Sanity Check

[Tom]

I've spent a lot of time working up a financial model for a possible laundromat and my projections using what I think are fairly conservative assumptions show a total annual revenue of about $250K. Does this seem out of line or reasonable? (15 x 20lb, 5 x 40lb and 1 x 65 lb washers, all front loaders)

Also, using all the known costs plus some fudge I project profit as a percent of revenue at about 32% --- is this in line with what most of you see?

[Howard]

All depends on location, location, location; even regardless of your managerial and operating skills.
Location.

[Chuckels]

Seems ideal to me. You have to wonder where the $250k is being spent now and how to direct it all to your new store.

Are you thinking about a new mat or purchase of existing? Where in CA?

Chuckels

[Duane]

$250,000 Seems a little high to me for a store with 21 washers.


Do you have a proforma? I can send you one that will help do the calculations for the number of turns per day needed to make a profit.

Are you a CLA member? Members of the CLA get a copy of their annual survey that has a lot of useful information that can give some ideas on what is possible with a store.

Howard is correct about the location, location, location thing....

[Anonymous]

Agree, the numbes seem a little high for that configuration, but without knowing the market it is hard to say. What are you planning to vend that equipment at. How many dryers and what are you vending that at? Is your 250K based just on that equipment, or do you have WDF, D/C and other revenues lumped in there too?

[ajay]

what known variables is your projection of $250k is based on. Have you looked at existing laundromat's water/electric/gas usage and then determined % you can pull from each/ used demographics?

ajay

[Kitty]

I always thought that projecting potential income is fairly easy, a(as it is only a projection....)its the reality of how it all comes to be is the real dilema.

What percentage of the location area are you figuring on? Where is the area currently washing? How do you plan to capture part of that market? This is where it becomes harder to compute. Who is going to help you make the 250k in revenue?

[Howard]

Kitty hit the nail square on the head.
Every customer you may get is currently doing their wash and spendiing their money somewhere else.
How many of them are going to change and for what reason(s)?

[Anonymous]

It is true that everyone is currently doing their wash somewhere now, but that is an oversimplification. I have seen figures that seem to state that there is a roughly 20% turnover in the rental population a year. Thus, if you have 100 customers you should expect to at best retain 80 of them over the course of a year. Hopefully you will gain a percentage of the new people that move in so that your total base is atleast 100 by the end of the year.

Looking at this another way, 20% of the potential customer base is up for grabs at anytime, thus the new mat has an equal chance of grabbing those customers as the existing mats.

[Tom]

Thanks everyone for all the input. The calculations include everything: washing, drying, soda and soap vending and wash and fold. There was a mat about 2 miles away that lost their lease and closed recently, this is where most people went. There are two other mats about 5 miles away in either direction that are both kind of run down.

I have dryers in a 1.5:1 ratio to washers and will charge .25 cents for 8 minutes which is what the other mats charge. The 20# front loaders will be $2.25-2.50 which is also what the others are charging. The area I am looking to put this in is a beach community with about 2000 people but many are in older apartments or rent rooms. I figured 5% did not have access to laundry as I drove around and counted up apartments and looked to see if they had laundry facilities. The area around this area +/- 4 miles has about 25K people, I assumed that 5% of them also did not have access to laundry, many migrant workers, and of that 5% I figured I could get 20% of those people as customers from the rundown mats as my equipment is newer, there are good places to hang out while your doing the laundry and I will offer wash and fold services. I assumed about 10% of my business would be wash and fold as their are a lot of single professionals in the area. Another line of business I did not count on or include in the model is washing horse blankets, this area is a big horse area and I've been told that I could expect to get a fair amount of business from that.

How does all this sound?? Any obvious flaws in the assumptions?

Thanks again, Tom

[Anonymous]

Your numbers don't sound unreasonable if you are replacing that mat. BUT, what does the owner have planned for that location, is the owner going to put another mat in his building, or is something else going in there. Can you talk to the person that owned the mat and maybe learn something of his business?

[pete f]

I hate to be the ballon buster but someone should take the other side..

less than 10% of all laundromats do 250k or more a year.

What was the water readings from the mat that closed down? That will give you the best indication of potentail customers

In a beach community, you have a big seasonal business.
You may not be factoring in the slow months. I have a mat on the beach, the slow months are 50% of the peak months.
I have similar demograhics as you pointed out and I do about 100k a year.

