Wednesday, July 27, 2011

Water Bill Analysis Using Monthly Water Bills

Perhaps the most commonly used method of using utility bills to establish a range of income in a Coin Laundry is monthly water bill analysis.  Almost every buyer is told about - or attempts to verify by reading - through their own efforts or those of their agent, the analysis of monthly water bills to verify the income of a Coin Laundry.

Depending on the method - and the skill of the person reviewing the monthly water bills - the results are worth noting, and although not precise, they can be one item to consider in your evaluation.  

The idea behind monthly water bill analysis t is simple.  Washer machines at a Coin Laundry use a measurable volume of water each time they are turned on.  The water bills show you how much water has been purchased by the Coin Laundry in a specific period of time and therefore by dividing the water usage of the washers into the total amount of water purchased, you are able to determine how many times washing machines were started.  This allows you to estimate the revenue that can produced from the consumption of this amount of water.

Water companies sell water in Hundred Cubic Feet (HCF) units. One cubic foot of water is equivalent to 7.48 gallons of water. Therefore, 748 gallons of water per HCF (Hundred Cubic Feet).  Some water companies provide the actual number of gallons used as opposed to listing the use of units of HCF.

To perform the calculation, determine the total number of HCF for 30 days (check to see the number of days inthe billing cycle) and multiply the number by 748.  You then divide the total number of gallons of water by 30, which would give you the total number of gallons of water used per day.

Although dryer income in a Coin Laundry can vary by the number of minutes sold - eight minutes for twenty-five cents, for example - a standard used and supported by some agents is 25% to 40% of monthly washer income.  This estimate of dryer income is based on the experience of agents who specialize in Coin Laundry brokerage.
Although water bill analysis is one method of income verification, it does have the potential to be wrong.  Water meters sometimes are not accurate, the water meter may also be connected to other businesses or the house (water flowers and landscaping) water supply.

In addition, since seller are aware that water bills are used in the verification of income, there are the stories that seller's can leave a faucet running in the back room in the months before they offer their Coin Laundries for sale in hopes of throwing off the water bill analysis.  Requesting two years of water bills can frequently discover this trick.
Since there are several other inside pieces of information used in water bill analysis, It is often best to have a professional assist in the process.  The fees to review - or assist in the due diligence process - all the items prior to a purchase range from $300 to $800 for most professionals.

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

Why Not Dress Up The Outside Of Your Coin Laundry

Too many Coin Laundry owners fail to focus on the large expanse of exterior space that is available to make their Coin Laundry unique and memorable.  An exterior mural can help bring art to the neighborhood, and actually enhance the memory of your store.

Murals have been used for a long time inside Coin Laundries, but recently fairly beautiful original artworks has found it's way to the exterior of buildings.  It's the type of item that makes children urge their parents to return to the Coin Laundry "with the peacock on the side, mommy."

Cost can range from a few hundred to a few thousand depending on the size, detail and skill of the artist.  

Some of the best mural paintings come from the brush of Los Angeles artist Allyson Jones Wong, Cellphone:  626-798-3077.

She is highly recommended because she is talented, has reasonable prices and is skilled at interior murals as well.  Some of her very good work is in Mexican Heritage pieces that are fun, entertaining and reflective of many customer bases.

The artist, for an additional cost, can have a graffiti protection paint - clear paint put over the mural - on the entire design, although it is the experience of most owners that murals depicting the heritage of the customer base are seldom the object of graffiti attack.  It makes your Coin Laundry unique.  Consider it for your store.