Cyclical Nature of Coin Laundies
There are a couple of reasons for this sudden increase in business, both of which makes complete sense. Firstly, when the weather breaks and the seasons change, away go all of the winter clothes and out come all the summer clothes. Many customers will wash all of the winter clothes before storing them for the summer. You will see them bringing in their comforters and blankets to clean them as well. Hurray!
Secondly, customers pull out of storage all of their summer clothes which have been stored all winter. In addition, graduations are here so there are plenty of graduation gifts like new summer outfits. All of this needs to be washed to be ready to wear. Hurray again! And bingo, we have a great month!
So, why is this a problem for potential investors? The reason is because if the investor is not careful they can easily over pay for a store. You see, many who seek to purchase a coin laundry do so in the spring time. I don't know why, maybe it is because they just got a big tax refund and want to invest it. Maybe it is because more Laundromats go on sale in the springtime than any other time of the year. But whatever the reason is, as an investor, you need to make sure that you don't just look at the numbers for the last six months of the business.
I always recommend to my clients, that you analyze the income of a store based upon the last 2 years of operations and to make sure that it includes the numbers for two summers if at all possible.
Last spring I knew a guy who purchased a Laundromat based upon the numbers from only the prior six-month period ending in May '06. So in other words, the seller only provided him 6 months of earnings and they were for the best six months of the year, rather than the average earning of the entire year. Now this store made a lot of money and the difference between the winter months and the summer months was well over $3,000. This translated to a net income difference about $1,500 a month and he overpaid for the store by over $75,000. When he realized his mistake, and came to me, it was too late to do anything about it.
So beware of "The Spring Bounce" if you are shopping right now for a store. In the world of Pooh, if you are not careful you might get pounced! And if you were wondering, yes this also happens in the Fall, right around Pumpkin time.
- Brian Brunckhorst