who came up with the formula

[mellofelow]

Originally Posted by KJ

The only thing gas prices effect is net revenue.

I know... the P&L shifts to the dryer side. But my underlying message is another subject all together.

[Xiong]

Originally Posted by couvsuds

Besides, sometimes a high percentage for dryer to washer income could mean your washer prices are too low.

that's an interesting point to investigate

either the washer price is too low, or the dryer price is too high?

so to do in terms of $ per lbs, would that resolve these?

[laundryboy2]

This formula ONLY references REVENUE and where it is coming from when related to the whole.

Cost has NOTHING to do with this 'rule of thumb'.

In these times of lower cost NG (in the States), the benefit will show up on the P&L statement. Maintain your revenue (income) while lowering your costs (expense) WILL increase profits!

[Xiong]

Originally Posted by laundryboy2

This formula ONLY references REVENUE and where it is coming from when related to the whole.

Cost has NOTHING to do with this 'rule of thumb'.

In these times of lower cost NG (in the States), the benefit will show up on the P&L statement. Maintain your revenue (income) while lowering your costs (expense) WILL increase profits!

so the we should be taking about markup, instead of this ratio?
say if it cost me $0.50 per dry cycle, and my dry price cycle is $1.00, then that's very very good = 100% markup? the problem is what should go into the cost, i.e. electricity, gas, wear/tear, etc? and has anyone determine the cost per cycle for each different types of washer and dryer?

[apartment_guy]

Originally Posted by Xiong

so the we should be taking about markup, instead of this ratio?
say if it cost me $0.50 per dry cycle, and my dry price cycle is $1.00, then that's very very good = 100% markup? the problem is what should go into the cost, i.e. electricity, gas, wear/tear, etc? and has anyone determine the cost per cycle for each different types of washer and dryer?

I am a bit of a junkie when it comes to spreadsheets and number-crunching. I built a spreadsheet when I was considering the cost of softmount fronts (Horizons, although numbers for the Maytags would be similar) and came up with utility costs of 25 cents per load for washing and 15 cents for drying. Note that these washers use almost no water and the dryers are 24K or 25K BTU.

If you are using borrowed money then your cost of ownership is going to greater than your utility costs, and indeed even if you pay cash for the equipment your "opportunity cost" (that is, the loss of revenue which you might have earned if you had invested the money in something more lucrative, like a high-yield bond or a brothel) will likely be as much as your utilities.

In many markets your biggest cost will be the floor space the machines occupy. Forty machines doing four TPD in a $2,000 per month store works out to 33.3 cents per turn.

In any case, although I don't own a mat I assume that the idea is to charge the highest vend possible without driving away your customers while cutting expenses as much as possible... without driving away your customers. But I can't see that the concept of "markup"... that is, the relationship of cost to revenue.. is relevant.

[Xiong]

Originally Posted by apartment_guy

I am a bit of a junkie when it comes to spreadsheets and number-crunching. I built a spreadsheet when I was considering the cost of softmount fronts (Horizons, although numbers for the Maytags would be similar) and came up with utility costs of 25 cents per load for washing and 15 cents for drying. Note that these washers use almost no water and the dryers are 24K or 25K BTU.

If you are using borrowed money then your cost of ownership is going to greater than your utility costs, and indeed even if you pay cash for the equipment your "opportunity cost" (that is, the loss of revenue which you might have earned if you had invested the money in something more lucrative, like a high-yield bond or a brothel) will likely be as much as your utilities.

In many markets your biggest cost will be the floor space the machines occupy. Forty machines doing four TPD in a $2,000 per month store works out to 33.3 cents per turn.

In any case, although I don't own a mat I assume that the idea is to charge the highest vend possible without driving away your customers while cutting expenses as much as possible... without driving away your customers. But I can't see that the concept of "markup"... that is, the relationship of cost to revenue.. is relevant.

thanks a bunch

i'm trying to figure a systematic process for doing this business, or a profitable system for operating the business.

sure very market is different due to different costs of the utilities, machine, rent/mortgage, loan repayment/capital recuperation, etc...

to me a markup is just one of the many ways to figure out what you should be charging to cover your costs/expenses

per what you mentioned, does it make sense to just consider the total cost of operating the laundromat over the number of machines generating revenues, or its appropriated portion (if you have service laundries). total cost would be as on your profit/loss statement or/and relevant items from the balance sheet?

say if you just got a self-service laundry only, and your total monthly expenses is $10,000 which 50 machines must generate revenues to cover. that would be = $10,000 / 50 = $200 per machine, that's what each machine should be generating to cover itself and its worthy to you?

getting complicated?
if we get into more details, i.e. a machine would occupy a volume space (l,w,h) in a mat, not just the floor space (l,w)?
hard to put an opportunity cost on, sense it's not on the income statement (profit/loss) or balance sheet?

[apartment_guy]

Again, in my business (apartment rentals) costs and revenue are independent. I am always looking for ways to make my buildings more efficient and less-costly to run. On the revenue side, I set rents at the highest levels possible without alienating customers. If my rents are too high tenant turnover will become more frequent (which costs me money and time) and I might find myself with a vacancy. My expenses amount to about 30% of revenue, so I do not “need” to increase rents just because costs increase. Nonetheless, when costs increase (and particularly when increases in things like electricity and water are so high that they are written about in the newspapers or discussed on the TV news) then tenants tend to be understanding, which provides me with an opportunity to increase rents without much fear of a revolt. But it is worth noting that in my market there are thousands of new condos coming onto the rental market, so landlords are being cautious about rent increases.

I expect that the same caution is warranted in the laundromat business. You can set your vend to acheive some sort of ratio, but if customers don't like your prices they'll go elsewhere, however accurately you have measured your ratios.

I analyse my financial results on an ongoing basis, but it’s just for my entertainment, given that the one thing that is difficult to measure on a spreadsheet is risk (except to the extent that one can run “what if” scenarios). In my business the risk is that developers will continue to add ten thousand condos a year to the rental housing stock, which will result in higher vacancy rates, or that interest rates will rise, which will make my properties less attractive to potential purchasers who plan to use borrowed money, particularly as lower-risk fixed income investments will provide better returns than they do today.

Again, I expect that the same dynamic is at work in the laundromat business. If someone is about to build a new megamat a block down the street then your financial analysis becomes meaningless.

Finally, one other aspect of “opportunity cost” which I did not address is the potential to use the space for more productive purposes. For example, my apartment laundry rooms are in basement spaces which are not of much use for anything but storage, and because I don’t pay rent my laundry rooms might be regarded as highly profitable. On the other hand, if I converted the space to storage lockers for tenants and rented them independent of the apartments I could generate far more revenue that I do with laundry. Unfortunately tenants expect to have onsite laundry and if tenants had to schlepp their laundry to the mat four or five blocks away my properties would lose much of their appeal.

When I moved into my neighbourhood forty years ago there were at least five laundromats on a mile-long stretch of street in what was then a sleepy downtown neighbourhood. Over the years the street became trendy and three of the mats closed. These closures may have resulted from their inability to grow revenue as costs increased, but it is entirely possible that they were profitable businesses when they closed… but were nonetheless able to generate even more income when remodelled to sell lattes or yoga wear.