Laundromat Demographics

The local demographic to the Laundromat will essentially give you an idea of potential for a Laundromat business. One should always drive around to look at the competition but also get an idea of the neighborhood driving around at least a mile radius. Ideal neighborhoods tend to be those with a higher concentration of apartments with working class families who do not have washers at home. College areas, working class neighborhoods or those with younger populations are also good locations. In order to get an specific idea, one should purchase a local demographics report and look for more data.

As a rule of thumb these are some of the factors favorable to Laundromats:

- At least 25% renters with higher percentages the better
- Older neighborhoods with higher concentration of apartments, at least 20 years old.
- At least 35% working class with higher percentages the better

Sources: Laundromat123.com

Water Meter Analysis

Water Meter Analysis is the one method people in the Coin Laundry industry agree as a way to asses revenue. The results are not always precise but if done correctly one can verify income claims by going over the water bills. The idea behind this concept is simple. Washer machines at a Laundromat are the main drivers for revenue and each machine uses a certain amount of water every time it is used. Therefore, checking the volume of water used during a certain period of time can tell you how many times the washer machines have been used and thus one can come up with a revenue estimate.

Problems with Water Analysis

Sometimes water meters reading are wrong due to several reasons and the buyer should always keep this in mind. Water meters are sometimes not reliable if they are not working properly. Sometimes water meant for laundry operations are diverted or used by other tenants, and sometimes unscrupulous owners will leave the water running few months prior to the sale in order to give the reading a higher usage since he knows this will be looked at. The best way to inspect an operation using water analysis is with a professional third party consultant using the IRS method for auditing Laundromats. Seek a consultant to do this analysis and compare it to what brokers or sellers show, sometimes brokers will collide with sellers when it comes to this analysis.

How to Calculate Water Usage

Water companies sell water in HCF or Hundred Cubic Feet units. One cubic foot of water is equivalent to 7.48 gallons of water. Therefore, 748 gallons of water per HCF (Hundred Cubic Feet). There are some water companies that will write the actual gallons used as opposed to HCF. To analyse total usage, one gets the total number of HCF for 30 days and multiples that number by 748. We then divide the total number of gallons of water by 30, which would give us the total number of gallons of water used per day. So for instance, if top loaders at a Laundromat get used 100 times a day, one multiplies the number of gallons a top loader would use times the number of cycles (100) and come up with total usage. One could then match these numbers and see if they are congruent.

Dryer Income Estimates

Dryer income is usually 25-50% of washer revenue. There is no exact formula for this since habits vary depending on location or circumstances. But as a general rule of thumb there should be 20 minutes of dry time for every wash cycle.

Sources: Laundromat123.com

Pre-Inspection of Prospective Laundromats

Once you found one or more Laundromats that fit your buying criteria, you should start planning for pre-inspection of the premises, the equipment, lease and other factors listed on Before You Buy a Laundromat. The following are must checks for a prospective Laundromat.

Equipment Inspection

First you should set aside a few hours of your time and go to the Laundromat on a busy day like Saturday or Sunday. You should see if customers are happy with the machines they are using and you could also ask them about their experiences with the equipment at the location. You should test and try each machine and write down notes on the model, serial number, etc. and see if they are in working order. Washer Machines should be check for noises, length of cycles and leaks. Dryers should be checked for proper temperature, bearing problems, etc. It would also be a good idea to hire a commercial laundry repairman to check the machines so you can have a clear idea of what is actually being sold to you.

Vending machines such as snacks, sodas, arcades and others should also be checked for functionality. Put money in each of them and make sure they are in proper working condition as that is part of the sale and your future revenues and expenses.



Check Plumbing

There is a great deal of plumbing inside a Laundromat and you should not spare any expenses to make sure plumbing is in working order. Hire a plumber to check for leaks, potential problems in the future, etc. Make sure the copper connections are in working condition or if they need replacement.

Water Heater

Write down the serial number and model of the water heater. Find out when it was last serviced, how long has it been in operation. Do the same for the water pump and make sure they are in working condition or in need of future replacement. Water Heaters costs several thousand dollars to replace and any deficiencies should be factored into the final offer price.

Sources: Laundromat123.com

Finding a Laundromat to Buy

Once you have an idea of the size of Laundromat you would like to buy, the next step is to start looking. The best place to search for Laundromats are usually newspapers and online business to business websites. And from there you can start getting an idea of what is in the market and what to expect.

Another efficient way to find Laundromats for sale is by going to a Coin Laundry broker. But do your due diligence on the brokerages, research their reputation by contacting the Better Business Bureau, look for comments online, ask other Laundromat owners. Unfortunately there are many unscrupulous brokers who are in the market to make the most money without the interest of the buyer at hand. Always have a third party advisor like a consultant and a lawyer in addition to any broker.

