Richard Weisinger- Laundromat Resource

The Most Valuable Episode for Your Bottom Line to Date

In today’s episode, we delve into the world of taxes with a true Laundromat Warrior, Richard Weisinger.  Famous for going toe-to-toe with the IRS in the 80’s and 90’s on behalf of laundromat owners, Richard knows the laundromat business like no other. And it shows.

As a former multi-laundromat owner himself, not only does he give actionable, monetizable tips for your tax planning purposes, he also gives great tips on operations, management, and acquisitions. This is an instant classic episode!

In today’s show, Richard and Jordan discuss:

  • Richard’s background in the industry
  • Richard’s battles with the IRS
  • The differences between laundromats and other businesses
  • How to raise prices at your laundromat
  • Why thinking about and planning for taxes is important as a business owner
  • Depreciation- what is it, how does it help you, what is bonus depreciation
  • Leasehold improvements and taxes
  • State income taxes
  • Timeless tax tips worth their weight in gold
  • Depreciation recapture
  • 1031 exchanges
  • The power of real estate and businesses together
  • Top tips for laundromat management
  • What to look for in a laundromat location
  • Why you shouldn’t fall in love with your business
  • Valuing your own work
  • Using reputable agents
  • Due diligence

And so much more!

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By Laundromat Owners.
For Laundromat Owners.

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    Episode Transcript

    hey what’s up guys it’s jordan with the
    laundromat resource podcast this is show
    number 78 and i am pumped that you’re
    here today and it’s kind of funny that i
    say that because today
    we’re actually going to be talking about
    taxes now before you just click off
    immediately let me just say that i
    genuinely think this might be one of the
    most profitable
    podcasts that you could listen to as a
    business owner if not the most
    profitable one
    and the main reason for that is because
    so much of our money goes towards taxes
    and being able to properly set up your
    business to minimize taxes and again i
    just want to be clear i’m not about you
    know doing shady things to avoid taxes i
    don’t think you need to do that and i
    think this conversation will demonstrate
    why i think you don’t need to do that
    but when you set it up properly you can
    minimize your taxes and increase your
    profitability in your business and that
    is what we’re all about here uh is
    increasing our profitability so uh we
    have richard weisinger on the show today
    and this guy is a legend i call him in
    this show the laundromat warrior and
    you’ll hear why here in a little bit
    it’s funny to refer to a
    uh a tax guy as a laundromat warrior but
    you’ll see why
    here during the episode but genuinely
    grab a
    you know piece of paper and a pencil or
    your remarkable two like i used to take
    some notes
    or if you’re driving or working out
    which i know a lot of you guys riding
    your bikes working out driving whatever
    you know
    listen to it
    intently
    and soak it all in because there’s so
    much good information in there not just
    about taxes but uh as a former operator
    and somebody who works with operators
    all over the country uh he has a lot of
    great great just solid business owner
    advice for laundromat owners so
    uh you’re gonna love this it’s a great
    one and in fact i’m not gonna take too
    much more of your time up front let me
    just remind you head over the forums
    forumslettermartresource.com
    forums ask a question answer question
    engage get involved over there
    man it’s when we’re connecting ups when
    we’re networking
    that is when uh
    man that’s when
    we accelerate our growth and um let me
    just tell you uh
    subtly i guess that it will pay off for
    you in more than one way to be over
    there on the forums being active having
    conversations so head over there uh and
    uh join me over on the forums and uh you
    can find the link to the forums which is
    just laundering resource dot com forums
    and everything else we talk about on the
    show including richard’s contact
    information on the show notes which is
    laundromat resource dot com slash show
    78 and if you’re on youtube they’re in
    the description down below all right
    let’s jump into it with richard
    weisinger right after this all right
    guys today’s episode is brought to you
    by atmosphere tv you may remember back
    in episode 34 when atmosphere tv’s mike
    kelly joined me on the podcast it was an
    epic epic episode if you haven’t
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    it’s incredible ton of value there one
    of the things we talked about is just
    the importance of creating a good
    positive atmosphere in your laundromat
    and i was just rereading the book by
    simon sinek start with why
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    out to me is that people
    don’t make purchase decisions based on
    you know the logic of
    you know any
    decision that they’re making to spend
    their money it’s more based on a feeling
    and an association and so it’s really
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    atmosphere no pun intended
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    all right richard thank you for coming
    on the show how are you doing today
    good great oh man i it sounds it sounds
    funny to say this because i know that
    we’re going to be talking about taxes on
    this but i’m like actually really really
    excited for this conversation and you
    know i think when most people
    hear the word taxes they you know recoil
    or they
    instantly fall asleep or something like
    that but i’m actually very excited so
    thank you for coming on
    uh why don’t you before we kind of jump
    into some of that and you know i’ll just
    preface all this by saying
    and you know i’ll probably mention this
    in the intro but i i think this might be
    one of the most
    uh
    financially impactful
    discussions uh that i’ve had on the
    podcast for the majority of people
    because you know
    taxes take up so much of our income and
    if you get kind of some of the tax stuff
    right you can actually save yourself a
    whole lot of money so i’m really excited
    but before we get into it why don’t you
    tell us a little bit about you who are
    you and how did you wind up
    on a laundromat podcast today
    i have in excess of 40 years experience
    as a cpa
    i have an mba
    and i have a second master’s in tax
    and
    i’ve handled all types of clients over
    the years
    several years ago
    over 30 years ago
    i was interested in laundromats for
    myself
    and i did a study an investigation and i
    made all the mistakes
    that neophytes usually make and i bought
    multiple stores
    and i realized there was a lack of
    knowledge in the tax end in the coin
    laundry industry
    and people kept coming up to me and
    asking me questions colleagues from the
    coin laundry industry
    and
    next thing i knew the irs had targeted
    coin laundries
    on a national program
    they had written a manual how to audit
    them
    and they went after them all over the
    united states
    and simply because
    i owned stores
    and i
    had a
    an owner’s knowledge
    as well as a pretty good tax background
    people started coming to me and asking
    me to help them and represent them
    in the end i represented over 140
    different owners at different times
    on exams around the country
    we prevailed in virtually every single
    case
    the irs
    ultimately it took them several years to
    realize the ground wasn’t fertile
    because they started with the assumption
    that if it’s a cash business everyone is
    a crook
    and they then try to back into the
    results
    only to find that they couldn’t do it
    so they started using what’s called an
    indirect method of income reconstruction
    where they figured
    they’ll try and go and determine how
    much water was being used
    and try and then back into a result how
    many turns your store had to have done
    well there was
    there was really piling supposition upon
    supposition and erroneous variables
    because they didn’t know how much water
    a given machine used they didn’t know
    the the spread
    uh what percent the allocation what
    percentage of machines were used for
