Educated guess?

[Walter]

Folks,

I'm looking at a mat to purchase. Will be getting together with the owner next week to review utility bills, etc. Spent 4 hours today (Saturday) from 12-4pm doing customer counts. Total for the 4 hours was 12 customers, avg. 3 per hour. Most customers are young mid 20's. Looked like their laundry loads were "average".

Without being able to observe their actual machine usage, would it be reasonable to guage the following, based on Maytag Front Loaders; Average of 3 washers per customer (@1.50) + 2 dryer loads (ADC) for 30 minutes each
@.25/10 minutes.. for a toal of $6.75 per customer

I know this doesn't match watching the actual coin drops, but am I at least in the ballpark with my estimates?

Also, is it fair to assume that Saturday afternoon wouild be a pretty peak time of the week? This mat is open from 7:30 to 10:30 everyday...

If my numbers are reasonably accurate, there seems to be a major discrepancy between the owner's claim and my observations..

Thanks for whatever input or insight you can give...

Walt

[mike]

Walter,

You're right, sat. & sun. middle of the day are peak times in most areas.

I always say "spend an entire tuesday at the mat !"

If everyone did this, not many people would be so rushed to buy !

Don't just watch, but actually mark down how many customers for each machine, and total the days "take" (usually an unpleasant surprise)

I think you have an idea of the volume :-(

[Follow]

I think Saturday between 12-4pm is the dead hours for busy day..most people come early or late on saturday.. but, Sunday should be all day long busy..also, this is holiday season, many people are shopping those hours..

I think , you should visit laundry mat different hours to see what is the deal is, also, one saturday will not do..( I did study one month when I was trying to buy Lmat.)

good luck..

[pete f]

My mats are not so busy mid day Sat, as a rule, but sometimes they are slammed. depends on the weather, moon, who knows.
Go back and search utility, we had a poll. Use some sort of average and then do the math using his bills. If they have a big w/d/f it will have to be recalculated as coin rev to get a closer number using utility bills, but you should get a general range.

I think some water bills and gas bills is a better way to judge business at the mat. I would never spend a day watching people.
It is nice to drive by and see how many cars are from time to time.

[mike]

No offense PeteF,

but,

Checking the gas and water bills, while helpful,
only tells you gas and water was billed (not necessarily for paying customers.)
(could be a water leak, freeloaders using the toilet all day, could be lot's of heating, or inefficient dryers)

There is no substitute for eyeballing the customers, (it also helps you to pick up on any problems with the store.)

[Andy]

If I were about to spend tens or hundreds of thousands of dollars on a mat I would spend an entire week there during all hours or at least pay someone to sit there and record the numbers. The other alternative is to set-up a video recorder or get your hands on the security video to review. Remeber this is but one tool to judge performance all other available resources (tax returns, utility usage, payroll records etc...) should be scrutinized.

[fluffy]

My general thoughts on this -

1. Mid afternoon (12- 4pm) is the slowest part of the day. You need to understand customer flow at all points of the day.

2. You should eyeball the customer traffic to get a feel for whether the revenue numbers quoted are "ballpark". For example, if the numbers require an average of 8 TPD, the place would have to be ridiculously busy.

3. You should also understand any seasonal fluctuations - income statements by month would be nice to understand.

4. I think it would be very hard to doctor the gas useage figures (water you could perhaps run a tap and increase the consumption, but bleeding a gas line or something seems unlikely).

Good luck with your figures...it's not rocket science, just make sure you approach it with common sense.

[fluffy]

Forgot to add one other item -

On most coin changers (the two I have anyhow), there is an internal counter that can't be changed (unless you replace the entire computer board). You can use that as another one of the tools to verify income.

{Don't everyone get excited and say that someone could run 20's through there or something silly - that's why I said it was an additional tool to use:eek::eek:.

[JBTcajun]

My comforters, small rugs,dog beds,pillows,and anything I can sneak out the house with are about worn out. They have been washed to death. Early morning, mid day, late night everyday in the week, every mat in the area. You can learn a lot in the time it takes to wash, forget to put in dryer then put in dryer a load. There are diffrent trends single male doing own wash, doing wdf, single woman, families, even the rowdy kind have their favorite times. I kinda like it, will miss these few hours of getting to know the other costumers, THEY WILL BE MINE SOON!. LOL well at least I'll invite them.