Before You Buy a Laundromat

People get into the Coin Laundry business for a variety of reasons. Mostly, Laundromat buyers just want financial independence and the relatively comfortable lifestyle a successful Laundromat can provide. Reasons for selling Laundromats include disputes, divorce, illness, moving, etc. And a buyer should ALWAYS be mindful of who he or she is buying from.

Buying a Laundromat can be somewhat tricky in that more times than not revenues are not easy to assess because of the cash nature of the business. An Laundromat owner might now keep the best of records, etc. But with the help of Laundromat auditing consultants, a buyer can get a range of revenues and double check claimed income. As a buyer, you MUST ALWAYS verify revenue by using utility methods and site visits. Something to keep in mind is that brokers are salesmen and most will lack the objectiveness of a third party consultant.

Who is Selling?

One has to know who and why a person or entity is selling the business. The seller will be providing revenue records for buyers to analyse and before giving credibility to the revenue records, one has to trust the seller. A broker receives from the seller a revenue statement and all expenses and this data is used in a spreadsheet to present a financial picture of the operation.

Water, Gas and Electric Bills

Usually 95+ percent of the revenue from a Laundromat is tied to water usage. A competent consultant can verify seller's revenue information by using a formula that provides a range for revenues. Many times brokers will assist in verifying revenues but as a buyer you should always double check information with a third party consultant. A seller should have at least a year's worth of utility records to be verified.

Financial Records

Ask for tax and bank deposits if available. Do they match claimed revenues and income?

Joint Coin or Money Collection

While not necessarily a way to verify income or revenue, a buyer should request seeing collections and seeing the "coin count". This is particularly useful if the water meters are being read at the same time, that way one can attribute the exact correlation between revenue and water usage. ALWAYS have a third party auditor or consultant with you when doing this. Problems with inflating revenues by "sprinkling" coins in the boxes prior to joint coin collections are a common problem with unscrupulous sellers. And some brokers who are focused on commission and who hide behind the clause of "not being responsible for information provided by seller" might look the other way costing you, the buyer potential financial pain and frustration.

Site Analysis

One should always visit other stores in the area to asses the competition. Factors such as pricing, equipment, etc. has to figure in the final offer for the Laundromat. In addition, one can get an idea for room for growth. If being represented by a broker, they will do that as well because it is their job but as the buyer you should always do this yourself as well.

Store Visit

You should visit the store randomly and see how it operates. Better yet, you should spend 2-3 days at the store and get to know the clientèle, the workers, issues, etc. One can get a better idea of what is working and what can be improved by doing this.

Lease

Ask for a copy of the Lease and read it carefully. Call the landlord and get to know them as well. Sometimes unfavorable lease terms will damage the potential of a Laundromat. Have an attorney go over the Lease with you to avoid any surprises in the future.

Industry Research

Look online for Laundromat resources. Ask other owners of what issues, ideas, or suggestions they might have for you. You can also join trade groups or visit trade related events for a better idea of the Coin Laundry Business.

Sources: Laundromat123.com

Considering Buying a Laundromat

The Coin Laundry Business is an attractive operation because of it's relatively low level of maintenance and potential cash flow. Many people consider this business as a retirement business or as primary business, whatever attracts you to this industry, these are the factors usually considered:

ROI (Return On Investment)

Relative to the time spent on this business, a Laundromat offers very attractive rates of return. Some Laundromats are able to return up to 25% on Investment.

Absentee/Part Time Business

You can run a Laundromat with as little as 3 hours per week. Therefore, this can be the perfect part time business or absentee business.

Tax Benefits

Because of the equipment included in a Laundromat, one is able to use depreciation of equipment against income which leads to great tax benefits.

Recession Proof

While Laundromats are not fully recession proof, people still need to do their laundry. Recessions usually force people, especially in lower income areas to cut back on the frequency of going to the Laundromat. But washing laundry is a must and regardless of economic environment, there always be a supply of customers.

Cash Business

Laundromats are an all cash business

Low Labor Requirements

Labor for Laundromats usually requires minimum skills, therefor labor costs are minimal. One can opt for part time workers or full time and equipment repair can be done at reasonable prices.

Minimum Inventory

Technically speaking, all the inventory you will ever need are for your vending machines. Laundromats function on water, electricity and gas. All variable expenses tied directly to how much the machines are used.

Easy to Sell

Laundromats are highly in demand because of the relative ease of operation and cash flow and there will always be a demand for them. Therefore, this is not a business that would require especial training or much advertising as most people know what a Laundromat does and how it operates.

Sources: Laundromat123.com