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.
A Complete Guide to Selling Your Laundromat
There are a lot of resources now for people who are buying their first laundromat. We have a free e-book, tons of tools, courses, and guides to help people navigate that process. Many people forget, however, that most sellers are selling for the first time, too. Sellers need guidance, tools, and resources to navigate these uncharted territories, as well. In this guide, we’ll light the path to selling your laundromat for the most money, quickly.
When selling your laundromat you must determine how you are going to sell it, prepare the information a potential buyer will need, prepare your business to be ready to sell, and value your laundromat. Your laundromat’s value will be based on its performance, so you also need to ensure that it is performing optimally in order to sell it for the most money and quickly.
Determine How You Want to Sell Your Laundromat
The first question you must answer when you decide to sell your laundromat is whether you want to sell it yourself, or enlist the expertise, network, and services of an agent or broker. There are pros and cons to both. I have found that usually going the agent/broker route (I’ll just refer to agents and brokers as “brokers” going forward) is the better option. But if you’re a DIYer and want to sell on your own, I’ll give you some tips on how to do that.
For Sale By Owner
If you decide to sell your laundromat yourself, you’ll need to do a lot of the work an agent typically does yourself. You can skip the section below on how to find a great agent and what to look for in an agent, but the sections on Information, Preparation, and Valuation will be crucial for you to go through. They will help you position your laundromat to be sold quickly, for the most money.
When you’ve gone through the three steps to prepare your laundromat to be sold, you’ll need to list it in a place where potential buyers are looking. Obviously, the best place to list your laundromat for sale (for free!) is at Laundromat Marketplace. This is the website we send buyers to and we also promote listings from the site on our different channels. Sellers have seen great success listing there, and since it’s free, it’s a no-brainer.
With that said, there are other places to list your laundromat for sale. Craigslist, Bizben, BizBuySell, and other listing sites do generate potential buyer leads, as well.
After you list your laundromat for sale, you’ll (hopefully) be receiving offers in the form of a Purchase Agreement or Letter of Intent (LOI). When you and a potential buyer agree to terms in that document, you’ll submit it to an escrow company or lawyer to execute the transaction for you.
At the close of escrow, the escrow officer or lawyer will transfer your business to the buyer (or buyer’s entity). You will turn over all keys to the buyer and collect your capital gains. But before you can collect, we need to rewind and talk about how to make sure you can collect the most money from the sale of your business, quickly. If you’ve ruled out selling through an agent, you can skip to the Information section. If you’re still considering selling with a broker, read on.
Where to Look for Great Agents
Finding a great agent or broker to help you sell your laundromat will make the process of selling your laundromat more painless, net you more money, and get your laundromat sold more quickly. A great agent is knowledgeable about the business, trustworthy, well connected in the industry, and systematic in his or her approach.
Finding great agents can be easier said than done. There are some great agents out there, but there are some really bad ones out there, too. I have a couple of suggestions to help you find some qualified candidates.
- Check laundromat listing sites like our sister-site, Laundromat Marketplace for agents who are listing laundromats for sale regularly. Active agents are often, although not always, better agents. Active agents will inherently have some of the qualities and characteristics we’ll want in our agent.
- Google can be your friend. If you’re in a large metro area, you may have laundromat-specific agents and brokers that specialize in selling laundromats. Often time, although not always, you will be better off listing your laundromat with one of these specialists. If you’re not in an area that has laundromat-specific agents, your next best bet is to look for a small business broker or agent. Although they may not have the exact, specific knowledge of the laundromat industry, they will generally know business well and understand how to position your business to maximize your sell price.
- Referrals are a valuable source of information to find people to work with who have been valuable to other people you trust. I classify those referrals in two categories. The first is personal referrals. These referrals come from a specific person you know and trust. The second category I call collective referrals. These referrals come from websites such as Google, Yelp, or even our sister-site, Laundromat Marketplace in the form of ratings and reviews from multiple people.
I highly recommend talking with multiple agents if there are multiple available to you and to choose to work with the best one.
"Work With the Best, Become the Best."
