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How to Buy a Laundry

You don’t need experience in the sector, but shrewd judgement is needed to secure the right business at the right price.

Few laundry owners had experience in the industry when they started or bought their business.

That said, if you’re looking at buying a laundromat, it pays to familiarize yourself with the sector and the fundamentals of running a business generally.

To this end it's worth seeking advice from other laundry owners, visiting other laundries and undertaking a business-related course or two.

DIY skills might also be a bonus, potentially saving you from paying for repairs when washing machines break down, as they all too often do.

Budget

Your budget will obviously limit your options, while the amount and expensiveness of equipment involved do mean that laundries don’t typically come cheap.

Decent sized laundries for sale in Canada can cost in the realm of $150,000 to $500,000 and beyond.

So what variables will influence the price?

variable price

Financial factors are obviously pivotal: sales revenues, operating costs and the resulting profits over the last few years. Gross income can vary wildly from tens of thousands of dollars up to six figures in rare cases.

Based on other information you learn about a business for sale, you need to make a judgement call about the prospects for growing those profits under your ownership.

Identifying potential

Find a struggling laundry in a favourable location, with decent dimensions and modest competition and you could land a bargain.

In such circumstances, 35 percent profit margins are achievable for an owner who keeps their store “clean, repairs its equipment quickly, uses energy-efficient systems and offers good customer service,” according to US Coin Laundry Association CEO Brian Wallace, quoted in the Coin-Operated Laundry: Entrepreneur's Step-by-Step Startup Guide.

Something as simple as changing the opening hours can improve the bottom line – most likely extending them given the significant fixed costs involved and the fact coin-operated laundries don’t even need staff.

Laundry location

The most favourable locations are those with a large number of residents without access to washing machines. That makes low income and/or densely populated urban areas, particularly with a high proportion of rental properties and/or a college campus nearby, prime locations.

However, laundries can still thrive in upscale neighbourhoods if they offer complementary services like professional dry cleaning and a wash-and-fold service.

Laundry-location

It’s a mature market with fierce competition so also use Google to ascertain how many competitors there are in the vicinity.

Diversification

As with location, you can’t increase the laundry’s dimensions, which obviously limit the number of machines you can accommodate.

If a laundry for sale is failing to utilise its floor space, there may be better alternatives to simply buying more machines if competition is fierce in the local laundry market.

You could monetize the spare space by doubling as a dry cleaners, or offering a wash-and-fold and drop-off service, alterations, shoe repairs and key cutting, or selling retail items like ties, shoelaces, and shoe polish.

Many forward-thinking laundries also sell snacks and drinks, sometimes via a vending machine, have slot machines, or even have a play area for children.

Valuing a laundry

Once you’ve found a business that is either thriving or has the potential to thrive, it’s wise to get the laundry independently valued since many sellers overvalue their businesses.

Valuers will often use the sale prices of similar laundries recently sold as a benchmark.

They also typically multiply net income by a ratio determined by the favourability of various factors.

Value Laundry

Those variables include local competition versus demand, the lease length and cost, local utility prices, premises’ visibility and accessibility (parking spaces help), and the age, condition and standard of premises and equipment.

Laundry due diligence

Whether it’s a desire to retire or being worn down by the battle to stay afloat, finding out the reasons for sale – insofar as you can secure a believable answer – can help your negotiation strategy (ie, are they more desperate for a high price or a quick sale?).

An in-depth investigation should examine:

  • Profit and loss statements, lease terms, maintenance records, and other documentation
  • The condition of the premises
  • The models, age and condition of the washing machines and driers (the latest machines accept debit cards and even Apple Pay).
  • How the business operates day to day
  • The digital operation: website and social media reach
  • Analysis of trends in the laundry sector
  • Local demographics, competition and anything on the horizon – such as new housing developments – that might make the environment more favourable or hostile

Completing the purchase

Once due diligence concludes, the two parties commit to thrashing out final terms. If your investigations unearth something new and worrisome, you should seek to drive down the previously agreed price – or you could abandon the deal altogether.

Hopefully, we’ve given you a useful grounding in how to find the right laundry and negotiate a fair price. However, only a business broker can give you expert help and advice throughout the buying process itself.



Bruce Hakutizwi

About the author

USA and International BusinessesForSale.com Manager for BusinessesForSale.com, a global online marketplace for buying and selling small medium size businesses. The website has over 60,000 business listings and attracts over 1.5 million buyers to the site every month.

@BizForSaleUS

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