[BWJR]

Based on your info, it sounds like the mat is doing less than $100,000.00 / year. What is the owner asking and why is he or she selling?


BWJR

[Walter]

To All,

Thanks for your responses! I spent more time at the mat today (Sunday) observing. Customer counts by hour: 9-10am (1); 10-11am (10); 11-12 (3); 12-1pm (4); 1-2pm (3); 2-3pm(2). Total of 23 customers over 6 hours. Yesterday (Saturday), total customer count was 12 between 1-5pm.

BWJR:
Owner is asking 260k, claims mat is grossing 10.5k monthly. No WDF. It looks to me that the mat isn't achieving this gross. From the preliminary numbers I've seen, owner is claiming an adjusted net of 45-50k. It seems to me at 50 times monthly net, asking price should be closer to 200k...

I'll look at the utility bills this week, but this 'overrepresenting' of monthly net has me wondering about the owner's scruples.Even if the utility numbers seem ok, there's still a credibility issue developing in my mind. I don't mean to jump the gun, I could be wrong... (as I have many times in my life!).

Any thoughts or comments?...

Walter

[MSKLAUNDRY.]

Can you tell us specifically the equipment mix, make/model?

In order to get that net it would have to have no employes, cheap rent and perfect equipment. Sounds fishy!!!

[Walter]

The mix is as follows:

9 stacked ADC dryers
16 Maytag Washers top loaders
6 Wasco Front Load Washers Triple loaders (Emerald Series)
1 Wasco Front Load Washers Giant Loader (Emerald Series)


Walter

[Walter]

MKSLAUNDRY:

Forgot to mention that all equipment is approximately 2 1/2 years old. And, yes, you're right, there are no employees...

Thanks again,
Walter

[pete f]

mike, no offense taken. We all have our ways. I actually never bothered to even look at the water bills, much less spend the day or week spying on any mat I ever bought. I made offers on many more mats without any real anlyizing owner's stated incomes. If you know an area, and have ideas of potential reveune then that is all you need. I did watch the water meter on one mat I wanted to buy, though. I am not into the conspiricy theorys that abound here, owners running water taps, bleeding gas, and other things. I have a sales agreement I present and the owner has to sign that the stated revenue is true, and if not I get to sue him and jail him/her for fraud.. Pretty simple. Spend weeks at a laundromat? I don't even want to go to my own for more than an hour or so. I am not saying do some homework, but any business is a risk, and some people are not cut out for it.

As for a mat doing 10k a month, 50k a year cash flow is very realistic. As for price, we have discussed this before. Cash flow times 3, 5 even 7 depending on factors that show it will continue to generate that cash flow. Make an offer based on what it is worth to you, not what the seller is asking. I have paid near full price, and I have bought for 40% less than asking.
Walter, you have not even seen the water bill and already you assume the owner is overstaing by a large amount. This is what watching a laundromat will do, you have no real numbers to use, only percieved or guessed. Not very business like.

[Walter]

To All,

Thanks very much for your input to my question. I value all your comments...

Pete: I have one slight disgreement with one of your comments back to me. I don't think it's accurate to describe as "spying" when one is trying to get a real eyeball estimate of numbers & demographics of customers entering the store. It's all well and good to say that if the buyer has misrepresented you can sue him in court. We all know the time/money/hassle involved, let alone the possibility that you might not win the case. It seems to me reasonably prudent - as well as ethical and moral - to observe a mat for a while prior to entering into an agreement. Anyway, just my different point of view... On the other hand, I think you may be right: based on other business ventures I've been involved in, I've grown to be a little less trusting than I would like to be.

Again, thanks for your comments!

Walter

[pete f]

Walter, thanks. No hard feeling of course. Spying? Well, maybe that was to harsh:) I look at it as a waste of time... Everyone has a risk tolerance level, mine might be higher than others. My sales agreement is more of the art of negotiation, it keeps the honest people honest. Not many will sign a paper allowing me to sue/jail them, that takes out some risk. Most of the time I could care less, I have my own plans and the previous owner was not much of a factor anyway. If you are buying a grade A mat then I would want a more though look-see. I have always tried to buy the worst places in the best location, so any past numbers are just that, past numbers.

