Jordan Berry [00:00:00]:
All right.

Jordan Berry [00:00:00]:
This is part 3 of a free course on how to buy your first laundromat. If you haven’t watched the first 2 videos yet, go back to that first because those are exactly how you can find a deal and get it under contract, including the tools and resources that we use on our team that we’re offering to you. This video is about what happens after that. Once a laundromat is under contract, job is simple. Not easy, but simple. Verify the performance of the business before you close. We want you to know exactly what you’re buying before you buy it. This could be easier said than done, especially since most laundromats are still challenging businesses.

Jordan Berry [00:00:39]:
But when we help clients through this phase, everything we do falls under what I call the 4 pillars of due diligence. Pillar number 1, verify the income of the laundromat. Now, what the seller says, but what the store actually earns. Pillar number 2, verify the expenses. Know how much money’s coming in. You got to know how much is going out. Utilities, rent, repairs, etc. You got to know what the expenses are.

Jordan Berry [00:01:05]:
Pillar number 3, determine the trajectory of the business. Who’s the lease competition, market trends, and importantly, whether the store is improving or declining. And pillar number 4, identifying the value-add opportunities. What’s the plan after you buy? Pricing, upgrades, marketing, operations. How do you make it better? If you’re itching to get started, we keep the tools and resources and checklists that support all 4 of these pillars at laundromatresource.com/resources. But this is just a framework. You can get after it right now, those 4 pillars and the tools on the website. But if you want to see how we actually perform due diligence for our clients step by step, stick around.

Jordan Berry [00:01:48]:
Let’s head back to the studio and I’ll walk you through our 4 pillars.

Jordan Berry [00:01:52]:
Of due diligence and what you need.

Jordan Berry [00:01:53]:
To do to ensure that you buy your first laundromat the right way the first time.

Jordan Berry [00:02:00]:
Okay. Back in the studio to break down the 4 pillars of due diligence for you. Now, if you remember from the last video, this is part 3, by the way, a 3-part course on how to buy your first laundromat. Part 1 was how to find the laundromat. We introduced you to the laundromatdfy.com, done for you, laundromatdfy.com platform that we created, a DIY user type for you to be able to utilize the same platform that we use to find deals for clients, keep track of those deals, and to keep track of brokers also as you’re building relationships with brokers looking for deals. So go check that out. And then the second video, we talked about how to value a laundromat and create a compelling offer for that laundromat to get you to the point where you can do this part 3 of due diligence. Over here in part 2, in determining the value, we introduce you to our tool, the laundromat analysis calculator, which you can find at laundromatresource.com under resources and calculators over there.

Jordan Berry [00:03:01]:
If you’re at a point now where you’re trying to do due diligence on a laundromat, this is the video for you. I’m going to show you exactly the process that we take our clients through, our 4 pillars of due diligence. To help make sure that they buy the right laundromat the first time. They don’t have to go through the expensive mistakes that I went through that I talked about. And listen, our goal here, one of our core values and our goal during this process is clarity. And the whole point of clarity is we want you to know what you’re buying before you buy it, just like I mentioned. Here’s the process that we utilize that you can take and utilize yourself. Now, if you remember from the last video, Most of the time when we’re making an offer on a laundromat, we’re using the numbers the seller gives us.

Jordan Berry [00:03:49]:
That’s our first analysis. A lot of times a lot of zeros. Those numbers are very average and round. They’re unverified. Well, once we get that offer accepted, we need to start getting specific information from the sellers so that we can do our second analysis, which is where we use the numbers that you discover in that analysis. Our goal here is to get more precise numbers, as precise as we can, and to use those numbers to look for how this laundromat is really performing. Okay, we utilize what we call our income verification stack to do that. And here’s the reality is that still to this day, most laundromats are cash businesses.

Jordan Berry [00:04:33]:
There’s not a lot of cash accountability. Sometimes there’s reliable collection data or profit and loss information that you can utilize. Sometimes there’s, you know, accurate taxes and bank deposit statements, but a lot of times those are missing and it can make it tricky to really value a laundromat. So what we do is we take a few different methods of trying to determine how much money a laundromat is making and we stack them on top of each other. Okay, so let’s dive into our 4 pillars of due diligence. And with pillar number 1 and determining the laundromat’s income. Okay. So we utilize that income verification stack.