What to Look for In Great Agents
Once you’ve found a source of agents, you need to do a little detective work to identify the great agents. When you work with the best, you become one of the best so it generally pays off to take this next step and find out who your best option to work with is. Here are some things to look for when identifying a great business broker or agent to work with.
1. In-depth knowledge of the industry.
Obviously, you want to work with someone who knows what they are doing. I say obviously, but I have consulted with many clients who have initially listed their laundromat for sale with a real estate agent who really didn’t know much about the industry, if anything at all. Utilizing an agent who understands laundromats, knows what makes them valuable, and gets how to position them to help buyers see the value in your laundromat will make your life so much easier. It will probably also put more money in your pocket.
Here are a few questions you can ask an agent to determine their level of knowledge of the industry:
- How would you value my laundromat?
- How and where would you market my listing?
- What information would you need from me to get it listed?
- What prep work would I need to do to get it sold?
There are plenty of other questions you can ask. Hopefully those will get your brain jumpstarted to think up more.
2. Trustworthiness.
This can be as difficult to discern as it is important. Having a trustworthy agent is arguably the most important key to successfully selling your business for the best price, quickly. Unfortunately, I, personally, and many consulting clients of mine, have had encounters with agents who were not trustworthy. It ALWAYS results in a loss of money. So find a trustworthy agent and pass on one that isn’t trustworthy, even if they are the best in all other regards.
To determine trustworthiness, I’ll give two quick tips. First, listen to how the agent talks. You’ll often hear signs of red flags if there are any there while you’re asking the questions from above. If they suggest you do shady things, it’s likely they’re willing to do shady things behind your back, as well. Second, listen to how other people talk about them. You want an agent that other people rave about. You don’t want an agent that other people carefully craft words about, or downright speak poorly about. The caveat to that is don’t take a single sample. Try to get at least a few people talking about your agent and their experience with them.
3. Well-connected in the industry.
Knowing other people in the industry and being known in the industry puts more tools, resources, and buyers at their disposal. When an agent is well-connected, they have benefitted from the wisdom, experience, and knowledge of other people. This not only helps them do their job better, but it also gives them, and you by extension, access to their networks, tools, resources, knowledge pool, and more! So here are a couple of questions to ask to determine how well-connected they are:
- How did you learn the business?
- Who have you worked with in the past?
- Have you heard of Laundromat Resource? (Just kidding!)
- Where do you go if you don’t know how to handle a certain situation?
4. Systematic approach.
Taking a systematic approach to selling laundromats means the agent has thought through the process and has either created or utilized tools to help streamline the process, both for themselves and for you as the seller. Taking this approach will make things easier for you and will make things clearer for the buyer. Here are some questions you can ask to determine if the agent takes a systematic approach or not:
- Do you have a checklist of information you need from me?
- How do you package the information I give you and distribute it to buyers?
- What marketing channels do you use to promote your listings?
Next Steps
There is some great information on how to find a great agent to work with in this guide, but I wanted to leave you with a couple of practical items to take for your next steps if you’re thinking about selling your laundromat.
- If you want some help finding a great agent, we’ve worked with agents from all over and know how to find great ones. We would be glad to help you find an agent to work with free of charge. You can learn more about this on our page for sellers.
- Check out Laundromat Marketplace to see how other people are listing their laundromats, to find agents to work with, or to list your laundromat on your own for free.
If there is anything else we can do to help you sell your laundromat, feel free to schedule a call with us to talk more.
Information to Gather
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.
"Put Yourself In a Buyer's Position and Provide Everything You Would Want."
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!
Prepare Your Laundromat To Be Sold
Have you ever browsed on Zillow at houses for sale? If so, you may have seen some listings that wowed you. Maybe they stirred something inside of you and made you want that house. You’ve probably also seen some listings that made you wonder what the seller and agent were even doing. The house is a mess. The pictures are awful and don’t show you what you need to see. And unless you’re a flipper looking for a bargain, you probably weren’t drooling over those houses.
