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Old 01-04-2016, 02:41 PM   #1 (permalink)
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buying a laundromat ???? and valuing a buisness

So I'm looking at buying a laundromat from a very close friends father. I trust all his numbers, trust that he is being honest, and trust that they wouldn't steer me towards a horrible deal.

Everything is in place and it basically runs itself from an operations standpoint and has been for 10+ years.

Profits $18,000 a year after all expenses including $14,000 in employee wages. 1 contract employee that has been there a long time.... opens the doors, sweeps and light clean 3 times a day, locks the doors. And one hourly employee sat and sunday.

Everything is in decent shape and doesn't require any immediate attention.

What's the business worth?
My understanding is that laundromats use a higher multiplier then standard businesses that require more hands on.

My plan would be to stick the fiancÚ in there as her new job and fire the part time employee.
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Old 01-04-2016, 02:44 PM   #2 (permalink)
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So I'm looking at buying a laundromat from a very close friends father. I trust all his numbers, trust that he is being honest, and trust that they wouldn't steer me towards a horrible deal.

Everything is in place and it basically runs itself from an operations standpoint and has been for 10+ years.

Profits $18,000 a year after all expenses including $14,000 in employee wages. 1 contract employee that has been there a long time.... opens the doors, sweeps and light clean 3 times a day, locks the doors. And one hourly employee sat and sunday.

Everything is in decent shape and doesn't require any immediate attention.

What's the business worth?
My understanding is that laundromats use a higher multiplier then standard businesses that require more hands on.

My plan would be to stick the fiancÚ in there as her new job and fire the part time employee.
Yikes - Me personally, wouldn't stick any family members or possible significant others in a Laundromat. Scary times these days not like years ago.
Not sure on the valuation part.
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Old 01-04-2016, 02:46 PM   #3 (permalink)
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Thinking out loud

Also does it make sense to make a cash offer if I have it? He is willing to carry a loan.... for a reasonable in treat rate but not one so low that my money would make more elsewhere.
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Old 01-04-2016, 02:47 PM   #4 (permalink)
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Yikes - Me personally, wouldn't stick any family members or possible significant others in a Laundromat. Scary times these days not like years ago.
Not sure on the valuation part.
Not a sketchy neighborhood at all and next door to other quality buisnesses. She also wouldn't be working sat at 10pm
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Old 01-04-2016, 02:49 PM   #5 (permalink)
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Do you have money to launder? If no, then I would not buy. Save the cash business for funds you need to clean

$18000 a year profit just isn't enough of a % myself.
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Old 01-04-2016, 02:50 PM   #6 (permalink)
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Not a sketchy neighborhood at all and next door to other quality buisnesses. She also wouldn't be working sat at 10pm
Put up some cameras if there aren't any already. Good to hear on the hours and the girl.
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Old 01-04-2016, 02:52 PM   #7 (permalink)
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At 18k/yr it would be a decent bit of "mailbox money" as I like to call it, just make sure you're not buying your gf a job.
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Old 01-04-2016, 02:56 PM   #8 (permalink)
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What condition is all the equipment and who has been fixing all of it. I know some of the parts for the big washers can get very expensive. Your profit could get used up real quick if you have to start fixing the stuff.
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Old 01-04-2016, 02:56 PM   #9 (permalink)
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Did you ask why he's selling it?
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Old 01-04-2016, 02:56 PM   #10 (permalink)
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Are you buying the entire location, or just the business? What I mean by that is does he own the building and real estate, or leasing it?

Personally I wouldn't offer more than I thought I could make back in a few years. Plus, if you're just leasing the property, you have to factor in that your rent will go up, utilities will go up, you could get it sold out from under you, etc.

Oh, and all of those "I trust" in your first post make me think you're gonna get fucked.
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Old 01-04-2016, 02:58 PM   #11 (permalink)
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What do you need to put up to buy this for the $18K profits? I assume maintenance is also factored in somewhere?
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Old 01-04-2016, 02:59 PM   #12 (permalink)
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Look at utility costs. My mom owned one for 15 years, gas dryers + 320 gal water heater was fairly economical at the time. Have the Maytag man on speed dial and be ready to deal with a lot of stupid. She sold it 12 years ago and it's one of the nicest things she's done for me.
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Old 01-04-2016, 03:01 PM   #13 (permalink)
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Old 01-04-2016, 03:02 PM   #14 (permalink)
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Not a sketchy neighborhood at all and next door to other quality buisnesses. She also wouldn't be working sat at 10pm
Laundromat in a non sketchy neighborhood? Who the heck uses it?
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Old 01-04-2016, 03:03 PM   #15 (permalink)
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Not sure I would fire the part time employee right away either. Good help is hard to find, if they have been there awhile and doing good work, that's worth something.
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Old 01-04-2016, 03:06 PM   #16 (permalink)
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I get that its your buddies family but you need to enter this as a business deal not a friendship deal and go over all of the numbers with someone who knows what they are looking at. Friend or not once the deal is done you either made a good purchase or are stuck with someone elses headaches.