Jordan Berry [00:05:12]:
And what we do is we stack them on top of each other and we look to see, hey, is there anything weird sticking out that shouldn’t be? Are there any anomalies here? And if there are, then we dig into those and we say, hey, what’s really going on here? Did the seller misrepresent something or did they not know something? Did we do something wrong? Is there something weird happening with this particular laundromat that we need to know about?

Jordan Berry [00:05:34]:
Right?

Jordan Berry [00:05:35]:
We don’t want have to any big surprises. So that’s what we’re going to do to get get a, a pretty good sense of how much money this laundromat’s bringing in. Let me give you a couple of examples of what you can do to verify the income of a laundromat. Number 1, you can do what we call coin collections. That is going through with the owner, collecting coins out of every machine and counting those coins and seeing how much money actually came in for a defined period of time. Okay? Just very practically speaking, Here’s what this looks like. You go in the very first coin collection, you empty all of the machines. Uh, you can count the coins.

Jordan Berry [00:06:14]:
Uh, but the whole goal here is to start from scratch. Okay. Zero coins in the boxes so that the next collection, you’ll have a defined period of time between those collections. Okay. One of the stipulations or contingencies that you want to make sure you have in your offer is to make sure that if you’re doing coin collections, the owner doesn’t do any collections without you. Okay. So you’re going to go through and you’re going to collect the coins with the owner. I count coins when I do coin collections.

Jordan Berry [00:06:44]:
And even if I’m just collecting in a laundromat that I own, I do them by size and type of machine. Okay. So I’m not counting the coins out of every single individual machine. I’m counting and recording coins by all the top loaders, all the 20-pounders, and then I count them and record them. All the 30-pounders, count them, record them. All the 60-pounders, count them, record them. Right? So all the dryers, all right. Or all the 30-pounders, all the 45-pound stack dryers, right? Depending on what machines they have in there, I’m collecting them that way.

Jordan Berry [00:07:15]:
And the reason I do that instead of just collecting the whole store and then counting is this gives me a little bit more data to work with in terms of, okay, what machines are popular? This is going to allow me to calculate turns per day for that collection period. And if you’re not familiar with that, turns per day is one of the KPIs that we utilize, key performance indicators that we utilize in our industry. To help us decide how well we’re performing, help us benchmark our store. Turns per day is the average number of times each machine is used each day, right? So you might have a store where, hey, the 20-pounders have 4.7 turns per day and the 40-pounders have, you know, 2.9 turns per day. That just tells you that either there’s less 20-pounders and they’re popular, or maybe there’s a pricing issue, or it just gives you a little more information to to work with to determine your strategy of how you’re going to run your store once you take over.

Jordan Berry [00:08:15]:
Okay.

Jordan Berry [00:08:16]:
So that’s how I collect coins. You want to do that over a period of 2 to 4 weeks. And the goal is to get an average daily collection over that period of time and extrapolate that back out to— we use 30.4. That’s the average number of days in a month, 30.4. And we want to see that that number, the coin collection number, is pretty close to within you know, 5 or so percent of how much money is actually coming into the laundromat, or how much money that they said was coming into the laundromat before we made our offer, right? So we want to see it being pretty close. Now, there are some things that can make it fluctuate. There’s some seasonal fluctuality— fluctuation— fluctuations in laundromats, and we need to take that into consideration. However, we want to see that You know, things are not drastically different there.

Jordan Berry [00:09:10]:
And if they are, then we need to dig into a little bit of why, you know, maybe it’s like, hey, it’s, it’s June and June is just a slower month in a lot of laundromats, you know, or there was a big snowstorm and everybody stayed home for 2 weeks because we all got locked in. So the collection was lower or something like that, right? So we want to dig into that. Or it could be, hey, they said more money was coming in that’s actually coming in, right? That’s a possibility too. So we want to do that collection count. Now this is not foolproof. I would not rely solely on this. Owners to easily do what we call salt the mines, which is add quarters, or even do phantom washes, which is where they put quarters in and run washes. So in order to have a little bit of accountability on that, and also to see a little bit more of what’s going on in the store, you know, a lot of people will tell you, hey, go sit in the store, you know, all day for, on a weekday and on a weekend and just sit there all day.