Your business listing will be looked at similarly. And although buying a house and buying a business are different processes, the concepts do overlap. In addition to preparing the documentation a buyer will need to see, you should also prepare the rest of your business to wow potential buyers. This article is about how to do that.
Preparation is the Key to Success
If you’re thinking about selling your laundromat, you definitely want to watch the replay of a webinar on how to sell your laundromat for the most money with Andrew Cunningham. (It’s usually only for pro members with the other webinar replays, but I won’t tell if you don’t tell!) I embedded it above so you can watch it.
Back to preparing your laundromat to sell. I’m going to break this preparation up into two categories. The first category is preparing the business. The second category is preparing the aesthetics.
While we at Laundromat Resource believe and preach that the value of a laundromat is based on the performance of the business, I also must acknowledge that aesthetics do play a role in the perception of your business, both by potential buyers and by your customers.
"Preparation is the Key to Success"
1. Preparing Your Laundromat Business to Sell
Laundromats are valued based on a multiple of the net income they produce. Net income is the amount of money that is left after paying off all business expenses. As a seller, then, your laundromat is most valuable when you can maximize your net income. There are two sides to net income and as you prepare your laundromat to sell you should look at both sides.
Income
Obviously, increasing the income of your laundromat will help increase its value. There are a few different ways you can do this, especially if you have a little bit of runway before you sell. Let’s talk about a few options.
- Raise Prices
Usually, the quickest and easiest way to increase your income is through raising prices. Laundromat owners are notoriously bad at raising prices to market value. We’re afraid we’re going to lose customers or that a competitor will undercut us and put us out of business. Or, maybe, we’re just afraid to get complaints from customers. However, as inflation and expenses rise, raising prices is normal and natural. Just look at gas stations. Their prices change daily sometimes. So, do a little research to see if there is room to raise prices. - Advertise
More customers mean more money. So invest in advertising efforts to draw in new customers. This can be paid advertising (faster) through platforms like Google and Facebook, or organic advertising (slower) through search engine optimization (SEO) or social platforms. - Promotions
Usually coupled with advertising, promotions designed to attract new customers or to retain existing customers will help you increase your laundromat’s income when properly applied. - New Services
Another option to increase income is to offer new services, such as alterations, a drop-off laundry service, or a laundry pick-up and delivery service. Sometimes these new services can be grown to equal, or even eclipse, the size of your existing business. This option won’t be a quick process so if you’re selling imminently this may not be the right thing for you, but if you have a little time it could work. - Add Income Streams
Obviously, adding more ways to bring in income will increase your income. Selling soaps, snacks, and sodas, adding an ATM machine, or adding any other additional income streams can help you boost your income and, therefore, the value of your laundromat. You can download a list of Value-Add opportunities to give you more ideas when you join the free or pro membership!
Expenses
The other side of net income is the expense side. While you can potentially increase your net income by increasing your overall income, you can also increase your net income by decreasing your expenses. Here are a few categories to consider that could decrease your expenses on your way to maximizing your net income.
- Staffing
I hesitate to mention this because there is usually more to be lost than gained by decreasing staff hours or pay. However, it’s worth examining whether you are getting the most out of your staff. There may be hours you can cut without major consequences to the overall customer experience. I would advise being cautious here. Often, a better alternative to cutting hours or reducing employee pay is to simply look for a higher-quality employee. But, as one of your largest expenses, an examination of wages is warranted. - Lease
While you likely already have a lease, it is most likely one of your largest expenses. It may be worth a conversation with the landlord or property manager to see if there can be any renegotiation in the lease. A reduction in the rent amount, the common area maintenance expenses (CAM), or triple net costs can save you money and add value to your laundromat. While you’re negotiating the lease, longer leases are more valuable for laundromats, so work on getting some time added to the lease, too! - Efficiencies
The most obvious ways to gain efficiencies in a laundromat are to replace old equipment with new equipment. That can get pretty expensive pretty quickly and if you don’t have a long enough runway to demonstrate an increase in business and decrease in expenses, it may not be worth it. However, there are also other things you can look at to achieve a more efficient operation. For example, ensure there are no water leaks or drips (or gas for that matter!). Make sure your boiler is set to the proper temperature. If you have a hot water tank, insulate it. It will reduce the workload on the boiler, saving gas and electricity. Connect timers on the lights. You can even consider turning off power to washers and dryers when you’re closed. - Unnecessary Services
This is a good time to evaluate the services you pay for and determine whether or not they are serving the business. Sometimes we sign up for services, publications, or software that served us at one point but no longer do. Cancel any unnecessary services or subscriptions to save on those expenses. - Insurance
Again, I’m hesitant to mention this as you can usually find cheaper insurance somewhere but you typically have to compromise on your coverage. Don’t sacrifice coverage to save a few dollars. However, it’s always good to keep your insurance agent honest and see what other options, packages, and offers are available. Saving money on your insurance or getting more coverage for your money will both make your laundromat more valuable.
