SEARCH  Right Arrow

Determining The Value Of A Laundromat: Laundry Broker Tips

I've been in a number of Laundromats to evaluate the business and have been asked by a customer or attendant "Are you doing an appraisal?"

Most of us are familiar with an appraisal. We normally relate that process to a person determining the value of a home by comparing it to similar homes in the same area.  Then, based on recent sales, the appraiser comes up with the value.

So this is this the way we determine the value of a Laundromat?  The simple answer is no..and yes.

You would certainly compare the store you want to buy with other stores in the area but stores that are similar on the surface may not be similarly valued.  To a large degree the net income will determine the value of a store. So you need to the best of your ability first determine the net income.
 
Then the "appraising" starts.  Evaluating various aspects of the store and its surroundings is how we determine the "multiplier".  We will then multiply that figure by the net income to find the value.

There are several items to evaluate to determine that multiplier:

Demographics- Is this store in an area that will support a Laundromat?  A neighborhood that has many apartments or renters, multiple people per household and income below $35,000 is one example of a good neighborhood for a laundromat.
 
The Lease-It will take several years to pay back your investment so you need to have many years left on a lease or have the ability to get a new long term lease.  Additionally, and obviously, you want it as low as possible.  Gross revenue is a factor, and if it's high there is some wiggle room, but you want it at or below 25% of your gross revenue.  (There are other things to consider in a lease which are beyond the scope of this article).

Age, condition and manufacturer of equipment-If equipment is newer and in good condition the multiplier should be higher.  Equipment is expensive and can last for many years so if you don't have to replace equipment for ten years or constantly fix equipment you are in good shape.  The manufacturer should be considered too.  Like clothing, cars or furniture there are laundry equipment manufacturers that are better than others. The better equipment will be more efficient, less likely to breakdown, last longer and therefore be a better value.

Utility Costs-Some cities or jurisdictions can have higher utility costs.  Gas and electric tend to fluctuate less but water and sewer costs can vary and be quite costly. Flash! Laundromats use a lot of water.

Parking-Some neighborhoods are walker friendly but most will require a decent amount of parking.  In short the more parking the better.  However, beware, a lot of spots don't mean a lot of available parking.  If there is a nail and hair salon and a couple of restaurants in a shopping center there will be many patrons in need of parking and some using spots for an extended period of time.  There is no exact formula as centers vary but be aware of this important benefit or liability to your stores success.
 
Visibility, Ingress and Egress-You want your store and or sign visible and from all directions.  Ideally you want your customers to enter the parking lot from both or all directions.  You don't want customers to have to go past your store and make a U Turn to get back to it.

General condition of store-In what condition is the floor, the bulkheads and folding tables?  Does it need new paint, furniture, ceiling tiles? Will it need new TV's or security cameras?

Competition-If this is the only store in the area and it's not likely competition could easily enter the market your multiplier will increase.  And it should! The multiplier will decrease given more competition.

The base line for this multiplier in today's world is 50.  Once you have determined the value or lack of value based on evaluating the items mentioned you can add to or subtract from this base multiplier.
 
Let's say, in one example, there are many positives to this store and you feel good about a multiplier of 60. The net income is $5,000 per month. This business should be worth about $300,000. In this case you are looking at a 20% return on your investment per year.  Pretty good!
 
As another example a store needs some tender loving care, some new equipment and you will be fighting for business due to competition. A multiplier of 40 sounds better here.  This store is making a net income of $4,000 so in this example the store will only be worth $160,000. Better deal, yes!?  Maybe, but remember you will invest more money (and time) on top of the purchase price to increase the income. You buy some new equipment, do some improvements and advertise.  This costs you $100,000-$150,000 but you eventually get the income up to $5,000 per month. In the end this example gives you a similar return to the first example you just got there in a different manner.
 
We all get excited about starting a new business; have high hopes for getting a great deal and making a high rate of return. All possible indeed but first, to the best of your ability, determine an accurate net income for the store then be as objective as possible in evaluating the items mentioned above so that you pay a fair price for the store and are fairly compensated for the investment of your time and money.

Contributor:

Steve Erlinger: Laundry Broker, Consultant - Southern California
Name: Steve Erlinger
Company: Coin Laundry Sales And Consultation
Area(s) Served: Southern California
I specialize in the laundry industry broker and consultant in Southern California. I assist buyers navigate the many facets of finding, evaluating, and operating a laundry business. I also help current laundry owners find additional stores, sell, evaluate an existing laundromat. Call 949-500-5893.
Details  | 
 

Back To Articles & Blogs


Helpful Resources To Assist In Selling And Buying California Businesses
Larry Larsen: Laundry Consulting, Brokerage, Insurance

I have over forty years of experience in the sales, ownership, management, and construction of coin laundries. He is a licensed broker active in the sale of coin laundries, a licensed insurance agent specializing in coin laundry insurance. Phone me at 714-630-9274 or 714-630-Wash.

