What is a reasonable price for a mat?

[chad]

Originally Posted by Howard

No way. That two year old store is probably at its peak, and has no place to go but down. You will be very sorry down the road if you pay that much.

Howard, that is your opinion but my store is a fact. Going on its 3rd year and my numbers continue to grow. I do over 30k in the summer now. Every store is different and so is every city. Every store that is sold for 3 or 4xs net is either a dump or needs some type of work done soon.

[Skipper]

This store is about 15 yrs old, earnings are consistent over the last 6 years since I've been following it. The owner raises prices to keep his net constant as needed. He is in his sixties and ready to retire. Equipment was replaced in 2006/07. Earnings before salary, depreciation, amortization and interest are $165,000 to $175,000 over the last 36 months. Financing will be offered by a combo of owner, the bank, and I am able to handle most of it myself if required. I can get money for 3.55% fixed for 7 yrs. There is 10 yrs left on the lease and rent is 11% of current sales plus triple net. The washes start at $2 for a 20#, the cheapest in town.

So far you guys have said (Case), 4 yrs, an SDE of 4 ($700k), is way too much, Howard says $525 to $700k is a good range, Adamski says $150k to $963k is a reasonable range (and close to the $975k asking price), Mellow says it's a reasonable price in CA (I'm in FL), and the 27% profit on sales is indeed low JH, b/c utilities are 36% of sales (see $2/load above). Will the market support higher prices? The owner doesn't want to test it.

Case, a multiple of 4 means it will take 4 years of earnings to pay for the mat before my salary, interest, and taxes (loans are paid back with after tax dollars), but some here think 5.5 years is reasonable. The last business I purchased (professional services) I paid a 1x multiple of gross and had it paid off in less than 2 years of earnings. These laundries seem expensive by comparison.

With a range of $150k to $963k, it sounds like the price is what I'm willing to pay and the seller is willing to sell it for!!! I think I will counter a multiple of about 3 and see how badly he wants to sell. Thanks everybody for the advice.

[Sudds]

The prices might be right for SoCal but we're talking Florida. Big difference. Getting a ROI in 4 years is very sporty. What kind of equipment, what's left on the lease? How many competitor mats have you been to? Similarly, how many mats have you spent some time getting to know?

As mentioned previously, that is very high figure. I'm sure you can find something for far less than what your evaluating now.

If your ever in Central Florida feel free to look me up. You can observe and practice all you want. Thanks.

[chad]

Originally Posted by Sudds

The prices might be right for SoCal but we're talking Florida. Big difference. Getting a ROI in 4 years is very sporty. What kind of equipment, what's left on the lease? How many competitor mats have you been to? Similarly, how many mats have you spent some time getting to know?

As mentioned previously, that is very high figure. I'm sure you can find something for far less than what your evaluating now.

If your ever in Central Florida feel free to look me up. You can observe and practice all you want. Thanks.

How many stores do you know in fl that net 175k a yr?

[Adamski]

Originally Posted by Howard

No way. That two year old store is probably at its peak, and has no place to go but down. You will be very sorry down the road if you pay that much.

Howard,

A 2 year old store is not necessarily at its peak. It could still be growing (not likely though) or it could even out at that level for decades providing the place is kept clean and the equipment is updated on a reasonable schedule.

My store is over 50 years old. It's one of the oldest businesses in Muskegon. By any normal measure, it should be 6 feet under by now.

[Howard]

Unless you have hidden a store in an industrial area with no signage and no advertising you should expect that everyone in the market has seen that it is there and if interested given it a try. By that point in time just about the entire market is either using it, tried it and moved on, or just has no interest in going there. Are there exceptions, I am sure they are, but for most places this is going to be the case.

The equipment is now no longer new, it might be out of warranty, or will be before to long. Things are starting to wear a little, but are still in close to new condition.

The bottom line is that buying such a store will require you to pay top dollar. You are going to be paying a lot of money for goodwill, much much more so than if you built the store yourself. This is assuming the store is doing decent business, if business never developed you may pay less than what it cost to build.

The bottom line is that you pay top dollar for such a store which most likely will not develop much if any new business. Further, the equipment is not going up in value, it is going down as time passes. Others have accessed how well the store has done and new competition might be just around the corner. The store is most likely at its peak in terms of value.

You are probably better off to either build yourself or buy that older store that does whatever business it does in spite of itself. Maybe the equipment is worn and adding new equipment or other things will generate more business.

The bottom line is what do you think you can do in this new store that the existing owner has not already done to grow the business, if you can't come up with specific things then why are you paying top dollar for it when it can only stay flat or decline.

[silver56]

Skip take this for what it's worth as I don't even own a 'mat but have been researching and talking to a number of folks over the last nine months. When you start to get these huge price tags of $500k-$1m for a laundromat I think you're only asking for trouble, particularly if it's going to be your first foray into the business.

A place of that size is going to command a considerable amount of time and attention on your part, so you might as well bake in at least 40+ solid hours per week (if not more) for several weeks/months until you get a good feel for the shop.

Additionally, be very wary of trusting the 'net numbers if the machines are relatively new. The annual repair expense is probably lower than what it would be in the future so you have to factor that into your numbers. Plus, it's become abundantly clear to me that for any 'mat math to really work you have to be able to do your own repairs. If not, you're paying some hump $80+/hour to come in and give you the run-around.

Be aware that in this laundromat business there is a lot of bad money thrown into the industry thinking "hey, I can get paid back in only four years." Look around. Myself included, there's probably at least a half dozen "wall street" types on this PL forum sniffing around this industry based on these ROI claims. Yet the folks here on the forum have totally opened my eyes to the reality of running a 'mat and it's not child's play.

Despite all this I'm still looking to get in but I'm looking to buy a smaller (i.e. 2000-3000 sq ft) 'mat that needs work.

[bodman]

Hey Chad an average gross sales in my neck of the woods in North Fl. is 14k a month , so one claiming 54,166 dollars a month would be an anomilly.

[Xiong]

i probably won't pay if i can build for less than the asking price.

very important is location and demographics, then ages of the machines and lease terms.

every situation is bit different, so best to determine what you want and work backward