2. Preparing Your Laundromat Aesthetics to Sell
It’s not supposed to be the case, but the feeling a buyer gets when they look at your laundromat will play a factor in their interest in your laundromat. It will also play a factor in how much they are willing to pay for your laundromat.
When I talk about preparing the aesthetics, what I am really saying is that we need to evoke a positive feeling in buyers when they encounter our laundromat. There are a few things we can do to help make that happen.
- Keep It Clean
Ok, this one has to be obvious, right? Well…have you ever walked into a laundromat that wasn’t clean? Probably more than the number of laundromats that you have walked into that were clean. We obviously want to keep it clean, but it’s important to be extra diligent with this when you’re listing your laundromat. Not only will it give a potential buyer a better impression of your business, but it will also make your customers happy. Win-win. Be meticulous. - Keep It Fresh
Make your laundromat feel fresh. Paint the walls. Add some plants. Consider updating your flooring. Look for ways to freshen up the place. If your laundromat is feeling dated, consider updating small touches, like the signage. - Maintain the Outside
Both buyers and customers will experience your laundromat first from the outside. Get them started on the right foot. Make sure the parking lot and sidewalks are clean. Keep the windows washed. Make sure your signage is in good condition. And, of course, paint the outside if it needs it. - Appeal to All of the Senses
We tend to focus on what we can see. However, often smell and sound can evoke powerful emotions. Make sure your laundromat smells fresh and clean. And consider what potential buyers and customers are hearing, as well. Personally, I’m not a huge fan of listening to daytime talk shows or news channels as they tend to create a negative atmosphere. Consider an alternative like AtmosphereTV to keep things positive. - Pay Attention to the Details
A great tip is to get someone you trust to be honest with you that doesn’t already know your laundromat to come in and point out things that need improvement. This can sting a little, but having fresh eyes on your business will open your eyes to things that need improvement that you wouldn’t have noticed. Make minor repairs, ensure the bathroom is in great shape, and add subtle touches like trim pieces. Keeping your laundromat coordinated, both in color and in material, will go a long way to provide that wow factor. - Represent Your Laundromat Well Online
A bonus! Many of your customers will experience your laundromat for the first time online, not in person. So make sure your listings are complete, high-quality photos are used, and descriptions are clear. Make sure your website is modern and informative. Check that your Google and Yelp business profiles are complete and updated. Update any social media accounts for your business. All of these will help a buyer understand your business more, evoke a positive association with your business before they ever see it, and instill confidence in your business. - List it For Sale on Laundromat Marketplace
It’s free. There are a LOT of potential buyers checking there. And you’ll sell it fast! Why wouldn’t you?
Selling your laundromat can be a big deal, but following these principles outlined above, you’ll be well on your way to selling your laundromat for the most money.
How To Value Your Laundromat
When selling your laundromat, your asking price should be 3.5-5 times the net operating income of your business. You can determine that multiple by considering the age of the equipment, the length of the lease, and the terms of the lease.
Valuing a Laundromat Business
When determining how much to ask for your laundromat, there are various factors to consider.
Laundromats, like any business or commercial real estate, are valued based on performance. The way we measure performance is through a number called the net operating income (NOI). NOI is the gross income minus expenses (excluding taxes and loan payments). The other 3 main factors to consider are the ages of the equipment, the length of the lease, and the terms of the lease.
