Increase your Laundromat’s Value
Every investor is looking for a return on their investment however, not every investor knows how to properly value their business. Don’t miss out on a buyer or leave money on the table by presenting a poor laundromat value. The laundry business is unique and following several industry-specific factors and characteristics will help improve and determine the value of your laundromat, according to our laundry experts and those asked in the February issue of Planet Laundry.
What affects the value of your laundromat?
- The number one factor affecting the value of any laundromat is the cash flow. Buyers and investors alike are looking for a three to four year return on their initial investment meaning your books must be in the black year over year.
- The lease is also very important when gauging the value of the laundromat. The best lease for a buyer is between a 10- to 20-year agreement ensuring the goodwill of the landlord and store owner as well as securing an owner friendly rent rate. The 10- to 20-year lease is the best of the best but anything higher than a five-year agreement typically translates to a higher valuation.
- Although the age and condition of laundromat equipment isn’t the end all, be all of the laundromat valuation process it certainly can make a difference in the final outcome. Equipment in a laundromat with high traffic will suffer from more wear and tear so it’s imperative to judge equipment condition by use rather than the manufacturer depreciation value.
Outside factors that affect laundromat value
- Now it’s time to do your due diligence on the competition in the neighborhood. Are there any new stores coming to the area? Are the neighborhood demographics changing? Is the neighborhood being gentrified? Is there an increase of new jobs in the area?
Factors that don’t affect the value of your laundromat
- Offering additional services like a wash/dry/fold service has zero effect on the value of a laundromat because there’s no guarantee the staff will be retained and the buyer may not be interested in carrying on the services.
- The only time outfitting your laundromat with brand new equipment will impact the value of the store is if you spring for top of the line energy-saving machines because they have a direct effect on the bottom line.
Ways to increase the value of your laundromat
- Plan the sale of your store at least three years in advance to make necessary changes from improving electrical or plumbing to painting walls and upgrading TVs.
- If there is competition make sure to stop by to check out their prices, condition of the equipment, general appearance and cleanliness to make sure your store is at least on par with other stores in the area.
- Ensure the equipment has at least five years of top performance left by making necessary repairs to all machines.
- Maintaining good financial records of your laundromat is a great way to increase the store’s value. Accurate and complete records is the seller and broker’s best friend because it creates trust. Because it is primarily a cash business it’s important to maintain accurate P&L balance sheets, cash flow statements, tax returns and bank statements.
BDS Laundry Systems’ expert vended laundry team possesses decades of experience helping investors find the perfect laundromat and assist in valuations and making improvements to current designs. Contact our vended laundry team online or call 800-688-0020 to start a conversation on how to become a laundromat owner.