    what
    so
    it’s the old garbage in garbage out
    out that would come with a result
    and i would destroy them when they tried
    to present it so they really wouldn’t
    take the cases to court
    it was simply a case of
    who had the greater staying power and
    a tax attorney i used to use
    had a position
    no negotiation full concession or we
    litigate
    and that’s pretty much the position that
    i took
    and it turned out to be right because
    if
    they knew they were going into court on
    something
    that was highly questionable
    that required a lot of supposition and
    guesswork on variables
    they probably would not prevail
    and consequently
    they didn’t take these cases to court
    they tried to intimidate
    by waiting to the last minute to see if
    the
    taxpayer would uh would
    crumble but
    uh over time
    they lost enough of these things that
    they went on to other pursuits and they
    dropped the coin laundry industry
    so
    and their manuals whatever they’re using
    is so out of date
    but they ran into problems
    because
    there were things like the word i love
    is accurate
    they
    would say
    that these statistics these um
    water usages are accurate
    and
    i invested 40
    in a manual from the
    american
    i think it’s a water meter manufacturers
    association
    and there was one
    paragraph
    on one page in their entire book
    that said that they defined accuracy to
    within
    90 percent tolerance
    as soon as you have a 10 percent give
    your numbers are pretty much worthless
    and
    that that was the case when if they
    would use that in court that what
    they’re basing on is accurate and i
    would say
    well accurate only means 90
    they would back away
    anyway that several years ago and
    that’s no longer a major issue although
    they still
    like any type of business that has cash
    because there’s less controls in a cash
    business
    and it uh they generally can shake
    something out of the owner
    out of uh intimidation
    yeah so
    okay i mean basically what i’m hearing
    is that you
    spent a lot of years going toe to toe
    with the irs on behalf of
    laundromat owners is that
    yes it’s correct and by the way i found
    them to be fair
    i found the irs to be
    fairly decent
    and uh
    know their their place
    yeah there were some rogue agents but by
    and large they were a decent
    organization to deal with and they
    weren’t always wrong i did not uh
    represent always uh saints
    i had my share of sinners also right
    but
    uh i said by and large
    it didn’t justify their commitment for
    for time to uh to go after the coin
    laundry industry
    yeah and i think i think the issue
    personally you know just from your
    account of it that i have with
    the irs and that is that they started
    with an assumption
    of you know that laundromat owners are
    all crooks and tried to back into that
    and that you know while they may have
    been okay to deal with and fair on the
    front end i feel like that’s an unfair
    assumption to start with in the
    beginning so
    i’m just gonna dub you right now the
    coin laundry warrior uh going toe to toe
    with the irs for
    laundromat owners so man
    wild time sure
    uh okay so that is your background so
    you did own some laundromats back in the
    day i’ve owned three three okay
    and can you tell i mean just before we
    get into the tax stuff can you tell us
    just a little bit about your experience
    owning laundromats
    it is the antithesis of a hands-off
    business
    which led me
    to
    tell clients when they asked
    for a hands-off business
    i told them get a certificate of deposit
    if the surest recipe to having no
    business at all and to losing everything
    is to have a hands-off business
    the moment you stop watching
    the uh
    the cash register and you stop managing
    is when you’ll lose a significant amount
    of money
    coin laundry industry has employee
    problems
    it has repair problems you have flood
    you have utilities you have negotiations
    with a landlord you have payment of debt
    service you have equipment replacement
    i could go on and on it has every single
    issue that every other business has
    so
    uh and the successful operators and i
    know them from all over the country
    are great business people
    and in fact they’re the ones that you
    want to deal with
    you’ll very seldom
    hear
    one owner complaining about another
    owner when they’re both savvy business
    people
    because neither of them is in a race to
    the bottom and prices or free dry or
    anything
    that
    may be considered a problem
    um
    in the industry
    uh they’re savvy business people
    and
    one of them i think of i won’t mention
    his name
    uh
    likes to say that he’s the first to go
    up in price
    and he’s right because he understands
    business
    so
    it’s
    i said it’s like like any other business
    one little one difference between the
    coin laundry industry and other
    businesses this is a very very
    capital intensive business
    in my field
    as a cpa
    i can buy an adding machine or a uh an
    iphone
    and a computer
    and that’s the extent of my capital
    investment
    with a coin laundry industry
    with a coin laundry uh
    store
    you have multiple machines
    you have leasehold improvements
    uh
    it goes
    on and on and on and these are all fixed
    costs so before you even start you’re
    out of pocket a significant amount of
    money plus the deposits the utility
    companies and the landlord are going to
    want you to make plus if you don’t have
    a cardless system plus the cash that
    you’re keeping in a change machine
    so there is a significant
    outlay
    before you ever see penny one
    the nice part in the coin laundry
    industry
    is your revenue comes in before your
    expenses generally
    and very very seldom do you see a
    business like that where the revenue is
    front loaded
    a magazine company would be front loaded
    you would collect for a year’s
    subscription and then you would have to
    perform afterwards but that’s the
    exception not the norm
    yeah absolutely it’s really nice not to
    have to deal with invoices not to have
    to try to chase down people to pay you
    know what they owe because it like you
    said it’s all collected on the front end
    and i love i mean i just i love that you
    someone who’s been in this industry for
    a long time
    and is very intimately familiar with it
    is saying hey the best operators you
    know are raising their prices they’re
    not racing to the bottom they’re adding
    you know more value
    and
    in charging for it and you know i
    i’ve talked before about how you know
    the
    the the zombie mats quote unquote that
    are out there now are the are the ones
    who aren’t doing those things they’re
    not they are racing to the bottom
    they’re not reinvesting in their
    businesses they’re not running them
    like
    businesses they’re trying to run them
    hands off uh kind of as you mentioned
    so i love that you mentioned that i love
    that you said that
    uh oh and just real quick another uh
    you know just another sort of
    side note uh based off of what you just
    mentioned is you know
    right now is a good time to be raising
    your prices as inflation is on
    on the move
    and uh it’s a good time to be raising
    your prices our utility bills are going
    up and all that i don’t know if you
    haven’t the only time i’ve seen laundry
    owners
    savvy as a group
    has been
    when there’s been a crisis
    there was a water crisis about 20 years
    ago
    and laundry owners used that to increase
    their uh
    uh
    with their vend prices
    and
    nevertheless they’ll then sit for 10
    years at the same price
    when we all have inflation on an annual
    basis even in normal times these are
    extraordinary times now
    but in normal times you have inflation
    and laundry owners
    do not go up by the way that’s one of
    the advantages
    in a card system
    where you’re not married to 25 cents
    increases
    i could date myself and talk about 10
    cents but fortunately those
    uh they’re gone
    but
    with 25 cents people are very very
    reluctant to go from two dollars to two
    and a quarter for example
    whereas
    on in a card system
    you can go from 2 to 210 to 215.
