Need Help Analyzing a Mat

[Rob]

I'm new to the mat business and I need some help.
This board has been a great source of information.

I looking at an existing store in northern NJ very densely populated area primarally hispanic. There has been a mat at this location for the past 34 years although it's changed owners a few times.

The current owner has had it for the past 4 years he's looking to sell to focus on his primary business. The mat has all Wascomat gen 4 equipment with Wasco dryers which look like they're American Dryer with a Wasco name. The store is 1700sqft with 31 washers and 30 pockets.

Here are the vend prices

16 18# @ 1.75
10 35# @ 2.75
5 55# @ 3.75
30 dryer pockets 10 mins. for .25

The store is open 7 days a week 6am - 11pm.

The owner claims he does $3500/week in wash/dry and $1000/week in WDF and dry cleaning. Approx. 230K year

Lease has 13 years left:
Rent 2784/month
CAM charges 450/month
Utlities average $3674 for the past 12 months
Water usage for the past 12 months has averaged
222 cubic ft. or 166,000 gallons per month.
Payroll 800/month
Insurance $550/month

I can verify the WDF and dry cleaning through his paperwork but, how do I verify wash/dry income?

Existing owner is not willing to share tax returns or schedule C "since a large portion of the income is not reported to the IRS". I'm in the process to trying to verify his expenses, he claims his net is 90K/year which I find hard to believe.

All the equipment is operational and appears to be in good condition, existing owner does all the repairs himself except for bearing or large jobs.

Any help would be appreciated

Thanks

Rob

[Kitty]

Lets start out with the fact the store will have to do just at 5tpd to make that amount per year which would include the wdf income. Payroll at 800 bucks a month computes to 30 hours a week at approx 7bucks per hour and that would be inclusive of all tax requirements? Utilities should run between 20-25% of gross which would calculate to above 50K a year. Rent over 38K including the cam charges. 6600 a year in Insurance.

1. How busy is the mat?
2. Is there more than 1 employee? I would guess it takes more than 1 to do the wdf? How many employees does he currently have? Cable bill? Garbage bill? Advertising? Vend supplies? Telephone? Property tax? Regular supplies?
3. Alot more questions to ask, and if he'd screw the IRS, what keeps him from doing the same to you?

Calculating 2 gallons of water per pound of machine based on 5tpd the water usuage should be above 336K gallons per month.

If he is only using 166K hes getting maybe 2.5 turns per day....probably selling because he is not very profitable?

[Anonymous]

The gross numbers sound viable for the area. Note that gen4 wasco's are 50# not 55#. I don't buy the net. The utilities seem way too low as does the labor. $300/month for utilities is not possible. I would expect the utilities for that sort of gross in that area to be closer to $1,500 per month.

[mike]

The volume seems reasonable to me (for a busy store)

It's all about the asking price.

(you won't KNOW the net until it's your store)
could be $90,000.

I would try to get the landlord to extend the lease NOW.

If he doesn't want to, at least that could be a bargaining chip to help push down your price.

[mike]

Kirby,

I think he means that utility figure to be monthly
(averaged over the last 12 months)

but I'll let him speak for himself.

[BWJR]

Rob,

I just sold a Mat in April, which probably did a little mor than the one your interested in. Here are factual numbers as I can remember them. I did about $3400.00 a week just in the coin laundry, this did not include WDF or Dry Cleaning business. My expenses were as follows:

Rent incl. CAM - $54,000.00 / yr.
Utilities Gas Elect. and WS - $28,000.00 / yr.
Payroll- $40,000.00 / yr
Insurance - $1900.00 / yr.

The above expenses are your main concern. I used about 3 - 3.2 million gallons of water a year at about $2.95 / 1000 gallons. There are other expenses, but not including debt service my net was about $60,000.00 a year.

My equipment was as follows:

14- 18#'ers
5 - 30#'ers
6 - 50#'ers
25 - 30# dryers

I hope this helps

Request 3 years of all utilitiy bills so you can verify business and at the same time get an idea of the trend. If you can get a copy of the c schedules for 3 years at least you will get an idea of his true expenses. He is probably playing the expenses pretty close to the vest. Hope this helps.

Good Luck,

BWJR

[Rob]

Kitty,

He has 5 employees, full time 3 part time.
trash removal $125/month
property taxes are included in CAM charges.

Is 2 gallons per pound of wash a good rule of thumb to use when calculating usage?

Kirby,

Utilities are averaging 3674/month for the past 12 months.

[Kitty]

I heard 2 gal per pound was a good average on fronts. 5 employees at 800 month......sounds like hes not claiming something?

[Anonymous]

$3674 a month could be a good number. Do you have this broken out by water/sewer, gas, electric? Assuming a decent sewer charge that is probably a reasonable number. I agree that the payroll number sounds way low - I would expect it to be in the $40K plus range, especially when you include workers comp and payroll taxes.

Overall it sounds like the numbers (except payroll) make sense.

[Kitty]

What about the water usuage versus the gross revenue?

[Anonymous]

Kitty, you are right the water usage is low. I was relating it to my water usage, but my vend prices are much higher. Water usage is probably too low for that gross - good catch.

[Rob]

The breakdown for utilities:

Average per month for the last 12 months

Water $610/month
Sewer $1031/month
Electric $945/month
Gas $1088/month

as far as his payroll goes, he has a company that does it for his full time workers, I believe the part timers are paid off the books.

