my market thread

[ntbushwick]

All,

I am am embarking on a study of the of the market surrounding a mat I am interested in. I will use this thread to post questions pertaining to such. I would greatly appreciate any feedback that I receive and will return the favor in the future for any newbies who are as clueless as I am now.

My first question...which is very open-ended...

-within a 3 mile radius of the mat, I have 12 competitive mats. the population within 3 miles is approx 160K. Is this market already saturated? I know you have no idea of the profit margin for the mat but I am still interested in your thought. If you need more info please let me know.

Thanks.

[pete f]

your numbers do not help. 3 miles in urban city is a lifetime, vs rural or semi r. which make a difference. Many markets are overbuilt, if that is your question, with general info you get general advices. Given your short take, seems 5k per sq mile pop, so 4 mat per sq mile seems in order.

[ntbushwick]

All,

I have been working on my research for the mat. I have some data that I would like to share with you all and hopefully gain some insight from you experts.

The mat is 4400 sqft. Essentially the mat is divided down the middle which creates an east side and west side of the mat…respectively.

On the east side we have the following:
Dryers:
26 – Maytag model (JT30XG, ST30XG, JT30WE, ST30WE) these were the model numbers listed on the owners manual that I reviewed.

Washwers:
6 – 30lb Maytag washers (couldn’t find the model number – I will provide at a later time)

12 – Maytab top load commercials – I think 2.5cu ft washers (couldn’t find model number – I will provide at a later time)

They also have a large childrens play area with a huge tubular slide for them to play on (I would say it is at least 200 sqft

On the west side we have the following:
Dryers:
18 – Wasco 30 Dryer M406774


Washers:
6 – Wascomat 35lb #125

2 – Wascomat 50lb #185

10 – Wascomat Double Loader #W75

16 – Maytag Neptune commercial


Water heater:
Total of 3 Hamilton model # HEDN315 water heaters.

Furnace:
Somehow I skipped this..I will find out.




I am working on obtaining the utility bills but his revenue as stated looks like this:

2004 - $200,398
2005 – $164,280
2006 – $156,064

Expenses look like this: 2006 – based on monthly expenses

Gas $1500 11%
Water/Sewer $1100 8%
Electric $700 5%
Labor $3500 26%
Lease $3300 25%
Insurance $250 2%
Phone $70 1%
Alarm $40 n/a
Garbage $300 2%
Supply $400 2%
Cable $22 n/a
ATM $40 1%

Gross income per month 2006 = $13,005
Total expenses avg per month = $11,207
Net monthly = $1,798

Present lease is $3300 per month, and no increases for another 5 years – this can be negotiated.

Labor consists of 2 shifts – 7AM – 3PM and 3PM – 10PM. Employees are actually independent contractors and are paid $7 per hour weekdays and $9 per hours on Sundays.

Demographics look like this: all stats based on 3 mi radius

- 12 competitive mats
- 2006 population = 169K
- Age Distribution (2006)
Total %
0-4 12,373 7.3%
5-9 11,350 6.7%
10-19 23,333 13.8%
20-29 23,849 14.1%
30-39 24,835 14.6%
40-49 25,147 14.8%
50-59 20,548 12.1%
60-64 7,132 4.2%
65+ 20,991 12.4%
- Race Distribution (2006)
Total %
White 124,274 73.3%
Black 24,414 14.4%
American Indian 487 0.3%
Asian 3,923 2.3%
Pacific Islander 18 0.0%
Other 11,094 6.5%
Multirace 5,314 3.1%
Hispanic 30,641 18.1%

- 2006 Household Income Distribution
Total %
<$10 K 9,796 13.8%
$10-$20K 9,985 14.1%
$20-$30K 10,642 15.0%
$30-$40K 10,272 14.5%
$40-$50K 7,094 10.0%
$50-$60K 5,925 8.4%
$60-$75K 6,750 9.5%
$75-$100K 5,503 7.8%
> $100K 4,912 6.9%

- 2006 Household Net Worth
Total %
$0 or Less 9,368 13.2%
$1-$5000 10,747 15.2%
$5000-$10000 5,240 7.4%
$10000-$25000 8,725 12.3%
$25000-$50000 9,114 12.9%
$50000-$100000 11,095 15.7%
$100000-$250000 12,578 17.7%
$250000-$500000 4,735 6.7%
$500000 or More 2,399 3.4%

