The question of “value” can be a tricky one. It’s buying season, and plenty of business owners, entrepreneurs and investors are in the market for their next coin laundry acquisition.
This means determining value is increasingly important. However, value can also be a bit subjective on the surface, with the current owner placing a different value on his or her laundry business than a potential buyer. To clarify, the best course of action is to look at a few of the main elements of a business, in order to narrow down the true, realistic value.
Here are five of the most important ones to note:
“Laundries often last a lot longer than other businesses.”
1. The longevity
Unlike many other businesses, laundries tend to last. In fact, this is the hallmark of a quality coin laundry – it was there in the ’50s and ’60s, and it is there today. This is due to the unique nature of the industry. Coin laundries are always in demand, and the only thing that truly changes is the equipment. So, a business owner who upgrades the store to keep up with the times is likely to stick around.
When determining the value of the business, consider its long-term life expectancy first. Even a laundry with every other positive feature included won’t be worth a whole lot if it is unsustainable.
2. The lease
The next most important feature of a laundry business is its lease. Say you buy a coin laundry, but its lease expires within the year. This gives you little (or no) time to recoup your investment, grow the business or resell to another investor.
Time isn’t the only consideration for a quality lease, though. You also want reasonable terms. One is comparable terms to other leases in the area. Naturally, you also want the lease rate to be in-line with the laundry industry. Think about negotiating terms with the landlord at the time of the purchase. The goal is to acquire a lease that is favorable and affordable, plus leaves you enough time to support your investment.
3. The equipment
The next most important element of a laundry business is its equipment. You don’t want to buy a store that has extremely out-dated machines and fixtures, since you’ll be the one who has to repair and replace the components. High-tech, updated and functional equipment will also attract more customers. Don’t forget about deferred maintenance, either – the cost of repairs has to be factored into the overall value of the business.
4. The business model
Next up is the laundry’s business model. This affects the overall value in three key ways:
- Operation style – Do you need employees? Is it open 24 hours? Does it need additional businesses or services to operate efficiently (cleaning crews, security, etc.)?
- Competition – Is it priced competitively with nearby laundromats? How about apartment complexes’ laundries?
- Consumer demands – Does the laundry answer consumer demands? Does it have the right equipment for the job? Is consumer spending where it should be?
The overall business model can be incredibly useful when valuing a laundry business.
5. The market
The fifth, and final, most important valuation element in the laundry industry is the market itself. Learn about the city and the neighborhood where the laundry is located. Determine if there is adequate parking or public transportation for your consumers. Also look into city tax breaks and benefits for businesses, including the local budget and economic plans for the future. Some cities are more likely to support your business – and this industry – than others. That makes for a more valuable coin laundry.
These five elements directly impact the value of a business. Learn what they mean for you, so you can seamlessly move forward with your next laundry acquisition.