Welcome back to another episode of Laundromat Resource, the podcast where we dive deep into the world of laundromats and provide you with valuable insights and resources. In today’s episode, we have an exciting guest joining us, Brian Smolin, a successful laundromat owner with a wealth of knowledge to share. We’ll be exploring the topic of SBA loans for laundromats and the power of leveraging assets to buy and grow your business. But before we get started, mark your calendars because we have a live Q&A session with Brian on August 17th at 4 pm Pacific Time. To join in on the conversation or find more information, head over to our website at laundromatresource.com/events. So grab your headphones and get ready to learn from Brian’s experience and expertise. Let’s dive in!
PLUS, Brian is going to join Jordan for a free live Q&A! You’re invited!
Thursday, August 17th, 2023
4pm pst/7pm est
Sign up at https://laundromatresource.com/events
Links from the show
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Jordan Berry [00:00:00]:
Hey. Hey. What’s up, guys? It’s Jordan with the Laundromat Resource podcast. This is show 121, and I’m pumped you here today. because today, we have an awesome guest on the show. Brian Smolin, who is a laundromat owner, and we talk about his story, but also super knowledgeable about SBA loans. And in fact, we talk in-depth about SBA loans for laundromat today, and it’s one of the most common questions I get is can you use SBA loans? How do you get SBA loans? And we’re gonna talk about all of that with Brian today. So this is an episode I don’t care where you’re at in the process, man, using leverage to buy assets is the faster path to building wealth. And SBA loans can be one of the best ways to actually use leverage to buy a business. So we’re gonna talk in-depth about that. And not only that, but Brian and I are going to jump on a live Q and a August 17th, at 4 pm Pacific Time, 7 pm Eastern, August 17th. You’re gonna wanna make sure you join us for that, especially if you wanna ask questions about SBA loans, lending in general, longer mats in general. Like I said, you know, he knows longer mats also because he owns them Andy owns Linux. So we’ll be talking about laundromats and owning laundromats and buying laundromats and also financing and SBA finance. Is it gonna Awesome, live q and a, and it’ll be, I just I’m excited about it. And Brian’s just an awesome dude too. So it’s gonna be a lot of fun. If you want to get the information about that, check the show notes if you’re on YouTube, it’s down below or lawnormatresource.com/ show 121, at lawnamresource.com/show 121, or go to the events page, lawnamresource.com/events, where you can see how to sign up for this event, any of our webinars, any events that we got going on. There’s always stuff going on over there. So make sure you’re checking there frequently in lawnamerresource.com/events. come join us for that live q and a. Okay. That’s all I wanted to say. That’s today’s fast lane tip, by the way. Live q and a with Brian Smolen, talking about Loner mats, talking about SBA loans, talk about loaner match and SBA loans. Gonna be incredible. alright. Let’s jump into it with Bryant. Let’s get into his story, and then let’s talk about some SBA loans. Ryan, how’s it going? Thanks for coming on the show, man. Hey, Jordan. How’s it going? Thanks for having me on. Glad to be on today’s job. Yeah. Yeah. I’m glad. you reached out, and we got in contact and talking about some cool stuff today. So I’m super excited to chat about all of that. And, I’m doing well. Thank you for asking. Before we jump into today’s main topic, why don’t you give us a quick little background? Who are you? And how did you get to this Pinnacle of Life where you are on the laundromat resource podcast.
Brian Smolin [00:02:39]:
Nah. Great question. So I would say my background is kind of traditional and most people that own small businesses. So, came out of school, worked in corporate finance at a variety of firms, then did that for 3 to 5 years moved over to a, at the time, small startup. we work which most people do know the story of that company spent another 3 or 4 years there. And then due to the some stuff going on there, my job was eliminated after a little while and then spent a little bit of time working for a variety of small companies, doing some real estate investing for myself. And then started to get the itch after I saw sold my first home at after the first wave of COVID to look into small businesses. So I was looking at at the time was already under contract for some commercial real estate and being somebody that is not, I don’t have a single creative bone in my body. So everything I’m drawn to is operational in nature. So was looking at stuff like car washes, laundromats, things that it’s really just all about the process and the people and just being consistent with it. And after speaking to a couple people that have had a ton of success in the car wash industry. All of them said that they would never change it, but if they could redo it, they would have gone the routes of laundromats. I said, well, that’s very interesting because that is the other thing I’m currently looking at. So after realizing that at the time that getting involved in a car wash was just slightly out of my price range or even if I was able to get into 1, it really would have put my back against the wall because the stuff that goes on from a maintenance perspective when you purchase a value add anything is big dollars. So from there, I really kind of pivoted and just really started looking into So being my I’m located in New York, I live in Long Island and was looking at a variety of them, looking at stuff on Long Island, looking at stuff in the boroughs, and going into literally everyone I saw it no matter where I was, if I was on vacation, if I was just stopping at the store, and there was one next to me, go in there, take a look, and the common denominator for all of them was that, wow, these places are disgusting. 9 out of 10 of them were terrible. I wouldn’t do I wouldn’t wanna do my laundry there. And that’s when it kinda clicked where I was like, okay. these people, if all these stores are in business and they’re run like this, it can’t be that difficult to do decently well if you’re running it well. So being somebody that didn’t have a tremendous amount of starting capital, I was automatically looking towards, okay, how am I gonna finance this thing. So the first thing I did when I was looking into thing. And as you know, and you’ve gone through it many times with your underwriting and stuff like that when you discuss it, is that it’s very hard to come up real numbers. You do need to assume a lot of the things, and all of them just weren’t adding up. So I got connected with an individual that worked for a distributor and start explaining you to go down the route of building from the ground up. And at first, it didn’t seem like something that was attainable to me due to just the extremely high startup cost. And the more I kinda looked into it, the more I kinda thought it through and realized that it does give you the opportunity to really build out your store exactly how you want it and put all the controls and the technology in place to really allow you to run it as hands off as you can be. So you’re still there all the time, but if you wanna step away, you could still have that ultimate transparency into your business if you step away for a day or a weekend. And going down that route, I realized that, yeah, I’m gonna need some sort of financing to get this alarm because $200 is not gonna do it. So leveraging my real estate background, I automatically knew that going the whichever way I was gonna go from a financing perspective, whether it was raise equity from people or some sort of debt product or SBA or the machine financing or the equipment financing arms of the equipment I’d buy that I would need I would need So as I was going through that, I realized that, okay. The best people to work with are typically your small community lend because once you go through that application process, us with anything with a big bank, your Bank of America, your JP Morgan, you really just numbers on a page. So going with a small community bank, it’s more relationship They do have that alignment with investment in the community. People don’t think so, but it is true. The small community banks do heavily valued the relationship, the type of thing you’re opening, and past experience, and other thing. So going through that route, I went to small regional now from there, that was just the start. So what I had to do from there was also build out a business plan and financial projections and all sorts of other things that went involved in that. And by some miracle, my loan ended up getting approved. And that’s how I ended up opening up my store as well as that’s how I ended up going with the SBA option. So I know I just said a lot right there. Yeah. Yeah. You just went straight for the heart there. Straight for the jugular.
Jordan Berry [00:07:57]:
I love it. okay. So, I mean, let’s let’s back it up here in just a second. So did you build a laundromat? Did you buy 1? Did you what? Talk to us about what you did. you actually did. Sure. So my store, I opened on in Nassau County, Long Island. So it’s just about 45 minutes outside of Manhattan
Brian Smolin [00:08:16]:
and to, decently sized sharp shopping center, and we did pretty much a white box when we signed it. So it was you walked in the door. It was just four white walls and a ceiling. it was previously, I think, like, a dollar store or not like a dollar general, but like a dollar ask type store. So we had to bring in every Yeah. And just so everybody’s on the same page, white box build out is basically taking a a space that was not a laundromat before and turning it adding the infrastructure
Jordan Berry [00:08:45]:
and and everything that you need to turn it actually into a laundromat. did you did you,
Brian Smolin [00:08:51]:
purchase the real estate with this, or is this a a lease of a white box, basically, and a build out there? No. Although I would love to be in a position to acquire the real estate as well, because I’m in real estate. So for me, it makes complete sense. This was a large shopping center, so it just wasn’t it wasn’t in the cards too this real estate. So this was just a pure lease mile. Not yet. Uh-uh.
