Turns Per Day Assumptions

[Anonymous]

Dear All,

I am working on a financial model for starting a laundromat. It seems that the "Turns Per Day" assumption is probably the most critical and yet the least controlable input. My way of arriving at a "Turns Per Day" number is as follows:

Average Number of People in Store / Hour: 4
Number of Hours Opened / Day: 12
Number of People In Store (Total Turns) / Day: 48 (4 X 12)
Number of Washers at My Hypothetical Store: 37

Therefore, Turn / Day / Washer: 1.30

Does this make sense?? Am I being way to conservative? It seems like most books/articles suggest using 3 or 4 turns per day per machine. Why am I coming up with 1.3? Are there more than an average of 4 people in a store / hour? I want to be conservative yet with a 1.3 turns per day, I don't think my numbers are working out. Please advise. Thank you.

Regards,
Bruno

[Anonymous]

Take a look at some of the threads on demographics. I've never heard anyone talk about number of people in a store at a time - it really is not a very good number to use. Is that person doing one load or five? You need to look also at what sort of usage are the other mats in the area getting to give you an idea what business is in the general area. While distibutors like to claim the average is 5 TPD, that is a high number, but I can almost guarantee that 1.3 TPD will not be viable.

[Kitty]

This is where a demographic report and demo analysis will help you figure the amount of people up for grabs in the area of which you are considering. Figure a percentage of the percentage of demo numbers listed on the report within the radius of your proposed area. I would look at a percentage of renters, and a percentage of persons to income, as well as a percentage of the population total. You want to figure on how many households you could capture, the demo report will give you a per person average per household. Be conservative with the percentage you think you could capture within a 5 mile radius. The demo report is based on households and the report should state what the average household consists of. If you think you could capture 300 households in a 5 mile radius, you can take an weekly amount of say...12 bucks a week in laundry revenue. Your yearly revenue would be approximatly 185K not including ancilliary services. Use the 185K to see how many turns it would take to generate this amount.........remember approx 40% of the 185 is dryer revenue and should not be included in actual tpd.

[Anonymous]

What if I want to use observational data instead of demographics data? It's very very difficult to estimate how much of a market you can capture within an area. If I go to various laundromats in the area and see how many customers they are averaging, I can get a better sense of how much business I can expect.

I don't have any turn per day info on the local mats. The best I can do is go to each mat in the area during various times of the day and see how many people are in there. That's why I used "people in store/day" assumption. I see your point that each customer would average more than 1 load. So if the average is 2 loads then I would double my turn per day estimate from 1.3 to 2.6 - that makes it closer to the 3 or 4 tpd numbers that everyone suggests.

[Anonymous]

Why not get the water bills for the local mats and then with information on what equipment they have you can calculate very accururately how much business they are doing.

[Kitty]

It is difficult to calculate or assume what you could capture in any market. You must do some observation to see whether there is even enough pie for you to even think about taking a slice from it prior to a demo study. If the current competitiion is not meeting demands, or not meeting marginal satisfaction demands then you may have enough reasons to build from scratch, however, if the current competition is adequately serving the market then you should consider another area.

[Anonymous]

How do you get the water bill for the local mats? Once you have their water bill, how would you go about estimating tpd?

[pete f]

where is Easton?

Some markets have 2 TPD, others 7 TPD, this averages 4.5 TPD
Of course the average is useless.

What does your distrib say? Use 1/2 of his projection, then go from there.

[Kitty]

You must have the water bills to determine how many tpd the competition is using. You must know what size machines and how much water they use to determine how many turns the comp is doing to average their water usuage. You can call your public utilities dept. to get this information.

Unlike Pete and some of these guys I like to calculate the numbers and come to my own conclusion, while distributors are knowledgeable in many area, they may not know your area your considering. I believe you should know all there is to know from your own laundry education before you jump in.....

[Fred50]

Wubr,

It's very easy to get water bills. Call the water dept in Easton with the address and name of the mat that you are interested in.