    no one leaves you
    over a few pennies
    in fact it’s from my experience
    people don’t really we accord the
    customers a lot more credit for shopping
    we think they they stop at every laundry
    and check their prices before they come
    to us it’s just not true
    customers are like pavlov’s dogs
    they’ll come in come back week in and
    week out unless you give them a reason
    not to
    if you treat them shabbily
    or if the store is filthy
    there’s a lot of out of water machines
    or you refuse to make a refund
    you’ll lose the customer
    and short of that the customer is yours
    to lose you really have to try hard
    yeah i love that i mean do you have any
    do you have any advice i mean
    i really want to get to the tax stuff
    but i’m just curious do you have any
    advice for owner i mean you said it like
    we as a whole are pretty bad at raising
    our prices do you have any advice on
    that should we get on some kind of
    schedule
    you know
    i think you need to examine it annually
    and frankly
    now it would not hurt for people to
    raise their prices
    they can put they can post articles on
    the bulletin board
    about price increases but it doesn’t
    take a genius to know that when you were
    paying three dollars a gallon for gas
    before and you’re paying 450 now or even
    more
    that that same cost increase has gone
    through to the coin laundry owner who
    uses natural gas and who uses
    electricity
    so
    uh
    all of which are either made or
    generated by uh carbon fuels so
    um
    and that’s only one one aspect of our
    costs
    so
    uh
    you
    whoever is the brave soul to do that
    will probably find the competitors
    joining after the fact
    often it’s a case of not wanting to be
    the first yeah
    yeah and that fear too i mean
    i i hear all the time owners who have
    this fear of wanting you know raising
    prices
    and what if the the other competitors
    don’t do that and then everybody leaves
    and now you go out a bit you know so
    there’s that fear but i think you’re
    right like it’s as soon as
    you know you raise your prices a lot of
    times other people follow because it’s
    better for
    for them to charge more too you know
    they’re making more money too so or they
    have higher expenses
    so
    all right well let’s chat a little bit
    about
    taxes well real quick i just want to say
    uh you know i i
    got connected with you through andrew
    cunningham who’s one of the favorites on
    the podcast he’s been on a couple times
    now um i’ll put links for anybody
    listening who wants to hear andrew’s
    podcast episodes uh because he’s been
    one of the favorites but uh
    uh
    great guy and super glad that he
    connected uh connected us together
    and i don’t know if you want to share
    any of his deep dark secrets behind his
    back in front of everybody no i’m just
    kidding
    i know
    andy
    well over 30 years 30 years and
    he is one of the type of people you want
    to use
    uh
    if you’re going to buy a store or sell a
    store you want to use someone who knows
    the business
    period
    the
    a neophyte simply won’t
    won’t cut it
    so uh and if you’re in something for 30
    years
    you know that you’re damn good
    you know what you’re doing or you you
    wouldn’t be in it
    so
    yeah absolutely and he i mean i i say
    this all the time i even say to his face
    like he he knows his business pretty
    much
    if not better than anybody i know he’s
    you know just as much as anybody that i
    know this guy knows his stuff and it
    comes through when he comes out on the
    podcast or or webinar we’re doing or
    whatever so
    good good guy okay let’s talk about
    taxes what i mean why is what why is it
    important that we talk about taxes and
    and think about taxes as business owners
    and and try to navigate taxes why is
    this important for us
    a famous judge
    learned at hand
    basically said
    that no one owes more
    than the legal
    rate to pay
    on tax and anything to do anything
    further is foolish
    i’m paraphrasing him but that was a very
    famous
    court decision
    the it is not
    patriotic to overpay your tax it’s
    stupid
    the
    i think the people
    who i’ve dealt with over the years
    who want to avoid tax entirely
    generally fall into that stupid category
    you can’t avoid tax
    and
    for me
    i believe in optimizing tax and i think
    the only way to save taxes to pay tax
    but
    that
    seeming contradiction
    simply means
    to recognize your taxable income at the
    lowest possible brackets
    and
    to
    have no tax one year
    probably means you squander deductions
    and if you were to have had tax it would
    have been at the 10 bracket the 12
    the 15
    give me that i’ll pay tax happily at
    that because what it means is the income
    that would otherwise go in a higher
    bracket isn’t going in there
    so
    you can recognize income at 10 percent
    you can recognize it at 30
    the difference is the government has
    picked your pocket for another 20
    percent
    so
    the idea
    is to optimize
    uh your tax to use to use up all of the
    lower
    brackets
    and
    typically
    discussions on tax planning and coin
    laundries revolve around one thing and
    that is depreciation
    you can write off assets
    called either
    section 179
    write off
    or you can use what’s called bonus
    depreciation which is effectively the
    same thing it’s writing off your assets
    or you can depreciate your assets
    the
    uh the life of coin laundry assets is
    generally five years on
    equipment and
    for leasehold
    uh improvements you’re into a longer
    life
    so
    uh
    but typically
    most of what you get will be
    uh equipment
    when you buy a store
    you
    people make the mistake 99
    of the clients i’ve dealt with
    make the mistake
    and
    put down that they’re buying
    leasehold improvements
    you can’t buy a leasehold improvement
    by operation of law
    they belong to the landlord
    so how could you buy something
    that doesn’t belong to the seller
    so
    that’s wrong
    however you could have something called
    the leasehold interest
    where you value
    the ability to occupy those premises
    and an actual life example of what i
    went through years ago will help explain
    that
    years ago i dealt with a very famous i
    won’t mention a client men’s clothing
    chain
    that was running tear jerker ads going
    out of business after
    a hundred years downtown
    and they had multiple stores
    well
    the little
    asterisk side note footnote was
    they didn’t lose their lease
    downtown they sold it for several
    hundred thousand dollars
    because they had a very long term lease
    at like 25 cents a square foot
    in a market that was at that time
    probably two dollars buck and a half two
    bucks square foot that had value to it
    so
    you’ll find occasionally you’ll find
    something like that available where the
    tenant has a long term lease at a below
    market rate
    so
    when you buy a store to the extent
    that the uh sewer hookup fees have been
    paid already
    and a lot of you have the dryer curtain
    walls you have the the bulkheads
    you really have
    to the person who paid for it that would
    least hold improvements
    to you as the buyer of a store you
    probably have a leasehold interest
    which is an intangible
    because you can’t touch it
    but it still has tremendous value
    now if you take a leasehold interest
    you write that off
    over the life of the lease
    so
    now the irs controversy in that is the
    irs
    wants you to include options
    if there is a reasonable expectation
    that the options will be exercised
    so
    you could have a situation where it’s a
    substantial
    uh period of time
    i usually take the position
    that it is more akin to a uh
    what’s called a section 197 intangible
    which has a 15-year life
    it’s it’s similar to goodwill
    and no that’s not the fastest write-off
    in the world because you get five-year
    write-off on equipment
    but it’s not too shabby either
    it’s a decent and
    if the
    the laundry owner looks at his or her
    own tax situation
    they’ll see whether or not they have a
