A money question

[JC Theriault]

I finally got my cashflow numbers put together concerning wash & dry vends as well as rent and equipment prices. I'm still waiting on plumbing and electrical quotes after contractors viewed the space today. There isn't a lot of carpentry work to be done and whatever stuff I can't do re. woodwork, sheetmetal and equipment rough-ins I'll be bartering for with some existing customers who buy signs from my small vinyl sign shop (ie. truck lettering, jobsite signs, etc).

The space I've got my eyes on is approx. 25 feet wide by roughly 60 feet deep with a 10' drop ceilling. The idea is to use 2/3 of the depth for the laundry with the remainder at the rear to be used as a studio for my sign business/office and secure storage. The landlord wants $1500.00 per month (Can $) and he'll kick in some dividing walls and routing of plumbing pipes as free improvements just to get this strip mall back up and running like it should be - Was empty until a clothing store and a restaurant opened in the past 6 mohths, the space formerly housing a dollar store is set to reopen in early January and my space is the end unit that used to be a deli and fish market.

He already put in a new ceilling, lighting and floor tiles in the vacant units.

I'm within a 15 minute walk of two major university campuses and located smack dab in the middle of the off-campus housing area. The idea is to offer a small, cosy self-serve facility that is handy to the grocery stores and other places students support.

I'd like to start with 8 top load Maytag washers and 4 double-stacked propane Maytag dryers. Nothing too fancy, just good used equipment and I plan on going low-tech by using quarters for payment as the corner store next to my spot asked if I'd provide them with all the quarters I clean out of the machines each day and in turn they'd provide change to my customers. I'll be open 7am - 11pm every day.

I plan on pricing as follows: Wash $1.25 & Dryers 8 minutes for 25cents.
If I figure on an average of $90 (72 loads) in washer revenue per day plus $72+/- in dryer revenue per day ($1.00/32mins. average to dry) then I end up with $162.00 per day x 7 days = $1134.00/week x 50 (budgeting for two extremely slow weeks out of the year in case of storms etc) = $56700.00 in gross receipts excluding any soad vending or pop vendor payments. My rent eats up $18000.00/year (3 year lease) and my bank loan payments take another $3000.00 a year (15 years) and that leaves a balance of $35700.00 to pay out all my utilities and other stuff and hopefully add to the $5000.00 I intend to have banked for emergencies.

I've already canvassed the area that I'd draw my customers from and everyone from seniors to students to single parents have complained about how they find it inconvenient to travel by city bus to the nearest laundry. I plan on offering small "thank you" days each week such as Tues/Thurs nights being Student Nights and Mon/Wed mornings being Seniors Days. I'd give out free laundry soap to people doing washes at those events.

Sorry for the long-winded post but I thought I'd present my plan as it currently stands. Thanks for reading and any comments are welcomed!

Jean-Claude

[Maywood2]

Hi Jean-Claude... Also a newbie here, so don't take my word as gospel, but here are my initial thoughts to your post --

9 turns a day sounds awfully optimistic (in my area anyway). I understand national average (U.S.) to be about 5 TPD. You've got all small machines, so they'd get more turns than larger machines (for whatever poundage of laundry people will do at your store), but 9 still seems high to me.

You say a 15-year bank loan -- I hope you don't expect your top-loaders to last 15 years... (particularly if they're already used). I'd expect more like 5-8 years total life, maybe, depending on how busy your store is. If you were to take a 15-year loan, what do you do when your washers die out before your first loan is paid off? Get another loan? You'd be best served by having your loans paid off before your equipment reaches the end of its life. (As I understand it, the profit/cash-flow in the years after you've paid off your loan -- and before you start to need to replace equipment -- is the real reward of this business. You kinda slog through the loan-payment years accepting a less-than-magnificent cash flow, but once the loan payments stop, you can start banking some real dough.

I'd start by taking your utility bills off the top line. (Don't leave it as "a balance ... to pay out all my utilities and other stuff" afterthought.) I was using 28% of revenues as my projected utility cost (most seem to be somewhere around 25-30%), but with the current MAJOR spikes in energy costs (here in U.S. anyway), I don't know if that's even enough.