Jordan Berry [00:09:15]:
Some day. Awesome. Okay. So you ended up using an SBA loan to do a white box build out, basically. Is that Yes. Okay. And when did you say you opened? your store? So I opened in
Brian Smolin [00:09:28]:
I assigned the lease. I wanna say pretty much New Year’s Eve of 2020. Okay. Alright then. they started breaking down April of 2021, and we officially opened the doors February of 2022. So it took a while to build that thing out. Yeah. For sure. So, I mean, we were building and signing in the height of COVID. So, of course, with anything, you has a lot of positive and negatives where the space I’m in today being that we did sign at the height of COVID, we never would have been able to afford if we sign this
Jordan Berry [00:09:59]:
6 or 8 months prior or even 6 or 7 months ago from today. So we got extremely lucky with the lease terms that we were able to lock in for What amounts to 25 years of term? Yeah. I was gonna ask, did you get, what kinda lease did you get? Did you get, like, a 10 year with 3 opt 5 year options or Yes. That’s exactly what it was. It was a 10 year base with 3, 5 year options. Nice. And you got some good good terms on that. Well, there was a lot of during that time, because it’s it’s interesting, right? because during that time, there was a lot of panic among specifically retail landlord where they were looking around being like, all these businesses are down and can’t pay their rent. What’s gonna happen? Like, are these businesses gonna survive? Are we gonna be out all this rent? gonna be anybody to come in and replace that. So like you said, you came in at a really good time to come in and sign a really good long term lease probably helped that landlord breathe a sigh of relief during a very tumultuous time. However, also during that same time, we saw prices for equipment skyrocket. We saw labor costs skyrocket. We saw, timelines, length and supply shortages, all that stuff. I’m sure all that played into. Can you talk about what what was that experience like? Yeah. So
Brian Smolin [00:11:15]:
being that I’ve spent the majority of my career, in a variety of corporate finance positions, large companies, small companies that I kind of understood my underwriting when I was coming. So I knew that, okay, everything’s gonna take longer than it expects, and it is gonna be more expensive, whether it be an additional permit cost or something that was unforeseen. So you do need to plan for that. like, the construction company I used to build out my store was absolutely fantastic. I can’t say a single bad thing about them. I mean, coming from a background where I built my first house. I worked in construction as a kid. Like, everything completely pinned straight. Like, their work was phenomenal. That said there were small overages with their work. Wasn’t anything major, but stuff that’s expected. Like you said, with the machines, we locked in at one price. and we got hit with increases by the time it arrived because our machine order was put in maybe a week after we signed the lease. We didn’t get them until 9 or 10 months later. Yeah. That is
Jordan Berry [00:12:13]:
that was that was crazy. I mean, there was some, like, long lead time 9, 10, 12 plus months sometimes for that equipment, which is crazy. Yeah. How how’d you find this construction companies. Is that somebody you work with with the distributor? Did you go out and find them yourself? How did you how did you get them? Yeah. So great question. And the way I found them was through the subdistributor
Brian Smolin [00:12:35]:
I was working with at the time. So when I was looking at ones that were pre existing and already up and running. I was looking to see if there was, like, a consultant out there or just someone that I could kinda bounce my numbers off of. Like, okay. This is where I am. fairly confident, but what’s missing? So when I went through with them, they were like, alright. Your your stuff is pretty on point where it should be. Like, there’s a couple things we we change or treat, but more or less it’s where it should be, which I was already confident, but just trying to figure out why these offers are none of these deals I was looking at made sense. and then that’s when they started going into, okay. Everyone’s gonna try to pitch you on this is what it does, but I could only show you that So now you have this delta between what they wanna sell the business for, what they can actually show the business does, and what they’re telling you they’re putting in the pocket, And anyone that’s buying a business know is that you can only purchase that business based off of what they could show you. So that’s why all these deal after deal was just falling apart once we got into due diligence. So this person also does project manages the building of the stores. So he works with he has relationships with construction companies that come in and they built my whole store. So he was not only my sub distributor, but my PM as well. Nice. Yeah. That’s that’s awesome. That’s usually helpful to have somebody who,
Jordan Berry [00:13:54]:
knows the business on your side. And, and also, you know, having a construction crew that gets this business, right? It’s not necessarily super complicated to build out a loan map, but there are some things that, you know, some nuances to this business that don’t really apply to other businesses particularly when it comes to plumbing, electrical, that kind of stuff. Oh, absolutely. And the thing is is what some people don’t realize also is that I’m
Brian Smolin [00:14:18]:
I’m confident I probably could have pieced together the right people to come in and do each part, whether it be the plumbing, the framing, the electrical, placing the machines, building out, doing the tile work, whatever. I’m confident I could figure that out, but at the end of the day, you’re also up against a clock where being that this is such a infrastructure intensive build, you’re not just opening up a retail store where you’re stopping some shelving or a deli where it’s some equipment and refrigerators. You’re doing massive work to the infrastructure of these stores, and that stuff takes time. and your rent free period is a finite amount. So if you don’t get those doors open by that time, well, now you’re paying rent, which you’re in the if you’re in a high rent market, it could be 6, 7, $8000 a month. That’s coming out of your pocket month after month. So even just a 2 month overrun could be 6, 15 to $20,000 that’s coming out of pocket. So I knew that nobody works for free. So even though this person was introducing me to the construction company or was being the sub distributor for Dexter, yes, I’m paying a premium somewhere, but you’re paying it regardless. So you might as well pay it and make sure that it gets done correctly and on time. Yeah. Yeah. Which is yeah. I mean, I think it’s a really great,
Jordan Berry [00:15:34]:
perspective. And, you know, particularly when you’re when you’ve got that sort of lease ticket there. And it sounds like you did some good work in negotiating some some free time to allow for the construction and the build out, you know, to happen where you weren’t paying. Did you make it in time?
Brian Smolin [00:15:50]:
Yeah. We got we got very fortunate. So what happened with us is We were 9 months post permit. So what ended up happening with us is it took 4 months to get the permits approved. and that’s with using an expedited. So from day 1, we were working with an engineering firm to make sure everything moved along quickly, and it still took us 3 or 4 months to do that. Then on top of that, we had 9 months. Our construction crew that was in here doing it, they were always on time, like, they they were ahead of the game for the whole entire way. It was really just the issues with the getting the machines in place. And even with that, we still went about a month and a half over. And fortunately with that was our center was sold, like, 2 months after we opened. So, like, the month and a half that we eventually would have owed in back rent just kind of went under the rug. Sweet.
Jordan Berry [00:16:44]:
Yeah. That’s awesome. And you know what? I bet that a big part of the reason that they sold, when they did is because of the lease they signed with you guys. because, you know, when they lock up that space and that long term lease, that looks real attractive to a buyer. I’ve got a stable business here. That’s gonna be here for a couple decades. And — Yeah. Absolutely. That was definitely a part of it as well because when we came in, there was definitely some vacancy within the center. And then right after we signed,
Brian Smolin [00:17:12]:
they had, like, 3 or 4 other stores that also came in. So they started filling it up. And for whatever reason, the REIT just decided it was time sell their portfolios. So I’m sure they did did did right by themselves. Yeah. Way to go making, other people rich. Let’s talk about you, though. I mean, how’s how’s the business doing? since you’ve flung open the doors? No. It’s it’s been good. I mean, you always wanted to do more than what you’re currently doing. We’re, like, 14 months in 6 yeah, 14 to 60 months in, and we’re just kind of a breaky. So you’ll have a couple months that are you’ll have a month that’s slightly above, months slightly below. depending on, like, just the variables, but it’s really kinda trending to where we want it to be. And being in the suburbs,
Jordan Berry [00:17:51]:
I kind of expect it our runway to be probably around 2 years before we were really chugging along. Yeah. Yeah. Well, and I I mean, that’s a question I get asked a lot is like, okay. If I build new, you know, everybody kind of and I actually, I just had a consulting call this morning where we had this exact discussion and the guy was like, I’m thinking about building new. And I’m like, okay, you know, we need to talk about the runway to actually get the thing built and the machines installed and to where you can open doors because there’s a a runway there. What a lot of people don’t think about is that the the runway after that actually can be pretty substantial also to get to that break even point and then profitability. it doesn’t usually happen where you fling open the doors and the flood gates open and money is raining from the skies and you’re swimming near full? No. Not yet.
