Potential Buy

[Anonymous]

Hi all,

I am new to this forum and already have learned a lot of usefull information.

I am looking into buying his laundromat, and if possible I want to get you opinions. Using the check off list that somebody posted on this board, I was able to gather the following information.

Financials
Gross Monthly avg $6250
Rent $1700 for 750 sq. ft.
Water (Sewer) Bill avg $860 per month
Electricity avg $270 per month
Gas avg $480 per month
Supplies avg $100 per month
Insurance avg $100 per month
Net $2740

Washers
23 washers
3-triple EPSO-10 years old
4-double-EPSO
12 Maytag Front Load 3-5 years old.
4 top load - 10 years old
Dryers
3 Maytag stackable(2) - 3 years old
9 ADC single - 10 years old.

Alarm system in place. Insurance ok.
4 years left on the lease with annual increase of no more then 2%. Option for another 5. No CAM.

Price of the business 85k.

Please give me your thoughts. Thanks in advance.

[IPSOTECH]

Is this a unattended mat? If not then what about labor costs? Equipment repair costs?

[Anonymous]

it is completely unattended. Pure laundry, no WDF. I did not get the repair costs. The owner will provide those in couple of days.

[anonymous]

Can you verify with tax returns
If this is wrong all you expensives will be wrong also.

[Anonymous]

The owner is willing to go thru several coin audits, but I was told that he is not comfortable showing the tax return, because it combines his 2 other mats and another business.

[Coinwash]

I was told that he is not comfortable showing the tax return, because it combines his 2 other mats and another business.

RED flagYou must look at the Tax returns for the past 3 yrs.
No one would lie to the taxman and say they are making more.
Everyone tells everyone they take from the top.
This is wrong and should not even be taken into consideration. To me that’s a RED flag
That's just to bad he owns two laundromats and he shuffling books. That may work well for him(and good for him) but WHAT ABOUT YOU??

*You hold the cards, Why??? because you can WALK away...


*This is just my opinion do what you think is right

[Anonymous]

Thanks, I will ask him again. Can anyone tell me if the numbers make sense at all? I would appriciate some opinions.

[Anonymous]

How can I calculate the actual revenue based on the bill that they gave me?

[Anonymous]

Two things that you haven't accounted for. 1)The amount it will cost to close this place at night. It costs around 70-100$ a week for a person to go there and clean and close up for the week. And 2) the repair costs for the machines which could be significant depending on the condition they are in. Looks to me like you don't have a great deal of wiggle room to work with here in terms of taking even more out of your bottom line. Also your rent seemed high for a place this small. Do you mind me asking what state you are in as it could be due to that state's market. Besides all of this, the person won't let you see their financials. This all just seems a bit crazy to me. For a place that won't make a lot to begin with this seems extremely suspect. Good luck!

[Anonymous]

tcaf2059xx,

The place in Mass., that is why the rent is hi. I did not get a feeling that the owner is hiding something. His broker gave me all the info besides repairs and tax return. And while these are very important, I feel I can get them if push for it.

[Anonymous]

Ok that makes sense for the rent. However, I would be very cautious about this place and would do my research and wait before putting in any kind of offer. That's just my take on it. I'm not trying to scare you off, but i'd be very skeptical...very...that's all I'm saying.

[Anonymous]

ok, but what makes you so skeptical? i mean i will get the tax returns, but so far i have not heard any comments about other numbers. that would really help. also i will run them by my CPA/JD.

[Anonymous]

I just see a lot of red flags here.

1) He said that he didnt want to give you his tax returns. If you can get these than obviously this is void.

2) He did not give you any expense number for the repairs yet which will be significant

3)He did not mention to you that there would need to be a person there to close and clean(yet another expense). So therefore, he is hesitant about verifying the income and at the same time not telling/showing you all of the expenses.

4)And this is another thing: I bet you this person is unwilling to give you any sort of owner financing as well. If this is true it would be yet another tip off. Are you considering paying all cash? And also have you made an offer already? I would definetly not give all cash due to all of the above mentioned.

What makes you so excited about this place??

[Anonymous]

To play devil's advocate, it could be that his door is on a timer, and he cleans the place himself.

As a new owner though I can tell you that repair and general upkeep expenses will throw you a bit the first couple of months. Seems I'm continually either placing a $60 order at costlessparts.com or spending the same at home depot. For instance my speedqueen drain pump system sucks, I spent $65 at home depot today for parts to make some home-brew lint traps. Before that it was $18 for a motor relay, might as well order a couple spares, there goes another $50 or so. It all adds up.

