, specific to the location you are hoping to buy, is important before making a purchase decision.
| Helpful Resources To Assist In Selling And Buying California Businesses |
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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. |
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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. |
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Mike Hurrell, Broker: Coin & Card Laundry Specialist Brokerage 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. |
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Elizabeth McGovern: Escrow Services - SF 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. |
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Janet Carrera - Escrow & Bulk Sale Services - SF 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. |
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Ranvir S. Sandhu, Esq. - Legal Services For Buyers And Sellers I've worked at top Bay Area law firms and have extensive experience with business entity formation, mergers, dissolutions, conversions, employment matters, including experience in reviewing and negotiating transactional documents such as leases and purchase agreements. |
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Larry Larsen, Broker, Laundry Specialist - Orange, LA Counties 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. |
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Diane Boudreau-Tschetter: Escrow And Bulk Sale Services 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. |
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