    strong appetite for write-offs
    many of them don’t
    and
    in the last few years i’ve had clients
    who realized that they had made a
    mistake
    they had done their damnedest to zero
    out
    their income every year taxable income
    and then they woke up and said gee we’re
    approaching age 62 or 65
    we don’t have
    the earnings years for social security
    purposes
    so we’re not going to get diddly squat
    can you do the op can you
    show income
    i must have like five clients a year
    who ask that which is the antithesis of
    what you would think
    so they’re willing to pay
    more
    to get that income and by the way social
    security is based on your 35 highest
    earning years
    so
    before i practiced what i preached when
    i had my own stores i zeroed out a few
    of those years and
    years later i
    i said boy i probably made a mistake
    because i’ve got zero in those years
    so i scurried to add some higher
    higher income years to ensure that the
    35 years would be the max
    so
    you
    you want to be be careful
    uh yes you can save on income tax but
    you may have
    other reasons or concerns for
    showing some income
    yeah yeah and i i mean i i love that
    you’re talking through all of that
    because number one i think a lot of
    people
    probably have never even heard of a
    leasehold interest
    uh and so
    you know talking through that but i mean
    you mentioned something right in the
    beginning of when you were talking and
    you were saying
    you know hey if you’re shooting for you
    know
    trying to get into that 10 12 15 tax
    bracket as opposed to like a 30 plus
    tax back bracket you might be saving
    you know 20 percent on your taxes and
    that that’s
    i that’s a bigger deal than i think
    people realize like saving
    you know that 20 percent is uh it’s a
    pretty big deal it’s hard to get a you
    know that kind of return on any kind of
    investment and so i think part of why i
    think this tax conversation is really
    important is because you’re able to save
    such a high percentage if you if you’re
    managing your taxes right and i think
    just that short conversation
    conversation that you just had
    shows that there’s a lot of things to
    factor in both short term and long term
    that you need to kind of construct and
    kind of weave together to create the
    best scenario for yourself as a business
    owner as
    you know whether you’re an employee or
    whatever there’s a lot that goes into
    all that
    i i’ll also tell you
    from a tax planning standpoint
    most of us live in states that have a
    state income tax
    i happen to live in california which has
    the highest we go as high as 13.3
    percent
    if you do adequate tax planning
    you can have your cake and eat it too
    you could leave income on the table to
    qualify for social security
    but adopt
    a different
    tax strategy
    for state purposes where you’re writing
    off the uh the assets faster
    and it may pay to do that so that you’re
    paying less in state income tax
    especially in an era when state income
    taxes are effectively not deductible
    you’re now under uh the tax laws that
    exist today
    the first ten thousand dollars
    of state and local income taxes is
    deductible and that includes real estate
    property uh property tax anything over
    that is not deductible
    so you may want to have different uh
    systems for the federal and for
    california different methodology
    yeah yeah well as a fellow resident of
    california i
    uh you know i feel the
    the high state tax uh pain that
    everybody else around here feels and
    you know just
    figuring out i mean having the cake and
    eat it too and and kind of weaving
    through all that i mean it’s why i
    always recommend you know consulting
    clients hey talk to a good cpa who
    understands
    uh you know
    particularly for business owners who
    understands
    uh good tax law is going to help you
    construct
    something like that and we’ll give
    people an opportunity to figure out how
    they can contact you here in a little
    bit uh but let’s let’s chat just a
    little bit about
    um
    maybe just some some timeless i mean
    you’ve kind of already dropped a couple
    of things here but some timeless tax
    tips that you might have for us as
    business owners what are some things
    that we should be thinking about
    uh as we do our own tax planning uh any
    any advice for us
    one bit of advice that uh is age-old
    that still works is the concept of
    bunching
    and what bunching means
    is to
    pay all your expenses in one year
    because you may have a situation
    where you had medical expense last year
    and you have medical expense this year
    and in
    in total
    you would qualify for a medical
    deduction
    on your if you itemize
    but because the spread among two
    different years you don’t
    it might be the same way with a
    charitable contribution
    you may find it more
    advantageous to do it all in one year
    consequently if you’re not going to
    benefit
    from a charitable contribution that you
    would make in december
    why not make it january 2.
    the next year
    and then take the following year’s
    contribution and be and donate that in
    december of the same year
    suddenly you’re in
    uh the same tax year and you you can
    probably benefit from something you
    wouldn’t have otherwise benefited from
    before
    what’s interesting is we used to talk
    about
    if you sold a business or any type of an
    asset on what’s called an installment
    plan
    where you you’re collecting your sales
    price in
    multiple
    uh payments
    were you to sell a business in
    december
    2021
    calling for a payment in december 2021
    a payment january 2
    2022
    and a payment
    january 2 2023
    you sold a business that requires
    payments
    in one year and two days three payments
    and you’re in three different tax years
    perfectly legitimate
    irs will not upset it the courts will
    respect it
    that’s smart tax planning
    because
    you’re using multiple years
    and
    you really want to stay ahead of the
    curve do something like that at the same
    by the same token
    you want to pay attention
    to the likely outcome in washington of
    any tax increases
    i might have said increases or
    reductions
    but the reality is they they look to be
    going one way only
    at least the discussions
    because i have told many clients
    you have a large gain
    the sure thing is to recognize it now
    because i know that there’s not going to
    be tax law changes in 2021
    i can’t say the same for 2022
    and i do know
    that what’s proposed the rate increases
    so
    you’re probably better off taking the
    chance biting the bullet and paying the
    tax now
    which is exactly what i had said at the
    beginning of this podcast
    the way to save tax is to pay tax
    but it’s simply through optimization
    yeah that i mean that’s super smart and
    using kind of those uh
    rigid deadlines that the irs has you
    know for for taxes to your advantage so
    you know selling and
    basically
    getting receiving payment for you know
    really whatever asset but particularly a
    business
    over three years but really at only
    being a little over a year here’s
    another one for you people who pay
    estimated taxes
    and those are people who have
    income from retirement rents
    interest dividends
    any type of income unemployment
    for which there’s no withholding
    if you if
    you’re in that situation
    then you you should understand that the
    payments which we erroneously call
    everyone calls them quarterly payments
    so they’re not quarterly
    the payments are due april 15th june
    15th
    september 15th and january 15th
    or what i call the fourth sixth ninth
    and thirteenth months
    that’s the antithesis of
    quarterly but
    if you understand
    when those
    payments are
    determined
    it’ll help you
    the payment that you make in april on
    april 15th is for the period january
    through march
    the payment that you make june 15th is
    january through may
    and the one that i really love is the
    payment that you make
    september 15th is january through august
    31.
