to buy or not to buy

[Kard]

I have been visiting this forum for the better part of a year and I really respect how the experts are willing to share their knowledge with us newbees. I thank you in advance for any help you can give me now that I finally found a mat I may be interested in. I have a few questions:

The equipment is 10+ years old and I don't like the mix (only 3 triple loaders & 4 double the rest are single - total of 23 washers and 12 dryers). He is saying his assets are worth 60K, I think they are much less. Is there a formula or a web site that can help me detirmine the actual worth of his equipment?

At first glance (wich usually shows the business in the best light possible) the bottom line seems crummy. Cash flow of 22K per year with 12K depreciation value. The past 2 owners only had it for less than a year each (although if you can beleive the broker they both have good reasons to sell) the broker says for this reason he does not have tax info to share with me(does that sound right??). The good side is the business itself has been around for about 20 yrs and it is in a good area, the bldg is in good shape, the previous owners have done nothing to generate business and store is in good shape, albeit boring to look at. He is asking 100K and it is 2200sq ft.
I think there is alot of opportunity to grow but the signs tell me to run (poor equipment, poor cash flow, high turn over in owners). Any input would be appreciated.

[Burley]

I would probably run away too......why get in line to invest your money where others have failed. The hundred thousand number may sound high....but try to go out and build a mat yourself if you really want to get in the business. A 2200 square foot facility with new equipment should run you well over $250,000.

Sorry that I don't have a good answer for you. It is really had to have an opinion without knowing the demographics, location of competition, condition of water heater, etc.

[petefritz]

The value of the equipment as "used" to a dealer is much less than 60k,. but 60k for assets is probably right. It can cost 35k just to run water/sewer/electric for a mat that size, let alone any water or sewer impact fee the town may charge. You are really buying cash flow, and the likleyhood it will continue to cash flow for a period of time you pay for. If it makes 22k a year and he wants 100k, than it is about 4.5 times cash flow. That is not a bad number, a little high for the age, but much depends on the lease ( or does this include the building???)
competition, all the factors it can continue the cash flow. 10 yr old machines are not bad, paint, cleaning, new carts, etc can make a big change for cheap. You can change out tops for bigger machines in many cases. Depreciation is a tax item, not something would even consider, as you change it to make your taxes less based on your personal needs. I have never looked at, or wuill ever show, a tax return in buying or selling mats. Look at water, gas, electric bills and see if they are steady, and if they add up to the revenue stated. I also have a reveune number signed off by the seller as to true fact, so they don't lie as much.

[mrcoinop]

make a low offer start at half his asking price.


what brand of machines, that much space for so little quantity must have lots of folding tables


need more info boiler age make, furnace a/c unit age, lease ,or oun building!!!!! would be nice, plumbing, elictrical
laundry equipment make models etc.....

[Kard]

I need to find out about the boiler, ac,plumbing & electrical. I have a copy of the electric, water and oil but the dates are so scattered, I am going to call for a more complete set. I think there is a formula so I can translate water usage to washer turns. Where can I find that? And what do I do with the info I get from the gas & electric?
There is 12 years left on the lease which is $1800 per month and increases to $2200 by 2006 and will stay at that price
until the lease expires.
The double and triple washers are Wascomat Senior W125 & Juniors W74(never heard of them). THe rest are 2 Speed Commercial GE washer WWC9000 Fclads (??) Dryers are all Loadstar IIIs. There are some folding tables, carts, a safe, chairs ect..
I think the demographics are good. Fair amount of appartments (actually there are a few appartments in the same bldg). There is another mat in the area but it is at least a mile away (I heard that is ok for competition) and I like the location - at an intersection of 2 busy streets there are other business in the plaza some food, a dollar store. I just can not figure out why this place is not a gold mine!

[petefritz]

From your list it is clear the equipment is very old, try 20 years.
The best thing is the place is still making money in spite of old machines. Thus could be a great remodel, retool situation, of course you need to get the price to a point which you think is worth that. A new remodel store could increase biz 25% tyo 100%, so if you got a 50% bump up it would cover the equipment note and then some.
The rent ratio is best at 25% of gross or less. you neer metion the gross, so is hard to say if rent is high or not.
At this point I would say the equipment is worth nothing, but the good will and impact fees, build out is worth something.

[mrcoinop]

we have wascomats machines even older than that and they work great W123 x7 that are third gen you just have to keep up on maintenance W125 are even better!!! than what we have bigger door easy to load and unload check the machines for play open door put your hand on top of inside push up if you have some play at all it needs a bearing job done check the soap box look for build up iron browning stain bad or just really hard water

We did our remodel over the last year which included paint walls bright blue with some yellow trim had an artist paint animated clothes line above dryers added 2 new W630 tripples to total 9 tripples 4 new top loaders 6 TD30 30 wascomat stacked dryers new boiler a.o. smith and also a TV we did not replace everything just partial and painted old dryers white. we also have attended from oening to close. we do wdf mon to fri buisness has increased greatly and we dident break the bank did on a beer budget ha! ha!

So what i am saying you are looking at a good potential just dont pay to much $100,000 seems high dont spend all your money just to get try and get lowest price so you can buy new equipment customers will like this very much. check everything boiler, dryer venting, furnace a/c unit, if place looks old and tired but you have location, demographics, and people come in the door still it can only get better not worse gothere on a weekend and do your own laundry to get an idea of how many people come in the door do drive byes check head count if you always see people doing laundry its worth the taking the chance if you got the time! but will take alot of elbow grease it is a very much hands on operation that i very much enjoy.