General Sources/Answers Needed

[udt89]

So i've been browsing these forums and other sites for a while now, and i'm about half way done with my business plan for a laundromat. I will be purchasing an existing business, not building from scratch. There are a few i've been looking at and was wondering a few things.

Is there a website that is dedicated to selling all things for laundromats? Like dryer tags for WDF orders, invoices, payroll systems, etc.

How do you guys regulate the WDF part of your business? What type of system do you use to monitor it?

Whats the best way to get an idea of the revenue a current laundromat is bringing in? Can you rely on water/gas bills? Should i scope the place out each day? What times should i go?

Basically the one i am looking at has an asking price of $65k. The owner isnt planning to offer financing for it, so i would need to come up with a lot of the money, and go to a bank for the rest. By him not offering owner financing i assume two things, tell me if im wrong. One, the price will come down a lot more. How can he compete with a larger business for sale that will be owner financed? Its a negative side to his sale, so i should get a discount. Second, is he not confident about his business? If the business was bringing in money, wouldnt he be ok with having the new owner pay him back with generated sales? He is retiring, so maybe he just wants the money to retire with.

Here is the store details:
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Asking: $65,000
Included in the Asking Price:
Furniture, Fixtures & Equipment: $40,000

Gross: $105,000
Cash Flow: $22,000

Summary Description:
The present owner still has a 10 year old price structure. You can go right away from $1.75 to $2.00, giving a straight additional profit to the bottom line (+/-)$15,000.00/$20,000.00). If you want to work too, you can added an additional $20,000.00 a year. You can renegociate a new 10 years lease(numbers included in the present bottom line)with an option.
General Information
Year Established: 1994
Employees: 3
Facilities: Immaculate 1,500 square feet in a wonderful strip mall, with plenty of parking, and located on a very busy major road. 20 Wascomat / 11 dryers (16 pockets)/ Natco boiler.
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Now believe me when i tell you its the cleanest laundromat i ever been in. Machines are well maintained since the owner is a washer/dryer mechanic.

Did a yellow pages search, and this is the only laundromat in the town that its in. It is also the closest laundromat for some bodering towns with laundromats in those towns. The town its in doesnt have any apartment complexs nearby, but in the neighboring towns there are a few and this mat is closer to them than the laundromats in that town. I'm just confused how this guy has been in business for 10 years in this neighborhood. Its fairly upscale with what i think its a low tenant population.

Can anyone give me a good way to figure out if this is a good investment? Anyway to somehow get the owner to finance the mat? If he doesnt finance, i doubt im gonna buy. Is there anything i can say/do to get him to finance? Like make the terms shorter on the loan? If the gross is $105k and the cash flow is $22k, does that mean he has $83k in expenses/payroll???

Thanks guys, sorry for the long post

[azkid]

Sounds like you've got a lot of things going on. The general questions about running the laundry the existing owner or manager should be able to tell you (how to handle WDF, supplies, etc.) - that's all straightforward, you can also check out www.cleanersupply.com (http://www.cleanersupply.com) for tags, etc.

As far as owner financing, frankly I wouldn't carry back any financing if I was selling a store for $65K either. You should be able to come up with that money (personal savings or loans) - if you can't then the business probably isn't a good fit for you. You didn't mention the age or capacities of the equipment, but it seems like a very reasonable price based on your description. There are many ways to bring the net up also (go partial attended for example).

[theo90]

If i was the owner of this mat and the figures that you just gave are true ....then no I would not do finance either. The only thing you can do is if the mat has been on the market for a while then maybe you can use this to your advantage in the event that he is tired waiting for a close on this business but still you he would carry only a small note and you would still need to come uo with at least 40 as a downpayment.

In my experience I really dont believe any figures until they put in a contract that this amount comes in weekly. When you ask them this all truth comes out. Example ....I looked at a mat for the same gross as yours but a higher net. The asking price was 105. After some reserch I was comfortable bidding 75 for what I saw at the start. At that gross, I told them in the contract they need to write the weekly amount as part of the deal. this is a cash business and because of this I trust anything of what they say nor do trust what their last tax return is because all could change quickly. When push came to shove the truth came out and the weekly figure kept going down . Bottom line the numbers were not the truth and my bid dropped to 45k for a lost business that I will rebuild.