Jordan Berry [00:10:03]:
And you can do that. There’s nothing wrong with doing that at all. I don’t know about you, but my time is pretty valuable and I don’t necessarily want to sit at a laundromat all day. If I don’t have to. So one thing I recommend is make it a contingency that you get access to the security camera footage. Now you can scrub through it quickly and you can also make sure they’re not doing anything shady like running phantom washes or things like that, right? Again, this is not foolproof, but this is one of the methods you can verify income in our stack of methods. Another one, let me pause real quick. I want to point you to lawnmowerresource.com.

Jordan Berry [00:10:40]:
Go to the resources tab and you can see guides and worksheets right there at the top. Uh, it might say something different, we’re getting ready to make some tweaks there, but it’ll say either guides and worksheets or tools and resources, something like that. And over there is a bunch of downloadable tools and resources. Some of them are free, some of them are part of our pro community. But again, if you’re in this due diligence phase and you’re trying to do it yourself, The pro community is a no-brainer over there because you get access to all these tools and resources. We have a monthly Q&A that you can jump into, and we can connect you up with a mastermind group in addition to that if you want to do that as well, which is super powerful. But anyways, this is where our tools and resources, uh, live, where that can help you kind of go through this, including a collection sheet, um, so that as you’re doing your coin counts, you can collect the information here. You can see a collection sheet right here, right? Okay, so utilize that.

Jordan Berry [00:11:40]:
Most of the tools and resources to help you go through this process are on that page and downloadable there. If you’re a client working with us, you actually get a personalized repository of these tools and resources and our little more advanced tools and resources over there as well. If you’re interested in that, check out lawrencemattresource.com/coaching. Okay, now the, Second method or income stack that you can utilize that we’ll talk about today is what we call the water analysis. Okay, and that’s basically saying, based on how much water is used in a store and based on how much it costs for that water and what the equipment mix is for that store and what the vend price is for that store, based on that information, we can get a pretty good idea of how much money a store is making. Okay, here’s the thing. I know that probably sounds very complicated to do that, but here’s the thing is that we have created again on the resources page a water collection spreadsheet. They’ll actually walk you through that whole process and do all the complicated math for you.

Jordan Berry [00:12:46]:
I did it so you didn’t have to do it, you know what I mean? I got you, don’t worry. So go download that water analysis spreadsheet over there. The one caveat to the water analysis spreadsheet is that almost every time, if not every time, that somebody’s come to me and said, hey, the water analysis spreadsheet is giving me a way different number than what the owner’s claiming, should I be worried? If not every time, almost every time, the reason behind it is somebody just Googled, hey, how many gallons of water does a 40-pound Speed Queen washer use? And they took that number and input it in there. This spreadsheet depends, it’s very particular, depends on the specific model of the machine and how much water that particular model utilizes. So if you’re getting a way wrong number, you need to do some research. So let me just tell you real quick, the model numbers of most machines are either if you open up the door, if it’s a front load, if you open up the door or a top load, open up the top, usually there’s a sticker either on the door or on the panel inside the door, or maybe on a top load, it could be on the top or the back of the machine that has the model and serial number in it. So look there for the model number. You need to do that for every type and size of machine.

Jordan Berry [00:14:02]:
So if they have 30-pound Speed Queens and they have 30-pound Dexters, you need to have the model number for both of them and do that for every size washing machine in there. And once you have that data, you’re going to get a pretty good sense of how much money is actually coming into that laundromat based on that equipment, those vend prices and how much water is being used in that store. Okay. Again, it takes a little bit of work, but it’s totally worth it because it gives you pretty good data on how much is coming in. Okay. Again, that’s another way to stack information in our income verification stack, making sure things are just lining up. You can also utilize, you know, and I kind of mentioned this before, but you can also utilize your bank deposit statements. Taxes, tax returns, things like that, some paperwork trail to help you verify the laundromat’s income.

Jordan Berry [00:14:57]:
And most easily, if the store either is hybrid, it uses coin and a card or app payment system, or is entirely cashless or digital payment system, then you’re able to just print out a report, you know, from those software things to say, here’s how much income has come in to these machines over this period of time. That makes things very simple. Okay, I need to pause real real quick, because one thing that we need to be aware of is that the, uh, self-serve income, that’s mostly what we’re talking about today, but many laundromats are adding drop-off wash and fold services and pickup and delivery services to their business. Usually they’re— if you’re unlucky, they’re going to have a paper ticket model where they just write up all the paper receipts and they have all those. You’re going to have to go through them all, put them in a spreadsheet and all that to verify all that.. But if you’re lucky, they’re going to have a software system that’s helping them manage that business, that side of the business. And again, that you’ll be able to just print off reports for that. The one thing I’ll say there is you got to make sure they’re not double dipping, which means they’re not counting income from the wash and fold and counting it as self-serve income, something we see a lot.