Brian Smolin [00:18:38]:
Absolutely. And that’s actually one of the biggest things we focus on when I work with clients myself on the SBA approval process is really being realistic and covering yourself for worst case scenario. But if you’re but to, like, your point, if you’re in other areas, like, I’m in the suburb. People drive to you. People are more spread out. My client that’s in Brooklyn Crown Heights that just opened, like, 2 weeks ago called to me after, like, 8 days of being open. He’s like, alright. I’m a little nervous. He’s like, we had, like, 2 o’clock and we haven’t had a single person in the store. I’m like, that’s fine. You’re only like, you don’t have a customer base. You’re building a customer base. I’m like, what do you do your 1st week? He’s like, we did $5 our 1st week in self-service. I was like, do you know how long it took me to get it into the suburbs? I was like, I mean, you did what you should have done. But, like, that’s phenomenal that you’re doing $5 week 1 of being open and you’re worried about not doing anything at 2 o’clock on a Wednesday. Yeah. Yeah. Yeah. That’s awesome. Yeah. $5. I would have loved to do $5 when I bought my first laundromat and was losing money when I thought I was gonna be making 5 grand. Oh, it took us months to get to that. Month. I mean, it was 6 or 8 months before we had our 1st $5 week. Yeah. Yeah. And it takes time. Like, And that’s, you know, that’s that’s something if you’re thinking about building it out. You just have to kind of factor that. And it takes, you know, I think people think like, okay, it’s gonna take a month or 2. but no, I mean, I what I pretty commonly see is
Jordan Berry [00:20:02]:
8 to 18 months. Really? I mean, like, that’s kind of the runway that I see for hit that breakeven point to and to kinda crossover into profitability. And sometimes it can take longer than that even. and so, you know, that but that’s something that you need to actor in, what what I don’t wanna see happen, and, I have seen happen, unfortunately, is people use up the majority of their capital to get things off the ground, and then they don’t have enough to cover that runway, you know, until the profitability point. And that can put you in a really bad
Brian Smolin [00:20:37]:
situation. That’s the biggest thing because if you screw that up, you’re you’re dead before you even you’ve crashed before you’ve even taken off the ground. Exactly.
Jordan Berry [00:20:48]:
okay. So I I wanted to I wanted to, talk to you just a little bit about, first of all, thanks for sharing that stuff. Cause I, I mean, I think, like I said, I think stuff is is very valuable just for people to hear like here’s what it actually takes. You know what I mean? because it’s easy talk yourself into things without actually knowing like kind of what it takes to build that. Oh, abs absolutely. Yeah. And I see see that a lot. I spent a lot of time talking to people out of things they’ve talked themselves into, with my consulting. So I’m sure you see some of that too. Okay. So I wanted to chat with you just real, real quick about what what did you do? So so one of the obstacles when you build or one of the the things that you have to kind of make happen when you build as opposed to buying is, you know, when you build from scratch or from white box or whatever, there’s not current laundromat there, and then there is one. Every single one of your customers is currently doing laundry or laundry somewhere else. Right? And this is I call this a very habitual or rhythmic business. So people just kinda get in a habit. They go to the same place to do their laundry. Usually on the same day, you usually at the same time ish, you know, and and when you build brand new, you have to break habits of people and entice people who are currently doing their laundry somewhere else, some other way to come do it with you. So can you talk a little bit about how you got people to come to your laundromat? Yeah. So that’s
Brian Smolin [00:22:16]:
that’s one of the things I really go into heavily with my clients when they’re saying like, okay. How long should we expect? And to your point, it is something that is just you do the same thing. Like, when you find a place, whether it being going to the supermarket or, I would say, even putting the gas station in that as well, where you have your routine you go to the same exec supermarket every single week, whether it be twice a week, three times a week, once a week, whatever it is. You have a lot of things going on in your life. So it is a mindless activity, and we’re all people of habit. We don’t like change. So you have a long day. You come home from work. You’re dealing with the kids. You need to go to the supermarket. Your mind’s going 6,000,000 places. 2 weeks ago, you saw that new supermarket that just opened up that you wanna go to. You keep telling yourself you’re gonna go there. You come home from work. You get in the car. You go to the supermarket. Next thing you know, you’re at the supermarket. You always go to because we are people of hap we have creatures of habit. We do the same thing. We like doing that. Same thing goes for a laundromat. So even if people have casted and want to come, they still might go to their leather laundromat 2 or 3 times before they eventually come to yours. So it’s really that day 1, that 1st year, it’s all about just being as consistent as possible. Like, for us to get people through the door, of course, we were doing Facebook marketing. We were doing Google AdWords, posting in the local Facebook groups, things like that. But that only goes so far. I mean, it’s definitely helpful, but the biggest thing is regardless if you get 10 new customers that 1st week or a 100 or whatever it is, just providing an unbelievable experience to those customers as soon as they walk in that door. Yeah. I love that.