A new mat is a gamble in numbers at best, I would guess less than 1/3 of them ever do any good.

I would try to find out about the old mat, why it really closed down and how much rev or water or gas it used, something you can get real info from.

It could be a worthwhile venture, just maybe not as rosey as the spreadsheet makes it out to be.

[Anonymous]

Volume depends on your location. In the North East it is close to less than 10% of mats do less than $200K

[Andy]

You really would be cranking to do $250k per year. It sounds like a decent location, but you still have to make the numbers work. Plan to go a year before you approach your projections.

About the horse blanket thing, I know we've had some business from those cowboys, but we used to have a washer in the back for that kind of stuff. If your customers who put their wash cloths and such into the same washers get wind of that operation they may never come back. I am not saying don't promote it just make sure don't shoot yourself in the foot.

[mike]

Andy is right about keeping the horse business separate from the other, I would put in 3 - 40 lb. washer in a separate area for the horse blanket business, and promote it !! (also, don't be shy about charging more per pound for this business, they can't go anywhere else) That's why you should only offer them large machines. Perhaps you could discount that price only if they bring you ALL their laundry.
I had a racetrack near one of my stores, and did very well from those blankets.

[Anonymous]

Keep the damn horse blankets. I had a woman call me about bringing some in, I thought it would be great business. She used two 75# machines. When she was done I had to run each machine twice empty just to get all the damn hairs out. Now I don't allow that stuff if I see it anymore.

[Andy]

How much do you charge for horse blanket washing mike?

[PeterH]

Shoot! The proposed store is about the size of mine when I took it over, and I barely did 90K gross my first year! If I did 250K, I sho' wouldn't be at my "real job" in corporate America right now! Even after I put in the new dryers and washers, I stand at about 110K gross for 2002.

Here's what you do: figure out your 100% utilization -- how much you would make if all your machines were going from opening to closing each day for the year. Be sure to factor in some time for people to load and unload the machines (I use the 1.5 washer turns/hr. If your dryers are 10 mins/.25, then 9 turns/hr). Multiply that by a REASONABLE percentage of about 20%, and that might be your gross for your first year.

Example:
5 triples x $3.00/cycle x 1.5 turns/hr x 12 hrs the store is open x 365 days/year = $98,550.00

$98,550.00 x 20% utilization = $19,710.00

Do this for your washers and dryers and let us know the numbers you come up with.

[Gary C]

I am with the desentors on this one. Not that I don't think it will work just I don't think for a second it would do 250k a year. You would need 50% more machines to do it. The reason I say this is that even if you could pump that out for a little while you would start to loose customers to the other mats because yours would be too crowded and people just don't like that. I have 17 - 20# and 5 - 40# and 24 dryers and there is no way I am going to hit 250k. I think I have a pretty similar town to yours 23k on the coast.

Hope it goes well

Gary

[Andy]

I agree with the last several posts. I think the location sounds like it might have some legs, just not the legs that will bring in $250k-that's a lot of laundry

[Tom]

Wow!! Thanks for the feedback. I checked the water usage for the last 4 years of the mat that just lost their lease and talked to the company that sold the machines to them. Based on the numbers I estimate they averaged about 1000 loads per week and supposedly did a good Fluff and Fold business. They averaged 213 HCF a month over the last 4 years (748 gallons/HCF). They had 31 x Maytag top loaders and 2 x 40 lbs front loaders.

These usage numbers are all pretty consistent with my projections. What do you all think??

[Anonymous]

Like I said before, I am confident that you could do that, assuming he does not reopen or no one else reopens. It is a doable number with that many machines, and your water figures prove that out.

[RAM]

that is 159,324 galns/month avg.top load use 34 gal/wash/$1.25/wash,that is 4686 washesx$1.25=$5857.50x12months=$70,290.00x150%drye r=$105,435 total revenu per year that store
if you do wash and fold 1000lbs/wk at $0.75/lb that is $750/wk x 52 weeks =$39,000 but than you have to pay $39,000 in payroll

[Lar Hylobates]

213 HCF is way too little for 250,000 gross...I think I lose that much in leaks.

[PeterH]

1000 loads a week? I go anywhere from 550 turns a week to just over 700 turns a week, and that to me is 110K yearly gross.