As far as a complete projection process, have you addressed/estimated all of the following expense categories:
Fixed and Variable Utility Costs
Rent
Depreciation
Interest
Equipment Maintenance
Property Maintenance
Operating Supplies
Insurance
Advertising
Accounting and Legal
Labor for Attendants/Janitorial
Security
Miscellaneous

Then to calculate the cash-flow, you also need the Principal Repayment amounts on your loan.

Will people walk 15-minutes carrying their loads of laundry? I know they say they don't like the bus, but in the middle of a Canadian winter, a bus might be preferable to a 15-minute walk.

Just some quick thoughts. Hope it helps.

John

[JC Theriault]

Thanks John for the advice. I've got to sit down over the next couple of days and revamp some numbers which will include reducing the number of turns per day and bring my loan into the 7-8 year payoff range.

I walked a 15 minute radius of my proposed location several times today, talked to residents and building owners and discovered that I've got approx. 700 single student + 200 single senior apartments within a 3 to 5 minute walk, roughly another 800 students and 150ish seniors in stand-alone buildings (mostly converted historic homes) within the 6-10minute radius and some 2500 (70% students) stand-alone units in the 15-17 minute walk radius. I've even got a church-owned seniors apartment building that has some 200 apartments in it but only 4 washers and 4 dryers for the entire complex... and its right across the street from my proposed location.

As for students and the winter weather I had spoken to the two universities that run a chartered school bus monday to friday between the off-campus housing stops and the campuses from 6am until 11pm and since my laundromat is located right on the route they would consider adding a drop off/pick up location during non-peak hours (ie. 10am-2pm and again from 6pm until 10pm) at no charge as its viewed as a student safety improvement idea.

I think I'll make a revised cashflow forecast with reduced sales and more accurate expense figures and if I perform better when up and running then I'll end up celebrating some Sat nite! If I run a tight ship for the first 7-8 years and get things paid off then maybe my profits and equipment refurbishing needs will be easier to come by after those few years.

Thanks again!

Jean-Claude

[Maywood2]

Hi Jean-Claude. Sounds like you'll have a better idea once you re-do your projections.

Top-loaders don't last all that long (compared to rigid-mount front-loaders). You mentioned you're buying used equipment -- how much life is left in them? I don't think you can reasonably expect more than 7-8 years TOTAL life from a top-loader, if you're busy. (Without repairs being an issue, cost-wise and being out-of-service wise.)

Was also thinking -- if you have a large possible clientele, is 8 washers enough? (Top-loaders are small, maybe 12-lb capacity.) In your cold environment in the winter, people probably wear 12 pounds of clothes just to walk outside... <grin>
If you really think you can grab alot of those students and elderlies as customers, think about the number of washers. You want enough that they won't stop coming to your store because every machine is always being used, and not so many that much of the equipment is sitting idle. It's a tough call, and you're probably better off erring on the lower side, to minimize your investment. But don't leave money on the table if the demand is really there.

Also, if they're mostly students, maybe you can set up the space so that it is comfortable for them to hang out while they do their laundry. Free Wi-Fi access? Couches instead of hard plastic chairs? Music they'd like playing in the background? Hell, maybe even a band or a DJ on Fri or Sat nights? (If there's no noise issue with neighbors at that hour.)
You're planning on using 1000 sq-ft of the space for the laundrymat, with only 8 washers and 4 stack dryers, so you should have room to let them be comfortable. Plan the space and also your hours of operation wisely so they WANT to come there; could you make it more of a social-thing, instead of a weekly chore?

I'd probably sacrifice the senior clientele if I had to, in order to get the college population. (Yes, the college kids are seasonal, but 9 months out of the year is a pretty long season.) My concern would be that the elderly are not likely to drag that many large heavy bags of laundry to my store, because of physical limitations. The college kids will be able to drag whatever needs washing.

Again, just my thoughts... Where are you in Canada?

