Laundromat Resource Forums Laundromats Newbie looking for help with analysis (too good to be true?)

3 voices
6 replies
  • Author
    • #5092
      Andrew McGregor

        I recently found a mat for sale and just started talking with the owner yesterday so I will update this as more details reveal themselves.

        I was provided p & L statements going back to 2017. I asked for verification through tax statements, bank statements, and/or utilities. He will send over the tax statements tomorrow so these numbers are just from the P & L.
        Here is a link to a spreadsheet with the P & L summary reports and machine info so far.

        So at first glance, this looks like a really good deal. Owner wants 65K and is willing to finance with 50% down with 1K a month as debt payment until payed off. I’m sure that is negotiable but even if it isn’t, the mat still takes in close to 800 – 1000 a month and will be payed off in less than 3 years. There are some easy value adds and expense reductions too, which I touch on below. This is also the only mat in a town, which is a pretty hot tourist spot in both winter and summer.

        There are a few things that concern me. The age of some of the machines is one. I asked about his maintenance but haven’t gotten an answer yet. I am planning to have to replace more than half in the next 3-5 years depending on what shape they are in. If they are in good shape, even better. I know I need to get them all checked out by a professional as that is beyond my knowledge for now.

        Another is that the mat also doesn’t pay water, just electric and gas. Is that normal? I assume that is taken on by the building owner. My concern is that I will have to take on that cost when the lease is up in 2024. I’m not sure how taking over a business’ lease works, but maybe I can renegotiate before full committing. The mat might not even be metered so the building owner just pays for the entire building at once. One idea I have is to try to take on the water cost either way and get a portion of the lease reduced. I know that I can reduce the water usage, especially if I need to buy or replace some of the machines, so it kinda be a win win. I still need to talk to the owner about this.

        There are two snack/drink machines and a soap machine that are operated by another company. Currently only 10% of the profit from those machines goes to the mat. This is an area where I know I can increase my profit. Current owner says profits from those amount to maybe $30 a month. An addition of an ATM as well as a couple games that I outright own would do well. I already have the ATM from when I tried to start and ATM operation business (didn’t do too well during a pandemic..hard to find places to put atm’s if most places are closed). What is the general opinion of trying to put my own snack/soap machines in the mat at the expense of those already doing business there? That might be an extra $100-200 a month.

        There is no drop off service. Seems like a no brainer to try to get one set up.

        Lastly, there are two employees that help with opening (literally just turning on the lights and making sure nothing is out of place from the night before) and closing (sweeping up, taking out trash, etc…) One is the owners daughter who isn’t going to be working there if I take over. I don’t think I need either of them employed as I plan on taking over all those duties. So that is a 2K reduction in expenses a year. Does anyone have experience with letting go grandfathered in employees?

        The mat could use some a few little touches here and there to spruce it up. Wifi, maybe new paint, a better waiting area, potentially outdoor seating when the weather is nice, a couple more big tables. Overall though, it looks to be in good condition. Of course that might change when I actually go in to look at later this week and when I have someone look at the machines.

        The reason for selling is that the owner is getting old and wants to travel. He is tired of the mat requiring him to be there.

        What am I missing? What do I need to think harder about? Anything glaring stand out?

        Thank you for reading this wall of text. Please let me know if the google sheet link doesn’t work.

      • #5095
        James Monroe

          Good job finding one and starting the due diligence process! I’m no expert (still looking for first mat) but I think you need a few more pieces of info. My lender asks for:
          -P&Ls and/or tax returns from 2018, 2019 & 2020 (as many as we can get)
          -Last 12 months consecutive utility bills to include water/sewer, gas (supply and delivery) and electric
          -Detailed equipment information to include model numbers, serial numbers, age and vend prices as well as ancillary equipment information
          -Premise lease
          -Demographic study
          -Competition analysis
          -Equipment sales order for upgrades? (if applicable)
          -Leasehold Improvements? (if applicable)
          -Asset purchase agreement (draft is OK)
          -Why the seller is selling

          Any “concerns/red flags/questions” keep track so you can ask the experts. The machine condition (definitely get checked), and the lease, in my opinion, is too short. I hear most guys say 10yrs or more. It seems like there is potential. Your due diligence now will answer all of your questions for later! If you don’t get answers on here set up a call with Jordan, or reach out to other experts. Apologies for not having much to say. I’m new. Your taking action, which is huge. Your not reinventing the wheel either so the answers and resources are out there. Keep us posted.

          • #5112
            Andrew McGregor

              -All good things to think about, thank you. When you say a demographic study, what do you mean by that?

          • #5100
            Jason Dodge

              Labor seems really light. I think you would have to pay at least $15 a day to get the store cleaned. That’s $5500 a year. His repairs also seem light but he isn’t doing much revenue, if the equipment is newer and he does his own repairs that could be correct but it still seems light, one circuit board is $150 to $200.

              The lease and the water are big issues. Can you negotiate a new lease now and keep the water out of it? Water is a big expense, that and payroll will eat all the profit. Wash and fold can bring in additional revenue but can also raise expenses unless you plan to work there every day.

              I personally don’t know the small town market that well. I’m sure you can do better than the current owner.

              • #5114
                Andrew McGregor

                  I agree that the lease and water are big issues. I plan on trying to negotiate a new lease. There hasn’t been anything said about water actually being included in a new lease but it is something that has crossed my mine as being a possibility.
                  Regarding labor, I received new numbers. There are two part time employees, an opener and a closer. The opener is paid $10 a day and the closer is paid $20 a day which amounts to $30 a day on labor. That adds up to 10,000 a year, which is significant and at least 5 times the amount stated on the P & L. I’m not too worried about that as I plan on working there myself everyday. What concerns me is that maybe there are other numbers that are skewed.

              • #5119
                Andrew McGregor

                  What type of tax forms should I be looking for? I received a form 1065 from 2020. The amounts don’t quite match up to the 2020 P & L.

                • #5136
                  Jason Dodge

                    I’m not an accountant and the forms can very depending on the type of entity he has. When tax forms and P&L’s don’t match up it can be tough to tell where the truth is.

                You must be logged in to reply to this topic.

                Laundromat Resource Forums Laundromats Newbie looking for help with analysis (too good to be true?)