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Maximizing the Value of Your Coin Laundromat

Guest post by: Brian Brunckhorst

Article Overview: There will come a time in every laundromat owner's future when moving on and pursuing other endeavors is the right thing to do. Regardless of your reasons for selling, if you have managed your business well, your coin laundry could be a substantial asset. However, if you've poorly managed your store, don't have an accurate set of financials, and haven't planned for the sale far in advance, the value of your business could be negatively impacted. Despite what some might think, the time to plan for selling your store is not the day you list it for sale, but rather, the day you buy it.

Maximizing the Value of Your Coin Laundromat

There will come a time in every laundromat owner's future when moving on and pursuing other endeavors is the right thing to do. Regardless of your reasons for selling, if you have managed your business well, your coin laundry could be a substantial asset. However, if you've poorly managed your store, don't have an accurate set of financials, and haven't planned for the sale far in advance, the value of your business could be negatively impacted. Despite what some might think, the time to plan for selling your store is not the day you list it for sale, but rather, the day you buy it.

The one question that you should be asking yourself is, "What are the things that I can do now to maximize the value of my Laundromat in two to three years?" To answer that question, here are three steps that you can do today to help you maximize the value of your coin laundry.

Step 1: Calculate the Value of Your Laundromat

All businesses that make a profit are valued based upon a multiple of net income. This multiple, in the coin laundry business, I call the SVM or Store Value Multiplier. This is equal to the value of the store divided by its average net monthly earnings before debt service, over a 12-month period, usually the most recent one. To calculate the SVM without knowing the value of the store, one must look at several criteria including, multiplier base, lease, equipment, competition, demographics, amenities, and overall coin laundry market. By adding or subtracting from the multiplier base, an adjustment for the other factors, you can arrive at the SVM. The SVM has a range anywhere from 0 to as much as 75, but usually ranges from 40 to 60.

I have a course that, among other things, teaches you how to calculate the value of a coin laundry and how to calculate the Store Value Multiplier. Once you have your SVM, you can calculate the value of the Laundromat by multiplying the SVM times the average monthly net income. As an example, if your calculated SVM is equal to 50 and the store has an average net monthly income of $4,000, your store would be worth around $200,000.

Step 2: Examine the Laundromat as if You Were Going to Buy It

As a buyer interested in purchasing a coin laundry, you went through the phase in the purchase process called Due Diligence. This is where you examined all of the financials of the business, analyzed the demographics, and inspected the equipment. When planning for the sale, revisit the steps you took when you bought your business and look at the business through a buyer's lens. You should create a list of everything that a buyer will find when examining your business. The list should include both the pluses and minuses of your store.

Ask yourself, "What makes this store superior than its competitors and what makes it inferior?" Be sure to identify any major risks that would potentially scare a buyer. These risks should be things that are both within and outside of your control.

Once you have made your list, sort it in the order of importance. Remember, the more detailed you are here, the better idea you will have of how a potential buyer will view your business.

The course that I sell also teaches how a potential buyer will back into your income through water analysis and how to analyze the market with a demographic analysis. Knowing how a buyer will be looking at your store is critical in determining how to maximize its value.

Step 3: Improve Value and Reduce Risk

After you have calculated your SVM, take the steps now to improve the different criteria that the multiplier is based upon. As an example, if your lease only has a few years left on it, the SVM will be negatively affected. By spending the time to renegotiate your lease with the Landlord, you will be able to secure a longer and more stable tenancy, thus increasing the multiplier. Likewise, replacing old equipment with new equipment or adding better amenities would also have a positive impact on the SVM.

Now that you've identified what your store's major risks are, you can take steps to correct some of them. Make a list of the top three things you can do to reduce a buyer's risk. Perhaps you could secure a maintenance agreement to fix machines and stabilize your repair costs. Or, increase your store's ancillary income sources. You could try to reduce your insurance rates by shopping around or lower your gas usage by replacing your old boiler.

Any specific elements that create value or preemptive action you take to lessen the buyer's risks will not only enhance your business's value, but in many cases will also put extra cash in your pocket each month. And for those of you who don't have any plans to sell your business for the foreseeable future, now is the best time to get your operation running its best. You never know when life's circumstance will throw you a curveball and being prepared will help you get top dollar for your business.

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Article Tags: coin laundromat, coin laundry, laundromat owners



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