When Buying A Laundry Why You Should Have An Exit Strategy When You Buy

Comments & Replies: 2 Views: 38547 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

Contributor: Chuck Post: Laundry Specialist, Consultant, Due-Diligence

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.

Contributor: 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

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.

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, ProIntermediary Programs

Founder Of BizBen.com (since 1994). I am the Lead Advisor for the ProSell, ProBuy, & ProIntermediary Programs. I consult daily with buyers, sellers, and brokers daily about buying and selling California small to mid-sized businesses. Call 925-785-3118.

Shalonda Chappel: Escrow & Bulk Sale Services - Southern California

Escrow services to brokers/agents, sellers, & buyers. Established 43 years. Extraordinary service. Experienced with handling difficult transactions. One stop for all your escrow needs: Bulk sales, lien searches, UCC searches, liquor license transfers, publishing & recording services. 951-808-3972.

Randall Barondess, CBB, Business Brokerage Services

Experts at: Preparing Businesses For Sale, No-Cost Valuations and Lease Modifications. Troop Business Services Division prepares small, mid-sized and large businesses for sale by confidentially packaging the business and providing guidance throughout the sales process.

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.

Chuck Post: Laundry Buyer Representation, Consulting, Due Diligence

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

William F. Ziprick, Attorney: Legal Services For Buyers And Sellers

Through creative problem solving, attention to detail, accessibility, & understanding that unnecessary delay is often a deal killer, I work closely with my clients and other professionals to consistently achieve a high rate of closings. Office: 909-255-8353, Cell: 509-951-7230.

Related Articles, Events, Blog Posts, Discussions, Videos, Interviews

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.

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.

Why Deals Fall Out: Unrealistic High Asking Prices Are Usually The Reason

The unfortunate truth is that approximately 50% of all small business sales transactions fall out. While failed transactions can happen for a many reasons, Peter Siegel, MBA (BizBen Director & Business Purchase Financing Expert) discusses the main reason deals fall through; steep asking prices.

If You Plan To Offer Seller Financing: 3 Things Owner Sellers Need to Know

When selling your business, offering seller financing is a great way to help your business standout from others on the market and it is also a good strategy to consider that can help you close a sale. Peter Siegel, MBA (BizBen ProSel Program & Financing Expert) explains. Reach him at 925-785-3118.

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).

What Should I Do If Other Buyers Are Trying To Buy The Same Business As Me?

Buying a small business is hard enough when there is no competition, so how might a buyer navigate the process when there is additional competition from other buyers? Potential small business buyers are offered a few key ways that a buyer can beat out other potential business buyers in this article.

Business Purchase Financing - 3 Things You Need To Know Now For Success

Looking to buy a small business? There is good news regarding business purchase financing. More financial institutions are coming back into the market with business purchase financing. After years of being selective many lenders are more open to financing deals. Peter Siegel, MBA covers this topic.