Looking at purchasing

[Michilini]

I have come across a mat for sale in my area. The owners will not supply books since they haven't been doing them correctly... sigh. People just dont understand how they devalue thier businesses... anyways. The mat comes with property with a small space leased to another business in the back. The leased area has been there for a long time, working on one year leases that they havent been keeping track of... "rolls eyes"... sigh again. Seems they dont actually know how to run a business but instead have a hobby.

There are 3 laundrymats in the area, including this one. You can actually see them from the front door. Population for town is 10k, but is attached to a larger city with population of 27k. Area has alot of low income and hispanic people.


Water and Sewer 5.50/1000 gallons
Yearly water history for all 3 mats:
5,419,000
9,167,000 < New machines, new laundry about 4 years ago
5,930,000 < One we are looking at buying


I do not know how much the value of the building is unfortunatly. But here are the specs:

Tax appraisal is 128k (low of course)
7870 site sq. ft.
3355 building sq. ft.

Mat uses 2378 sq ft, other area is leased.

They have a busy WDF. Employees are doing laundry the whole time they are working. Hours are 7am - 10 pm, 7 days a week and it is fully staffed. They charge 0.75 per pound for WDF. Supposidly in order to take any more WDF they would have to either expand or have a night shift doing laundry. Do not know if this is true or not, but everytime I'm there, there are alot of bags and staff is doing laundry.

Machines are old, most are in the 20-30 year old range. There are around 5-6 that have been replaced in last 4-5 years.

41 Washers:

32 Top Loaders
5 18# Loader
3 35# Loader (Im assuming this is what is used for WDF)

19 Dryers:

16 30#
3 35# (again assuming WDF)

All income and expenses are done based on information I have collected and calculated using IRS water calculation. Nothing has been provided from seller. I have no income listed for WDF since I do not know how much is actually being done so, therefore, all assumptions are based on coin and do not reflect deductions from quarters being used for WDF. I am not including any vending income or expenses since, again, I have no information.

Monthly Income:

12,140 coin

Total Monthly Income: 12,140

Monthly Expenses:

Water 1000
Gas 1400
Elec 1700
Payroll 3600
Pay tax 225
Ins 180
Othertax 100
Phone 40
Repairs 100

Total Monthly Expenses: 8,145

Net Profit: 3,795

Minus mortgage, taxes and insurance 3000?
Plus lease space income of 600

Total Monthy Net: 1,395

Yearly Gross: 145,680
Yearly Net: 16,740

We have done some calculating and assumptions based on WDF. Based on what we have seen and heard we have figured an additional 3000 per month for vending and WDF. Which would give an additional 36k Net.

Asking price is 340k

Any suggestions, comments, complaints, or advice would be appreciated.

[Coinwash]

I have come across a mat for sale in my area. The owners will not supply books since they haven't been doing them correctly...

WHAT??? Sit in his store for a month watch the traffic...Then look at his bills
You want to see his tax returns for the last few years if not WALK AWAY -

[pete f]

The water usage does not seem right. Is it 593,000 gallons per year? I think it is cubic feet? So about 1 million gallons a year.

It is very good to own the building the mat sits in, if it is ner your home even better. I disagree with coinwash here, forget about tax records, use the info of water and gas usage along with pros and cons of everything involved to see what price is acceptable to you.

The way it works is the owner tells you what the income and expense are, you have a period in which to verify his numbers before proceeding to a closing.

Nobody gives out tax returns or hard data to a prospective buyer, only general information until a contract is signed.

It is nice to have some books to look at, I am sure if you got serious the owner would turn up something. I have met with owners and thier handwritten collection book after making an offer durring the due dilliagence period.
They claimed to have nothing durring initial discussions and late filing taxes.

The mat has to meet certain criteria for you first, then get the price. You can not use the mortgage payment as part of your net income calculations for valuation purposes either.

[Michilini]

Oops, you are correct. I have wrong numbers for water. Here are correct gallons of water per year for each mat.