Be smart about this.
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Old 01-04-2016, 03:09 PM   #17 (permalink)
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$18k a year doesn't sound like too much profit to me. Is there anything you can do to increase that like vending machines or selling single use detergent or something like that?

There's a laundromat up here that has a bar in it. Not sure if that is worth the trouble in CA though.
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Old 01-04-2016, 03:14 PM   #18 (permalink)
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That doesn't seem like a ton of profit for the risk.

However, general rule of thumb is Present Value of 10 yrs cash flow (profit). However, estimating the cash flow is the hard part. With such low profit, there are so many opportunities for that to vanish. Repairs, increasing rent, fire, etc. Seems to risky for such low profit unless it is real cheap.
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Old 01-04-2016, 03:23 PM   #19 (permalink)
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He is selling all his laundromat 10+ due to health reasons. 18k per year is after average repair and upkeep costs.

I don't have money to launder but I could see it as an easy place to make some side cash.

His daughter, my best friend, is the one who has been managing it and does all the repairs/ labor intensive upkeep..

Leased property..... I would obviously negotiate the best lease possible with options before closing on the buisness.

It's next to ucsc.the local college full of dirty stoned hippies with to much money so they would be the ones using it.

Video cameras would be going in
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Old 01-04-2016, 03:24 PM   #20 (permalink)
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10 yrs is about the life span of industrial washers and dryers. He probably needs to replace equipment and decided to dump the business instead. The IRS audits laundromats by the utility bills. 18k does not sound like the profit margin is correct. A clean, well run laundromat should net closer to 40 or 50. Also, if you want to reduce your overhead, better read up on washer/dryer repair. A service tech coming out on a weekend can clean you out if you don't know what's going on. His lease may be close to renewal also. Another thing is to check out the sewer fees and if there is an increase on the horizon. I looked into the very same business about 15 years ago. After getting an education I backed away very quickly. Quite often when these business come up for sale they need a bunch of money dumped into them.
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Old 01-04-2016, 03:27 PM   #21 (permalink)
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Not a sketchy neighborhood at all and next door to other quality buisnesses. She also wouldn't be working sat at 10pm
What is a laundromat doing in a nice area? They're for poor people.

Maybe I just don't understand because EVERY laundromat I've ever been in has been only slightly less sketchy than that time in Dubai that I got in an unlicensed taxi by mistake.
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Old 01-04-2016, 03:30 PM   #22 (permalink)
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10 yrs is about the life span of industrial washers and dryers. He probably needs to replace equipment and decided to dump the business instead. The IRS audits laundromats by the utility bills. 18k does not sound like the profit margin is correct. A clean, well run laundromat should net closer to 40 or 50. Also, if you want to reduce your overhead, better read up on washer/dryer repair. A service tech coming out on a weekend can clean you out if you don't know what's going on. His lease may be close to renewal also. Another thing is to check out the sewer fees and if there is an increase on the horizon. I looked into the very same business about 15 years ago. After getting an education I backed away very quickly. Quite often when these business come up for sale they need a bunch of money dumped into them.
He's old and having regular unexplained seizures. It really has nothing to do with him not wanting the business and everything to do with him being unable to handle it.

There is three years left on the current lease that in my opinion is over the market rate in cost.
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Old 01-04-2016, 03:38 PM   #23 (permalink)
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It's also very small. But profit per Sq ft it's his number 1 laundromat if that's worth anything.

He is pretty smart and isn't hurting for the money. I think he's hoping I will want to owner finance it so we can make more on the back end. I'm hoping to lowball with a cash offer which I'm thinking won't work in this case.
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Old 01-04-2016, 03:43 PM   #24 (permalink)
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Something doesn't add up.

$18k annual Net profit seemed a little low in your original post, but after you said it's next to UCSC, it seems really low.

If it's owner financed at, say $150k over 10 years at a high interest rate of 8% (private loan) that's $1800/month, which is more than the net profit.

Even if you pay cash for the business, you need to look at what replacement cost is for the equipment, how old it is and maintenance records.

For the seller, replacing equipment and taking a loss for a few months isn't as big of a deal since he has 10+ laundromats to make a profit off of. For you, it's a big deal.
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Old 01-04-2016, 03:45 PM   #25 (permalink)
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Laundromat in a non sketchy neighborhood? Who the heck uses it?
Tons, in Los Angeles.
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