Another to consider is the current market conditions. Is there pent-up demand causing a seller’s market? Is there an abundance of laundromats for sale and not enough buyers causing a buyer’s market? As a general rule of thumb, in a seller’s market, you can probably add .25-.5 to the multiple in your asking price. Conversely, in a buyer’s market, you may want to subtract .25-.5 from the multiple.
Now that we understand how market conditions affect price, let’s talk about how each of the three main factors in a laundromat’s value affects your asking price.
1. Age of the equipment
Having newer equipment in your laundromat is obviously more valuable than having older equipment. That will factor into the value of your laundromat through its influence on the multiple. Obviously, then, the newer the equipment, the more upward pressure it puts on the multiple, and the older the equipment, the more the multiple is depressed.
Let me give you some rules of thumb to help you determine the value of your laundromat.
These numbers are not precise as there are a lot of factors to consider but in a neutral market, equipment that is 0-5 years old should fetch a 4.5-5 times multiple. Equipment that is 13-15ish years old is going to be valued at 3.5-4 times NOI.
Equipment older than that is nearing the end of its life and will need to be replaced soon. This needs to be factored into your financial model and may lower the multiple below that 3.5 times mark.
"Laundromats Are Valued Based On Performance. We Measure Performance Using the Net Operating Income."
2. Length of the lease
Lease length is critical to the value of your laundromat. Longer leases make laundromats more valuable. The reason for this is that a long lease gives stability to a business that is difficult and expensive to relocate if a lease is not renewed or the rent is increased dramatically. Therefore, when preparing to sell your laundromat, if you don’t have much time left on your lease, you may want to consider negotiating a new, long-term lease or adding options to the end of your lease. This extra time will give buyers more confidence and increase the value of your laundromat.
Here’s how the length of your lease can affect the value of your laundromat. Again, longer leases are better, so leases that are 15+ years tend toward 4.5-5 times the NOI. Leases around 10 years, as a guideline, are valued at around 3.5-4 times NOI.
When I consult with buyers, I almost always advise them not to sign a lease under 10 years. Even at 10 years, I’m feeling a little uncomfortable about that lease length. I advise them to make an offer contingent on negotiating a new lease or adding additional options to that lease. But, since they have to work that out during due diligence, that depresses the multiple. So, if you can, do that work before you list your laundromat for sale and keep that value yourself.
3. Terms of the lease
There are a lot of things that go into the terms of the lease. Specifically, however, I’m referring to the rent amount, including any common area maintenance (CAM) or triple net (NNN) costs. When looking at the rent amount, we generally determine the multiple based on the percentage of rent amount versus the total gross income of the laundromat.
Here are some general guidelines to help you get a feel for how the rent amount influences the multiple.
Obviously, paying less rent is better, so lower leases will command a higher multiple. As a guideline, rents that are around 25% of the gross income of the laundromat or less fetch a multiple of around 4.5-5 times NOI. When that percentage creeps up around 33% and up, the multiple decreases to around 3.5-4 times NOI.
Again, these are all guidelines and will fluctuate depending on a variety of factors, but these guidelines will get you very close to a proper valuation of your laundromat when it comes time to sell it.
And, of course, if you are planning on selling your laundromat, either on your own or through an agent, make sure you list it for free over at LaundromatMarketplace.com. Thousands of visitors a month browse the Marketplace looking for their next laundromat investment, so be sure to list yours there. And, as always, it’s free to list it!
Selling Your Laundromat
Whatever your reasons for selling your laundromat are, this guide will be a helpful framework to help you think about how you can sell your laundromat for the most amount of money, quickly. Be sure to check out all of the resources available to help you buy, run, and sell your laundromat at Laundromat Resource. We provide information, resources, and tools by laundromat owners, for laundromat owners to help you buy, optimize, scale, and, when necessary, sell your laundromat!
Feel free to reach out with any questions you have. And again, reach out if you need help finding a great agent to work with. We know great agents when we see them!