    if your income and i had
    over 10 million dollars of gains from
    clients in the last
    let’s just say post august 31
    this year
    what that means
    is if they were paid september 1
    they do not have to make an estimated
    tax payment until january 15th
    so they can sit on their cash
    and if you understand
    which i haven’t discussed yet
    but there’s safe harbors
    in the tax system that enables you to
    make your tax payment april 15th
    despite how large your income may be
    and i have some clients with the income
    that’s in the seventh certainly high
    seven figures
    who
    had extraordinary income
    that
    uh where they’ve met the safe harbor
    they’re not gonna have to make the
    payment until the last minute
    and i’ve told them hold your money
    because all you’re doing is making the
    government an interest-free loan
    but you have to understand what the safe
    harbors are
    and they’re relatively easy to do
    by the way the
    that is federal law
    most states comply
    unfortunately the state that you and i
    live in
    uh has limited compliance
    if your income exceeds a million dollars
    all bets are off there is no safe harbor
    so
    again something that you need to know
    what california going its own way when
    it comes to laws that’s
    ridiculous we never do that around here
    uh yeah okay uh
    so
    look i mean can you can you chat just
    for a second about
    these safe harbor i mean we have people
    who
    you know listen to this podcast we’re
    gonna fall under that can you talk a
    little bit about the safe harbor stuff
    i’ll talk safer but i’ll give you a few
    cute things to know right
    that are
    perfectly
    legal
    estimated tax payments are credited when
    you make the payment
    and again what an estimated tax payment
    is
    is the government’s attempt to get you
    to pay your tax
    throughout the course of the year
    because the government said we have our
    bills to pay
    continuously so we want you to pay
    your tax bill
    throughout the year and not wait until
    april 15th
    well
    if you are credited
    uh for your payments
    april 15th june 15th september 15th and
    january 15th
    you could find yourself
    in a world of hurt penalty wise
    because you could have a hundred million
    dollar refund
    and have payments for underpayment
    uh have penalties for payment of
    underpayment of tax
    because the penalties are computed on a
    quarterly basis
    so the government says that’s great
    you paid us september 15th
    however you earned your money in january
    and february you should have paid it in
    march
    consequently
    everyone fills out this penalty schedule
    and you will pay the government
    penalties the penalties are really akin
    to interest
    here is a cute way
    to
    uh minimize that
    payroll taxes are deemed to have been
    paid in readably throughout the year
    if you have your own business if you
    have a corporation
    and you were to take a bonus at the end
    of the year
    and withhold the entire bonus
    that would be deemed to have been paid
    throughout the course of the year
    so while you may have paid it december
    31
    you’ll get credit as if it had been paid
    january february march april etc
    and uh there’s one other that i’ve used
    very successfully
    in the past
    you find that you’re in a horrific
    situation penalty wise
    and
    there’s very little that you can do
    well if you have an ira account
    take a withdrawal from the ira
    have them withhold a ton of the tax
    whatever your shortfall is
    and then
    pay it back within 60 days and pay back
    100
    what will happen is the amount that was
    withheld for tax will go into the
    government
    and was deemed withholding and is deemed
    to have been paid from january february
    march the same as payroll
    so it’s a very good way to get
    withholding in
    and not be any worse off because if you
    repay
    an ira
    a distribution within 60 days
    it’s not taxable it’s deemed a no harm
    no foul situation
    the nifty little things to uh to know
    and use
    if you find yourself in that uh in that
    situation there’s one more thing i did
    not mention before which i want to
    mention
    uh
    the concept of depreciation recapture
    people talk about well they were sold a
    store i’ve got a lot huge capital gain
    they don’t realize that that is not true
    capital gain is only the portion that’s
    taxed
    at the very favorable rate
    the government says if you wrote off
    depreciation
    over the course of the years
    then we expect you
    to
    pay that back recognize when you sell
    that business or that equipment to
    recognize that depreciation at ordinary
    tax rates and anything that remains
    you can recognize at capital gains rates
    and a way in tax planning to minimize
    that
    is
    the
    recognition of depreciation recapture
    is deemed to be the lesser of the
    depreciation that you took previously
    or the gain on the asset
    by
    simply
    reducing the sales price
    on what is
    attributable
    to those assets that had the
    depreciation
    you can control the amount
    of recapture
    i realize this is heavy stuff and uh
    and highly complicated but what it says
    is to do your planning there’s a very
    there was a famous commercial on the
    radio here in los angeles about 40 years
    ago
    uh from a company brentwood savings that
    said 50 of smart is knowing what you’re
    dumb at
    and
    that’s still true
    go
    you need to know when to get help when
    you can turn to someone who knows more
    and leave it in their hands
    so
    uh
    that’s that’s a smart way to go
    you can control your tax destiny
    yeah that’s that’s huge and i i mean
    i i think that’s it’s so big right
    because the depreciation right is a huge
    perk it’s why a lot of people buy
    laundromats frankly is for that
    depreciation uh that and tax advantage
    that they get from that depreciation uh
    however you know that’s not it’s not
    free money right that does need to be
    paid back and from my understanding and
    correct me you’ll know better than me
    uh but 1031 exchanges no longer apply to
    businesses properties
    only now is that correct
    that’s correct
    yeah so only only real estate now
    and believe me i’ve had 1031 exchanges
    on airplanes
    so
    i’ve seen them
    on everything by the way the most common
    1031 exchange that ever existed
    no one ever treated right
    that was turning your car back to the
    dealership and getting credit for it
    all you were doing
    was exchanging one vehicle for another
    fortunately the irs
    didn’t bother with it they didn’t
    it would have required too much
    man-hours
    but
    every one of those cases where you where
    you use the car in business and you turn
    the car back
    to the dealership to get credit and take
    an uh a new car was the 1031 exchange
    ah
    i didn’t know well and just i i i
    brought this up but just so everybody’s
    on the same page not maybe not everybody
    knows where the 1031 exchange is can you
    explain that just briefly for us yeah
    section 1031 of the internal revenue
    code
    required
    you
    as a seller
    not to recognize gain or loss
    if instead of selling your asset you
    exchanged it
    so in other words
    if you took
    uh
    your car
    and you gave it to the dealer
    uh as a down payment on a new car
    whether or not you had a gain or a loss
    you’re not you were not allowed to
    recognize that
    all that you would do is increase the
    cost of the new or reduce the cost of
    the new based on
    the value that you were given
    and
    where
    1031 exchanges have really been used are
    in real estate
    people the great wealth in the united
    states has come from overwhelmingly has
    come from real estate
    and
    what
    savvier real estate people would do is
    they would take a property that was
    worth a lot of money that they had a big
    gain in
    and they would exchange it for a larger
    piece of property
    elsewhere
    so they would keep pure emitting up
    never paying tax on the gains
    because
    they had never cashed out their chips
    and then
    at the very end
    what would happen they would die
    and
    we usually talk about you death and
    taxes are two things that you can’t
    escape
    but actually
    if they kept doing that
    they
    their death ensured that they escaped
    the tax bill the best example of that is
    actually not in real estate it’s george
    steinbrenner
    when he died
    the yankees were worth well in excess of
    a billion dollars
    there was no tax paid for them and i