- John

[anonymous]

Another thing you may want to look at is not only repairs because some of the machines are old but you will need to look at cost of putting in new machines in the near future. In addition, I would also inquire about the water heating system. Heavy use equipment don't last forever.

Plus, I would check on the rental lease it seems to me that you will need to negotiate a longer lease if you can. You don't pay CAM then make sure you know what you will be responsible for.

Personally, the numbers look fine (for the equipment mix) maybe a little high. But, just like any other appliance the older they get the less efficient they become.

[Anonymous]

runchman
Yes, the mat is absolutely unattended. This guy owns other businesses and he strategy is minimum time investment. He cleans the place himself several times a week. The door is on timer.

tcaf2059xx, to answer your points.........

1) He said that he didnt want to give you his tax returns. If you can get these than obviously this is void.

I will shake this out of him.


2) He did not give you any expense number for the repairs yet which will be significant

It's not that he did not want to give them. He was just not around for several days and the broker could not get the details.

3)He did not mention to you that there would need to be a person there to close and clean(yet another expense). So therefore, he is hesitant about verifying the income and at the same time not telling/showing you all of the expenses.

He is the person. He takes care of everything.

4)And this is another thing: I bet you this person is unwilling to give you any sort of owner financing as well. If this is true it would be yet another tip off. Are you considering paying all cash? And also have you made an offer already? I would definetly not give all cash due to all of the above mentioned.

You are correct, he does not want any financing. I i get there, I was planning on giving him cash. To the best of my knowledge, the guy is selling all of his laundromats (3) in order to invest money into real estate construction in Greater Boston Area. So that kind of explains the whole reason for selling and no financing.

What makes you so excited about this place??

At this point I do not what is the true value of this business, and how much I should pay for it. Let's say I spend 700 a month on repairs, and I have no idea if this is a reasonable number, I will still make some money. About 2k net. That is of course if the tax return checks out fine. I also believe that there is an opportunity for WDF. There are probably 75 businesses (restaurants, gas stations, body shops, kindergardens) within 500 feet. I think that there is an opportunity to expand business..

[mike]

He is a seasoned owner, (not someone who inherited the business, or tried it out)

He has three mats, and chose to sell this one first.

You mention that he "WILL be selling his other stores" are they listed now ?

A seasoned owner is selling, why ?

A newbie will buy and make money where he can not? (he's not selling for no reason, $85,000. which he will invest in real estate ? I don't think so, he would keep this store if it was making money.)

And, 750 square feet is a tough size to swing a cat, let alone do drop off.

[Anonymous]

1)If you can get the tax return from him than great....but I'd analyze it carefully. Why didnt he want to give it to you in the first place?

2)Ok so he cleans the place, so to him that is not an expense, but to you it might be unless you are willing to do it yourself(I am assuming that you must live close to it)

3) As for the repairs, again make sure you get them.

4)No owner financing can, but not always can mean that the individual is not confident in their business. They tell you they are investing in real estate, well that's fine, but what about you? Do you have 85,000 cash and do you want to put up that much money?





runchman
Yes, the mat is absolutely unattended. This guy owns other businesses and he strategy is minimum time investment. He cleans the place himself several times a week. The door is on timer.

tcaf2059xx, to answer your points.........

1) He said that he didnt want to give you his tax returns. If you can get these than obviously this is void.

I will shake this out of him.


2) He did not give you any expense number for the repairs yet which will be significant

It's not that he did not want to give them. He was just not around for several days and the broker could not get the details.

3)He did not mention to you that there would need to be a person there to close and clean(yet another expense). So therefore, he is hesitant about verifying the income and at the same time not telling/showing you all of the expenses.

He is the person. He takes care of everything.

4)And this is another thing: I bet you this person is unwilling to give you any sort of owner financing as well. If this is true it would be yet another tip off. Are you considering paying all cash? And also have you made an offer already? I would definetly not give all cash due to all of the above mentioned.

You are correct, he does not want any financing. I i get there, I was planning on giving him cash. To the best of my knowledge, the guy is selling all of his laundromats (3) in order to invest money into real estate construction in Greater Boston Area. So that kind of explains the whole reason for selling and no financing.

What makes you so excited about this place??

At this point I do not what is the true value of this business, and how much I should pay for it. Let's say I spend 700 a month on repairs, and I have no idea if this is a reasonable number, I will still make some money. About 2k net. That is of course if the tax return checks out fine. I also believe that there is an opportunity for WDF. There are probably 75 businesses (restaurants, gas stations, body shops, kindergardens) within 500 feet. I think that there is an opportunity to expand business..

