June 23, 2022

Behind The Deal: This Laundromat Could Earn $10K in Weekly Revenue After Renovations

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Behind The Deal: This Laundromat Could Earn $10K in Weekly Revenue After Renovations

Unconventional Acquisitions

June 23, 2022

Behind The Deal: This Laundromat Could Earn $10K in Weekly Revenue After Renovations

This week, we’re breaking down a laundromat deal that two of our UA masterminders, Paul and Mary MacIntosh, are in the process of adding to their portfolio. But this isn’t their first rodeo…

Paul and Mary have already acquired a laundromat, and the deal they’re about to close on will be their second laundromat, and it’s just 20 miles away from their first location. 

P.S. If you’re new to the world of Unconventional Acquisitions, we’re here to show you how to invest in boring businesses (just like laundromats), so you can grow your wealth, find financial freedom, and start adding cash flow to your investments on day one through M&A. 

Let’s get into it…

Laundromat GIFs | Tenor

Here’s how this laundromat deal went down

Paul and Mary discovered their second laundromat after their salesperson, who normally scopes out deals on their behalf, was initially interested in buying it. But because of a conflict of interest, their salesperson wasn’t eligible to approach the business to buy it, gather information or do due diligence, or even make a deal. 

That’s when they passed the torch over to Paul and Mary.

What’s interesting about this opportunity is that it was an off-market deal—meaning that the deal was no longer listed as for sale or available on any local listings or websites like BizBuySell.com.

The owner was also a generational entrepreneur, which is usually the case for about 55% of all small businesses. The laundromat business had been passed down to the current owner from his mother, but he was no longer interested in running it. He was also sort of lukewarm about selling it.

A look at the deal numbers

When Paul called up the original owner, he learned that this laundromat was making about $300 per week from the coin-operated laundry machines (about $15k per year).

The owner had also listed their reported income after expenses at around $12k per year, making the overall annual revenue closer to $27k.

Revenue from Coins: $15k/year
Reported Revenue: $12k/year
Total Annual Revenue: $27k

The laundromat owner had originally asked for $125k for the business, and his mother (who still held the note on the property), was looking for $200k for the property. All in, this deal was looking like $325k for the asking price.

Paul and Mary ended up offering $100k for the business and $190k for the laundromat property, and came in at a total deal cost of around $290k all-in.

Final Deal$100k$190k$290k

As far as the equipment goes, the laundry machines were all working properly, but they were older models that were about ten years old and had been around since 2012.

Commercial grade laundry machines tend to have a pretty good shelf life, so this was a huge value add for the overall deal. In general, you can expect to see a return on revenue of anywhere from 5-6x the equipment cost for newer machines, and 3-6x for machines that are a bit older like the ones on this deal.

What their process looked like for an SBA loan

Paul and Mary went to their bank and applied for an SBA loan to fund their second laundromat deal. During the bank’s initial due diligence process, they discovered that there may have also been a dry cleaning service on the property at some point, and so the bank backed out. 

Immediately after getting the news, their loan agent tried to secure a loan from a second bank, but it was another no. That’s when the SBA office shared that if they were attempting to find funding for a laundromat deal that had a dry cleaning element, they would need to do a two-phased assessment to determine the environmental risk of the property.

After SBA completed the first phase of their assessment, they found that it was unlikely that a dry cleaner had been on the property previously, that it may have just been a rumor. They allowed Paul and Mary to forego the second phase of the assessment and move forward with their deal.

When it came time to run the actual environmental assessment, the seller ended up funding the first phase with an engineering firm, which came out to around $2k as a fixed price.

If they would’ve needed to complete the second phase of the assessment, it would cost closer to $8.3k and would take a couple of months to complete.

Paul also shared a little insight into his contingency plan if the SBA office would have required the second phase of the assessment, or if they wouldn’t have let them get the funding for the deal.

There is often an additional option to get funding for a laundromat through an acquisition loan directly from the machinery manufacturer, but the interest rate is slightly higher than an SBA loan. 

After the first phase of the environmental assessment went through, Paul and Mary were able to secure $150k for their SBA loan for the property and would put an additional $40k down in cash for the business and $40k for the property.

Final deal amount: $290k
Down payment: $80k

Assets loan: $400k

How they’ll renovate the space for $10k in weekly revenue

Once Paul and Mary knew that their deal was on the path to closing, they came up with a plan to 5X their weekly revenue.

After running the demographics for the area of their laundromat, they determined that if they were to offer more machines and switch to only accepting credit cards, they could make it happen. 

They’d also learned that the building they were acquired was doubling as a laundromat repair office, in addition to the actual laundromat. If they acquired the building like they were planning, they decided they would gut the space and tear out the repair shop that was in the back of the building and add more machines with more capacity.

Paul and Mary would also add about $400k in new equipment with a debt repayment plan from the machine manufacturer that costs around $7k per month. 

Part of the rationale for all of these renovations was that there are a lot of people who were living in the surrounding area, Most of them were going to laundromats that were nearby, but that location wasn’t the closest laundromat to their actual neighborhood. 

Because of the demographic and population footprint of the area, Paul and Mary feel confident that a fresh facility with quality equipment that was well-run would attract the right clientele to their small business.

Another upgrade that is in the works is to transition from coin-operated laundry services to only offering credit card payments. There is also a program that would allow card-operated services to be offered to EBT candidates (i.e. welfare) to use funds that can be used on other things besides food. 

The demographic breakdown of this area does have a high number of EBT participants, meaning that if Paul and Mary could be known as the preferred choice for laundry, they’ll be providing a service and easily securing more of the market.

We’ll keep an eye on this laundromat and see how things go after the deal is expected to close this summer, with renovations planning to be completed later this year.

If you’re brand new to the world of laundromats…you’ve just found THE place on the internet to learn how to turn them into a literal cash-flowing machine for you and your investment portfolio. 

If you’re looking for more info about actually buying or acquiring your first business, our online course for small business buyers is for you. It’s packed with the playbooks and years of industry knowledge you’ll need to get set up to be a dealmaker today. 

…or if you’re really serious about investing in small businesses, you should probably head over and join our mastermind

Yours Unconventionally,

Codie & Ryan

Co-founders – Unconventional Acquisitions

You can also register for the course here OR if you are serious about buying a small business, join our Mastermind.

If you want to learn more about how to find and buy businesses, check out these articles 👇

You can also register for the course here OR if you are serious about buying a small business, join our Mastermind.

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