Connect with laundry experts

Register for a Free or Premium membership now

Learn about the laundry industry

Read valuable content to build your business

Expand your laundry business

Classified Postings are free for Premium members

Join Now Login Advertise Payment

The Laundromat Success Programâ„¢ helps you create a detailed plan to completely protect all aspects of your laundromat business.





Please tell them Coinwash.com sent you....

  #1  
Old 07-12-2017, 10:48 PM
LaundryNewbie LaundryNewbie is offline
 
Join Date: Jul 2017
Location: Southern California
Posts: 2
Default In Escrow - How do I value the store?

Hi all,

I am a new prospective laundromat owner that is currently in escrow on a store.

Store price is in the $500K range, with reported earnings of around $9K/month.

My dilemma is that after doing our due diligence, we believe that the owners are slightly over-reporting revenue and significantly under-reporting expenses to the extent that the store is likely only doing $6K to 7k a month in profit (at best).

The store is in a prime location (very high population density, very low income), but there are a number of competitors in the area, one of which is much newer, nicer and is only 0.2 miles away. We believe we can fix the store up for around 20K to $30K in cost, and if we wanted to change the 16 double-stack dryers (very old, 2001), then add another 70 to 80K on top of that.

So....While I was originally comfortable with purchasing a store for up to 5 times earnings (especially if it has potential to grow), I find myself very reluctant to pay 6 times earnings or MORE, just "for potential." I am working with a laundry consultant who is telling me that most new laundry buyers never want to pay a penny for potential, and that is a big mistake that newbies make, always looking at the numbers, etc. That I should be willing to PAY EXTRA FOR POTENTIAL.

So my question is, how much over 5 times earnings would you pay for POTENTIAL in a situation like this. This is not a run-down mop-shop selling for $80K, but a fully functioning store that is selling for over $500K and is producing $6 to $7K a month in profit (more if you ask the owners!).

Am I looking at this incorrectly if the MAX I am willing to pay is 5 times their REAL EARNINGS that I've calculated?

Sellers have refused to show their tax returns and literally have no books for us to go off, just their numbers written in a notebook of their so-called collections. We have done observations on six separate days, 15 hours per day, and have a pretty accurate count of the revenue they are actually pulling and the real expenses they are incurring. If anything, we are being too kind to them in our analysis.

What's the most I should pay? At what point do I just walk away?

Edit for Clarification: This store is leased, so we are not paying for the real estate. We will need to negotiate a 15 year lease with the current landlord.

Last edited by LaundryNewbie; 07-12-2017 at 10:51 PM.
Reply With Quote
  #2  
Old 07-12-2017, 11:14 PM
Coinwash's Avatar
Coinwash Coinwash is offline
Head Administrator
 
Join Date: Oct 1999
Location: NY
Posts: 2,989
Default

Go to editorial page please 1st

Then start reading posts.....
__________________
Coinwash.com Bulletin Board,
“We are the most used Laundromat Bulletin Board on the NET.”

Please visit the Sponsors who Support Coinwash.com


----------------------------------
Everything expressed here
is not necessarily the opinion of
Coinwash Corp. (Coinwash.com),
Sponsors, or this Webserver.
Reply With Quote
  #3  
Old 07-13-2017, 12:17 AM
LaundryNewbie LaundryNewbie is offline
 
Join Date: Jul 2017
Location: Southern California
Posts: 2
Default

Hi I already did that. I've also read around on these forums for the last few days as well.

Apparently coin laundry's in CA are typically valued at 4-5 times annual earnings (Some brokers even say 4-7 times earnings), so it appears that CA laundries are a bit pricier than other parts of the country.

My questions still stand.
Reply With Quote
  #4  
Old 07-13-2017, 07:32 PM
shad2038 shad2038 is offline
Moderator
 
Join Date: Sep 2008
Location: Mildura Australia
Posts: 1,241

It is very hard to bank "Potential"

Never pay more than 5 X Nett!

See if you can get Utilities for last few years, together with income you may be able to figure whether improving or going backwards. I have seen figures for a mat that showed growth of income, but no positive change to utilities. He held off, and ended up paying 60% of asking price. 1st years figures were down 15%, so obviously overstated.

Buyer beware!

Good Luck.

Last edited by shad2038; 07-13-2017 at 07:34 PM. Reason: Spelling.
Reply With Quote
  #5  
Old 07-14-2017, 03:13 PM
KJD KJD is offline
Premium Member
 
Join Date: Jun 2003
Location: NY
Posts: 1,350
Default

Maybe it's just me but for a 1/2 million I'm going to see books and tax returns.
If not there is something to hide.
Reply With Quote
  #6  
Old 07-24-2017, 11:28 AM
grosa001
"site-seer"
 
Posts: n/a
Default

Quote:
Originally Posted by KJD View Post
Maybe it's just me but for a 1/2 million I'm going to see books and tax returns.
If not there is something to hide.
I agree COMPLETELY. They need to earn their payday. If you can't run an organized business with books, records, etc, you shouldn't be able to get $500k on the market for being sloppy.

From someone who overpaid when first getting into the business (based on potential), my advice would be to tell them you want a steep discount for not having books, or go find another store to invest in.
Reply With Quote
Reply

Thread Tools

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is Off
HTML code is Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
I just opened escrow on my first mat tnsr35 Laundromat 101-Newbie Section.

2 03-19-2016 03:48 PM
New Store Laundry Girl COINWASH.COM

6 06-11-2006 07:52 PM
Falling out of escrow? Walter COINWASH.COM

3 07-16-2005 08:25 PM
I just opened escrow on my first mat Laundromat 101-Newbie Section.

0 12-31-1969 07:00 PM


All times are GMT -5. The time now is 07:58 PM.


Powered by vBulletin® Version
Copyright ©2000 - 2018, Jelsoft Enterprises Ltd.
Coinwash.com has the right to cancel Memberships and to block whom ever we choose.
When we feel rules have been broken or the website (coinwash.com) has been misused.
Tell them Coinwash.com sent you...

Tell them Coinwash.com sent you...

Tell them Coinwash.com sent you...

Tell them Coinwash.com sent you...

Tell them Coinwash.com sent you...

Tell them Coinwash.com sent you...



Tell them Coinwash.com sent you...

Contact the folks at the Laundromat Success Programâ„¢ today to make sure your laundromat is safe. It will help you sleep better tonight.