This is a sponsored post by Cents. Find out what Cents can do for your laundry business here. All reviews and opinions expressed in this post are based on my personal view.
Every seller wants to sell their business for the maximum amount of money. The reality is when selling a laundromat, presentation matters. Any good broker will tell you that you need to keep your laundromat clean, keep your machines working, and keep the atmosphere positive when selling your laundromat. However, presentation also matters with the information you provide to potential buyers.
When selling a laundromat, be prepared with the information that buyers will need to make an educated offer on your business. The categories of information you will need to present to buyers are income numbers, expense numbers, and laundromat details. Having this information available will speed up the selling process, give confidence to potential buyers, and yield the highest value for your laundromat.
The Value of Documentation
Before we jump into it, I included a video below where I asked a laundromat-specific lender to give advice to sellers on how to sell for the most money. It’s worth a watch!
I want to take a paragraph to instill that having solid documentation makes your laundromat more valuable. When you can show detailed collection sheets, the collection sheets match the profit & loss statements (P&L), and the P&L correlates with your bank deposit statements and taxes your business is more “financeable.” Any asset that can be financed will be more valuable and command a higher price. It’s therefore in your best interest to keep good records for your business.
Utilizing a software solution like Cents can help you keep great records and ensure your laundromat is “financeable.”
Let’s talk briefly about what information is needed and when. Generally speaking, average monthly income, average monthly expenses, monthly lease amount (with CAM and NNN costs when applicable), and the number of years left on the lease will be general information that buyers will need to gauge interest.
Typically a profit and loss report or income and expenses report, collection sheets, specific expense bills, and anything else more specific will only be divulged after the buyer signs a non-disclosure agreement (NDA) or after a purchase agreement is signed by both parties.
Documents to Gather
1. Income numbers
Buyers will obviously want to know how much money the laundromat makes. These numbers are usually general averages until a formal agreement of some sort is signed by both parties.
When you or your agent lists a laundromat for sale, they will usually take the gross yearly income and divide it by 12 to determine an average monthly income. You’ll therefore need your income numbers, usually from at least the last 2 years. These numbers will be used in a pro forma (you can download a free, editable sample pro forma when you join the free or pro membership)
Once a formal agreement is reached, the buyer will want to see more detailed numbers so that they can verify your numbers during the due diligence phase. This will include a monthly breakdown of income and from which sources the income is attained. Collection sheets (if you’re selling a coin or hybrid store) will also be requested at this point in the transaction.
2. Expense numbers
Similar to the income numbers, buyers will only require an average monthly expense amount initially and a more detailed expense breakdown when the agreement is formalized. To prepare for this, you should gather 2 years’ worth of utility bills (download pdfs from the utility company websites), the lease and all amendments and addendums, and any other documents that you can provide to verify expense amounts.
While it’s tempting to underrepresent expenses or leave some expenses out, it will only serve to erode the buyer’s trust and cause them to negotiate harder. I have seen this play out time and again in both the brokerage side of selling a laundromat and the consulting side of buying and selling a laundromat. You’re better off asking for what you want and removing red flags from the beginning. You’ll end up with more value for your business by the time the deal closes. If negotiations have to open up again during the escrow period, you’ll likely find yourself either losing the buyer or offering concessions you didn’t anticipate.
3. Laundromat details
Buyers will also need certain details to be able to determine a value for your laundromat. Again, they will need general information before an offer is agreed upon and more specific information after an offer is agreed upon.
The main pieces of information you’ll need to provide a potential buyer before there is any commitment are the equipment age, the monthly lease amount, and the number of years left on the lease.
If you don’t know the age of your equipment the agent you’re working with, the local distributor for your equipment brand, or the manufacturer should be able to help you determine that information. The monthly lease amount and years left on the lease can obviously be found in the lease document. Just be sure to check all amendments and addendums. Also be sure that the lease and any options are “assumable,” or that they will apply to the new buyer.
There is additional information that you can provide after you have reached a formal agreement with a buyer that will help the transaction proceed quickly and will also instill trust in the buyer that you are representing your business accurately.
For example, providing a buyer with the model and the serial number of each machine will help buyers verify the age of the machines (you can download a sheet to fill in that information when you’re logged in to your free or pro account). Providing repair receipts will help verify maintenance costs. Introducing the buyer to your insurance agent can help them check that step off their due diligence checklist while also verifying that expense.
The Golden Rule
When preparing to sell your laundromat, put yourself in a buyer’s position and provide everything you would want to determine the value of a laundromat. This will not only ensure a smooth transaction but will also provide you with the most value for your business.
And, of course, when you or your agent are ready to list your laundromat, be sure to list it for free on Laundromat Marketplace! Get your listing exposed to thousands of people searching for their next laundromat to buy, all for free!
