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…
If only I had a blogging magic wand. I’d say an annoying little jingle, wave a cool-lookin’ stick and my blog post would appear. The truth is that posts like this one take a l-o-o-o-o-n-g time to pull together; numbers, calculations, reviewing records, Zzzzzzz.
So, sometimes it takes me a while.
But I realize that posts like this are where the meat is; the stuff that other finance and number geeks like me thrive on. I’ve had a few readers send me some friendly, gentle pushes to publish an update on the laundromat business and how it’s going so far. Fair enough, because if I were them, I’d want to know too.
The Beginning
You know those home decorating reality shows where they take an ugly-duckling house and make it fresh and wonderful? (Just nod and say yes.)
Well…that’s how I feel about the laundromat we purchased. It was decorationally challenged (yup, made that word up myself). Actually, that’s putting it nicely. It was a bit of an eyesore. The vinyl wall paneling was the color of used-to-be-white socks. Or dirty dishwater.
Oh, and it had forest green trim everywhere. Well, where there was trim, at least. In some places it had fallen off and never been replaced.
This is one of the only pictures I have of the inside before I got my grubby hands on it. This is when we were spying on the laundromat before we bought it. I know, it’s hard to see the details.
Years of grime had made its way into the crevices of the vinyl on all the walls.
I took the picture below after I’d already painted the forest green trim, and you can’t see the grime on the walls. But trust me, it was there.
There was no personality, no theme, no logo, nothing. Even the clock on the wall looked to be from a 1960’s school classroom, and it was hanging on the wall just off kilter enough that it generated some OCD in me that I didn’t know was there.
Yes, we removed the clock before we finished painting. In fact, that clock came out and a whole new cooler chrome-and-white one was put in its place. I still need to take a picture.
The crazy thing is that it still made decent money. Even looking like that. But in the 12 months prior to the purchase, business had taken a slight downward turn. Revenues (and thus, net profits) were down from prior years. But we figured that a basic, economical facelift would increase business and we knew we would take a more ‘hands-on’ approach than the prior owner, since we live just a short distance away.
Finally…Some Meat and Potatoes…
First I compared the average monthly expenses from the most recent year of business for the prior owner with our own first few months of business to see how things have changed…or stayed the same.
The rent is higher for us, since it increases every two years, and 2015 was an ‘increase year’. We had to assume the prior owner’s lease, which wasn’t that favorable. However, we negotiated our rent down so that when we renew in 2018, the base rent will drop down to $2,000 per month, which puts $6k back in our pocket for the year.
We also are seeing an increase in water costs, which isn’t a shock, given that business/usage has increased as well as the drought status in California right now. Water rates will likely go up again, but we just increased our prices on all washers by 25 cents to account for that. (I’ll talk more about the price increase in a later post. That’s a whole other discussion.)
We also gave our janitor a raise. He was underpaid, does great work, is reliable, and is pretty much the entire reason why we can go days without ever paying a visit to the laundromat. He cleans at night, closes up, and sets the alarm, 7 days a week. He has asked for only 1 day off in the 4 months we’ve owned it.
We ditched the expensive cell phone plan that the prior owner used, and went with Republic Wireless for $10/month. Haven’t had any problems. Every dollar saved counts.
More Meat and More Potatoes…The Big Picture
I also pulled together a summary of what our average income, expenses and net profits have been in the four months we’ve owned it (annualized), compared to the prior owner’s most recent year, compared to the prior owner’s 3-year-average.
As I said, business had taken a downturn the 12 months before we bought it. But during the purchase process, we had reviewed the financial records of the prior years, and saw what it could make. (We verified that the downturn was not because a new competitor opened up down the street, etc. It was really due to the owner becoming involved in other business ventures, and the laundromat was no longer a priority.)
Looking at the numbers so far, we’re doing pretty well! We initially put some of the profits back into the business to purchase remodeling materials, a video surveillance system, etc, but for the most part we’re letting our business checking account build up a few months worth of expenses so we have a solid reserve account. Oh, and Randy treated himself to an Apple Watch courtesy of the business. He earned it. 😉
It’s important to have a nice cushion in the business account; we don’t live paycheck-to-paycheck in our personal accounts, and it won’t be any different for our business. Once that reserves is met (3 months of expenses), we’ll start transferring most of the profits to our investment account. (I can hardly wait.)
Now for some Before and After…
But first a disclaimer. These won’t be quite as striking as I’d like. I forgot to take clear interior ‘Before’ pictures. I got excited to get in there the first week and paint, and next thing I knew, I had painted all of the trim white before I remembered to get out my camera.
So…it is what it is. But these will just have to do.
Week 1: I took off the week from work, and my momma came in and helped me paint. Thanks mom!
You can see the dirty, yucky-colored walls better in the one below. At this point, the trim had been painted white and the walls were in progress of becoming a calming blue-grey color. Randy installed the video surveillance system.
Next we installed a paper towel dispenser and a soap dispenser at the sink…exciting stuff, I know.
Next we installed the missing trim around the dryers and put up professional signage.
Logo signage was installed on the soap vending machine, and trim was installed around it and painted white.
