January 2, 2021

Buying a Laundromat – Breaking Down the Deal

Ya baby… buying a coin operated laundromats, that’s what we’re talking about.

Here’s a breakdown of a deal my gent will run that we may buy. Just another funky business idea for non-correlated cash flow.

My deal: Buying a Laundromat

– $67k profit a year

– Buy w/ $0 of his own cash

– Use $100k in seller financing (using future sales to pay off owner)

– Finance Rest w/ Equipment loans

First, Why are we Buying a Laundromat?

What could possibly be sexy about hundreds of thousands of pounds of dirty laundry, circling through their rinse cycle, that’s paid for in coins, when you hardly even carry cash anymore?

Glad you asked, my friend. If you’re not sure if you’re ready to take the leap and buy your first laundromat, let me introduce you to my friend, Michael Nerby. He’s built a $750k+ business (with $250k in profit, might I add), just by acquiring a few of these sudsy and savvy laundromats.

Not only that, but Michael was able to make it happen by only putting up $35k of his own money into his laundromat deal. You can learn more about how he did it here.

Hopefully, you’re starting to see laundromats in a different light, so without further ado, here’s my list of the top reasons that we love buying laundromats:

Simple – customers do the majority of the work washing and drying their clothes
Little labor – means training, on-boarding, and labor is relatively minimal
Upfront cash – customers pay upfront, makes accounting and tracking easier
Recession resistant – people always need clean clothes
Good ROI – laundry industry has a 20-35% ROI and nearly a 95% success rate, according to Speed Queen (eek, not sure on 95% but maybe directionally).
Inventory. – Unlike a restaurant, convenience store, or grocery store, laundromats have very little physical inventory.
No Seasonality – Not seasonal or weather-dependent.

Cons

You (or in my case my gent and our operator) have to run a laundromat. 😉
$200k price tag – BUT I’m going to use seller financing and a small upfront like $20k. Learn more about how to structure deals w/o capital like this —> With UA.
Low barrier to entry – lots of laundromats out there.
Get Your Hands Dirty. You’re a plumber, electrician, businessman, marketer, janitor, and a million other things all rolled into one. Or you do what I do and give an equity split to an operator to run it for you and you front the cash.
Set costs keep on rising –utilities and rent don’t go away.
Customers – This is a unique client set, I have someone else do the coin collection, security, oversight etc. Because well… crackheads.

Here’s a high level of how the balance sheet looks.

It’s about the same over the 5 year period I requested, variable from $50-70k.

They wanted $200k and would finance through seller financing $125k.

I said, that’s cute. I also want Bloomberg’s balance sheet but sadly he won’t give it to me.

So, given there are 2.5M businesses for sale and he wants a deal, we are circling around my deal which look like this:

I negotiate down the price (bc you know world is burning), I give him a small down payment, and structure a deal to do the rest of the payment over three years. Lots of ways to get seller to do this that we talk about at Unconventional Acquisitions, I like structuring them so the seller wins too on the upside. If you want to buy a laundry business, you should join our laundry buying masterclass!

For this deal, I make about $5,583 a month as the buyer. We got a good multiple of 1.86x. Then, I am at breakeven in 3 months for my initial cash down and my Cash on Cash Return is 268%.

Read that again. WE’D MAKE IN YEAR 1: 268%.

If you want to learn how to buy laundromats with Codie and Ryan and our Laundromat Masterclass partner Mike Nerby, who has stacked 4 in the past 2 years for over $1 Million in annual revenue, and over $300,000 in annual profits, check out the Laundromat Masterclass!

Then again because I like to get paid on the closing AND capitalize on the business so I can hire an operator to do all the things I don’t want to do.

I get an equipment loan potentially for the $135k worth of laundry equipment and an SBA loan (they’ll do 90% of the revenue typically).

Which gives me $242k AT CLOSING on a laundromat in my bank account.

Then I start the process to go, find another one, and use those proceeds as the cash down.

DISCLAIMER: Devil Is In the Details When Buying a Small Business

There are 10 steps to buying a small business w/ seller financing or creative structuring. This is just one of them. You have to find the deals (origination), analyze them (due diligence) and on and on, but my job here is to OPEN YOUR MIND. Open it to the things us on Wall Street make billions on that YOU on Main Street, never do.

If you want to see how Private Equity heads become billionaires, don’t look to Wall Street, look to Main Street. They buy boring businesses, they turn them around and optimize them, then they cash flow off them.

This is a triple sided win. Business owner gets to retire, you get to cash flow, and employees get jobs as we optimize and grow.

This is the difference between TRADING stocks where someone has to lose for someone else to win. While building businesses, all can win.

Yours Unconventionally,

Codie Sanchez & Ryan Snow
Co-founders Unconventional Acquisitions