- 2006 Total Number of Housing
Total %
Total Dwellings 81,833
Owner-Occupied Dwellings 35,569 50.2%
Renter-Occupied Dwellings 35,310 49.8%
Housing Units Occupied 70,879 86.6%

- 2006 Education Attainment
Total %
Population Age 25+ 110,356
< Grade 9 3,562 3.2%
Grade 9-12 11,881 10.8%
High School 39,058 35.4%
Some College 21,527 19.5%
Assoc Degree 8,331 7.5%
Bach Degree 15,622 14.2%
Grad Degree 10,375 9.4%

- 2006 Size of Household
Total %
1 Person 26,558 37.5%
2 Person 19,518 27.5%
3 Person 10,108 14.3%
4 Person 7,679 10.8%
5 Person 4,076 5.8%
6+ Person 1,750 2.5%

Here is some additional information:

- The floors need to be cleaned and polished (or replaced and re-tiles or carpeted)
- All folding tables need to be replaced
- Couple areas of the ceiling has leaks / water dmg (minor) but needs replaced
- He has two vending machines / both of which are owned, broken, and old
- Has two ATM machines both hold $1200
- Alarm service is provided by Protection One
- All washers and Dryers are owned
- Has independent contractor that provide service and repairs
- No video games
- Two small hanging TVs

Current owner has not really tried to improve the place…lights burned out, looks a little run down, does not advertise…small amounts of WDF (maybe $200 per month). Wants to sell because he has “other opportunities”.

So that’s most of the information that I have so far. The mat was listed at 135K 4 months ago, now it is listed at 85K, and the broker says I can probably get it for 50-60K which would put it at about 2.5 – 3 x net. The owner has had the place for 3 years and is losing money. Previous owner had the place for 9 years and did very well during that time. There’s a lot that can be done to improve the place. For example, what are your thoughts on subleasing the east side of the mat with the childrens play area…I feel that regardless of how nice it is to offer this play service for children, it is seriously impacting the bottom line. If the east side is subleased, that would potentially recoupe an extra $19800 annually in lease fees. This would sustain the business better during the slow periods.

We have not even begun to talk about money yet…but the broker said this guy would carry some of the financing for me. That’s another thing…I would need to get loans for everything…my personal credit is good ~700+ score. Working on buidling my LLCs scorte. So regardless of the numbers above..I would expect an extra 1K per month expense for me for loan repayments.

Anyone have comments / suggestions / questions / advice? I would appreciate it.

Thanks for taking the time to read this..
NT

[TLR]

You need to study the NEW competition more thoroughly -and where they are located in relation to the low income demographics. Why is income going down yearly? Most likely it is due to 2 things - 1. Bigger/Better new stores being built in area and 2. Letting his store get run down at the same time. If there are new stores in area - you will not get that business back - no matter what you do. Everyone will split the pie - everyone loses. Customers go to closest laundry - and generally do not pass one laundry to go to another. Your purchase offer needs to be based on what store is doing TODAY - not potentially tomorrow or yesterday - and if those numbers do not work to make you a profit after all those expeses - walk away - some other sucker will coma along and you buy it cheaper in a couple years.

TLR

[ntbushwick]

Thanks for the response TLR, I have been waiting for someone to chime in.

Here's some interesting information. In 2005 and 2006 the the average water usage per 3 month period remained steady at approx 60 cu. ft.. The same seems true for 2007 thus far. If he was losing customers, wouldn't the water usage drop? Especially considering he has lost almost 20K in 2 years, I would also expect a decline in water usage that corresponds to the loss in customers. If water usage has not declined then how could he experience such a deep drop in revenue? He no other real means of revenue, so the coin ops are his main source. In the real world, do owners skim a little off the top of their income and file less than what they are really making to pay less in taxes? His revenue decline has not been justified yet.

Also, I will investigate the other mats. What types of things should I be looking for?

Finally, do you think superior customer service (going above and beyond what the customer expects) is niche enough to create a successful laundromat business?

Thanks,
NT