    forget what he paid for the ball club i
    don’t know 20 million dollars 30 million
    dollars
    so
    that totally escaped tax because upon
    death
    you receive a
    an increase what’s called a step up in
    basis to the fair market value
    so those people who held their real
    estate and kept pyramiding and
    exchanging it for other but never
    cashing it out
    built a huge amount of wealth
    and really weren’t paying tax on that
    they were paying tax on the rental
    incomes
    that they received
    and any side income but never on the
    gain on the property itself
    by the way that does not 1031 exchanges
    do not pertain to publicly traded stock
    so
    you can’t do that by taking
    stock with huge gains taking your amazon
    stock and trying to use it
    uh to buy microsoft for example or or
    another valuable stock
    you’ll want one of paying the tax yeah
    on the gain so also not applicable in
    crypto for those of you cryptophiles
    there
    yes
    and that’s a whole nother
    can of worms yeah whole another which
    the irs is still
    trying to figure out
    yeah well
    yeah thank you for that explanation on
    the 1031 and you know it’s it’s one of
    the reasons why i think you know
    if you can utilize
    buying laundromats and running
    laundromats to help you acquire real
    estate it can be a really powerful
    one-two
    combination both in terms of
    income in equity gain and also in tax
    advantages when you combine both of them
    together so
    and they’re
    very much divisible
    that’s a
    very true
    you also as a laundry owner operator
    have a lot more control over your
    business if you are the landlord
    and then as i said you can bifurcate the
    two you can sell the laundry and i’ve
    had many clients who did that but held
    on to the real estate
    yeah absolutely and there’s there’s a
    lot that you i mean you have a lot of
    options if you go that route
    uh okay so
    you know we’ve talked about a lot of
    things already and i feel like there’s a
    lot of value i have a couple more
    questions but i want to make sure you
    get to anything that you
    feel like we need to talk to if we
    haven’t talked about if we haven’t
    talked about
    anything you want to talk about and
    there were there are a few things okay
    yeah let’s go through some of those
    okay
    let’s talk about from a matted non-tax
    but from a management standpoint
    what do i think is important
    to a owner operator
    the number of turns
    that your equipment is doing
    and each type of equipment
    it’s
    probably i think the most important
    number that you have the most important
    uh statistic for your store
    because it tells you how you’re doing
    how you will be doing what you should be
    doing with your equipment replacement
    and
    if you’re able to keep and the records
    are very very easy because we all
    collect
    either you’re collecting a coin
    or you’re uh reading from the uh the
    card reader how much you did
    but
    if you have
    uh
    35 pound front loaders that are doing
    nine turns a day
    and you have some 18 pounders that are
    doing one and a half turns a day
    it tells you you you need more 35
    pounders
    and since we’re all
    a prisoner of the space in which we
    operate we can’t create more space
    all you can do is get rid of equipment
    and add
    other equipment that’s more valuable
    and it’s as you become more experienced
    as an owner operator you realize
    the old ad is the hip bones connected to
    the leg bone that you simply can’t
    necessarily add the additional equipment
    because you may have drier constraints
    as a result
    so you have other ratios
    so you have to
    strike a happy medium but i’ve seen this
    and the better operators i know do just
    what i’m saying
    they’ll scrap something because it’s not
    doing the turns
    and you’re better off
    it’s a sunk cost
    getting rid of something that isn’t
    generating you the revenue
    and replacing it with something that is
    really really smart way to go
    yeah and i think that speaks to i mean
    you were mentioning earlier is the the
    best in the business and i think this is
    starting to happen more and more in this
    industry and at a quicker pace too that
    savvy business owners are the ones who
    are doing the best in this industry and
    thinking about business in these term uh
    terms
    terms terms is
    you know
    that’s a savvy a savvy business owner
    move right thinking about how to
    optimize your laundromat layout to
    maximize income yes and also to maximize
    uh the opportunities that your customers
    are looking for you know whether that’s
    opportunity to use a 35-pound machine or
    an 80-pound machine or you know whatever
    the case may be
    and making sure you have enough
    washer-to-dryer ratio all those things
    that kind of work together
    the savvy business owners are the ones
    who are thinking about those things and
    and making those moves to optimize their
    business in those ways
    very very true
    the other
    point i was going to make
    relates to
    laundry locations
    when i got into the business
    typically you would always hear
    up we want apartment areas
    and dense areas
    that was true then and is still true
    today
    however there’s a lot of other
    additional areas where the homes were
    circle world war ii
    very small homes
    that either didn’t have laundry hookups
    or it would take up too much space
    i know
    multiple neighborhoods
    in uh this city that i’m in
    where that’s true
    and they’re good laundry areas
    other good areas are beach areas
    people don’t realize that because
    generally it’s thought of
    as
    lower income people are the nucleus of
    the business and that’s where we want to
    locate because dense areas generally
    equal lower income that’s not
    always true
    we have a lot of areas in
    los angeles for example
    that are densely packed
    and they’re very very affluent
    and the beach communities are certainly
    affluent
    they’re the people there are not price
    sensitive they are cleanliness uh
    sensitive
    but they’re not price sensitive
    and those because of limitations
    imposed by the government on building
    within uh
    x number of
    feet of the the coast
    ensure that those stores really don’t
    have future competition
    so those types of stores may be very
    good
    and there are other beach communities
    throughout and vacation communities
    throughout the united states
    where that’s very very true
    people wouldn’t think to locate a store
    there and they’d be wrong
    they
    i i can think of
    for example
    if you located a store at a truck stop
    it would be incredible
    you have a ton of transient people
    coming by
    who are not going to be price sensitive
    who probably would welcome that because
    a lot of these stops have uh overnight
    facilities
    where you could do very very well
    and you would have continuous business
    the other thing
    that
    we’ve in the business understand
    is that the laundry year
    closely parallels or it certainly did
    precove it this school year
    which means that
    we die in the
    summertime and come september october
    we start picking up
    really well and december january
    february we hit the crescendo
    and
    if you’re a
    buyer of a store understand that
    don’t get fooled on extrapolating
    numbers
    because it’s which numbers you
    extrapolate that count
    which months you’re including
    and certainly as a seller you don’t want
    to sell your store based on
    july and august
    uh numbers
    you’re significantly better off
    to have a subsequent six-month period
    that excludes them
    so
    whoever does their homework
    on this
    their due diligence
    should see a full year and they should
    see multiple years they should see
    utility belts
    and if they speak with someone
    knowledgeable like an andy cunningham
    they’ll tell them that there’s a
    seasonality factor
    don’t be fooled by that
    so
    um
    it’s really helpful for what you don’t
    know to seek out that uh that knowledge
    you can’t i overpaid about fifty
    thousand dollars to my first store very
    very easy to do
    and
    you know
    that’s the best uh education is to
    overpay so fool me once uh you won’t
    fool me twice
    [Music]
    that’s right yeah that’s uh i mean i
    i’ve been in the same boat and
    expensive expensive lessons learned but
    like you said you know you just kind of
    keep moving and take those lessons for
    what they are uh a couple quick thoughts
    on all those things you just said