Do an analysis assuming that all washers get equal usage and that front loaders use 2 gals of water per # of capacity. This method is guaranteed to be much more accurate than your observational approach as it's based on real usage.

As Kitty mentioned, add in 40% of your washer revenue as an estimate of dryer revenue.

This is the method that the IRS uses. Do a search here as this subject has been discussed many times.

Good luck!

[JBTcajun]

Good luck getting the water bills. My town refused. It doesn't hurt to ask. Water usage would be your best method if not all you can do is watch the stores. There will be 4 mats in the county when mine is built. When watching the mats I would actually go in and count the machines running, figuring 1/4 would be my costumers. (actually I think more will come but I like to be Conservative.) Actual water bills would be so reassuring. This is why we are called risk takers. Good luck!

[Kitty]

I thought it was part of public information? I've never had a problem getting the info in the several towns I have asked.

[Kitty]

JBT are you open yet?

[Anonymous]

Water bills are only public records if served by a municipal utility company - if provided by a private water company they are private. BUT, in many many cases the water meter is outside in plain view. Go take your own water readings. You can usually do the same with the gas and the electric meters.

[JBTcajun]

Kitty

I WISH

Still messing with city planning and development.
Tuesday 1st of 4 separate council meetings have to pass.
Hopefully will be through planning, permitting,etc in 3 weeks. Then we can move forward. Hoping for a March opening, though in September was hopping for January. Who knows?

[Kitty]

JBT,

What will your store offer that the other comp in your area does not? How did you calculate your projected income and how do you figure you will capture 25% of the total pie? Is the market not meeting the demands of the area?

[JBTcajun]

Kitty
Location
AC
See in from out
Clean
New and larger machines
Longer hours

I think I have posted the state of the existing mats already but here it goes again

1) the largest and most use own by absentee owner usually 50% or better doesn't work. They send someone once a week work on machine collect money. rawly does he get anything fixed.
Maytag just like home store. They have 2 #30 but only found 1 working. Also have 2 #30 dryers but they are very slow I think there isn't enough room behind them. The store is sweltering hot. Has ac witch is broken. Landlord wont fix. It is month 2 month. Dark and dirty cement floor roof leaks and have mold on ceiling. The mat is for sale and the landlord will not negotiate a lease. The rest of the building has gone professional.

2) Very small same owners as #1 but have never found the #30 there working. Dark like the other (if it were mine I would change the ballast and make those burnt tubes glow.) Not especially clean looking and smoking is allowed inside as their attendant smokes.

If store 1 had a good lease I would have bought these and retooled. Landlord says that tenant goes the store goes period.

3) New store, guy bought a building I was considering and put a mat in. As life goes I had spoken with agent the got sick #3 weeks in hospital, 3 weeks recoup. Start back to my project this guy in there. He bought old speed Queen tops, and 2 new fronts, is looking to put more as he acquires the money. His dryers are old and improperly installed. Every time there their attendant is starting them for people because they do not dry heavy stoof, best you can do is damp dry. He drinks while waiting and loves to explain how not all drunks are bad.

I am only hoping that I will capture 25% witch will make me cash flow and put a few groceries on my table. The demographics say if I had 25% of the potential I would be fine. Due to the broken machines there is a wait often. I have spent many hours washing everyones comforters, cloths, etc. If I had 25% every time there I will be fine.

It is a risk.I would like to get hold of the 2 stores that are for sale utility bill. Have gotten 1 month for them (august) but not the year.

I will take the risk. I will do it well. It will work.

The snow ball stand that I am putting there should handle most of the notes on its own. Leaving very little for me to pay even if the mat is not operated. But then again how do I know this? I don't just know of several doing the income I am speaking. The state laws changed and no one was grandfathered in. 4 stands closed last summer for not remodeling so that business is there to be captured.

Kitty I am taking a huge risk! By looking around and observing the market I am confident it will work. Time will tell.

[Kitty]

It sounds as if it is a good risk to take, the current mats are leaving you wide open to taste the pie and gobble it all up, which you probably will......