Jordan Berry [00:23:56]:
one of the things that I, always recommend too is, you know, whether you’re you know, opening up, a laundromat for the very first time where there wasn’t a laundromat, or if you’re just kinda taking over, you’ve maybe done some, you know, some touching up or whatever and you’re trying to get new customers again, kinda going back to what you were saying, like, you know, it’s it’s habitual and it’s mindless and people just kinda do it. Right? One one of the things I found to be super effective is do something dramatic that sort of forces them to snap out of that mindless Right? It’s like when you’re, you know, when you’re when you got like a hat, like, you know, it’s even like driving, right? You’re driving along. You can pretty much drive after you’ve been driving for a while, you can pretty much drive almost with your eyes closed. You just kinda do it mindless so you could be thinking about other stuff. But the moment somebody pulls in front of you, you’re paying close attention. You are focused on what’s happening there, right? And you almost wanna do, you know, on a less dangerous way, but you almost wanna do something similar when you open a new spot or you take over a spot and you’ve made some improvements and you’re trying to get new customers is you need to kind of snap them out of that mindlessness and do something dramatic And, you know, there’s a whole lot of different ways you can do that. You can offer free washes. That peaks people’s attention. You can do, you know, the the the famous now, double your money, double your money promotion where, you know, people put money on your loyalty card and you double it. Now they’re coming back forever because they have all this money on the card, and and they have to come back to use it. Right? So something dramatic, something that’s really eye catching, something out of the ordinary to sort of snap them out of that habit, that mindlessness,
Brian Smolin [00:25:33]:
and and get them changing those habits and come into your place and checking it out. So so that you can then provide them that incredible experience that you were talking, which is awesome. Yeah. And then also, like, all of that really depends on what’s what’s around you. So for me, I have probably within a two mile radius of my store, probably half a dozen more. They are all discussed Like, they’re not even in the same league of, like, how my store is. So for me, I really wasn’t pushing these crazy promotions. I don’t believe in giving away things for free. the biggest thing I did was just one I was fully attended from day 1. And the way I hired was I didn’t even care if somebody came in. I was like, I have experience in laundromats. Like, I don’t care about that. This is a simplistic business. I could teach you how to fold laundry. I learned how to fold laundry from an industry video. and we do it all that way. So all those things could be taught. My thing was just people that were genuinely happy. They smiled when we spoke to them and can engage with the customer. because that’s the thing I’m gonna blow them away with. Like, when I go into the places around my store, I feel depressed because you walking and their fell It’s not a pleasant place to be where you’re welcome to my store. You have music playing. You have TVs on with music videos. You have a nice experience. You have pleasant
Jordan Berry [00:26:52]:
you have my staff that’s engaging with you in those things that is the approach that I took to blowing my customers away. Yeah. And the customer servicing, I mean, that is That is by far the best thing that you can do when you build a store or take over a store is improve that customer and customer service side of things. And, you know, I I love, like, using the language of blowing them away. Right? Like, you want you wanna wow them. right, wow them with the level of service that you’re providing. And, you know, that’s gonna bring them back. They’re gonna come back because the experience is so good. Like, nobody wants to be doing laundry, right, nobody loves laundry. Almost nobody, loves doing laundry. Right? But if you can provide a great experience for them, painless, it’s fast, you know, positive, then, man, if you can make that miserable chore less miserable for somebody and maybe even borderline enjoyable,
Brian Smolin [00:27:48]:
man, they’re gonna they’re gonna love you. They’re gonna come back for life. Yeah. And that’s really one that was another big driver for what really piqued my interest in the industry as well. And, like, really what’s dictated how I’ve approached the business. So I grew up middle class family, me and my well, I’m one of 3, sister 3 is younger, sister 3 is older. We all did variety of activities, whether me and multiple sports or my sister is in dancing school or whatever. Come Saturday or Sunday. My mom had a pile of laundry from the floor to the ceiling. So we always had a washer and dry in her house, but there were so many times I remember her where she would pick it all up, throw into bags, and either take it to Washington Fold or do it herself. And growing up later, to her, it was never a negative experience. It was actually enjoyable for because for that middle class mom that is has the kids, the family, all that stuff going on, that’s also a escape for her in a nice place. my mom didn’t go to the closest place. She went to the place that was maybe a little bit further, but provided the nicest experience. She was able to go there, spread everything out, take 3 or 4 machines, sit, read a book, listen to the Yankee game, and get what would have been 3 or 4 hours worth of even more, 4 or 5 hours worth of stuff done in an hour or 2 hours and have a nice experience doing that. Yeah. Yeah. And that’s hugely informative. Right? Like, because I think that there is a lot of business out there that we could have if we can provide an experience
Jordan Berry [00:29:21]:
like that, right, where it’s not Like, I’d say, I mean, you guys had a washer and dryer. Like, you’re you’re not you guys weren’t the typical laundromat customer. Right? But because Number 1, kids are filthy and disgusting and create a lot of dirty clothes. And number 2, the experience was good. you know, your mom would go out and do that. Right? And so that was business that that laundromat owner got that they wouldn’t normally have. They hadn’t had a, you know, a good lean laundromat where they had a good atmosphere, for your mom to go and do that. And I think there’s a huge lesson that we can learn for that in this industry. And I like the fact that we’re moving that way. But to your point, 9 out of 10 laundromats in certain areas, especially, are still we call, like, a zombie mat. Right? So there’s a lot of opportunity there. And it’s
Brian Smolin [00:30:08]:
and it’s being, like, very business minded and, like, as much as I’m willing to take and very risky, where it’s like it’s very calculated. It’s these very unsexy industries and whatever. But if you walk into a laundromat or the success of a laundromat depends on providing a bright, clean, enjoyable, safe environment for your customer. That’s it. There is not there’s not a ton of variables that go into not a ton of moving pieces, and you see it time and time again, people screwing it up because the fact that, like, our business is, quote, unquote, based on 5 turns a day. And if that takes, what, a store 2 a half, 3 hours to do 5 continuous turns. So if I can get my store running 3 hours a day and then shut down shop, would be amazing. I’d be a rocker. Yeah. You would be. So the way I like to compare it to my customers, like, it’s just about long term execution. If you could just master those things, and being consistent for 2 years, you’re going to do well. You it’s just be getting over that hump of the struggle of getting to breakeven and just being able to do all that stuff. I mean, my biggest comparison I like to make it too because everyone could relate to it is that no matter where you live, no matter where you grew up, if I told you, do you have an idea? Like, could you think of that one restaurant in your neighborhood that is awful? nobody would you wouldn’t go there. It’s been around forever, but it’s it’s there. It’s been a staple there and the food’s terrible. Everyone could think of 1. They might not know it by name. the person that runs that poorly, like, that poor experience restaurant is probably ten times more sophisticated then your laundromat owner that runs a disgusting laundromat. With me, big deal. If I over if I over order soap 1 week, or 1 month, whatever, I just put it on the shelf and I usually wanna get to it. You could mismanage the laundromat for 10, 15 years and still not go out of business. Whereas if you mismanage your restaurant, you could get away with your with mismanaging costs 1 month, 2 months, maybe 3 months, but at some point, you will manage yourself out of business. So the bar is set so low in this industry. It’s just approaching with consistency and looking at your customers more than just people putting money in your machines. Yeah. That
Jordan Berry [00:32:19]:
that whole section right there, that is gold. You know what I mean? That is gold. And, you know, our The whole reputation of our industry, which is that it’s dirty and shady and all of that stuff is based just off of that where people did have. and do mismanage their laundromats for decades. And in fact, up until pretty recently, there was a lot of pride in being able to do that, right, and and being able to say, yeah, my I’ve had my machines for 30, 40 years. And you know, I basically spend no time, effort, or energy on my business, and it brings me money, which is fine. There’s nothing wrong with that. if you have systems, processes, and people in place to help you manage your laundromat and minimize your time, right? But if you’re just kinda letting float out there. That’s why we have all these zombie mats is because the bar is so low on what it takes to manage a success laundromat in most areas that, like you said, that consistency is really key. Like, that’s the that’s the standard. That’s the bar. And if you can go beyond that even better, but you gotta do at least that. And like you said, if you can do it for 2 years, you’re gonna be successful. love that. Yeah. And I think also the biggest reason why you have these stories in such the dilapidated shape you’re seeing today is because you have these people that are now in this unrecoverable
Brian Smolin [00:33:45]:
spiral. So what I mean by that is that, I mean, most people you tell them if you report, like, I report every dollar I make. we bring in a significant amount of cash, especially on the self-service, probably 50%. Every dollar of that goes into my bank. Why? Because into, like, this year won’t matter. Next year won’t matter. It probably won’t matter for a couple of years. That said, in when I want to leverage other financial products against my business, whether pull debt out of my business and not pay taxes on that, or if I want to expand to another store or whatever it is by me having everything reported like that, that gives me so much optionality, which far outweighs the 20, 30%. I’m gonna pay taxes when I do get to that point. If you have a good accountant and whatever, you’re gonna be able to minimize a lot of it from either having certain expenses that would normally you could layer on your business or things like that, but you now have these people that think you’re an idiot for not for reporting your your income like that. And now what happens to them? They get 8 years in, 10 years in, the store needs some needs a little uplift. They need new machines, but guess what? You look on their books, their books show nothing. They’ve been taking a loss, so they’ve been just barely getting by. Well, if I’m an equipment, if I’m a distributor, if I’m a bank, there’s no shot in hell. I’m gonna give that person a loan. So now what’s their options? They don’t. They don’t have any they don’t have any ability to obtain credit. Their store needs work. So all their choices is just to continue running that store.