[Kitty]

He's overstating income and understating expenses wouldn't you say?

[Rob]

I have no doubt he is understating expenses which is why I don't believe his $90k net. It's the income piece that i'm trying to get a handle on, then I came probably come close to figuring the real net.

[Kitty]

I figured the net to be 35-45K, I added cable, telephone, supplies, COS, and added more in actual payroll.

[Kitty]

Actually the water usuage is dead on 50% less than the actual amount of water that would be used to make the stated revenue he listed.

115,000 gross based on 166K water analysis

Expenses:

Rent & Cam 38808
Utlities average 46800.00 based on his bills
(28,700 based 25% of above gross)
Payroll 9600.00 1 @ 30 hours per week@ 7$ an hour
Insurance 6600.00
Garbage 1500.00
Cable 500
Telephone 500
Supplies 1000
Not included in his mix -Payroll 1 full time 40hrs 3PT @ 20 hrs each 4160 hours p/yr @ 7$=29120

Based on this anylysis and his utility bills he could be losing between and 10 & 20K a year, breaking even if the utitlities run more to 25% of 115K gross?

[Anonymous]

The utilities seem out of wack. I am in NJ too and they just don't seem to make sense. The electric is much more than my electic, yet the gas is less. I have very high water costs, and your water number seems proportionately higher. Check with the town and see what the sewer charges are compared to the water charge. It varries by town, but you can see if his ratio of water to sewer matches what the town says it should be.

[MSKLAUNDRY.]

I have found that most sellers do not include the little things that must not get overlooked and add up. He mentioned that he fixes his own stuff but you didn't allow for parts costs in there. are you going to fix the equipment yourself?

Another thing that stood out to me was the insurance cost which seemed a bit high.

Labor: Just because he has underpaid or in this case paid salary in a questionable way doesn't mean that it is not going to catch up to him or you if you do the same. You would be foolish to pay him a premium on something that he is doing illegally. You need to calculate what should be paid (minimum wage) for the amount of hours worked and use that figure as a basis for salary expenses. Anything less and you are not doing justice to your calculations on expenses.

I didn't see anything that states what he is asking for the store.

Look ask him if you can spend a few weeks and count quarters and verify the income. If he is on the level he will have nothing to hide from you.

I believe he is making somewhere between 40k to 50 k per year.

[pete f]

166k gal of water should equal close to the gross he states.
The expeneses are for you to add up.

[Kitty]

If he states he is doing 230K with a 1000 of that reveunue a week to wdf. He states water usuage of 166K. Assuming the wdf cost to be 37% of its own gross ( 370 a week to wd revenue 630 to cos and profit of WDF) and deduct the remainding income from the total gross. His gross would be around 200K a year 27Kfor wdf expense and profit.

To make that gross based on machine vend price he would need over 5 tpd. Each turn uses approx 2 gallons per pound machine?

576 gallons per turn for the 18
700 gallons per turn for the 35
500 gallons per turn for the 50

totalling 1776 gallons per turn to make 200K the machines would have to top 5tpd. His consumption would be 266400

[Anonymous]

You need to check how the machines are set. Since he cheats on labor he has probably also cut-out the pre-wash and one of the rinses, hence the lower water consumption.

[Kitty]

How much water does eliminating one of these features save in water usuage?

[MSKLAUNDRY.]

Aprox 7 to 8 gallons for a 18 lbs.
Aprox 16 gallons for a 35 lbs washer.
Aprox 23 gallons for a 50 lbs washer.

These amounts vary from manufacturer to manufacturer.
The above was for a Unimac/Maytag MAF18, 35 and 50 washer.

[Anonymous]

Marc's numbers are good, but remember if he eliminates both the pre-wash and a rinse then instead of an 18# machine using 35 gallons it is only using about 21 gallons. I looked at one mat that was using Gen-3 wasco's and they only had the wash cycle and one rinse. The moral of the story is be careful, just using the figure 2 gallons per pound gets you nowhere if you don't know if the machines are running with all cycles or not.

[Rob]

Thanks for all the advice

Let me clarify a few things:

I made a mistake on the payroll, it should be $800 per week or approx $3600/ month.

The owner has admitted to me that he has shut off one of the rise cycles which saves about 20% water consumption. I thought I seen another post on this board where this is posible. I guess I should have someone check the machines to verify that it's been done.


Kirby,

As far as gas goes he is locked into a contract where he pays .569114 per therm. I don't know if that is a good price. His gas supply charges from PSE&G are about $150 per month.

He's asking $300K and that's based on 3x net, that's why it's important for me to figure his actual net.

Hope this helps.

[pete f]

the gas price is great, and something you will not get.
One of the things I have learned buying mats over the years is MY costs and the Seller's cost can vary quite a bit. Base you offer on YOUR costs. Check Insurance, utility, rent costs, what will they be next year when you take over? The balance point will be the location. What it is worth to you,. Are their high impact fees? ( eliminate competition) scares's rents with that zoning?
Overall you must expect the mat to produce a certain amount of income over a period of time. I would pay much more for some locations than others. The judgment of worth is up to you.
I do not doubt his numbers, they seem pretty much on. I use my years of owning mats to determine a revenue per gallon, I do not do the math others use. We all have our ways.

Can you replicate the mat? I was just quoted 36k for plumbing and electric for a 1650 sq ft store, we are up to 300k already..and I have no customers. I am redoing a mat that closed years ago.