Jordan Berry [00:16:11]:
If you need help with that, laundromatresource.com/coaching, we’ve got a team to help you kind of go through that and make sure that things are as they seem. We’ve done that plenty of times. Okay. So that’s pillar number 1, determining the income can be very tricky. Again, we’ve got people that can help you through this whole process if you need it. Listen, if you’re going to spend tens or hundreds of thousands or more, or even 7 figures on a laundromat, and you’ve got questions or you’re feeling like you don’t exactly know, it’s a no-brainer, get somebody in there to help you. We’ve got a team that can help, but we’re not the only ones in town. Find somebody that you trust, that you feel confident working with.

Jordan Berry [00:16:50]:
I would much rather see you go get help with to somebody else and make the right decision than not get any help at all. So again, we’ve got a team that can help you, but also go find somebody if you don’t like that I wear a backwards hat and hair that’s long, because I get that a lot sometimes for some reason. But anyways, I don’t own a business because I want somebody else to tell me what I have to wear and what I have to look like. You know what I mean? That’s what I’m talking about. That’s the freedom we’re looking for, right? Okay, let’s jump into pillar number 2. That’s determining the laundromat’s expenses. We know how much money is coming in, we got to know how much money is going out. Typically, most expenses have some sort of paper trail, so that makes things a little bit easier to deal with.

Jordan Berry [00:17:32]:
However, we want to make sure that we’re accounting for all of the expenses that we’re looking for here. Okay, listen, we’re going to do things like request utility bills, any kind of invoices or things like that. Obviously, we need a copy of the lease. And here’s a little hack. Again, if you’re DIYing this, here’s a little hack. You can go to lawnmowerresource.com, go to the resources, go to the calculators, go back to the analysis calculator that we utilized in the last video. That’ll pop up here. And if you go to that performance section, remember there’s, you know, the very first analysis kind of performance numbers.

Jordan Berry [00:18:11]:
If you click the add more details, button there, you’ll see a list of income sources and the most common laundromat expenses. You can actually just use this as a checklist to make sure you don’t miss any expenses. Now, not every laundromat is going to have everything in this, you know, in this expense list here. Okay. Not every, every laundromat is going to have that, but use it as a checklist and rule it out. For example, maybe a laundromat is a self-serve, unattended laundromat and the owner’s taking care of it. There’s no payroll. You just want to verify that and make sure that’s the case, or there’s no phone bill because they don’t have a phone.

Jordan Berry [00:18:50]:
They only, you know, only online or whatever. Right. Just use it as a checklist to make sure you’re not missing any, any expenses. And just to tell you like why this is so important, I had a client who missed— initially we missed that there was a sewer bill. And the reason was the sewer bill was going to the landlord and the landlord was not forwarding it over to the the laundromat owner. And so we discovered it and it ended up being about $500 a month of a sewer bill that the seller didn’t know about. And so when we found, we went through this checklist, when we found that, if we had made the offer, if we had gone through with the offer we had originally made, this laundromat was at a 5X multiple. So that $500 a month is $6,000 a year cashflow they wouldn’t have had, but it’s also $30,000, 5 times that $6,000, $30,000 of equity they would have lost in the business right away.

Jordan Berry [00:19:48]:
So very important you don’t miss any expenses. Little hack for you is to, you know, use this as a checklist and just rule out anything that’s not an expense for them. And, uh, and make sure you log anything that is an expense and make sure that it is accurate and appropriate. Okay. And then the other thing that I’ll just say is, hey, if there is Any questions about it, get help, okay? Find somebody you trust who knows the business, who can help you go through that. I made a very big, a few very big expensive mistakes early on. I can tell you it’s not pleasant, it’s not fun. And it would be well worth whatever the investment is.

Jordan Berry [00:20:28]:
If you find another owner who will do it for free, awesome. If you find another consultant that’s better than us, you’re probably wrong, but awesome. And if you utilize us, it’s totally worth it. I’ll just say that upfront. It’s very, very easy for us to make up the value of the investment in our consulting just by making sure you’re doing everything right.

Jordan Berry [00:20:47]:
Okay.