Dong Bae, Business Broker, at ProCom Realty

Business Brokerage Services In Southern California.

Pramod Patel, Business Broker - Just Elementary, Inc.

Complete Commercial Services Offered By Just Elementary, Inc. Brokers, Consisting Of Business Opportunities, Lease Negotiations & Commercial Property Resale. With Agents Based In Los Angeles & Orange County We Have The Southland Marketplace Covered.

Edward Sohn, Business Broker: Southern California

Business brokerage services in the LA and Orange County areas.

Sean Edelstein, Business Broker: Southern California

If you're looking to sell your business, I offer maximum confidential exposure to the right Buyers. Competitive commissions with no upfront fees. Restaurants, Manufacturing, Wholesale/Distribution, Retail, Service & Internet based businesses. Call me - Sean Edelstein at 949-682-8711 for more info.

Michael Pahng, Business Broker - Bee Investment

Business agents for LA, Orange, San Bernardino County, Riverside County. Big experience in sales, property, business for many years. Grocery market, liquor store, wholesale and food industry. We have 4 locations differant city, convenience stores, gas station, car wash, dry cleaners, also ...

Steven Abraham, Business Broker: Orange County Area

Steven Abraham has 30 Years of Professional Business Broker Experience. He has Successfully Represented both Buyers & Sellers with Business (Bulk Sale) Transactions since 1986. Steven Works for the Leading Real Estate Company in Orange County with more than $5.3 Billion in Sales Annually.

Deborah Byon, Laundry Broker Specialist - Southern California

Deborah Byon, Agent gives you the expertise to ensure your investment yields superior results. We offer knowledgeable advice on how to successfully invest in a financially rewarding Laundromat business, and our financing options help you invest wisely.


Related Articles, Events, Blog Posts, Discussions, Videos, Interviews
Who Is Today's Laundry Business Buyer/Investor: Blue Collar Or White Collar?

Today, we see more growth in the white-collar sector than we do in blue-collar entering the laundry business. We are also happy to see a rapidly growing representation of Black and Hispanic investors; women entrepreneurs are possibly one of the fastest growing segments. Chuck Posts explains.

When Buying A Laundry Why Buyers Should Have An Exit Strategy When Buying

Chuck Post (reach him at 619-227-5711) a laundry consultant, specialty broker, buyer representative & due diligence advisor starts this discussion on why it's important to have an exit strategy in mind while buying a laundromat! He & others explain why this concept is so important to serious buyers.

Determining The Value Of A Laundry Business: What Factors Are Important

Steve Erlinger (laundry Broker & Consultant at 949-500-5893) discusses how to value a laundry. Issues that affect a value include: demographics, the lease, past financial performance of the laundromat, age and condition of the equipment, utility costs, competition and other factors all play a role.

Laundry Broker Explains Laundry Leases: 4 Big Issues For Buyers And Sellers

Chuck Post (Laundry Buyer Rep, Consultant, Due Diligence) discusses what laundry buyers and sellers should consider when reviewing and considering a laundromat lease. A must read for potential laundry buyers and owner/sellers of card and coin operated laundromats. Reach Chuck at 619-227-5711.

Selling A Laundromat? Top Tips: Valuation, Pricing, Finding Buyers, Resouces

Laundrys are popular choices among business buyers as they often can be successfully run as an absentee run business. You need to be strategic about when you sell your Laundromat so you don't get taken to the cleaners! Peter Siegel, MBA (at BizBen) provides laundry purchase financing - 925-785-3118.

Buying A Laundry: Coin Operated Laundromat Or Card Operated Laundromat?

More and more we see "Coinless Laundries". Anyone in the business or entering the business will face the age old question; Coin or Card? Well, perhaps it's not an age old question, but it is a question worth considering. Steve Erlinger (Laundry Broker & Consultant at 949-500-5893) explains.

Laundromat Due Diligence - Use Of Water Records, Conducting Investigation

A laundromat needs to be thoroughly looked over before a buyer should complete an acquisition. The income is important of course but, the path forward is even more important. Chuck Post, Laundry Advisor, Due Diligence Consultant offers laundry buyers valuable advise on this BizBen blog post.

Laundromat Business Valuations: Could Buyers Of Laundries Be Overpaying?

Chuck Post (laundry buyer rep, consultant, due-diligence expert) discusses the factors of appraising laundries. Why such high purchase prices is baffling - many times the value is so misunderstood that it results in laundry buyers over-paying for a laundromat. Reach Chuck direct at 619-227-5711.

SEARCH  Right Arrow


     

For Sale Postings · Wanted Postings · Blog · Events
Brokers · Resources · Advertising Info · Login
888-212-4747 · Full Version
Terms Of Use · Advertising Policy · Privacy Policy ·