Are you thinking about investing in a laundromat? Instead of jumping in head-first, dip your toe into the water by researching the business’s true value and earning potential. While a laundromat can be a solid source of steady income, that’s only true if the investment is backed by smart planning and due diligence. There are several key factors you should consider so you can make a confident, informed decision. Scroll down to learn how to evaluate a laundromat business.
Key Factors to Consider When Assessing a Laundromat
If you’re exploring the possibility of purchasing an existing laundromat business, it’s important to delve into all the details. The following factors should be on your radar:
Financial Performance
- Obviously, you’ll want to look at the revenue and profit margins. Review at least two to three years of financial statements to better understand the income consistency and profitability.
- Take a look at the expenses, including utility bills, rent, payroll (if the laundromat is staffed), maintenance costs, and supply costs.
- Consider whether the business uses coins or cards for payment and how that might affect revenue.
Location & Demographics
- Ideally, your laundromat will be in a highly visible and easily accessible area with great foot traffic and/or ample parking.
- Explore the local population, and remember that renters, students, and lower-income households typically drive more business for laundromats.
- Look at nearby laundromats as well, taking their quality, pricing, and popularity into consideration.
Condition of Equipment
- How old is the equipment? Older machines may be costly to repair and produce high utility bills, while modern, energy-efficient machines can attract customers and save you money.
- Ask for documentation of the washers’ and dryers’ maintenance and repairs. This will help you understand how well the current owner cared for them — and by extension, how well they cared for the rest of the business.
Lease Terms
- Is the laundromat currently leasing equipment? If so, review the lease terms. A longer lease offers more stability than a short-term lease.
- Check if the lease allows for equipment upgrades or any other value-add opportunities.
Customer Base & Reputation
- Visit the laundromat on different days and at different times to observe the foot traffic. Are there many repeat customers?
- Does the laundromat have a loyalty program in place?
- Look at the business’s reviews on Google, Yelp, and Facebook to check for recurring complaints and positive feedback.
Operational Details
- Is the business fully automated, partially staffed, or full-service? Consider how you may wish to change this in the future.
- Review the hours of operation, keeping in mind that longer hours can mean more revenue, but they may also increase your utility and staffing costs.
Compliance & Licensing
- Check that the business has all the required local licenses and permits and is compliant with all sanitation and fire codes.
- Make sure the facility is compliant with the Americans with Disabilities Act (ADA).
Growth Potential
- Brainstorm upsell opportunities, such as a wash-and-fold service, vending machines, and Wi-Fi.
- Review how the business is currently promoted, if at all, and brainstorm marketing ideas. Could you increase revenue through better signage, advertising, or promotional campaigns?
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As you can see, if you want to learn how to evaluate a laundromat business, you need to do more than quickly glance at the financials. By doing your homework and asking the right questions, you can avoid costly surprises and set yourself up for long-term success.
Are you ready to get started? Check out Laundry Solutions Company, a full-service provider of premium vended, on-premises, and multi-housing commercial laundry equipment. Since 1976, we have provided exceptional sales support, laundry design services, commercial laundry equipment (and leasing options), and laundry equipment service and parts. To learn more about our products and services, please call us at 800-383-9274 or contact us online. We look forward to hearing from you.