[Lar Hylobates]

Now you guys are really making me mad...a rare occurrance. I have over 1500 total turns per week on only the washers, use 450 HCF per month.

[Andy]

623 tpw for me

[CharlieS]

Okay, lets do some calculatin'

My stores average about 1/10 of their water bill each month in gross dollars. OK, this is very rough, but close enough. That would mean your closed store was doing about 16K a month.

A store will usually make good money if it can do 5 turns a day. A higher average means you will be losing business on weekends when the crowds hit.

To do 16K, your 21 machine store, with a capacity of 565 pounds, generates 81.93 per turn, priced at 10 cents per pound of capacity and assuming your dry income is 45% of your wash income (31% of total income). 16,000 / (30 * 81.93) would need 6.51 turns per day. 25K would require 10.17, a huge number. I think the only one here approaching that number is Hylobates.

It sounds like you have some definite possibilities, but that you are overestimating the potential and underestimating the amount of equipment you need.

Your next step is to do a serious demographics analysis. Is this community stable year round, or is it seasonal?

All things being equal, I would go unattended any time I could. The labor cost just can't be made up with the W&F. You would probably make great money off an unattended mat this size. Add attendants, and you will be lucky to make 1 or 2 K per month.

Finally, I don't think you need 1.5 dryers to each washer. I believe in 1 to 1, and others here even less. However, don't reduce the dryers, add more washers to get your numbers even. You need more 35 to 40 pound machines.

Charlie

[Lar Hylobates]

Charlie,
I unfortunately must now be smart enough to keep up with ANY of your post, but I did catch some reference to my store. I really don't think my store is doing HUGE numbers, but the water bill is real. I have stated in the past that if I was ever audited with water bills I would get burned. My store uses much more water than it should.


Someone mentioned to me the other day that I should put the rubber drain lines back on my toploaders and use stand pipes rather than let them just spill out into the floor drain.

[CharlieS]

Hylo - I was referring to your turns. From what you have said, my guess is that you have the highest number of turns per day of anyone on the board. How high is it?

I am guessing this based upon your numbers and your statements about the store being maxed out a large part of the time.

Charlie

[Lar Hylobates]

Here are my total turns per day average for January

Topload 125.63
Super 20 25.52
Milnor 10.94
Speed 35 18.53
Wasco 35 20.03
Horizon 29.98
Dryers 680.34

[Anonymous]

HELP, what are those number - they are not TPD, as the lowest one was 18.

[CharlieS]

Hylo - I take it that this is your total daily turns by type of machine. How many do you have of each?

Charlie

[Lar Hylobates]

Those are turns per day per TYPE of machine. I have a total of 51 washers.


plus about 20 more stacked along the side of the house and four more in the garage.

[CharlieS]

So thats about 230 Turns for 51 washers, or about 5.1 turns per day. I thought you were jamming people out the door. Is that just on weekends?

How do your customers like those stack washers?

:)

Charlie

[CharlieS]

5.1 where the heck did i get that number from. I know I typed 4.5.

Its too early to think.

Charlie

[Lar Hylobates]

It's not the way I view it, but I guess for your purposes it will work. Definitely still packed out the door on the weekends. I have my attendant call me for kicks anytime all the machines are being used simultaneously. He typically calls several times a day, Sat. & Sun.

As far as the rest of the week, I think there are plenty of times the place is slow. It wasn't like that a few months ago, but lately I arrive midweek afternoon and find it slow sometimes. Weird thing, though January was a record gross sales. A few weeks ago my changers did $2,700 on Sat. & Sun. only. This business is strange.


My new stacks work fine, seems most feel they are better, many use the old SQ slimlines by choice and a few have truly been adament that the new dryer suck. I've dryed a few things and think they might be slightly faster, but nothing huge like a distributor would have you believe. I feel as though I have a gas savings of 10 -15% compared to the slimlines.

Burned two motors already, I keep a new motor, computer board and a few odds and ends on standby ( got them from the distributor prior to closing the deal)

Bottom line Each pocket gets exactly the same turns, regardless of brand, age or position.

I do atribute some of this to a full house, however there are many who will not use the new ones.