All About Laundromat Pro Formas
When you’re buying a laundromat, or any business really, you will likely receive a document called a pro forma. Laundromat pro formas are a short summary of the performance of the business. There will be 7 categories of information about the business summarized on the pro forma. I’ll walk you through them here!
But first, be sure to download a free sample pro forma so you can follow along! Click the button below. No email required!
First, the basic business details will be on the pro forma. This will include information such as
- Laundromat Address
- Laundromat Square Footage
- Hours of Operation
- Building Type
- Current Owner
This information will give you a quick snapshot of the laundromat. It will help you decide quickly if the laundromat fits your criteria, it will allow you to look up more information on the laundromat (for example, checking Google street view), and give you an idea of the setting of the laundromat (i.e. strip center, stand alone building, etc.).
The pro forma will include the seller’s asking price on it. This will obviously tell you if the laundromat is within your budget, but it will also give you a ballpark of what returns you can expect to see from the laundromat. The value of the laundromat (asking and offer prices) are based off of the Net Operating Income (NOI) of the business. Knowing the asking price quickly will tell you if the returns will be what you expect.
A good pro forma will have a breakdown of all of the sources of income of a laundromat. This will include the income from the washers, dryers, and any vending machines, ATMs, water purification stations, fluff ‘n fold service, etc. that the laundromat may draw income from.
Included in the pro forma should be a breakdown of the average monthly expenses of the laundromat. This will include everything from the rent and CAM (common area maintenance) expenses to the utilities, repairs, licenses, etc.
This section should give you a good idea of how much money it will cost you to run the laundromat. There can be a lot of expenses when running a laundromat, so it is very important to understand the costs before you purchase a laundromat.
Also outlined in the pro forma will be a list of the assets of the company. This will include a list of washing machines and dryers organized by type and size, with key pieces of information about each type and size.
The pro forma should at least communicate the make of the machines, the ages of the machines, the vend prices of each size and type, and how many of each size and type there are.
Also included in the list of assets should be the change machines, any vending machines, ATMs, water purification systems, and anything else that the laundromat owns and that produces income.
The pro forma will also list any ongoing commitments that the laundromat has or that others have toward the laundromat.
For example, it will include any equipment that is leased, any loans that will be assumed, and any vendors that split revenue with the laundromat. Before buying a laundromat, it is important to know what commitments you are signing up to fulfill, and what commitments others have made to the laundromat.
Net Operating Income
The main point of buying a laundromat is to benefit from the cash flow of the business. This makes the Net Operating Income section of the pro forma the most important piece of information on the pro forma. This number is derived from the simple equation
Income – Expenses = Net Operating Income
The value of the laundromat is based on this number, as well.
Using Laundromat Pro Formas
When you receive a pro forma from a broker or agent, understand that the information on it was provided by the seller. The seller has reason to present their laundromat in it’s very best light in order to sell it for the most money possible. This means that you, as a buyer, should use the pro forma as a guide, but you must verify the information on the pro forma yourself before you finalize your purchase.
The old adage, trust but verify rings particularly true when making an investment of this size. Never rely on the seller, or even the broker, to verify information for you. Verify for yourself. I also encourage you to enlist the wisdom of a third party, whose income is not dependent on whether or not you purchase the laundromat, to help you verify the numbers and look for anything out of the ordinary.
Buy a Laundromat
If you’re thinking about buying a laundromat, there are two things that you should do right now if you haven’t yet.
- Join our community here on Laundromat Resource and receive (and read!) our free e-book, The Keys to Buying Your First Laundromat!
- Sign up to be on the buyer’s email list to receive the first look at laundromats before we list them to the general public! Even if you aren’t ready to buy one quite yet, it might be helpful to see laundromat pro formas as they come through so you can familiarize yourself with them.
At Laundromat Resource, we’re on a mission to help you achieve financial freedom through laundromat ownership! But, it’s up to you to take the action necessary to move forward. The two steps outlined above are easy ways to get started moving in the right direction.
If you’re ready for more than gathering information, book a free coaching call with us today! We can walk through any questions that you have, help you to take the next action step, or talk about what criteria you have so we can start the hunt for the perfect laundromat for you! Click the button below to book a free call!