Laundromat Growth Question

[RBHII]

Thanks again to everyone on this board who offers their expertise to us Newbies (or Newbie wannabe).

I am looking at a mat for sale in massachusetts. The mat has been open just over 2 years, and is doing about $125k a year gross. Lease of about $1,900 per month. Other expenses leave the net at about $35 to $50, depending on how much payroll one factors in (current owners are working most of the hours). At any rate, obviously, the plus is that the equip and infrastructure is brand new. Good location in that it's a high renter area, but no off street parking (common for this town). The owner is asking $210k. My question is, what are the chances that after 2 years, this store has reached it's potential? Of course, the broker is quick to sell "he has done no advertising, that's why he's not making more". But part of me says that after two years, the store is at it's market. I ask as obviously the store is priced somewhere between a new store and an existing store in terms of paying a premium. Thanks for your thoughts!

[thelaundrydoctor]

Here are a couple of thoughts, you should put some value on the owners time and deduct that from the net. Even thought the owner time is more valuable than an employee you proably shouild not charge the labor expense any more that an employee. Second new equiptment is a good thing and has alott of value, two years old is new at that sales volume. So back to the real question, proably not, im wondering, how lond agow did the current owners give up, or did they ever do any marketing? You could have a fair ammount of groth avaibility. You can always thing about other servises like WDF and becoming a drop station fora Dry cleaning plant.

good luck

[RBHII]

Thanks for the response.

The broker claims they have NEVER tried to advertise the store. But then again, I've read many times that most of your customers come to the store because it's convenient....making me wonder if there is any real room for future growth even with advertising.

[azkid]

I would not factor any "advertising related growth" into a financial projection. If you can run ancillary services, as mentioned previously, you can add a few bucks...but then you must certainly deduct labor costs (which may quite likely make it a negative in total).

[thelaundrydoctor]

Advertizing, might not be the marketing that you want to do. Mabie a under new Managment deal like Free dry for a week
(ONLY A SET PERIOD OF TIME) Find out when your slowest times and days are and lower your vend on washers. with on parking you need to try to balance out your business if possable. sepcial pricing in slow times can do that. There are other marketing ideas like Free soap, Free laundry bag to new customers(get your logo on the bag. One of the best thing I did was had a "A" frame sighn made and put it on the street. Some ccities wount let you do this, however, you might get away with it if you only use it part of the time.

[Burley]

Forget all of this talk about advertising. That may be wishful thinking that you, the new guy, are going to pump up the sales and make this thing real profitable. From what I have read here.......most mat's do little or no advertising. It may be that they are getting those in the area who need the service. Is there another mat nearby where people are choosing to go? If yes, then maybe you can play all of those games to get people to your location. If not, then take a good look at the financials. Are these sales numbers accurate? Check utilities and get more information. Then make a low ball offer. There must be a reason the current owner wants out after two years......and you should use that motivation to your advantage.

More information is needed for further comment. What is the quipment mix and pricing? What are taxes? How many square feet is the store? Lease terms or is the land owned? Give us more.....also, there is a big difference between 50,000 and 35,000. Would I pay $210,000 for a store the profited $50,000? You bet. But if it is really closer $20,000 (sales is only 125,000)....then now way. I would only offer a hundred grand and maybe the owner would be happy to bail out and cut losses. It is your call but I hope you have more information......good luck!