Selling Your Laundromat How to Get Started pt 1 of 2

 

So you’ve made the decision to sell your Laundromat, or at least look into it. How do you value what your store is worth and what to charge for it? There are lots of ways to sell a business, especially laundromats. Here are three easy ways to get started and figure out what your store is worth as a starting point:

The first way to sell your laundromat is to come up with a price based on your top line revenue and a multiplication factor of 1 to 5. 
What does this mean?
For example, if your store is doing $100,000 in topline revenue, that is revenue before expenses, multiply that by anywhere from 1 to 5 based on factors like:
-how long is left in the lease
-is it in a safe neighborhood
-what is the age of the equipment
-potential competitors in the area
-potential development in the area that could help or hurt business
-if revenue over the past few years is going up or going down or staying the same
-how fast you want to sell
There is no magic formula that will give you an exact answer about what to multiply your top line revenue by.
It is largely your gut feel, tempered with a heavy dose of realism.
Of course we all think our stories are perfect and that they are worth automatically five times gross revenue, however we no longer see our store in the same way as a first time customer or as another owner would so you have to temper your instinct to say your store is worth top dollar.
Look at other Laundromats that have been for sale in the area and in similar conditions and see what they’ve gone with. Ask a trusted fellow owner, distributor, or even a customer to walk through your store and tell you how they see your store and where the strengths and weaknesses are. You also have to look at your market and what type and how many buyers are out there or are you looking to attract.

So let’s pretend your topline revenue is $100,000 and your equipment is 10 years old or less and you’ve had good revenues but they haven’t really increased, and the neighborhood is OK but has a few developing problems  either with lack of development or crime. A good number to start is maybe 3×100,000. So another words you’re selling your store for $300,000. If you own the property you have to decide if you are going to include the property with that price or add the value of the property on top of that. Let’s pretend the property that you have your laundromat on is worth $100,000.
Now your price should be $400,000 for the business and the property. Don’t forget this is just a general guideline because there are lots of other things that you have to take into consideration before selling your business and coming up with a price. If you still have a mortgage, that will take some money out of your final price. If you have other loans tied to the property or the business, you will have to pay those off before any profit is realized. It’s always easier to go down in price and it is to go up in price so start a bit higher in my opinion. I'll explain more about this later.

Another way to sell your laundromat is to do a similar formula to the above, but instead of topline revenue you look at your net profit. You multiply that net profit by a factor of 1 to 10 and then sell at that price. It is still the same factors as above, but now you’re using what you have made at the end of the year as an example, and can honestly tell your buyer what you made  in profit. Topline revenue is $100,000. Your net profit for the year is $30,000 after expenses. With all of the same factors as the first example, maybe you multiply that 30,000 by 7. Now your sale price is $210,000. If you have been in business more than a couple of years either start with looking at your best year or I recommend combining the last 10 years and dividing to get the average profit, then multiplying that number. Either way you have to have proof of your numbers.

A third way of selling a Laundromat is to take the used equipment value, for that you can work with your distributor to get an estimate as to what your equipment is worth on the used market or look it up yourself online at auction sites and equipment sellers. Add 30% of your top line revenue to that number. Let’s again pretend your equipment is worth $100,000 and you take a third of your topline revenue which is $100,000, so now you’re selling your store for $133,000. This particular method of selling your store can work well if you don’t have any debt, your equipment is a little bit older, and you need to sell fast. This method might tend to attract more first time buyers, but it also has the ability to attract more cash buyers because the numbers are lover.  In addition to other owners and people that might buy your store at a lower price and revamp the equipment, it also brings in those people that are just getting into the business and have limited cash funds.

So if using the first formula gives you a price of $300,000 and the second formula gives you a price of $210,000, and the third gives you a price of $133,000, why wouldn’t you just use the first formula all the time and get the higher price? The answer is you can, however there are different buyers out in the field that by looking at numbers a different way. people that are just getting into the business in my opinion will look at more of the top line revenue. People that already have owned stores will look more at the net profit. The net profit has the advantage of you being able to say to a potential buyer here’s what I actually made at the end of the year, and my taxes are at proof of it. Another way is to run the numbers all three ways and get the average.

Some people say it is easier to sell a Laundromat where the owner also has the property. Some buyers will be turned away on a store that is strictly in a lease space because they want that property. At the same I’ve had plenty of people that do not want to be a landlord, and are much happier paying someone else to handle the exterior items like a parking lot or roof repair so they can concentrate on the inside of their store. Some owners want completely out and others want the rent income. You have to decide if you can stand to have someone else run YOUR store, even though they bought it, without you second guessing them. If you can maybe be the landlord. If you can't, sell the whole thing.

To read part 2 click here:
selling-your-laundromat-how-to-get started part 2

Ev
A Heck of A Nice Guy