[Anonymous]

I agree with mike...If the mat was generating 35k a year with the individual spending no time in it, why would they sell. You say real estate but he could get nearly the 80k if he just reinvested the profits from this business in two years. You just seem very eager to me. Is this your first mat?? In which case you should be even more cautious.

[Anonymous]

I am being cautious - that is why i do the research and ask your opinions :)

The truth is, nobody besides him knows the truth why he is selling. I know that he is selling all of them. One has been sold already. This is the second one.

So, general opinion - this is not a good deal? What's the fair price?

[Anonymous]

quite honestly, if and only if the financials are correct, your profits for the year appear to be 32,000- approximately 5000/yr for cleaning - approximately 3-5k for repairs...this leaves you with 22-25 net as long as the sales remain consistent. I would not pay more than 55k cash for it

[Anonymous]

have you made an offer?

[Anonymous]

Another thing...you state that one has already been sold...have you talked to that buyer...how is it working out for them, were they happy with their deal...how much did they pay for what they got.

[Anonymous]

It sounds like an ok deal at 75k-80k Just plan on doing most of the work yourself if you want to make it work.One sold here a few months ago for 95k doing about the same sales and the equipment was older too. But there is few large mats for sale here.

[pete f]

I have bought 4 laundry mats and never looked at a tax return of the seller, so forget the tax return, it is of NO value.

The rent ratio is a bit high than I like, the utility ratio sems a bit high also.
Some of my unattended mats have auto door locks, will cost about $1500 for two doors, so get over that issue.

My question is how far is this mat from your house?
Is thier any chance for another mat to open nearby? Can you control your market share? Are prices lower, or higher than other mats?
What does the over all condition appear to be? Can some paint, new sign, cleaning brighten the place up?
That is it.

The ask/cash flow ratios are in line, there are always other "things" but you can over anyalize yourself out of a mat very easy around here.

[Coinwash]

I have bought 4 laundry mats and never looked at a tax return of the seller, so forget the tax return, it is of NO value.

I have to disagree Check them ,what happens if they never paid there tax returns ????;)
You must look at the Tax returns for the past 3 yrs.
No one would lie to the taxman and say they are making more.

Everyone has there own opinions do what you think is right.

[pete f]

I have to disagree Check them ,what happens if they never paid there tax returns ????;)
You must look at the Tax returns for the past 3 yrs.
No one would lie to the taxman and say they are making more.

Everyone has there own opinions do what you think is right.

What does a tax return of a multiple store owner have to do with the gross revenue and expense of an individual store? If you have never seen one, I can tell you a tax return does NOT SEPERATE every stores' reveune. It does not seperate soap income, washer, dryer, etc.
Even a single store owners' tax return. The only thing there might be the gross revenue. Tax returns are very limited to the expense breakdown and include many non cash items that vary widely that will not transfer to a new buyer. An owner should have his records he uses to complile the tax return, that is what you look at. Water bills, gas bills, repair bills, lease. These are important.

[Coinwash]

What I am saying is that the tax return will at least show the minimum that was reported. {It is likely that the true gross is somewhat higher.}
Do you agree?
You should have an accounting report on each store held privately not only for this but for yourself,to use in decision making.

[anonymous]

I agree you should always have a look at the tax returns. If it is multiple store and the return shows low income the it will throw up a red flag. You could look at the gross and make some determanation as to it's validity by going by the other stores and looking at them. The tax return is not a catch all but it is a good read on the situation. Just part of the puzzle.

Gary

[pete f]

What I am saying is that the tax return will at least show the minimum that was reported. {It is likely that the true gross is somewhat higher.}
Do you agree?
You should have an accounting report on each store held privately not only for this but for yourself,to use in decision making.


How can a tax return that lists 280,000 in sales be of any value when looking at a mat that does 85k is grouped with all others, and done this way becuase of how the tax returns are?

[Kitty]

I can see taking a look at the return but knowing the information may need to be weeded through in the event the owner has more than one business holding.

Determining the revenue stated is essential as is determining the exact expenses that will be incurred. Both sides of the equation are very important, if either is off, so is the net gain/loss.

In this particular scenario, some common expenses are not listed. Low grossing mats have to be managed very tight as the cash flow cannot handle inefficient practices with the expenses.

At the gross revenue listed the water usage should be at or near 87K gallons, be sure to check the usuage against your machines and vend price to determine the accuracy of the stated revenue. Prepare a list of expenses YOU would incur and see what type of net you may earn.