The classic forehead-and-hat shot of the front of the store, with the new window and door signage. That’s my mom hiding behind the window signage. She’s so camera shy that one.
Randy starring in my after photo below (much to his dismay). The vinyl paneling and garbage cans were refinished, and we had a logo and instructional signage made to place on the walls. We also took photos of the surrounding neighborhood and Sacramento landmarks, selected four, and had them printed on canvas to hang on the walls.
So that’s the latest on our laundromat adventure. Now do you see why this post took me so long to write? 🙂
Thanks for tuning in.
Cheers!
Hi Laura –
I’m not going to lie, I was quite excited to read about a update on your laundromat business and this is great!
I like your idea of taking pictures of the surroundings to put them up on the walls, that makes the place look friendlier and more personal.
You managed to revert the downward revenue trend in just a few months, this is impressive. I’m sure your laundromat now has potential for even more.
Thanks for taking the time to write an update (and looking forward to the next), you guys are doing great!
Nick
Hey Nick! Yes, we’re hoping that the trend continues to move upwards. We’d certainly like to break his 3-Year average if we can. We haven’t even started advertising yet, and from talking to customers, it sounds like there has already been a lot of ‘word of mouth’ advertising going on. But thinking that once we get our official targeted advertising campaign going, it should only get better!
Great job!!! Looks amazing!!! I almost want to dirty up some of my clean clothes and drive right down there and do a load while looking at facebook on your free wi-fi!!! Where was this place when I really used to use laundry mats? Congrats to you all!!
Thanks Anne!
Congratulations! I don’t need to use the laundromat anymore but it sure looks great in the pictures
Thanks Terri! Took a little bit of sweat and time, but it was worth it.
Hi Laura,
I came across this post the last night and I’ve read through it all. What a great deed you are doing for people like myself who know the benefit but are to gun shy to move forward. You are helping break down the fear and motivating me to do something similar.
I do have a question about the expenses, I don’t see the SBA loan listed, is that on purpose or did I just miss it?
Thanks Jerry. Glad to hear that what I’m writing isn’t just fading into the universe, unheard. 😉 To answer your question, yes, I purposely left off the business loan. I wanted an apples-to-apples comparison of the monthly incomes/expenses for our 4-month experience compared to the experience of the prior owner. (Someone looking to purchase a laundromat may not have financing, or have financing with completely different terms, so I left that piece out of this post. But if I had delved into ROI or cash flow calculations, I would certainly need to include our $1,390 monthly loan payment.)
And just to be clear, our loan is not through the SBA. Currently, the SBA requires 2 years of applicable business experience to qualify (which we didn’t have). But we were able to get the seller to carry a note, which is exactly what we were hoping for.
Hello Laura,
I thoroughly enjoyed reading about your laundromat business investment.
I am curious, have you considered purchasing the real estate under the business from the property company? If the price is “right”, you may save that rent expense and own a piece of real estate.
Now that you have self-employment income from the laundromat, you can also open your own retirement accounts to soak up as much as possible. (depending on how you structured the deal of course – Corp vs LLC etc)
Hello there DGI…
Unfortunately, our store is part of a VERY large shopping center, so we didn’t have the option of purchasing the real estate underneath. However, if that had been an option, and the terms of the real estate purchase were favorable, we would definitely have considered it. And yes, it’s usually better to own the property your business is attached to, and avoid annual rent increases, while building real estate equity. But, it would have also required a higher initial investment than our maximum comfort level of $50k would have allowed.
Once we’ve been laundromat owners for a while, and feel a little more ‘seasoned’, we’ll be more comfortable making a higher initial investment to include real estate.
And, yes, with self-employment income, we’re already in the process of opening a Solo 401k, as we’re a Sole Proprietor.
Thanks for stopping by!
Great info. VERY useful
Thanks Terry!
Was there any gimme room in your SBA negotiations on the 2 year business running or did you not fight it much since the owner was willing to carry?
There is really no ‘gimme room’ on the SBA loan restrictions. From what I understand, the government will only back loans that have been vetted and verified. So banks aren’t likely to play around with the requirements, or they risk losing their government backing. We reached out to a few banks asking about SBA loans and they all asked if we had two years business experience, and once we replied no, they immediately shut us down. So we pursued private business lending, and were approved. But in the end, because negotiations between the landlord and the lender were taking a really long time, the seller just agreed to carry the note so we could close the deal.
What kind of terms did you agree on? Was the business loan through a bank as well? Thanks for all the info, looking at a l’mat with a seller next week so trying to soak in as much as possible.
The seller agreed to carry a note at 8% simple interest for 60 months. The initial business loan we had an approval for was with Firestone Financial; they are a lender that specializes in laundries and vending. Good luck with your purchase.
Hi Laura,
Are you outsourcing the vending machines?