Thanks!
John

[pete f]

From what I read you are considering about 1000 Sq Ft laundry. You have not mentioned any other l'mats, so I Will leave the demographics to you and just comment on what you are planning. I will have to use US dollar, you convert.
A REAL laundry mat will cost around $150,000 to put in, including equipment. 8 tops loaders and 4 double stacked ( I assume small homestyle dryers) is not really a laundromat. It is your sign shop have a few washers and dryers in it. All these people do laundry now somewhere, and probably have at least as good equipment to use as what you want to offer. Why will they come? Over 1200 sq ft it will look pretty small. If you are going to have university and old people as a greater mix of customers, then you probably do not need 80 pound washers, however if you want to build a successful mat you have to equipt it like a successfully mat. I could figure an equipment mix, but then the finance issue is questionable. Equipment dealers have 100% finance for equipment, and if you pay the build out from your own pocket it works out pretty well. Finding a bank to loan you money to put in pipes, electric, etc, stuff they can't repossess is tricky,,and for a 7 -15 year term impossible. Cut the TPD in half. You may have a great idea and location, but there is no money in this business for a 8 washer store. Step up to the plate.

[Anonymous]

Well said Pete.....you saved the rest of us from some typing. Very few people would come to such a small location with just 8 top loaders available. It is funny, in his own words Claude mentions a place with ONLY 4 washers and 4 dryers.....he isn't planning for much more than that.

[anonymous]

well, being from the USA myself and being used to laundromats with lots of washers and dryers. When you step outside of the USA, you will be surprise when you see mats in other countries. When I first arrived in Australia and went to the laundromat, I was shock at how small it was. In the USA, I've always use frontloaders and didn't know much how to use toploaders then. here, you have to learn how to use toploaders as 90% of the washers in all the mats I've been to are toploaders.

i've seen plenty of mats here that has fewer then 10 machines, and in shops much much smaller than laundry room in my basement in the USA :D

the objective is.....will it make you money :)

From what I read you are considering about 1000 Sq Ft laundry. You have not mentioned any other l'mats, so I Will leave the demographics to you and just comment on what you are planning. I will have to use US dollar, you convert.
A REAL laundry mat will cost around $150,000 to put in, including equipment. 8 tops loaders and 4 double stacked ( I assume small homestyle dryers) is not really a laundromat. It is your sign shop have a few washers and dryers in it. All these people do laundry now somewhere, and probably have at least as good equipment to use as what you want to offer. Why will they come? Over 1200 sq ft it will look pretty small. If you are going to have university and old people as a greater mix of customers, then you probably do not need 80 pound washers, however if you want to build a successful mat you have to equipt it like a successfully mat. I could figure an equipment mix, but then the finance issue is questionable. Equipment dealers have 100% finance for equipment, and if you pay the build out from your own pocket it works out pretty well. Finding a bank to loan you money to put in pipes, electric, etc, stuff they can't repossess is tricky,,and for a 7 -15 year term impossible. Cut the TPD in half. You may have a great idea and location, but there is no money in this business for a 8 washer store. Step up to the plate.

[bodman]

listen to peter, what you are proposing sounds like a recipe for failure.

national average tpd is 3.2 x 8 washers x 1.25 =32.00 plus 12.80 for dryers 40% of washers gives you 44.80 daily gross income ,
rent is 50.00 day add a loan ,utilities, repair , insurance. do you see the light from the train at the end of the tunnel.

Another lifetime ago 1974 I managed a student apartment building with 182 units 364 students . we had 6 tpl washers at .75 and 6 dryers 12 min for .25 collected 275.00 month .

I wish you great success in the future just do not think it will be with this venture.
That said the tallest building in Atlanta Ga. 10 years ago was a students final architecture project that recieved an F grade from his professor. tread carefully grasshopper. bodman

[shad2038]

I see the original post was 5 years ago. If you are still "in the game" how about letting us know how it all went?

[bodman]

shad thanks for pointing that date out, next time i will look at that before responding.