    love the truck stop idea i’ve never
    heard anybody say that before but i
    think it’s i think that’s a great idea
    somebody should do that
    number two i love the beach community
    idea i’ve been eyeballing a laundromat
    uh at newport beach for like years that
    eventually
    i will
    get
    or uh i have this dream of just going to
    get a laundromat in hawaii that either i
    can expense my trips out to hawaii or i
    can just kind of move out there and have
    my hawaii uh laundromat
    but
    in all seriousness uh those beach
    communities also tend to be more tightly
    regulated and not just beach communities
    but touristy areas in general tend to be
    more tightly regulated which means less
    building less likely for competition
    because
    they want to preserve the
    attractiveness of the area and so you
    know they do tend to be
    uh more tightly regulated and uh less
    spacious they want you know there’s more
    value in land in these in these areas so
    you know the the living residences tend
    to be less spacious which you know may
    uh may indicate that there’s you know
    opportunity for laundromats in those
    areas too
    yeah the other thing
    it’s very smart
    for you before you buy a store
    to look at any local ordinances
    regarding uh having employees on the
    premises
    regarding
    operating hours
    regarding sewer hookup fees
    i know of an area where it’s over five
    thousand dollars per machine sewer
    hookup fee
    now if you are the owner of the store
    you’re in like flynn
    because no one can afford can can pencil
    out
    a store that’s going to make any sense
    to compete against you
    so
    and
    unfortunately the politicians do things
    in a vacuum they don’t understand what
    they’re doing
    that
    the lion’s share of that of the customer
    base will use those stores
    are people who are on tight incomes
    and
    they’re making it their lives
    prohibitively expensive because the
    laundry owner is going to have to charge
    more
    just to uh just to break even
    oh and one more thing a uh
    something to avoid
    i said you’d look typically itinerant
    and transient barriers uh uh
    circle world war ii housing with the old
    uh
    small houses
    and
    apartment buildings
    what i found and i almost made the
    mistake it took someone to point it out
    to me
    i love this store that i found was clean
    it was quiet the people there was no
    hubbub there were no graffiti
    until a seasoned vet
    pointed out
    that
    the average age of the uh person
    in the store was virtually dead
    and
    was right
    the
    to the extent you had more elderly
    people
    there
    the place was there was very little
    washing done
    they would use top load machines
    and
    the smaller families
    and they would be very happy to sit
    around within the store
    and i’ve since realized that as i’ve
    studied some other areas
    where the uh the demographic shift is
    more is older
    that those simply are not good laundry
    areas
    because what you want are big families
    and a lot of turns and you want people
    coming in and out
    who are busy
    who don’t want to sit in your store all
    day
    so
    which is why when before you buy a store
    it’s very very helpful to drive areas
    and actually go and sit in various
    stores
    and see if you can come up with any
    common denominators
    yeah awesome advice and yeah i mean i
    think the avoiding kind of the elderly
    areas is great tip something i never
    thought about uh before i’m glad
    somebody pointed it out to you before
    you pulled the trigger
    and learned another expensive lesson
    uh you can only learn so many expensive
    lessons before you just go broke so
    good very very true
    good to learn from other people yeah
    look i’ve also had
    unfortunately i’ve had
    stories
    where someone bought a store
    based on the numbers
    and the numbers were accurate
    and then
    they either had
    riots in the neighborhood
    or they had an earthquake
    where
    uh all adjacent businesses were
    destroyed
    in a significant part of the area
    that changed the dynamics uh
    immeasurably
    the store was no longer viable
    through no fault of anyone’s by the way
    yeah it wasn’t a uh a seller who was
    misrepresenting
    and
    uh it was simply the
    one of those things that happens in life
    they always wind up in litigation but
    that’s costly and it’s not going to
    change the facts
    yeah yeah and and that’s true you know
    there are things that happen that you
    just can’t control and those are the
    punches you just gotta
    roll with and and chalk them up to hey
    man life just dealt me a bad hand on
    this one but
    uh you keep moving forward right keep
    keep going and you just don’t don’t roll
    over and die just keep going
    one of the stores that i used to own
    who
    i had sold the store to someone
    a gang firebombed the store
    the entire store was burned out
    geez i then know
    someone who bought the equipment
    because uh the the lender wound up with
    the equipment which of course had a fire
    smell to it
    but
    and that’s not uh that type of situation
    is uncommon but
    to have all of that used equipment is
    not the very often someone will get
    stuck with it a lender
    and it could be a lender from across the
    country who certainly doesn’t want to
    warehouse it or or move all the
    equipment
    it’s
    in everyone’s best interest to leave it
    local and to put it back into a store
    yeah
    yeah man i yeah i mean i’m sure we could
    kind of go back and forth trading horror
    stories uh you know of things that that
    can go wrong and do go wrong and and you
    know that’s where you know maybe we
    should have an episode on uh insurance
    at one point here too because that’s
    where you know hopefully you have some
    insurance that’s gonna help you out on
    that stuff but stuff does happen right
    this is business and you said it right
    from the beginning
    uh this is a business
    right and
    it’s not easy it’s not you know hands
    off it’s a business and things happen
    and i say all the time like if whenever
    you’re dealing with people
    or a whole bunch of machines like
    stuff’s gonna go wrong and you’re just
    not gonna be able to help it so you need
    to be the kind of person who can handle
    stuff when stuff goes wrong because it
    will
    that’s what happens in business all
    right so we have a
    a little section that we call
    uh secret sauce listen up it’s the
    secret sauce
    [Music]
    and i’m curious if you had to give some
    advice it could be tax or
    business advice uh either one for
    a current laundromat owner
    uh you have like one piece of advice for
    them to help them kind of improve their
    business or improve their you know take
    a take a positive step you know with
    taxes or or anything along those lines
    yes
    there’s
    someone
    i deal with who’s a client
    a friend
    and one of the best operators
    i’ve ever seen
    who understands the concept never fall
    in love
    with
    your business
    and
    i i think probably he subscribes to
    everything he has is for sale
    i’ve heard that before from
    successful entrepreneurs
    and that’s very very true
    sometimes someone will make you an offer
    unsolicited
    and
    it’s
    exceeds anything you might have ever
    anticipated
    you want to let it go
    the other thing is if you have a uh a
    mediocre business
    or a business that you feel has maxed
    out
    it’s time time to get rid of it
    the
    doesn’t mean you’re leaving the coin
    laundry industry most people i know of
    who are in this industry
    that’s simply a store that’s in their
    past they’ve moved on to other stores
    they haven’t left the industry
    but they understand the idea in the end
    is to make the biggest profit with the
    least amount of headaches
    and
    as i said this business has plenty of
    headaches
    simply because
    it’s a seven day and seven night a week
    business when you’re not there
    you’re worried about it because the
    store is there and invariably you’re not
    there at the store
    so it takes you a while to get there to
    put out any fires
    literally
    well that’s really good advice advice
    that’s never been given on the podcast
    before and this is you know we’re
    nearing 80 episodes here and it’s never
    been given i think that’s really great
    advice to
    you know let go and it’s
    kind of actually maybe a timely advice
    too as right now the valuations of
    laundromats are as high as i’ve seen
    them you know the multiples are going
    for higher