Jordan Berry [00:35:14]:
to maybe the best of their ability, which they’re probably not doing until that lease expires. Yeah. That is yeah. I mean, I love that. And I I’m a 100% on board with what you’re saying there. And I think that the pros significantly outweigh the cons of doing everything above board, right? And and you’re right there. A lot of people in this business and other, you know, similar kind of cash businesses that, you know, will scoff at the idea of reporting all the income. However, I think the pros significantly outweigh the cons. You know, and like you said, I a lot of the tax things can be minimize through, like you said, running, again, this is not tax advice from either one of us. but, just to, you know, be clear on that. you know, you you can run them, run expenses through your business and, you know, you can do things like, depreciate your equipment, all that stuff, make purchases, to improve your business and depreciate that. I mean, there’s a whole lot of things you can do on the tax size to really minimize or even completely get rid of your tax is for your laundromat. That is not unheard of, and it’s not that complex to do if you find the right people to help, do that. However, like you’re saying, the availability of tax free loans to go out and, you know, buy another business or do, you know, whatever you wanna do with that money, know, you’re gonna get a lot more, you know, opportunity for that if you have good books. And also when it comes time to sell, your business is gonna be more valuable because you have clean, clear books and you can show the amount of income that you’ve been able to bring in through your business. So lot of benefits. Oh, absolutely.
Brian Smolin [00:36:51]:
Absolutely. because that’s what you run into and why most of these places don’t these deals don’t make it to the finish line when you look on LoopNet or is buy sell. Like, there’s 6,000,000 laundromats in almost every market, but the valuations make 0 sense because they don’t report anything, and they’re expecting to get this, whereas based on what they could show, it’s worth here. So these people run into the to the this idea that they want their cake and eat it too where it’s like you get one or the other. You can either pet your pockets over the course of your business life and then sell it for what you could show it for, or you could reflect it the right way and then reap a large windfall when you do decide to pull that trigger, but you usually can’t have both. It’s one or the other. Yeah. Yeah. Yeah. Plus, obviously,
Jordan Berry [00:37:34]:
not to state the obvious, but I’m gonna state the obvious. It also minimizes your legal risk, and the ramifications of that. when you report properly. Oh, yeah. Absolutely not as well. So seems like that should be obvious, but it’s not super obvious in our industry, I guess. I don’t know. alright. So awesome. Awesome stuff. It’s like super, super duper good stuff. I can tell you’ve been immersing yourself in this industry. and that you’ve got some savvy even beyond this industry. So it’s really cool. Can you be talking about this stuff? I wanna go back because this is something that gets brought up a lot. in my consulting. I’m sure you hear it too. and that is SBA loan. So you you talk about how use an SBA loan. So I’d like to go back and just talk about SBA loan. How do you get an SBA loan? What are the pros and cons? Well, let’s start with pros and cons. We’re Can can you talk about some of the pros and cons of an SBA loan? Yeah. Absolutely. But I’m gonna even take a little bit further a step back and just explain what SBA loan is. Great idea. So an SBA loan is any standard loan that you could get from the bank. That said, it is
Brian Smolin [00:38:40]:
a program that ensures these banks against their losses in the event of defaults so that the smaller regional banks, these large could feel comfortable making a loan because in reality, a large institution really has no like, what why would they ever make a loan to me starting up a business from the ground up considering the failure rate on small businesses? So this is a government sponsored program that’s insured by tax dollars where they say, alright. Make these loans to these small businesses.
Jordan Berry [00:39:12]:
and in the event it defaults, we will backstop it. Yeah. Yeah. And just SBA stands for Small Business Administration. Right? So these are These are business specific loans and it works similar to like, a mortgage you know, on your house where the government kind of backs these things up. And, you know, the government is pro homeownership, and the government is pro, small this in in these ways. Right? And so this is one way of demonstrating their support, I guess, for small businesses to help small businesses get started Now, you know, SBA loans and loaner mats can be kind of tricky, which maybe we can talk a little bit about. But first, like, let’s let’s jump into some of the pros and cons of SBA.
Brian Smolin [00:39:58]:
So I would say the pros the biggest pro is the fact that one your it allows you to get into an industry that you normally wouldn’t be able to get financing regardless what it is. I mean, some of the they look at the risk profile of the industry and, I mean, the laundry industry is considered mature. Laundromats have a 95%
Jordan Berry [00:40:17]:
success rate more or less. So from — Real quick. — underwritings. Can I Sorry. I didn’t mean to interrupt you, but do you happen to know where that statistic comes from? because I have yet to find that statistic somewhere, but I hear I
Brian Smolin [00:40:30]:
No. I had to I actually pulled it and quoted it when I did my first business plan. So I included that in my application when I
Jordan Berry [00:40:38]:
I’ll have to go. Yeah. I would be curious because I cannot find that anyway. If anybody knows, if you’re, like, shoot me an email or comment if you’re on YouTube, I’d love to know where that stat comes from because I have illified. But I hear it all the time. I was just curious. Probably some consulting firm like a McKinsey or something like that that put it out when they were doing some sort of engagement, and it become the standard term. I will tell you that that stat single handedly did a lot of mental damage to me when I was struggling with my first lawner, man. I’m like, how am I in the 5% that’s not being successful right now? I’m losing money. But — Oh, absolutely. Like, I struggle with that too where it’s like you’re 16 months in. And there’s so much that goes into it, whether, like, where you live, all all the different things that go into it where you you just gotta stay the course. Yeah. Absolutely. Okay. So I didn’t mean to interrupt you. I just I you put that stat and I was like, I wonder if he knows where it came from because I have not been able to find it. Okay. continue. So pros are you can get the industry as a mature industry,
Brian Smolin [00:41:32]:
high success rate. The other pros is that typically you’re gonna get a longer amortization period. So what I what I mean by that is the term of the loan. So how many years you need to pay it back? So if you go through equipment financing arms, so like Dexter, or an Eastern Funding or what newly came out clean laundry. although as you might get a loan for 7 years. Okay? Well, if you could get one through the SBA and extend that out to 10 years, now those payments are substantially that 3 years additional in term is going to substantially reduce pressure on your P and L. I mean, sure, you’ll pay more interest, but you will have a you have a much lower bar to clear to break even if you’re doing over 10 years versus 7. that’s one of the first thing. The other thing is the flexibility with them. So what I mean by that is they will do a variety of things that are really helping you out. So one would be you get 6 months of interest only. So if so you’re just so for the 1st 6 months after you go to closing, you are only paying on the interest pump component. You’re not paying that fully amortized loan, which could be twice as much as what that interest payment So, again, it’s these things that allow you to lower that bar from a expense perspective on a month over month basis
Jordan Berry [00:42:47]:
to get you going in the right direction Yeah. And that and that allows you to, number 1, lengthen your runway, right, because you’re able to have more capital you’re you’re generating from your business so that you can last longer to get to that critical breakeven point and then merge into profitability. and it also, you know, if you can get there at allows you to, cash flow sooner too. you know, and that’s that’s more probably particularly if you take one over existing, but another kind of perk. Okay. What some of the cons of SBA?
Brian Smolin [00:43:20]:
well, another one big thing on the plus side is their LTV is a lot higher than where you’re typically gonna find it. So with s with SBA, they will go up to 90% TV. That’s loan to value, meaning meaning that if you’re doing a loan for our your whole cost is a $1,000,000. they will bring 900,000 to the table and you bring a $100,000 to the table, which is huge. Again, there’s negatives to being that highly levered, but that’s plots just to be able to get you in the on the playing field.
Jordan Berry [00:43:52]:
Yeah. That’s massive.
