Laundromat Resource Forums Laundromats Making an Offer during the pandemic

last updated by Jordan Berry 3 years ago
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    • #1599
      Corey Kane

        When making an offer in the current pandemic environment, should you discount the offer based on current revenues being down and the uncertain future? The laundromat is priced based on the net cash flow over the last four years but there is uncertainty going forward. Should the offer reflect that? Thanks

      • #1600
        Jordan Berry

          Corey, what a great question! And it’s a tough one. Here’s a general philosophy that I encourage my clients to operate by as a broker: Pay for performance, not potential. Often times brokers will try to inflate the price of a laundromat because “the vend prices are under market rate for the area” or, “the fluff ‘n fold is primed to expand” or, “new machines are going to dramatically increase the turns per day,” etc. While all that may be true, if you’re the one making those changes, you shouldn’t pay a current owner for that potential.

          Obviously, this situation is different and unprecedented. I’m curious to hear what other people have to say on this, but I think I would encourage you to maintain that same philosophy, only maybe hold it a little looser. We don’t know how long economic recovery will take. the timeline will obviously vary by location, but I tend to be in the camp that we’re looking at years of recovery. And while laundromats are essential businesses and are relatively stable, with so many people out of work there’s a good chance that laundromat revenues will be down for a while, in my opinion.

          So, with all that said, I would say my answer is, factor in the last four years of revenue, but weigh the recent perfomance much more heavily than pre-COVID performance. I hope some other people weigh in on this one!

          Do you have any thoughts on it, Corey?

        • #1601
          Corey Kane

            Thanks for your response Jordan. I tend to agree with you but before I make an offer reflecting downward revenues I wanted to make sure I was approaching it with the right thought process. Right or wrong I don’t want to offend the seller with a lowball offer unless I can back it up with a reasonable explanation. Thanks again for your advice! Much appreciated.

          • #1602
            Jordan Berry

              Yeah, it’s really a unique situation right now. I think it kind of puts everyone in a tough spot. But, if sellers want full value for their laundromat, they should probably wait until things go back to normal… I’d be interested to see how you end up playing it all out and how it goes!

            • #1873

                I’m struggling with this right now too. As the buyer, we are pushing for a multiple of trailing 12 months EBITDA since it includes roughly 3 months of COVID reality. Meanwhile, the seller is pushing for an multiple of EBITDA from 2019. It’s a college-based laundromat and there’s no telling what school will look like in the fall – and really in the near future. So, we are holding strong and I’d recommend the same for you. Though…we may miss out on this laundromat because of that so you probably shouldn’t listen to me haha

              • #1881
                Mitch Brunette

                  I’m a rookie to laundromats but have been looking at buying a business or laundromats for about 9 months at this point. I’ve done a couple small real estate deals and looking at whats next.

                  A thought for both of you is to google the term “clawbacks”. Perhaps you have the seller finance some of the purchase and in exchange not only do they get interest paid from you but they HAVE an interest in the business. What you get in exchange are defined revenue points that the business must hit, if they miss those marks, then the seller forgives a previously agreed upon portion of your principal owed to them. Bam, they get their price if all is well and returns to pre-covid numbers, you get your number if covid continues to rear its ugly head.

                  The key to this clause is ensuring they hold enough principal debt that you can knock that amount off if revenue benchmarks aren’t hit. Also, this could be tricky in a coin operation and will require a substantial amount of rapport between buyer and seller to establish a serious level of trust.

                  I’m not an attorney…. so talk to one 🙂

                  Good luck, hope this helps in some way!

                • #2338
                  b A

                    I made an offer and closed during the pandemic, and it was one of the best decisions I’ve ever made. Originally the owner wanted almost 4x net, I got him down to 3x net fairly easily. The uncertainty cut both ways for each of us. I did stipulate that the Mat had to have N revenue in the two months before closing. After two months of ownership when business should be dying it is still buzzing. As the pandemic has continued people kept traveling so revenue has been steady. In addition, now the business broker I used is slammed with people looking to buy a business in town as they look to leave the major metropolitan areas. Had I not taken the bold step and made an offer during the pandemic I would have missed out on a great opportunity.

                  • #2473
                    Bryan Wilson

                      Your templates on this site helped me put an offer in on a mat
                      listing price was 350k Talked them down to 196k with your templates and other due diligence research
                      Hopefully starting escrow soon lease needs a lot of work but it is a step in the right direction

                    • #2482
                      Jordan Berry

                        Bryan that’s insane! Wow! I’d love to hear how that all happened! Congrats! Hope you can get that lease nailed down. Glad to hear some of the templates helped so much! Let me know how else I can be of help!

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                    Laundromat Resource Forums Laundromats Making an Offer during the pandemic