Water bill to gross money calculation?

[KRS1516]

I have heard that there is a 'rough formula' using the average water bills tonto calculate the gross amount the store is making. Is there any truth to that and if so how do I apply it to figure out the gross of a potential store I am interested in perhaps purchasing. Please help as soon as available. Thank you.

Chris

[CanCanCase]

Chris-

Each machine uses a given amount of water per turn. Water-bill-gallons divided by number of machines (assuming they're all the same capacity machines) gives the number of gallons used per machine. Divide that number by the amount of water used in each machine per turn, and you'll have the number of turns the machines did for the month. Multiply turns by vend rate, and you'll get a very rough gross estimate of wash revenue. Dryer, WDF, vending, and other ancillary income will vary from store to store.

Keep in mind, individual washers will be of different capacity, or may be set to run different cycles with different water consumptions, so this math will only get you in the ballpark.

Personally, I look at tax returns to be sure they match P&L statements, then look at the utility bills... not to see if they're skimming a given percentage, but to see if the utility bills go up and down at the same rate and at the same time as declared revenue... ie: if it's always slow in October, and revenue is reported down, but water and gas were $300 MORE than August and September, there's something to look closer at.

There are some great articles on evaluating a laundromat in the Member's Section of the CLA website... Might be time to join and start your homework and reading! ;-)

-Case

[James2011]

I have heard that there is a 'rough formula' using the average water bills tonto calculate the gross amount the store is making. Is there any truth to that and if so how do I apply it to figure out the gross of a potential store I am interested in perhaps purchasing. Please help as soon as available. Thank you.

Chris

7~10% of revenue, roughly

[CanCanCase]

7~10% of revenue, roughly

Is that a rough estimate for your particular store, or a rule in general?

The point of this thread is that there are WAY to many variables to answer the OP's question with even a small degree of certainty. Even the same store can vary... I took my store #2 from overall utilities at 40% of gross revenue to a lean 18% after refitting with new equipment...

Even with 2 nearly identical stores in different towns (serviced by the same water board) my water utility as a percent of revenue is nowhere near the same between the two because of the massively different water/sewer rates charged by the respective cities.

-Case

[bodman]

I have have been able to multiply gallons of water used by a factor of .95 and that comes within 5 to 10 % of gross revenue down in north florida. not including the wdf numbers. This is not exact science but allows you to get a close approximation. I have done this method on my 3 unattended mats and the numbers are right on and I do time of day pricing 5 days a week. with out the discount you could go up to $1.10 and be close .

[Xiong]

there's no perfect way to figure this
you can do by each equipment type/brand, from the manufacturer's data sheet and use your locality charging rates.

my short and quick method is to get data from all the mats within the area that I'm interested in, then do the calculations to get an average across these existing mats. take into consideration that percentage of revenues means it's a proportion of revenues; revenues is then the independent variable, and your percentage of utilities is the dependent variable. make corrections for the different prices of the machines, get them to their base denominator (i.e. cost per pound, etc)

say if the mat you're interested has a utilities bill of $50,000 per year and from your investigation is that utilities to revenues ratio (ucr) is 20 percent in that area, then take $50,000 divided 0.20 = $250,000. compare that back to the other mats of similar machines, locations, prices, etc... does this look right to you? check that with their tax returns.

anyways, I'm a newbie so i'm not the expert in this industry yet :D


I have heard that there is a 'rough formula' using the average water bills tonto calculate the gross amount the store is making. Is there any truth to that and if so how do I apply it to figure out the gross of a potential store I am interested in perhaps purchasing. Please help as soon as available. Thank you.

Chris

[STOUT]

Tell you what. Since the IRS has that information and they can figure it out why not ask them?
That way when you get audited, you and they will not be in for any surprises.

Let us all know what you find out,

[Washin]

Try this.
http://www.irs.gov/pub/irs-mssp/laundry.pdf

[Randolini]

Well isn't that some light reading! Thank You for the info