Verifying Laundromat Income With a Coin Count
After you make an offer to purchase a laundromat and that offer is accepted, there is a VERY important question that you need to answer before you finalize your agreement to take over ownership of the business. A coin count is a critical step in answering this question.
Is this laundromat making what the owner says it’s making?
Verifying the laundromat income is critical to ensure you will receive the return on your investment that you are expecting. This question is much easier asked than answered, however.
One of the perks of owning laundromats is that they are all cash businesses. This makes them simple and attractive to investors and business owners. But, it also makes it difficult to determine how much money a laundromat is actually making.
In all honesty, it’s impossible to pin down the exact amount a laundromat is bringing in each and every month. However, you can know within reasonable certainty. There are a couple of things that you can do during your due diligence period to verify if the seller’s claims are in the ballpark of reality or not. This post will talk about what a coin count is and how to do a coin count. Plus, the best news is, we have FREE tools to help you do it on our resources page.
First, you’re going to need to do a series of coin counts with the owner. A coin count is pretty much what it sounds like. You’re going to count the coins (in a coin store) that come in each week on the same day and time. This will give you consecutive weekly income numbers that you will use to verify the seller’s income claims.
We have a FREE Verification of Income Worksheet that will help you track the coin counts. Here’s how it works:
- The coin counts need to occur on successive weeks on the same day of the week, at around the same time. It is better if this occurs when the store is less busy, but any day can work if schedules don’t permit a midweek coin count. For our example, let’s pick Wednesday.
- Wednesday #1- Along with the owner (it is still their laundromat, after all), go to each machine and collect all of the coins. Every washer and dryer should be empty after this collection. This gives you a clean start for your coin count. Along with this coin count you need to find the water meter and record what it reads. This part is important. But, that’s it for week #1.
- Wednesday #2-4 (or as many as you can/want to do)- Along with the owner, collect, count, and record the amount collected from each type of machine. For example, collect, count, and record all of the top load washers. Then repeat with 20lb washers, 40lb washers, 30lb dryers, 45lb dryers, etc. Collect and record the amounts of each type of machine separately.
This process will not only allow you to see how much money came in that week, but will also tell you how many turns-per-day each type of machine did for the week. Doing this over successive weeks will give you a feel for the average income of the laundromat.
Along with the coin collections, you must also take and record the water reading off the meter each week. This will tell you how much water the laundromat used over the week.
Putting the Coin Count to Work
- With the data that you gathered, find out how much total income the laundromat brought in each week and how many gallons of water were used each week.
- You will use the above data to compare to the income the seller claimed to receive on the pro forma and the monthly water usage from the previous water bills (which you should acquire from the seller).
Use your collected data from your coin collections and water meter readings to compare to the calculated data from the pro forma and water bill.
The Simple Math of the Coin Count- Step-by-Step
In order to compare apples to apples, you need to determine the monthly income from the coin count. In order to do that, first, use the data you collected to calculate the daily income, then multiply that by 30 to get a monthly income.
Weekly coin count income / 7 days in a week = Daily income
To improve accuracy, you can do this for each week of coin counts and average out the daily income.
(Daily income week #1 + Daily income week #2 + Daily income week #3 + …) / number of weeks = Average Daily Income (ADI)
Use your Average Daily Income (ADI) to determine the monthly income during the period of time you collected coins. The following formula will help you determine that amount:
ADI x 30 days per month = Monthly income
If the ratio of monthly income to water usage during your coin collection is similar to the monthly income and water usage amounts reported by the seller and confirmed on the water bill, then you can be reasonably sure the numbers that were reported to you are correct.
If, however, the values are much higher or lower, or the ratio of income to water usage from the coin count aren’t close to the hard data you have (from the pro forma and water readings) then something is amiss. This doesn’t mean you should back out of the contract necessarily, but it does mean you need to get to the bottom of the discrepancy.
If you find a discrepancy between reported numbers and hard data, this would be a good time to bring in third party help if you haven’t yet. You must uncover the reason for the discrepancy before you can move forward with the transaction. If you don’t you run the risk of your new laundromat taking you further from your goals instead of propelling you toward them.
We Can Help You
If you have already used your FREE coaching call, we do offer consultations for a fee. And take it from me, a small fee to get clarity on a coin count discrepancy can save you thousands of dollars. It would have saved me were that available to me when I purchased my first laundromat.