Brian Smolin [00:43:53]:
And then from a cons perspective, and this is something that I continuously drive home with clients is being that it is a government sponsored program is that they typically require a 1 to 1 collateralization ratio. on the loan. So for every dot so what that means is for every dollar they lend you, they want it supported by either a piece of equipment So when you’re doing a full build out, again, we’ll use that $1,000,000 example. So everything all in is a $1,000,000 you’re going to bring a $100,000 to the table. They will bring $900,000 to the table. Okay. Great. That’s now you’re starting So now how are they going to co look to collateralize that 900,000? So in my case where I I did a lease, all the cost to build that out is would be uncollateralized because if we go out of business, they’re not gonna be able to recoup any value from the sheetrock on the walls, the paint, the wiring, the elect goal. All that stuff that went in because the landlord owns that if I ever leave the space. So the bank doesn’t get any benefit So say that’s 300. Now you have your equipment, which might be 600. That is a hard asset. So now if you go out they could come in and physically take that equipment. So that is collateralized against that. So with that exposure, they needed shored up somewhat. So for that $300 that you need that you need to build out the space, they’re gonna look to take a lean against somewhere and for most people, it’s gonna be their personal real estate. And that’s the biggest thing I try to stress with people is like, listen. This isn’t just signing for a loan. If this goes south, they have a second mortgage on your house. So you better make sure you’re confident with the business plan, you’re confident, and this is the industry you wanna go into. And you have the funds to get you to the end of that runway where you all where your business is porting itself and paying you money. And that’s just a very big thing that people need to understand before they go go into that.
Jordan Berry [00:45:52]:
Yeah. That’s huge. And, you know, kinda in combination with that this is not, SBA related, but also a lot of times if you are leasing your space, The landlord also is going to want you to personally guarantee that. So now you’re, per that’s not always the case, but a lot of times I’m seeing a lot, lot more Now, so a lot of times now you’re on the hook for your personal house and you’ve got a personal guarantee on that that lease, at least for a portion of the lease. So debt Yeah. Absolutely. And they will typically try to push you around and get you like a full personal guarantee.
Brian Smolin [00:46:26]:
But realistically, like, that’s never your your attorney should be pushing back against that, like, the most that we agreed to a good guy guarantee. So it was 1 year. After that, if we leave, like, it’s on the business, And if we’re going out of business year 3, like, they’re not gonna get anything from my corporation because that point’s gonna be bankrupt, and they’re just gonna have to refill the space anyway. So that’s what you should be pushing for and never personally guaranteeing
Jordan Berry [00:46:51]:
that space. It’s just the landlord’s typically trying to strong-arm their sense. Yeah. Absolutely. And and and this is, I mean, I think that not to kinda going down a little bit of rabbit hole here, but not to, you know, belabor the point that is a good reason why you need someone who kinda understands this business to help you with that because it’s very easy to sign a lease where you’re on the hook for 25 years, for this lease. So, you know, 18 years down the line, something happens or whatever, you’re still on the hook until that option is up or or, you know, whatever the case may be. So, definitely a case for having somebody who understands a business, help kind of walk you through this whole process. okay. So on the con side of, of the SBA, you got that one to one collateralization And so and that actually is something to consider too. I hear a lot of people who are attracted to the SBA the lower down payment requirements a lot of times. but, you know, they may not have any collateral for the loan. is are there any kind of options there that you’re aware of, or is that sort of like, okay, well, So, yeah, and that’s a great question. So with the SBI,
Brian Smolin [00:48:03]:
if it’s there, like, their motto is, if it’s there, they will take the collateral for example, if somebody just purchased a house, they have no equity in the house, that doesn’t mean they’re not gonna still approve the loan. It’s just more of okay. If it’s there, we need to take it, but it doesn’t completely exclude it. If you’re if you have everything else right, you have good income, you have a down payment, you have a good business plan, you might be in a low risk industry. Those are things that all play into, your court, so to say, and also how you the way you approach it. So it’s it’s definitely more of a holistic thing. It’s not it’s not a 0 something where it’s one thing determines it or not. Yeah. Okay.
Jordan Berry [00:48:42]:
awesome. Alright. So when it comes to
Brian Smolin [00:48:45]:
qualifying for an SBA, what what are What’s an SBA lender looking for in order to get you qualified for a loan? Yeah. Great question. So now the way I kinda got into it, and this is something like I really stumbled into it. So when I first did my store, I knew okay. I was moving along anyway. The lease was getting signed. I was going to need some sort of financing And I knew at the end of the day that the SBA was just gonna be one it’s just one possible component in the outcome. So I was just going going through with it and decided, okay. This is I’m gonna try for this route. If not, I’ll go equipment financing. If not, I’ll raise a little equity for it. So I had multiple options. Now what the SBA is looking for is typically a full picture view of your business. So they’re making this decision on whether to award you 900,000 a $1,000,000 based on what they’re seeing on a piece of paper It’s like a 5 by a piece of commercial real estate, a 10 unit apartment building. The bank know is the address of that apartment building. they know what the market rents are for that area. So they know that if I default, there is this physical tangible asset that they’re lending again. So it’s very, very easy for them. So now with a business that doesn’t even exist yet, this is just an idea that you’re pitching a bank on. You need to make sure that you put all of that color in detail of what this business is going to be into a business plan along with your financials. And that’s the thing that’s difficult to articulate that along. Like, the first time I did it, it was weeks of me just doing iteration after iteration, after iteration, to make sure I had everything. I mean, we included stuff to the fact that as a kid, I grew up in the area, that we knew the shopping center, like, all those little things play into it because you live in the area or any of those little nuances, you were able to provide more color to that picture so to say that you’re presenting to these underwriters.
Jordan Berry [00:50:40]:
Yeah. Yeah. That’s good. And and, I mean, I think that helps give a sort of a a picture of what what to be prepared for if you are going after an SBA loan. you mentioned earlier a, a business plan. I know SBA wants to see kind of what your business plan is. How did you develop business plan? Do you have any tips for business plan?
Brian Smolin [00:51:02]:
So the way I started was I literally just started from Googling. So business plan and literally took, like, just devouring dozens dozens of them. Like, some weren’t gonna apply, but other things, but you’re just literally taking bits and pieces and figure out how to make it your own and cover everything you need. So that was the most difficult part when I did it was the fact that I was starting from scratch and if you’re not an articulate writer, which I am not, it makes it even harder. So because you need to portray everything,
Jordan Berry [00:51:33]:
through just text on a page, Yeah. And actually one tool that we are well, we’re finishing up development of right now that hopefully should be out by the time this is out. is a actual business plan builder to help. Just kinda streamline that process. And there’s gonna be, you know, some nuance in there, but it’s gonna get you a really solid, base for a business plan. and if you can if if you need to, you can go in and tweak it and stuff, but that will give you a very solid start to a business plan. And then you can, you know, you’ll have that available to, you know, whether you’re doing an SBA loan or if it’s just for your own sake to help you know, figure out how you wanna organize your business, or working with another lender or whatever. so check that out. Put the link in the show notes or down below if you’re on YouTube. if you wanna go check that business plan builder out. the other thing, what I oh, yeah. Okay. So I I’ve been taking notes, a lot of notes. I wanna make sure I hit everything. another thing that you mentioned is, financial projections. Can you talk how did you put together financial projections for this business?
