net income question

[Anonymous]

I am interested in purchasing a mat. Seller states gross yearly income is $130,000 with a net of $70,000. I am very sceptical about the ability to net almost 55% of gross. Is it possible to net this type of percentage? At this time he has only provided initial yearly expenses as follows.
rent $24,000
water $8,500
Sewer $9,000
electric&gas $14,000
insurance $4,000

I am aware of the fact that more expenses need to be provided. I am also waiting for equipment breakdown. My understanding is that this is an attended store providing WDF at $ 0.99 per lb.
Store is approx 1800 sqft. Utilities seem to fall within 25% gross, but that could be fabricated. Just looking for some initial opinions as I await some hard figures in order to proceed with due diligence.
Thanks

[Anonymous]

There is no way this mat is making that type of money. You listed rent $24,000, water $8,500, Sewer $9,000,
electric&gas $14,000, insurance $4,000. What about other expenses? Things like wages for the employees and workers comp and other employment taxes? What about equipment maintenance? What about CAM charges and other gotcha costs? Alarm monitoring, cable TV, telephone, garbage removal, cleaning, exterminators, permits and fees, yellow pages and or other advertizing expenses, if there is WDF what about supplies. I let others add some of the other expenses that have not been included - don't want to do all the work :)

[Anonymous]

Yes, I am aware that the seller left out a significant amount of expenses. Could all other expenses not mentioned by the seller total much more than $24,000?

[Jim]

Along with what Kirby said.....Your next highest expense is going to be payroll...approx. 20K. (attended full time at minimum wage). So that brings your Net down to 50K.

Now add in the incedentals that Kirby mentioned, another 10K (conservative). Net is at approx. 40K.
Also where in NY are you, if located in NY City prices always seem higher...

You never stated what his price is, I'd be curious to find that out.

Your question was is 55% net possible... sure it's possible after everything is paid off.

[Anonymous]

Jim, is that the new math we all hear about or am I missing something. You calculated net at 40K, which sure looks like about 31% (not bad) but then you say sure 55% net is possible. What am I missing here? Even with the limited expenses that were originally listed it only gave a net of 54%, thus I stick by my first statement - NO WAY 55%!

[Jim]

Kirby...


I was talking in general 55% is possible...maybe not with this mat though.

And as far as this new math...I've found it's not that difficult after a case of beer...trust me on this one...(hic)

[pete f]

I do not have any W/d/f , but will throw in a comment anyway.
Yes, 55% is do-able. You or your wife works and does the w/d/f.
I know a mat near me that gross 25k a year on w/d/f alone, the wife did it. The guy that bought it does it now. He probably rakes in 55k on a 90k a year store. Don't all go out and buy a mat just yet, it took 15 years to develop that w/d/f business.

This goes back to the mom and pop business we have. Once you add non-relatives to the picture it is not so profitable anymore. I am not sure the distribs mention this when selling those super sucker stores.

[Anonymous]

Agreed, 55% is possible - especially with a very large store, my point was only about the store in question.

[Anonymous]

Thanks for all the commentary. The store has 25 dexter washers and 25 dryers, I beleive American. I am waiting on specific size mix. The owner appears to be creative on the books per say. Does not seem to really track alot of the expenses or income. Cash came up frequently in our conversations. It seems to be a tough store to truly evaluate income and expenses based on his lack of record keeping. He currently has 3 part time attendants splitting shifts 7 days a week estimated yearly salary of $30k for payroll. How busy does a store with equipment indicated need to be to gross $2500-$2700 a week including approx. $100-$200 wdf weekly? There is no rent involved as he wants to sell property with business, so I will be paying a significant mortgage instead of leasing. Asking price for Business alone is $230,000.

[Jim]

Originally posted by abbott
There is no rent involved as he wants to sell property with business, so I will be paying a significant mortgage instead of leasing. Asking price for Business alone is $230,000.

$230K is way too high.....With the figures you have given us so far, it should be closer to $125K or lower....

Also, if his bookkeeping is that bad how are you ever going to do your due diligence ?... and how is he going to prove to you how much he makes...a wink and a handshake is not going to cut it.

As far as buying the building that is a good thing to have if you own the mat, but his price needs to be realistic.