The only vending machine we have is for soap/bleach/bags, and we just handle that ourselves. So the short answer is no. 🙂
Hi Laura,
What a great post!!! I’ve been looking up online for a laundromat business to buy. I found one in a pretty decent neighborhood that’s up for sale. However, the business has been closed for a few months. It belongs to the landlord. Its asking price is $35,000. There are only 2 40-lb washers that can be salvaged. The rest of the machines are very old and probably need to be replaced. It’s an old outdated laundromat that needs some repainting and redecorating. I feel like I’m not really buying the business anymore since it’s been already closed for several months. He said that if he can’t find someone to take over, he’d get rid of the machines soon. How much do you think I should offer to take over? What are your thoughts on this? The rent is about $2,700 per month. I can probably negotiate it down. Any advice would be appreciated.
That sounds a little like the second laundromat we’re in escrow for. (Ours is still in business though.) If it’s closed and hasn’t been in business for a while, then you are literally buying the value of the machines and the existing infrastructure (sewer hook-ups, boiler, pipes, drains, etc) and that’s it. I would price it out at $200 per machine for the ones that will eventually have to be replaced, plus a couple thousand a piece for the (2) 40-pounders, then add on about $15,000 for the value of the sewer hook-ups and other infrastructure. Then offer him that value, which may or may not be near his asking price of $35,000.
If the rent you quoted of $2,700 per month includes the CAMs (Common Area Maintenance, i.e. shared expenses with the other tenants), then that’s not too bad (assuming that the shopping center is busy and well-located). If that figure does NOT include the CAMs, then I would definitely negotiate it down if possible. You may even be able to negotiate a severely discounted rent especially in the first 6-12 months, to give you some breathing room until business gets going. Good luck.
Hi,
Before buying the business how did evaluate the state of the washing machines and dryers? How old were they?
Thanks,
Julian
We had a repair tech come out during escrow and evaluate the washers, dryers, boiler and major infrastructure. The machines were all different ages: front dryers were 6 years old, back dryers were 25 years old (and were just replaced), top-loaders were about 6 years old, front-loaders ranged from 6 years old to 25 (the 25-year old machines were just replaced). Thanks for stopping by.
Hello, im taking over an existing laundry business first of the month in Los Angeles. its about 1800 sq feet i know its a pretty small place. However, its a start pretty excited, as the place is dirty and the employee is somewhat running the business (Not Good) she has the keys to everything. Well that is going to change come January 2016. i read that you have a unlock/lock mechanism fixed to the front entrance door to the business? how much and where can i purchase that? also how many times of the week does your janitorial service actually is present at the location? Congrats laura to you and the husband. praying you get that second laundromat..
First, congratulations on your purchase! Our store came with the lock/unlock mechanisms already in place, but it is something that any reputable door company should be able to implement. (I wouldn’t try to DIY it, you could ruin your doors in the process) My best guess is that it will likely be at least $1,000+ for materials and labor. And our cleaning crew comes nightly after closing, 7 days a week. And thanks for the well wishes, keep me posted on how things go. I’d love to feature a reader’s story on their own laundry business.
Hi Mrs. Nickels,
Thank you for sharing your story, Can you tell us how much time you spend weekly or monthly managing the laundromat now that you have been up and running for a while. I assume there is administrative time at home and additional time you spend at the shop itself. How passive have you made it?
Thank you!
~Shawn
Hey Shawn — After the initial remodeling was complete, I would say Randy visits the shop about 2 to 3 times a week, spending about 1-2 hours each time. So on average, I would guess he spends about 5 hours a week there, and closer to 10 hours a week when he has a machine to look at or does accounting or other administrative work. But it’s still pretty darned passive for the profit we earned.
Thank you so much for this blog Laura! I was at the laundromat — my own washer being temporarily out of service — and on a whim googled the profitability of laundromats and found your blog. I’m keenly interested in the nuts and bolts of owning such a business. You’ve given me a lot to consider. Please don’t think the finer details will bore your readers. I found it very interesting and informative. Looking forward to future updates!
Thank you for this informative post! It answered a lot of questions for me!
Hello Laura!! I have read mostly all of your stories on this site and I have to say I thank you for sharing your personal opinions!! I am in the process of writing a business plan and doing research. At first, I thought it was smart to just open a store but reading your experiences I have now changed my mind and will look to buy an existing laundromat. I have wrote so many notes from things you and your husband has experienced. It has been extremely informative, especially learning about things I had no clue about lol. Were you guys required to have a business plan in order to get financed? And if so, how did you guys show numbers for financials from the laundromat before purchase?
No, we were not required to have a business plan. We decided to put one together to show the landlord and seller that we were serious and knew what we were getting in to. In our business plan we used the numbers provided by the seller and projected our own future earning from there.
First, thanks for the kind comments Nastassia! And yes, if you read through our site, it’s clear that we definitely lean towards buying an existing store, especially for a first-time owner. Once you get your feet wet and feel comfortable however, I think opening a new store can be a great thing.
As to the business plan, no, it was not a requirement, but was highly recommended by the listing broker.
And I’m so glad we did. We got great feedback from both the lender and the broker that it was the best business plan they had ever seen. (Shameless plug: We include our business plan template with the purchase of our book!).
We got the numbers from the information sheet provided by the seller/broker after we signed our Non-Disclosure Agreement. They had incomes/expenses listed, so we did the calculations and included them in our business plan.