How to Find a Coin Laundry Business

 

One of the most common questions I often get asked is how to find a coin laundry business that actually makes sense in buying. Finding the right Laundromat for sale is not always as easy as one might think. In my "Own a Laundromat" Teleseminar course on CD's, I spend quite a bit of time covering this subject. However, I thought that I might give you some tips that you could use right away.

The first thing to do, before you even start looking, is to figure out how much money you want the laundry mat to make on a monthly basis. This is commonly referred to as the Cashflow or Net Income. Since the value of a business is determined largely on its Net Income, this number will help determine the price range you should be looking at. Most coin laundries Net between $4,000 to $8,000 a month, which translates to a cost between $200,000 and $520,000. More on this later...

The next thing to do is to make sure you pre-establish your money rules. What kind of return on investment (ROI) do you want to get out of the business if you were to pay all cash for it? Most self serve coin-ops generate anywhere from a 15% to 24% return. Your task here is to determine what the minimum acceptable return is for you. An example would be a Laundromat that has a Net Income of $4,000 per month that you find for sale at $200,000. In this case the ROI would be 24%.

$4,000 X 12 months = $48,000 / $200,000

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Finding the Right Store is All About the Numbers

If your minimum acceptable ROI is 20%, then this store would warrant further investigation. However, if the same store was being sold for $280,000, your ROI would now be just 17.1%, which would not meet your minimum money rules. You should either pass or see if you can get a better price.

Next, determine the distance you are willing to travel to manage your store. I would recommend for your first store to have it be within a 30-minute drive if you are planning to manage it yourself. There are times, although rare, that you might be called where you have to drop what you are doing and go to the store. Imagine having an emergency at the store and having a 2-hour drive to get there.

Once you know what your target market is, you need to find every Laundromat within your target market. You can look them up in the phone book, search for them on the internet, and drive around looking for them. Many internet mapping programs will actually let you enter your address and the type of business (ie Laundromat) and it will map them all for you and give you the distance from your address.

Now that you have a list of all the coin laundry businesses in your area, you will want to determine which ones would generate the cash flow you desire. This one will take some legwork on your part because you will most likely have to go out and actually visit the stores. Here is a good rule of thumb for figuring this out.

Most coin laundry's Net Profit is between 35% and 50% of the gross income. So if you want a Laundromat netting $4,000 a month, it needs to gross between $8,000 and $11,500. That would mean you need to look for a store with enough washers and dryers to gross the income you want. Remember, the national average times a washer is used in a self serve laundry is between 3 and 5 times a day (according to the CLA). So take the total vend price of all the washers, multiply it by say 4 (the turns per day) and then by 30 (the average days in a month) and you would get roughly what the gross wash income would be for that store. Add to that number about 50% of the wash income for drying and you now can estimate what a store grosses per month.

Now you should have a list of all the stores in your target market that meet your size criteria. It's time to get in the car and look at them again. Visit 20 or more stores if you can. This will help you find what works in a Laundromat and what doesn't. You might even get lucky and meet some of the owners at there stores. If you do, ask them if they or someone they know would be interested in selling their coin laundry. It couldn't hurt to ask.

If you don't see the owner at the store, you could just drop them a note to let them know you were there and were interested in seeing if they or someone they know wants to sell a Laundromat. Don't forget to leave your phone number on the note so they can call you back. You would be surprised how many owners might just take you up on your offer and give you a call. The main thing here, like I said before, is to look. Get into action. You will never find a store if you don't start looking.

One thing about brokers, many brokers will list coin laundry businesses for sale on the internet. When dealing with a broker, you will be required to fill out an NDA (Non-Disclosure Agreement) and perhaps provide some information about yourself to prove you are capable and serious about purchasing a store. Stores listed on the internet tend to get a lot of responses. Like in a good Real Estate market, the good ones will go fast, so you need to check the listing often.

"So how do you know whether a coin laundry is worth pursuing?" This is a question I often get asked. The answer is to do a quick check of the reported P & L statement and see if the numbers make sense or not. Is the net profit between 35 and 50% of the gross revenue? Does it look like the seller is disclosing all of the stores expenses? Is the rent within reason? Does the ROI meet your pre-determined money rules?

The answers to these questions will determine whether you should spend your time moving forward or not.

 

- Brian Brunckhorst

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