Evaluating an existing laundromat

[jamaguy]

I'm interested in getting into the coin laundromat business and have been browsing through this forum, trying to absorb the wealth of information available. Through the pages upon pages of posts and various other readings, I’ve come to have a semi-comfortable grasp of what I need to look for and evaluate when considering an existing coin Laundromat. However, I do realize and can appreciate that research can only provide me with a partial picture of what to expect and only with actual experience will I be able to understand more fully. Experience is where I come to ask for the forum’s guidance, as I am now engaged in the due diligence process of a laundromat. If anyone is willing to give me any insight as to whether or not these numbers are feasible, it would be greatly appreciated.



Seller’s Stated Gross Revenue: $210,000



Equipment Mix & Price

Toploaders: 26 @ $1

30# Front: 12 @ $2

45# Front: 6 @ $3

60# Front: 2 @ $3.75

Dryers: 30 @ 12 minutes/quarter



Approx 3.5 Million gallons of water usage over the past year



There are no other auxiliary services such as fluff and fold. While there are a few vending machines, I am presuming the income from that source will be minimal. Once again, are the stated gross revenues achievable? Thanks in advance for your help.

[azkid]

Wow, that's alot of water, but it's possible. You would need about 6 TPD to drive that water useage (and 6 TPD would also drive the stated income figures). So, I would suggest you do your due diligence to determine what a TPD figure you are comfortable with for the location.

Are you in the video game biz by chance (jamma?).

[cashflownewbie]

I don't agree with the above evaluation. I believe that the TPD calculation should be::: (turns/day) * (365 days/year) * ( dollars/turn) = (dollars/year)... Now a few admonitions; first, 365 days is not a good number because people don't wash their clothes EVERYDAY of the year. Second, assuming that each machine gets used just as much as the other machines is also a bad estimate because the distribution would be guassian in this case. So I calculated TPD to be 6.9738 about = to 7. I got this number by (210,000)/ (365 * (26 * 1 + 12*2 + 6*3 + 2*3.75 + 30*.25 )) = 6.9738 TPD... Now on to more pressing matters. Does anyone have a spreadsheet that could aid in the evaluation of a laundrymat? What kind of bottom line cash flows per month could I anticipate. *Bottom line meaning PROFIT!.

[azkid]

Wow, you really are a newbie. I don't want to spell it all out for you, but you're wrong because you didn't integrate your fractals in conformal rotation.

Obviously, I did the calculation and just provided the bottom line answer. Newbie, one of your errors was using the $210K number and an inaccurate dryer calculation - you should use just the washer figures, which you can accurately estimate when you learn something about laundries. Also, I don't believe you should use the same tpd figure for each machine type either...that's why I told him to look at place with due diligence. The actual machine tpds will be determined by many things - including where they are placed in the store. Is that gaussian enough for you?

[petefritz]

>>Now a few admonitions; first, 365 days is not a good number because people don't wash their clothes EVERYDAY of the year. Second, assuming that each machine gets used just as much as the other machines is also a bad estimate because the distribution would be guassian in this case. So I calculated TPD to be 6.9738 about = to 7. I got this number by (210,000)/ (365 * (26 * 1 + 12*2 + 6*3 + 2*3.75 + 30*.25 )) = 6.9738 TPD... Now on to more pressing matters. Does anyone have a spreadsheet that could aid in the evaluation of a laundrymat? What kind of bottom line cash flows per month could I anticipate. *Bottom line meaning PROFIT<<
My laundromats all make money 365 days a year. Don't think people don't do laundry every day, becuase they do. Some of my biggest days are Thanksgiving and Christmas..

I calculate profit per gallon, not TPD. It is possible from a quick glance to achieve the stated revenue.

What would a spread sheet you are looking for be worth??

[jamaguy]

I apologize, but I made an oversight. I only counted the toploaders and frontloaders that were currently working. However, the seller stated that 30 toploaders (4 more than previously noted) and 14 (2 more) of the 30 lb. frontloaders were operational for most of the past year. Thus, I believe that the turns would be lower and more reasonable.

After visiting the laundromat many times, the usage appears to be pretty even between toploaders and frontloaders (meaning if 5 frontloaders are being used, approximately 5 toploaders will be in use as well).

I've come to the following annual P&L projection based on a very extensive review.

GROSS REVENUES - $215,000

PRIMARY Expenses:
Salaries and Payroll Tax - $16,500
Rent - $63,400
Gas - $27,500
Water - $10,000
Electricity - $12,000
TOTAL OF PRIMARY EXPENSES - $129,400

TOTAL INCOME BEFORE OTHER EXPENSES LIKE MAINTANENCE AND BUSINESS INSURANCE:
$85,600

The expenses represent somewhat conservative figures that I am very comfortable with. It is with the remaining expenses such as insurance (fire and liability), security, and repairs and maintenance that I am unsure of. In regards to maintenance, 10 of the smaller frontloaders are over 13 years old. Some are not working currently.

Questions are the following:

1) What is everybody's opinion as to what the remaining expenses may total to? What would the final net income before personal taxes and debt service be ($85,600 minus remaining expenses)?

2) What do you believe this business to be worth? How much should I be paying for this business? (fyi: This business is located in California)


Your help and advice is very much appreciated!

(BTW, azkid, i am not in the video game business although I do own many video games.)

[fatboy]

I think the next time I buy a laundromat, (on several different occassions) I'm going to sit in the laundromat for as long as it is open that day and literally count each turn on each machine.

[neal]

whats the asking price for the store?

[petefritz]

It is very high or he would have posted it. Not a serious buyer

[azkid]

There are a large number of posts discussing valuation - you can search the board and find a number of different methods and value ranges. To me, it's all about the riskiness (sp?) of the cash flow projections, and 2-5+ is very reasonable. Good luck.

Pete, I like the TPD method, because that can be physically verified for gut feel and it can also be doubly verified by calculation (tied to water useage and also verified to revenue).

[Scott9876]

Does anyone have ideas about evaluating an existing laundromat that is closed?

[Howard]

That is a tough one. Your best bet is to see if you can get water records from the local utility. You might try to approach the old owner -- but good luck there. I would be very careful about a closed mat, expecially if you are new to the business. Why do you think that you can do better than someone that was in the business. Don't get me wrong, I am not saying that you can't-- but you need to ask yourself why you think you will succeed where someone else failed.

This is a common mistake people in the restaraunt business seem to make over and over again. Perhaps because it is fairly cheap to open where one already was. But I have seen certain locations where new restaraunts keep coming in and keep failing year after year. It makes you think.

[neal]

Location, Location, Location