UPDATE – We now have a NEW website, Laundromats101.com!
This blog, MyShinyNickels.com, will remain a personal finance website, while all laundromat-related goodies, including this blog post, have been moved to Laundromats101.com.
Click HERE to read this post on the new site…
Last time I checked in, I told you that we’ve decided to pursue the purchase of a self-service coin laundry business. That is still the case, and for the last few weeks we’ve been completely immersed in coin laundry industry jargon. Who knew there was an entire underground (well, sort of) community of people who live and breathe the laundry business? No joke. I can now state with complete confidence that it’s true.
Everything from how to decide on what your wash and dry vend prices should be, to accurately estimating the value of an existing laundromat, to discussing the minutiae of utility usage.
Terms like ‘turns-per-day’ (how many times the average machine is used per day) and ‘water bill analysis’ (a method of using the water bill to support the seller’s stated monthly incomes) are things we’ve become very familiar with.
Why all of this knowledge absorption? Well, we firmly believe that one of the best things you can do when going into business (whether you’re starting new or buying an existing one) is to soak up everything you possibly can on the industry you’re interested in. This is critical not only for your own continued success in the industry, but it’s just as important to have this knowledge before you even make an offer.
As part of the business purchase process, you need to have confidence. You must be able to speak intelligently to industry concepts and terminology. Not only will this make the parties involved (business brokers, sellers, lenders) take you more seriously, but they will be less likely to take advantage of you if you sound like you know what you’re talking about.
In our case, we have a bit of a leg up, as Randy works full time as a Production Manager for a large commercial laundry company. But running a commercial laundry plant and owning a laundromat are still fairly distant cousins in the laundry business “hierarchy”.
So what are we doing right now? Well, we’re knee-deep in digital paperwork.
After signing a confidentiality agreement, we received the first half of what I call the due diligence records. By this I mean that the seller has provided a large chunk of detailed financial information…profit-loss statements, revenue and expense records, utility bills, lease terms, etc. However, we are still waiting on some other documents…more recent utility bills and the Schedule C forms from the last 3 years of income taxes, to name a few.
And because I’ve been Mrs. SpongeData LaundryPants lately, and am fairly familiar with laundromat valuations and income/expense statements, I can actually review these records and make a fairly quick assessment of whether the business is something we should continue to pursue.
The verdict?
So far, so good. We’re moving forward.
However, it’s important to note that our signed purchase contract is extremely flexible; we could essentially back out for absolutely no reason at all.
We’re meeting with the seller for the first time on Saturday afternoon to go over details of the business, procedures, etc. I’ll give you an update afterwards and let you know how it goes…
…oh, and before I forget, I just did a podcast interview on the financial blog site, HisandHerMoney.com! Go check it out HERE!
The site is run by a husband-wife team, Talaat and Tai McNeely, and they are two enthusiastic and fun people you should get to know. Plus, you’ll now get to match my face to a voice. (Does anyone else think they sound strange when they hear their voice played back?)
Everyone thinks that their voice sounds strange when played back (especially mine – except maybe in the shower – lol). That was a great podcast to listen to, Laura. And, no, you didn’t sound strange at all.
Happy to read how you guys are doing your required “due diligence” work on your planned business venture. Does the timing of the completion and assumption of ownership of this new business before or after this year end have any impact or importance on your tax reporting situation? Just curious.
It was interesting to listen to your podcast. The points that stuck in my mind in listening to you were:
(1) You guys were wise to set up intermediate “celebration targets” as you hit your various milestones in your journey to get out of debt. Ongoing motivation is important.
(2) Although $40K in debt in 2011, you guys were fortunately not as bad off as many others in deep debt.
You had equity in a house (not over mortgaged) that you used to downsize (saving a big chunk of $$ annually).
You both were (and are) employed, healthy, and bringing in income.
It doesn’t appear either that you suffered a major economic hit in the 2008 recession like so many others did.
All these points worked in your favour in getting out of $40K of debt and saving $100K thereafter in the relatively short time that it took you.
I mention these things not as criticism but to put things in some perspective for perhaps those readers out there who may wonder if they can get out of debt as quickly as you did, given their (maybe) less fortunate situation (egs., unemployed, ill health, minimal assets, etc etc).
Getting out of debt is possible – for anyone – so long as they have the determination and discipline to do so as you guys demonstrated. The important thing is motivation – to not give up, thinking that it’s impossible – regardless of how long it may take to accomplish. As they say: Rome wasn’t built in a day. Never give up.
Just my 2 cents …
Your 2 cents are always spot on, Rob. To your first point, yes, we’ve considered the tax implications of the business purchase, and we purposely set a minimum 60-day escrow so that it won’t change hands until the new year. 😉
As to the podcast, thanks for the kind words. I admit I’ve had my share of people who say “but we don’t have the incomes you do, and my husband is on disability, etc”. But I always go back to what you said above, that getting out of debt is possible for anyone. There is usually room somewhere, no matter how small, where changes can happen.