Brian Smolin [00:52:42]:
So the way I did it was, again, pulling from my corporate finance background. So that’s the hardest thing think people are gonna be faced with because the numbers really aren’t gonna lie, and the underwriters really rely like that’s what they’re looking at. So for me, the way I really did it was how people assess this industry to begin with. Okay. This industry is assessed based on turns per day. whether you agree with that or not, I don’t necessarily agree with that. I think it’s a crappy metric to use, but that’s how it’s assessed. So that’s how I’m going to translate this financials into. So, okay, what is the size of your store? Okay. That’s your it’s 3000 square feet. and now you’re just plugging in little things and you’re building that house. So this is the least cost. This is my This is my equipment mix. So how many £80 or £60, 40s, 20s, and so on that you will need in that space? Okay. So now you have that understanding. Well, what are you gonna price on that? Okay. Each one is priced at this price point. So now you could start to extrapolate what your revenue and what you need to do and achieve to to get to your breakeven. A lot of this stuff is using assumptions because if you don’t have a business that’s running, you’re really just kind of going with, okay. This is a percentage of this and doesn’t make sense. And there’s a tremendous amount of resources out there that allow you to get to that and drive you to those things in a conservative way. So if your gold if you’re a North star and how you’re gonna present to these people as 5 turns a day, that’s where I need to get to. Well, you’re not gonna open the doors and do five turns a day. You need to be laying out a plan on how you project this business to grow. So if you plan on being profitable or doing 5 turns a day after 2 years. Well, now there’s your 5 turns a day point, and you know backtrack into a reasonable growth rate from day 1. So it’s all those little things, but when you look at it I need to build this whole financials. Yes. It’s extremely overwhelming. But when you break it down into very tiny pieces, you’re able to kind of figure that out and piece it together. So things like your utilities. Well, I don’t know what my utilities are gonna cost. Well, okay. Ballpark, can you build your utilities? You’re gonna run 20% of your of your gross. Well, let’s make it 22 to be conservative. Does it matter if your water expenses is twice as much as it should be or your electrical expenses is 2 is not big enough or whatever. Not really because you’re still sucking up 22% of your gross revenue coming in and just putting it to the side as an expense. So that’s the things that matter versus it being absolutely perfect. And just being super, super conservative and realistic as to where you will go. Typically, on my projections, when I present these things, to customers to give to the bank, it’s like year like, they’re not even in, they’re not even turning a profit till halfway through year 2. And that’s what you need to be you need to be able to endure because if all things go well, sure. It’s 18 months or 2 years. But if you hit some hiccups, you hit a bad time, you hit some unforeseen expenses or whatever it is, that very well could be two and a half, three years in the pictures 15 or 20 years, it’s tiny, but it’s huge if you can’t get there. So it’s that that’s the other biggest thing. It’s just being super realistic and conservative
Jordan Berry [00:56:03]:
on your business plan and the numbers you expect to achieve. Yeah. And real quick, I just wanna point out. So so you’re, what you’re describing is, for your build out. And I would actually say that the numbers are probably fairly similar to that if you’re buying, like, a zombie mat and you’re retooling it. now you do have the benefit of having a customer base and that could be at varying levels, right, from the get go. and so it might shrink down that timeline of getting to your 3, 4, 5 turns, whatever it is that you’re trying to get to. because you get a little bit of a head start when you buy a zombie mat, even though it’s not, you know, great. but, you know, I I would say that that is probably pretty typical. If you’re buying an existing laundromat and it’s already performing, you should be cash flowing day 1. That is the goal. That is the plan. after all expenses and loan payments, you want to be cash flow positive. Day 1 lender mats, you know, at their core are a cash flow business, and we buy them for cash flow, to get the kinds of returns that not many asset classes other than Lautermats and maybe a select few other businesses can really achieve with the kind of flex time that long nuts can offer. So, so, yeah, so path to profitability and projections of profitability, probably fairly similar with a with a build out versus, and a build out and, like, a zombie mat versus, like, an existing performing laundromat, which should be cash flowing. Just wanna make that. Yeah. Absolutely. So that, like, day 1, yeah, if you’re buying something that that
Brian Smolin [00:57:42]:
is already in business and isn’t a value add store or ZombiMAT, then, yeah, you should be cash flowing day 1. But even those things, it’s like you need to make sure you’re taking into consideration all all the right factors that go into it that be presented So for example, if you’re taking over a store that is at a option point, so this person had 25 years after 10, they just wanted to get rid of they’ve made their money, and they wanna sell at the peak because now they’re selling it to somebody. Machines are only ten years old, and this person now has 15 years left of runway to run business. So they could take a loan out for 10 years, 7 years, and still have another 5 to 7 years of profitability post the loan being done. So it gives that’s typically your best point to sell. But if I’m buying it and your rent is $7000 a month, but it goes up 10 10% after that break point I need to make sure I’m looking at it as what am I paying today? What will I pay the day I take this over? I need to make sure that my rents reflect that. that this person wasn’t paying themselves any sort of salary. Well, I need to make something on that. This person owns it free and clear. Well, now I need to factor in my debt service. and and figure out all those things that the SBA is going to look into, whether it’s a new builder or pre existing store, and that they wanna see that you’re thinking through it each step of the way so to give them that level of comfort. Like, I always go into this thinking, what’s every what could they possibly ask me and come back and ask and make sure it’s addressed in one way or another. So putting on the hat of the underwriter and saying, alright. If I’m assessing this, are some of the questions I may have in can this business plan answer it? Yeah. Yeah. Genius, genius stuff. And, you know, in talk about valuation of a a laundromat and existing laundromat, you know, I I refer to that as a that’s pillar number 3, which is determined the trajectory of the and that has everything to do with, yes, you wanna look backwards to see the performance of the laundromat over time, but you also wanna look forward a little bit too, because things like rent jumps,
Jordan Berry [00:59:42]:
things I mean, there’s a whole bunch of thing. you know, like here in Southern California, we just had a mass of utility increases. Right? And so when you look back over the last 12 months, you’re gonna see one number for utilities, but when you look forward gonna see a pretty significantly different number, over here. And so you need to factor in not necessarily the performance of what it did, but what it’s gonna do when you take over. I thought you nailed that perfectly. That was great. okay. So SBA stuff. Well, let’s, I mean, And and maybe you know about this, maybe you don’t, or know the answer to this, or maybe you don’t, but can you utilize SBA for an existing laundromat purchase?
Brian Smolin [01:00:21]:
Yes. And it’s actually, like, your the the hierarchy it’s gonna go in which is gonna be easiest versus most difficult from a laundry industry standpoint is your hardest sell is gonna be trying to get them to provide you funds for a new build because they look at it just like a startup. You you’re building this business from scratch with no revenue, no customer. So they’re just giving you money with the hopes that it’s gonna succeed, and you have to on your financial life on the line for it. Your second is gonna be a store that is poorly managed, but it’s there. And your have the opportunity to turn around. So, again, they see that there is some value there because there’s a customer base. There are machines and your business plan will discuss as to how that will turn around. the top 1 or 2, the top 1, you know, might be tied is gonna be ones that are successful or ones that have the real estate because now they are segmenting that loan. Part of it is for the purchaser real estate, which is gonna be secured by the real estate. The other portion, which is gonna be much smaller, is gonna be for your build out and acquiring the space itself. or if you’re buying a value add where you’re owning the real estate, but you need to do some improvements. All that improvement you’re doing is now going into the real estate that you own. So if it fails, you still put a $150 worth of improvements into the space, and that still did increase the the value of that building. So those are typically gonna be the easier ones to get because it’s collateralized by the real estate itself. Yeah. Yeah. And I found that once you went, yeah, once you throw real estate into the
Jordan Berry [01:01:56]:
the mix there, SBA, they they just welcome you with open arms. They’re like, yes. We know the state. Oh, it’s love you. It’s cool.
Brian Smolin [01:02:06]:
Yeah. And and what I’ve — It’s a 1000. Yeah. And what I’ve seen is is
Jordan Berry [01:02:11]:
A lot of times, the SBA will just almost kind of even ignore the laundromat, you know, to an extent and just say, hey, you know, Basically, you’re buying the real estate and, yeah, maybe some laundry machines are gonna get left behind, but, you know, they they’re looking at that real estate and basing valuation and repairs and, you know, improvements, those kinds of things based mostly on the laundrom or on the real estate a lot of times. So once you throw real estate into the mix, so if you’re in a market where you have the opportunity to buy the real estate with the laundromat, or you’re you just find that opportunity around there. That is a prime opportunity
Brian Smolin [01:02:51]:
to go that SBA route. Oh, absolutely. And the thing is the way it’s structured is night and day different. So now if you’re purchasing the real estate as well, well, now let’s call 2,000,000, a $1,000,000 for the for the real estate. $600 for the for the equipment, $300 for the improvements. you’re bringing a $100 to the table, whatever. Now that million that you purchased for the real estate, that’s gonna be amortized over 25 or 30 years. So now it’s gonna substantially reduce your debt service on a month over month basis. So that’s a massive win. That $300 that you need to build out your store Well, guess what? That’s capital improvements to the space. That’s gonna be rolled into your 25 year 25 or 30 year loan. So now that $300 that typically in my case is spread out over 10 years, it’s gonna be spread out over 25 or 30 years for that other, investor. And then now you’re just left with the $600 for your equipment that’s gonna be spread out over the 10 years. So once you throw the real estate in, it’s substantially changes the dynamic of what your P and L looks like for the better. It’s just easier said than done. I mean, you need to hope to find a commercial space that’s vacant. That’s for sale at the right price or a laundromat that’s going out of business or one that not in too close proximity to another laundromat.
