Wednesday, July 27, 2011

Avoid Overpaying For Your Coin Laundry

A lot of very smart business people - and some with no business experience at all - purchase Coin Laundries every year.  If you have experience in reviewing business records you're able to get an idea of the revenues being generated by seeing the paperwork.  The utility bills - especially the water bills - can point you in the general area of income.

For those people who are first time Coin Laundry owners, often fall victim to inflated income numbers and understated expense items.  Sometimes the income variations are explainable - perhaps the agent took the listing at the time the Coin Laundry was having a very good month - and sometimes the "mistakes" are clearly intended to taken wrongly by the buyer or are outright frauds.

Coin Laundry Businesses are frequently valued on a "multiple of net profit."  It can vary with the age of the equipment, terms of the lease, and various other issues.  In California, the multiple is generally based on the monthly net income multiplied by 50 to 70.  store factors.

For example, if a Coin Laundry generates $10,000 in monthly net profit and the machines are in a fairly new condition with at least fifteen years remaining on a good lease, the estimated selling price would be between $500,000.00 to $700,000.00.

Coin Laundry owners are aware of the use of multiples and some will attempt to inflate their income to get a higher price.  Verification methods involving "counting coin" can have these same owners "salting the mine"  - by adding coins to their coin boxes at night, early in morning, or when no one can observe them.

"Salting the mine" is common, and buyers of Coin Laundry should not rely on "counting coin" as a means of establishing income levels.   An agent, who fails to tell you this well-known deception by sellers, may be in cahoots with the seller or merely more interested in earning commission than advising the buyer.

Being knowledgeable of this practice, hiring an independent expert or attorney to assist in the purchase is a good practice for potential investors and first time buyers.  This will help you from paying too much for your Coin Laundry.

Here are some suggestions of the minimum amount of research or due diligence you should perform:

1)  Try to get two years of income and expense statements, including Schedule C tax forms.

2)  Ask to see the past two years of utility bills, including gas, water, sewer, and electric.

3)  Do at least one or two all day coin counts by being in the Coin Laundry all day and count the money going into the washers and dryers.

4)  Do a water bill analysis of the income based on the water used.

5)  Hire an expert to help you analyze the information.

6)  Have a professional or attorney read and comment on the terms of the lease

1 comment:

  1. Hello dear readers,

    Apart from such enjoyable services, Laundromats have also made changes to the spine of their business that are appealing to their customers, and pulling in more. For the longest time, Laundromats have been self service laundries where people had to do all the work themselves.For learning details about-24 hour coin laundry

    Thanks and welcome
    Rose Daina