How To Find, Evaluate and Buy a Laundromat

That statement is common sense, right? It's amazing how many people go into business without doing the proper research on that given industry. An educated buyer won't overpay for the business in the first place. They know what it's worth, they know who their customers are and they now how they are going to grow the business before they even own the place. Before you buy a coin laundromat you need to be 100% sure you are making the right business decision. The only way to know for sure is by learning as much as you can about that specific business and doing the proper due diligence.  

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You should read this book if you want to know how to put a price on a Coin Laundry.  I’m a real numbers guy and I over analyze everything.  When you find the right location you need to be able to make an offer that puts you in a good financial position.  I get sellers all the time with some outrageous asking price on their coin laundry.  It’s almost as if they just pulled a number out of thin air.  If you’re a cash buyer it may work, but you are going to get a low return on your investment.  Even if you have enough cash to buy a particular location I advise to spread the risk and finance a portion of the business.  Let the bank or the seller carry some risk also.  Don’t take it all on yourself. 

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I just looked at a Laundromat for sale that a seller called me on, yes he called me, it’s in the book.  After a seller interview and the initial drive by I quickly realized that the seller was way over priced.  It did not take long at all to figure that out.  How do I know he is so over priced you ask?  Simple, I use a multiple of the net income.

If a seller is asking six times their net income as a sale price and the demographics are horrible, the location needs equipment and the place needs a serious cosmetic overhaul, then it’s overpriced.  Don’t pay for what a location could be.  Pay for what it is now.  Then when you turn it around you will reap the financial rewards for your hard work, not the seller for running a poor business all these years.  I run into this all to often, this location will be for sale for a long time. Either the seller will eventually get educated or some sucker will come along.  Don’t become the sucker. 

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When you find the right coin Laundromat and you will, just be patient.  There are some basic things that need to be in the offer.  Just imagine, the minute after you close the deal and head over to your coin laundry, you walk in the door and see all these out of order signs everywhere.  You quickly realize the seller hasn’t been maintaining the equipment while this process has been going on. Then you walk over to the changer and see the light on because it’s empty, all the quarters are gone.  Think this hasn’t happened, think again.  Some things need to be clear in the offer to purchase.  I cover these things.

Let’s take this scenario one step further.  A few months go by and you are beginning to realize that the Laundromat is underperforming.  What I mean is the seller supplied you with profit & loss statements and tax returns during the due diligence process after the offer was accepted.  The revenue they were claiming isn’t there.  They made up the numbers, they lied.  Sounds bad right?  Believe me this happens, it’s unfortunate, but it does happen.

What’s your recourse now?  Call your attorney and hang on, it’s going to be a rough ride.  I think you’re going to find out there is little you can do.

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Let’s concentrate on not getting into this situation in the first place.  You need to verify everything.  The water bill doesn’t lie.  In the book I show you how to get the water usage information for the washers and then use that to back into the revenue the seller is claiming.  This is no perfect science but it will get you close.  If there is a discrepancy it’s better to find it now in the due diligence process rather than after you are an owner.

Examples of how I do this are in the book and I also have a spreadsheet available on this website with tutorial videos that will make things much easier for you. 

Pro formas and profit & loss statements for a coin laundry are a vital part of evaluating a Laundromat that’s for sale.  We need the sellers past profit & loss statements and we need to do pro formas to project future income and expenses.  I have talked to several buyers throughout the years that don’t know how to do a pro forma.  They are looking at this laundromat for sale basically blind.

You need to know if the place cash flows monthly and annually.  I can’t stress the importance of the pro forma enough.  That’s where we find out if the laundromat is going to be profitable for us, with our debt situation.  I have example profit & loss statements and pro formas in the book and I cover typical income and expenses that a laundromat has. 

Get all the help you can in evaluating this laundromat business venture.

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