Jordan Berry [01:04:14]:
So it’s, yeah, that’s amazing, but it’s easier set. Yeah. Well, and especially in yours and my Mark it, right, where the real estate is tough to come by in, you know, in New York, in LA. but there’s a lot of places. I mean, I do consulting all over the place. And, you know, I for whatever reason, Chicago seems to just have these opportunities left and right. I just I don’t know what it is about Chicago, but go buy some real estate with Chicago. I don’t know. But, yeah, but other places, it’s it’s much more, available. And and I I’d say probably even the more rule you get, that word’s always risky for me to try to say, rule rule you get, more likely, they’re just it’s gonna be a mom and pop who owns a real estate in the laundromat, and they’re trying to sell it, as a pack edge deal, more often than not. Yeah. So, yeah. Like, we bought we bought a building in Massachusetts
Brian Smolin [01:05:07]:
that it was an apartment building and the owner owned this small little, laundromat that was downstairs. We ended up spinning that off, but it’s, like, so much easier to get this stuff and other in other markets that it’s it’s usually beneficial. Yeah. And real quick, I just because I I love this concept by in the real date with the laundromat.
Jordan Berry [01:05:27]:
real quick, I I see, investors who do this do one of three things. So I just wanted to throw this out there because I think this is really cool to be a a thought exercise if you find yourself in this opportunity. So one of three things that I see investors doing. 1 is buying the real estate and the laundromat and keeping both of them, right? The other one is buying the real estate and the laundromat and, writing up a lease between the 2 and then increasing the equity in the property and selling the property, harvesting the equity, and deploying it wherever else want doing it over again or whatever, just creating that equity. The others go in the opposite route where they write a lease up with the laundromat and sell the laundromat and keep the property let somebody else run the laundromat in their space. And so I I think that all three of those options are very interesting and there’s and there’s pluses and minuses to both. but you just I think it just kinda illustrates. There’s a lot of flexibility, not just in the financing terms. but actually in the way that you can kind of move your money around and, build your portfolio,
Brian Smolin [01:06:31]:
when you have these opportunity. So I kinda geek out. I get excited. Oh, yeah. Abs absolutely. I mean, that’s what we ran to where we were out of state investors. We were owning 5 hours away from us where it didn’t make sense to try to manage a 800 square foot laundromat. It was more beneficial for us to just sell off the laundromat get that cash infusion and that long term lease. Yeah. And all those things are once you throw the real estate in is extremely attractive to the to SBA. They love that. It gives them security, and it just makes it so much easier on the investor’s side. But like what you’re saying. It’s expensive in most markets and people that are just trying to get into the industry. They’re just trying to get a store. They’re just trying to get their their feet in the water. And getting that real estate is just a larger earning partner. Yeah.
Jordan Berry [01:07:21]:
Yeah. Dude, this has been incredible. I know we we kinda jumped on this call planning to talk SBA loans, which I actually was very excited about, and very cool to hear about your story. but I, you know, it’s you always run the risk when you talk about loan products or taxes, you know, those kinds of things where it can just be a very dry conversation, but this was awesome jam packed full of such good information. before we wrap this thing up, anything else we need to talk about when it comes to SBA loans or financing
Brian Smolin [01:07:54]:
general? Yeah. So the thing I would say the most is be extra extra conservative, where if you realistically think you’re gonna be making money in year at the end of year 1. Like, that’s fine. You know that, but wanna position yourself and make it look like on paper, you won’t be profitable till year 2. If you could look at those numbers and be okay with that worst case scenario, then you’re ahead of the game. Like, I love the Mike Tyson saying everyone’s got a plan until they get punched in the mouth. It’s the same thing where it’s you got that plan to be profitable at the end of year 1. And if that’s what you’re planning for and things don’t go to that plan, you’re screwed. So I’m always planned for the worst. Like, my custom my clients seem to be like, well, wait. I’m not gonna be making any money till this till year 2 a half. I’m like, yeah. That that’s what we’re that’s what we’re investing in this business based on. You have 15 years ahead of you? We don’t care about the first three. We’re we’re trying to keep you in business for the 15, not get you out of business entail. Yeah. I love and and I’m I’m the exact same one. I love taking the conservative approach because,
Jordan Berry [01:08:56]:
listen, things go better and you’re profitable in 6 months, not two and a half years, all the better. Right? Cherry on top. Yeah. But if you know that, hey, I’m looking at 2 years, two and a half years of runway, And I’m planning for that, and I am prepared for that. And it takes that. You’re okay. Right? But if you’re counting on that thing, you know, to be profitable in the 1st 6 to 12 months. And it’s not then you find yourself in a situation where, you know, you could be dead in the water before you really even get started. And so I love the long term, approach there and, killer killer stuff. So good. real quick, just to sort of point out one more time, if you, need help building the business plan, we get the business plan builder. I wanted to mention too, we also do have a, financial projections sort of calculator that can sort of help you with that again. you know, give you some guidance on how to get started with that. So check that out. Links are in the show notes or if you’re on YouTube down below, Brian, incredible stuff. I know that you help out other owners, especially going through that SBA process. What’s the best way for people to get a hold of you if they wanna talk? SBA or laundromats with you. Yeah. So they could get in touch with me on my email, [email protected].
Brian Smolin [01:10:17]:
Brian with an I and or on my Instagram at besmoan.com. These at besmoan.
Jordan Berry [01:10:23]:
So and I’m usually, available at any time. So those are the best ways. Awesome. And I’ll have links both to the email your email address and your Instagram account again in the show notes or down below. If you’re on YouTube, Ryan, this is awesome. Awesome stuff. any any parting words of wisdom or encouragement for the people?
Brian Smolin [01:10:45]:
just get make some decision instead of no decision. it’s better to do something than nothing And just the analysis paralysis, you’re not moving any direction. So a bad decision is better than no decision at all. such.
Jordan Berry [01:11:01]:
I put you on the spot to come up with something wise to say. I just gotta say you delivered. That was incredible. wasn’t it? I’m writing it down. Make some decision instead of no decision. That is I just I don’t know. I might get that tattooed on myself or something. Awesome stuff. Brian, really appreciate you. And, hopefully, you’ll be out there helping out, a bunch of laundromat owners get into the business I will be super pumped if that happens. So make sure you reach out to Brian if that’s something you’re interested in. And see you guys next week. I think thanks for having me on. Appreciate it. Alright. Hope you love that interview with Brian. So much good, good, solid information. But, again, don’t forget, here’s your one taker. I always say, hey, take some action here. This one’s easy. Go to lawnresource.com/events and sign up to come to this live q and a I’m doing with Brian Smullen. It’s gonna be a great time because we’re gonna talk longer match. We’re gonna talk SBA loans. So come, bring your questions. Have a good time. Always It still blows me away, but always, there’s a who’s who of laundromat owners and legends that show up to these live q and a’s and are answering questions in in the in the chat there too. So make sure you come join this thing. It’s gonna be a lot of fun. Basically, I mean, It’s it’s gonna be a party. And what kind of party is better than a party that’s talking about laundromats and loans? Like, I cannot think of a better party. So come join the party. resource.com/events. Enjoy that live Q And A with Brian and I. Alright. Alright. We’ll see you guys there. August 17th, 4 PM Pacific, 7 PM Eastern. Peace.