Jordan Berry [00:20:47]:
Okay. Pillar number 3 is skipped by a lot of people, but determining the laundromat’s trajectory. And let me just quickly tell you what I mean by that. We want to look at the performance of the laundromat over time. Okay. We want to see, is business generally trending up? And if so, why? How do we keep that train rolling? Is business plateaued? Everything’s flat. It’s about the same for the last year or two. We want to know why that’s happening, how we can increase that business.

Jordan Berry [00:21:14]:
And we want to know, you know, is it dropping off a cliff here? Is that the trajectory we’re on? And what’s the saying, like, don’t catch a falling knife. We want to know that. And if it is dropping off, we need to adjust our valuation accordingly. And we need to make sure we have a game plan on how we can level that off and then begin that growth process again for that laundromat. This is what we’re looking at in terms of trajectory. We want to know the, the laundromat’s income over time. We want to know the the laundromat’s expenses over time. Have there been significant changes in either of those? Um, importantly, we want to know the laundromat’s utility usage over time.

Jordan Berry [00:21:51]:
Definitely the water, also gas and electric. And then we want to guard against loss of income or value over time. Okay. So the other ones were kind of looking backwards. Now we want to also look forward. So that’s going to mean a few different things. Okay. So number one, That’s where we really want to dig into the lease.

Jordan Berry [00:22:11]:
Make sure you understand the lease and make sure that it is all set up to be good to go. You have enough time on it. The terms are good on it. All of that stuff for you so that when you take over, you don’t get hit by any lease surprises. We want to beware of decreasing revenue. So, you know, we want to make sure there’s no big problems or no new competitors or things like that that are really going to affect the, the income coming in. We want to beware of increasing expenses. We want to make sure there’s not going to be any big, like, if you have to have a lease with like a CAM, common area maintenance, or triple net lease, that there’s not going to be like a big roof repair or something like that coming up.

Jordan Berry [00:22:53]:
And you want to be aware of any other sudden big hits to the net operating income, right? So like the new competitor coming in or retooling or some kind of unknown problem, we want to make sure we get all of those those during the, uh, you know, during the due diligence period. We want, again, clarity. That’s what we’re looking for. Okay. Okay. And then pillar number 4 is our value— we call it our value-add pillar. Really what we’re doing is we’re making sure we have a plan and a path forward after you take over the laundromat. We want to look for ways to improve the business, to increase income, decrease expenses, improve, you know, efficiency, you know, do any repairs, maintenance, anything like that, add revenue streams, anything like that we want to be looking for during the due diligence period so that we can hit the ground running once we take over the store.

Jordan Berry [00:23:52]:
Okay. That was a lot. We went through a whole lot in this course. If you hung through all 3 of those, kudos to you. I hope you crush it. And hopefully the tools that we provided you and the resources we provided you help you through that process. But if you decide, hey, I’d love help going through all this, this sounds very overwhelming, we understand, we help a lot of people do this. We have a done-with-you model that we will help you through the process.

Jordan Berry [00:24:20]:
We will be looking over your shoulder, making sure you’re doing the right things, asking all the right questions, looking for the red flags, looking over your shoulder, making sure you’re not making any big mistakes. To get that laundromat the first time the right way. Or if you’re like, hey, I don’t have time to go out and find a laundromat and, you know, do all this on my own, we want you to help. We’ve got a team that does that as well. And again, our, our LaundromatDFY platform is custom built specifically for that. We added on a DIY user type for that so that you could do that, but that is custom built for that. It’s designed for that. On the done-for-you side.

Jordan Berry [00:25:01]:
So we can show you more about that side of things. If you’re interested in that, check out lawnmowerresource.com/coaching and, uh, you know, book a free strategy call and we will talk you through exactly what those packages look like and what you can expect. Okay. Hope you found this. I hope you found it helpful.

Jordan Berry [00:25:20]:
All right.

Jordan Berry [00:25:21]:
I hope you found it. And I hope this is a nudge in the right direction, helping you achieve financial freedom or whatever your goals are, leaving that 9 to 5. I hope that this helps you. If it does, very least, drop me a like, maybe a, maybe a subscribe. And I would love to hear from you in the comments too. And if you have any other questions, throw those in the comments. Love to answer those questions as well. If I can do anything else to help you, hit us up, laundromatresource.com, and we’ll see you in the next video.

Jordan Berry [00:25:54]:
Peace.