I could make comments based on what I know about the store you are looking at, but it would not be fair or accurate, as I do not know that market. I have a store with about the same mix doing 1/2 of that volume. I am in a different market.
Bottom line, no matter what "they" tell you, it will come out different, plan on spending money to catch up with "deferred maintenance" and a few bucks in some up grade to show the customers someone new has taken over and actually cares.

I know there are a few members, multi store owners, here who have bought stores recently, maybe they will chime in. I know our moderators work hard, but I do not think any of them have bought a store in the last 10 years, so maybe I give more in the trenches view. I only state the facts so you know them, no dis-respect to them or this board.

[Anonymous]

Walter, I bought my mat 4 months ago. One of the first things I did, was analize the 100 % capacity, this means how mnay TPD can each machine achieve taking into consideration the cycle time.
Washers and dryers. One you calculated this figure, you multiply the TPD by the price of each cycle, alwys done machine by machine. This gives you the 100 % capacity the mat can achieve in theory, working uninterrupted 24 hours a day, 30 days a month.
Compare this figure to the revenue the owner is telling he makes. This % will show how uch of the full capacity is used.
According to different equipment sales agents, teh average used capacity of a mat is somewhere between 25 and 45 %.
It would be a very busy one if it makes 45 %, I would say a very successfull one, normally the average use is around 30 %. You can find out the figures for the area you are wanting to buy, from the sales agents of Maytag, Wascomat, Dexter, etc. They usually have charts with pretty accurate information.
Besides this measuring tool, you have to see, as already others stated in this thread, tax returns (add a 10/20 %), financial statements, payrolls, utility bills, etc.
All this information together, will drive you mad, and make you think if it is wrth to go into this business.
But as you see, tehre are lots of us who with or without this infomation got into the business, and are very happy of having done it.
Let me tell you how I think in a year time.

In the meantime, merry christmas and goood luck with your new endeavour.
Daniel

[NJ Jon]

Walter -

When I analyze a mat, here's what I do.

First, know the make, model and number of each type of washer, and the wash price. From that you can get how many gallons each uses for a wash cycle, per mfgr specs (or IRS MSSP audit procedure). This takes about ten minutes to record the numbers and get the gallons.

Second, accompany the owner when he collects the money. Count the money BY THE TYPE / MODEL OF WASHER ie - add all the Dexter 18's together to get the total $ for that type machine. Record a separate number for each type of machine.

Also, when you do this FIRST reading, record the water meter reading.

Now you have the base lines. This first time you can only get the percentage of washer income by machine type. Also divide the dollars collected for each machine type by the wash price for that machine. If you counted the money accurately, you should come up with a whole number ( you can't pay for half a wash).

Spread sheets make this a fast and accurate process.

The second time you collect money, repeat all of the above steps, including the water meter.

You now know the number days since the last collection, the money collected for that period by machine type. Divide money collected by number of days by number of machines. This will give you average TPD. I think this has more long term accuracy than watching the mat for a couple of hours.

Now for the audit part. Subtract the water useage from the first reading from the second reading to get total water used.

From the TPD's by machine type, and water used per turn from the manufacturer for each machine type, you can get the total calculated water useage for the period by adding all the figures together.

Compare water meter to paid useage. The figures should be very close (add a little for toilets, deep sink, etc. maybe 2 - 4 %).

What this tells you - If the water meter is higher than the calculated useage by machine either there are a lot of leaks, money is missing, or some calculation may be incorrect.

If the water meter shows less useage than calculated useage, ask the owner to explain the difference. "salting" the coin boxes is one possibility. I had another reason shown to me by an owner, but I'd prefer to let your seller explain his reasons to you - to your satisfaction.

You should do the coin check at least twice a week for a couple of weeks, without a break (say Monday and Thursday night). That can tell you a lot about weekend versus weekday useage, busy times of month, etc. If you base all your budgets on only one reading you're at risk of making serious financial miscalculations, which will cost you in the long run.

Hope the above was of help. If you need any more info, please PM me.


NJ Jon