Existing or New Laundromat
The Laundromat business can bring great rewards if done correctly. It can also bring disappointment if one doesn’t take the necessary steps to make sure this business is right for you. That is why one will need to perform the necessary due diligence and get help from experts in the fields to make the right decision.
For a quick overview of the pros and cons of these approaches, let’s look at the following.
- New equipment and infrastructure that will need minimum maintenance for years to come.
- The potential for return on equity is higher because one would not be buying the clientele, which usually runs a certain multiple of total revenues
- A new location provides flexibility in design to meet investors own needs and desires.
- Equipment investment is substantial for a new operation.
- The cost of opening a new Laundromat can in the hundreds of thousands of dollars, much of it which will have to be cash as financing options would be limited.
- Construction delays and cost overruns are a big possibility.
- Usually there will be a negative cash flow in the first 6-12 months of a new Laundromat as it establishes its clientele.
- All equipment is in place so it can be a turn key operation.
- Predictable cash flow based on a track record and established clientele.
- It is relatively easier to obtain financing for an existing Laundromat. Usually the required down payment for a Laundromat will range between 40-50% of the sales price.
- Existing clientele can provide feedback on the operation so one can improve on it and thus increase revenues.
- Maintenance of used equipment and infrastructure such as plumbing, boilers, etc. can be costly.
- One pays premium based on a multiple profit.
- One can inherit many maintenance issues that are not apparent at the time of sale.
- One encounters the possibility of misstated revenues because of the cash nature of the business.