2,117,300
3,314,000
1,951,100 < One we are looking to purchase

[Boxer]

I found this and liked it, so please give it a read !
http://www.busbuysell.com/Sell/Buyers_Look/buyers_look.html


WHAT BUYERS LOOK FOR WHEN BUYING A BUSINESS

As a seller it is natural for you to be most concerned with your own needs, but don’t lose sight of the buyer’s needs. Unless the buyer’s needs are met, they will never buy the business. Sales that actually take place are win, win situations, not loaded heavily to the buyer or seller.

WHY IS THE BUSINESS FOR SALE? This is one of the first questions a buyer asks. There should be a good reason for sale such as health, retiring, moving etc. Buyers are always concerned that you may be selling because of some undisclosed fact which may hurt the business in the future. Buyers must see a logical reason for sale – without it they will assume the worst!

BOOKS AND RECORDS. Even though buyer’s may trust you completely, they will want proof of the sales and profits that the business has made in the past. This means that you should have income tax returns, sales tax returns, balance sheets and P & L’s ready for the buyer’s examination

REASONABLE PRICE AND TERMS. Quite frequently real buyers won’t even look at a business that is over-priced because they feel the seller doesn’t really want to sell.

TERMS. Generally speaking, banks are not very quick to finance the purchase of a small business. Over 95% of small businesses sell with seller financing, thereby showing confidence in the buyer’s ability and the business’ future.

INCOME. Buyers must feel they can make a decent living wage from the business after they have made their payment to the seller for debt service.

EQUIPMENT AND FIXTURES. Buyers will want a complete list of your equipment and will inspect it to insure that everything is in good working order.

LEASE. All buyers want a good lease and look to the seller to help in the transfer of the lease or in getting a new lease.

TRAINING. One of the reasons that buyers acquire a going business is that they can obtain a business they have no experience in and feel confident that the seller will train them. This opens up the number of potential buyers for your business.

APPEARANCE. Everyone wants to be proud of their business, therefore nice looking businesses sell first! Buyers deduct large amounts from their offering price for businesses that are in less than top shape. You should keep your business neat, clean and in good repair if you want top dollar.

NON-COMPETE AGREEMENT. Most buyers fear that you may decide to open another business just like the one they are buying and take all their customers. A promise not to compete within an appropriate distance and time, is normal for many businesses.

TIME IS OF THE ESSENCE. It’s always wise to respond quickly to an offer because buyers are often looking at more than one business when they make an offer. An offer can be withdrawn any time until it is accepted and delivered back to the buyer. If you don’t respond in a reasonable time, the buyer may lose interest in your business and move on to another.

NO SURPRISES. Almost any situation can be resolved if it is disclosed in advance. Please be sure to tell us about any problems such as: Are you behind in tax payments? Are there any problems with the landlord or lease? Are there any liens against the business? Are you in compliance with zoning, health and other regulations? Etc. If the buyer is surprised by something similar to this late in the process, they often just walk away.

[Michilini]

The mat has to meet certain criteria for you first, then get the price. You can not use the mortgage payment as part of your net income calculations for valuation purposes either.

Pete,
Would you use rent if you didnt own the building? I will actually be purchasing the building and mat separate with 2 different LLC's. Mat will pay rent.

[Palmyra Jim]

Unless the owner is willing to finance the operation, it will be hard to get a bank to fund the operation unless the reported tax information fits what they need. Locally in Rochester, I looked at a deal that the bank would not fund due to this problem. The owners were not reporting all income and would not share the books. I was not willing put in an offer and "wait to see" how the figures came out.

Is this someone you will be able to work with after the purchase?

Best of luck,

Jim

[pete f]

Pete,
Would you use rent if you didnt own the building? I will actually be purchasing the building and mat separate with 2 different LLC's. Mat will pay rent.

Yes, you have to figure an occupancy cost for the mat. simple way is use 20% of gross for "rent" Now recalculate. The financing of the deal in no way affects the value, however it greatly affects the cash flow.