How long has it been on the market.Has any other offers come about, etc. Instead of holding a note see if the figures are what they say cause if not maybe you can lower the price to what you can afford to pay cash for. At 22k net after a loan you will be left with hardly anything.

[udt89]

thanks for the posts guys.

so just a few more questions.

Back to the $105k gross and $22k cash flow. So that does mean theres $83k in expenses with this mat?

The more i look at the mat i start to think that this might not be the one. Its ashame becausei really thought i could afford it, since i have 20% of the asking price on hand. I think the mat has been on the market for 2 months, and there is an offer coming the end of this week. I might just use this mat as a learning tool about how to make a well educated bid. I'm getting the expense/revenue sheet fax to me from the broker. i will post what it says when i get it.

[udt89]

here is what was faxed to me

20 washers, 11 dryers with 16 pockets

Rent= 3200/month
electric= 1150/month
repairs= 20/month
water=450/month
soaps= 300/month
insurance 1800/year

equip value 40,000. has a natco boiler. <?>

the washers and dryers are 10 years old.

is this consistant with $105k gross? is asking 65k a fair price? doesnt rent seem high for 1500 sq ft? it is in a high end neighborhood with homes costing over 350k.

[RBHII]

That rent is way out of line for the gross and square footage. But remember, you can try to renegotiate the lease as part of the deal, some mats are sitting on leases signed in 2000 when the commercial market was at it's peak. The repairs line item is way too low for 10 yr old equipment. There's no gas, are the dryers electric? Plus like most mat owners, they've left out the small expenses that add up...ie alarm monitoring, etc.

Just my opinion, I'd do your own P&L, adding in a more realistic line item for repairs, telephone, cable, other expenses you know you will incur....I assume this is an unattended mat....but you still need a line item for labor for cleaning.....then base your offer on 3 to 3.5 times that.

[azkid]

I agree that it is best for you to use this mat as a learning experience in how to evaluate a mat for the future.

A couple of notes:
If possible you should talk to the owner and forget what the broker is telling you. You are missing some important basic questions about the mat from this broker list - for example, the gas/electric question with the dryers is fundamental, as are the sizes and types of washers. I wouldn't buy a mat with electric dryers. The insurance is too high, but that's a relatively small item. The rent is also high. If I was you I would do a turns per day calculation based upon the observed traffic at the mat and come up with your own income calculation and set that against the known expenses.

[theo90]

Something is missing...The expenses you indicated add up to roughly little over 63k. At 105 in sales it is roughly 8000 he says he brings in monthly then if you minus the expenses they faxed to you it shows the net should be higher????Something is missing right?

Forget the expenses at this point let them prove the amount that he brings IN

[udt89]

its not 8000 monthly.....its like under 3k/month. i definitly agree that something is wrong.

[udt89]

off topic here, there is a link on the coin laundry owners club site that is the typical operating costs of a laundromat, but the link is broken. anyone have the working document for it?

[azkid]

I think you are getting confused about a number of issues and I would strongly suggest you spend some time talking to people face-to-face about the industry. Talk to a distributor, or this owner for example. You also get some good industry information when you join the CLA.

Obviously, the line item that is "missing" on the expense line is the payroll. The broker probably didn't include it since they considered it "optional", but you should include it.

[petefritz]

it is easy to talk yourself out of a deal. what do you expect for 65K?? You can't even pay a permit fee in many areas for water/sewer for that kind of money. The replacement cost alone for this mat is probably in the 250k range, and it is "seasoned" 60k is peanuts in the large picture. Someone might buy that mat, retool it and do 50% or more better business. Takes money to make money. 20% down won't cut it in most of these deals either. I am not saying it can't be done, in the real world here you better have some cash or assets to back your deal and plan on not taking any cash for 5 years while you pay the notes off. As for this particular mat, location is key. The rent is to high for current gross, maybe you could peel away an employee and have some part time self serve unattned hours. How much W/D/F? The area does not sound like a good coin one. You have to define your business then go for it, ie, unattended, full service, big w/d/f, etc. There are pro and cons for each.

[udt89]

so maybe im asking the wrong questions.

I will have approx $15000 available to put down. What can i get for that? Im not looking for a huge money maker. I'm looking for something that nets 6k-12k a year. Just looking to get in the business and revive a slacking mat.

[theo90]

what do you expect for 65K??
If a store has this gross and the net is said to be 25 totally unattended, no wdf, no nothing, can 25 really be a realistic figure?