    uh than i’ve seen especially around here
    in la and some of the bigger metro areas
    new york you know florida
    texas those multiples are getting
    creeping up so it might be very timely
    advice for some of you guys listening
    right now too
    the reason that is by the way
    is
    those
    returns
    from a laundry are measured against
    what’s available in the marketplace
    you can get one tenth of one percent
    interest
    in a bank
    and yes you can do better in dividends
    or
    in some other
    instruments
    but essentially we’re at the lowest
    interest rates we’ve been at in us
    history
    so
    people
    who are
    looking to improve their financial
    picture
    are looking to improve what they take
    home
    20 percent looks good 25
    i
    caution
    would-be buyers
    before they look at 20
    to
    factor in
    what the value of their own services is
    and deduct that
    because
    you’re you’re earning that money
    it’s not simply
    money that’s idle that you you’d earn in
    a dividend or in a savings account
    so
    yes you can make a good money vis-a-vis
    what’s available in a bank today
    but again this isn’t operating business
    and when you’re not there physically
    overseeing it you are there mentally
    uh you’re sitting there at home doing
    the accounting
    calling the drain routing company
    calling uh equipment vendors arranging
    for insurance and and on and on and on
    so it’s very very much a business yeah i
    think that’s great advice and people you
    know i see this all the time when people
    list laundromats too you know not even
    just
    valuing their own time as the owner but
    a lot of owners who
    you know are working in their own
    business they run their it’s a it’s
    their job right and they won’t include
    those expenses
    in their valuations and so they value
    their laundry mats a lot higher even
    though because they have no
    they have no labor expenses because
    they’re doing the labor and they’re not
    paying themselves that way but i tell
    buyers all the time you need to include
    those expenses and that’s a little bit
    different from what you’re saying but
    you know that’s a pretty common scenario
    that i see
    uh play out
    a lot of times i i tell clients the same
    exact thing you just said you have to
    place a value on your own
    time and service because if you’re not
    doing it you’re going to have to pay
    someone else to do it
    and that’s simply reduces the rate of
    return it means that you you may well
    have overpaid for that business and
    significantly
    one more point of information
    that
    has been very successful for me
    and people do not realize even seasoned
    laundry owners
    loss of a client well screw him let him
    go elsewhere he’s a pain in the ass i
    don’t want to deal with this person
    i used to do the math and say well this
    person pays you five dollars a week
    maybe they pay you ten dollars a week
    okay so you you pay
    25
    utilities maybe even higher
    but
    if they paid you
    520
    a year
    and you
    incurred
    130 25
    so you have 390
    profit from that person
    well
    you look at
    what that store if that store is selling
    at a 20
    cap
    rate you take 320
    and uh
    divide it by two you’ve got 16
    uh 100
    of value
    that
    that store is suddenly worth
    so
    and there’s also the fact that it’s
    worth that much more on an annual basis
    so if you don’t sell it
    it’s worth that much more
    all i’m saying is sometimes
    it pays to put up with a little bit of
    the nuisance
    customer
    because that nuisance customer will
    still come come back week in week out
    and
    but otherwise the value of your business
    is nothing more than an uh accumulation
    of the value of each
    customer coming in weekly
    what you’re really selling when you sell
    a coin laundry is good will
    no one would buy the store for the
    equipment
    they’re buying it for the expected
    continued customer patronage
    and as such don’t chase a customer away
    for uh a little bit of nuisance
    put up with it count to ten
    deep breath
    yeah
    do some yoga or some meditation and uh
    you know profit that 390 bucks a year or
    16 17 100
    of equity in your business
    for that one customer yeah absolutely
    i think that’s great uh great advice uh
    we have one final section called pro
    tips pro
    tips
    do you have advice say somebody is going
    to buy their very first
    laundromat
    you have one piece of advice be it tax
    advice or or otherwise uh for somebody
    buying their first laundromat
    buy through
    a reputable
    agent
    number one
    number two
    do due diligence
    on
    the numbers that you’re presented
    they should pass the smell test
    uh
    by all means participate in the counts i
    realize counts can be can be rigged
    but
    and
    get water bills
    prior
    year water bowls you want to see
    where that store
    is going where it has been
    i have had cases
    where
    the seller was 100 honest in
    what the store was doing
    and
    this number is penciled right out
    and i told the buyer avoid the store
    like the plague
    now
    why would i say that
    there’s a saying
    never catch a falling knife
    so if i told you that a store was doing
    25 000 a month
    that’s great and the the seller has sold
    based on that
    ordinarily you would say that’s fine
    now if i
    give you a footnote and tell you that
    the year before it did 30 and the year
    before that it did 35 and the year
    before two years before that it did 50.
    you don’t know where bottom is all you
    know is that there’s something wrong
    either it’s been a lot of competition
    or customers have sworn off the store
    and if you were to graph that
    your graph is probably going to show
    next year you’ll do 20
    which means you will have overpaid and
    there’s nothing that that seller did
    that was wrong
    or untoured
    it’s simply
    he knew he or she knew
    what the business trend was and they
    wanted out
    so you really need to spend some time
    and also go look at adjacent businesses
    because if you have an adjacent business
    or when i say adjacent i really mean
    within the neighborhood
    within a mile area mile and a half area
    if you have other stores
    that are cooking and your storage is
    dead in the water
    you have a problem you probably don’t
    want that store
    so
    uh
    never pay money
    on the purchase
    to fix a store to what you think it
    should be doing
    that’s the seller’s obligation
    if you buy buy based on
    what it is and where you think it’s
    going it was it’s going to continue
    to go down
    of i said avoid it like to play
    yeah i think that’s great advice yeah i
    have the i have my four pillars of due
    diligence and pillar number three is
    determine the trajectory of that store
    you want to know is that store going up
    is it going down is it flat and
    right along with what you’re saying the
    big question no matter which one of it
    it is it’s doing you need to ask why why
    is business getting so good why has
    business been flat over the years why is
    business dropping
    and
    is there something to be is that is that
    something that i can overcome with a
    solid plan you know is it because of old
    equipment is because of bad management
    new competition in the area you got to
    understand that why if
    if you at all want to proceed forward
    you know after you’ve kind of determined
    the trajectory so that was great
    great advice uh there
    also i mean you mentioned i’m just going
    to drop a little plug but you mentioned
    finding and working with a great agent
    i’m really working hard on building that
    agent database for you guys who are
    listening here for all of us really um
    at laundromat marketplace.com so if you
    know of any agents uh or anybody who’s
    selling get them to head over there and
    create a free profile you can list for
    free over there uh it’s for anybody who
    wants to sell it’s for agents to be able
    to list it’s free there’s a lot of
    traffic going over the first week had
    over a thousand page views uh just you
    know from from doing that so go get them
    over there because i want to help
    connect all of us with those good agents
    it’s so hard to figure out who’s a good
    agent especially when you’re just
    getting into the business
    but if we head over there and we have a
    database of agents nationwide
    who have gotten good ratings and reviews
    from past clients that’s going to help
    all of us out and it’s going to help out
    the great agents which is really another
    thing that i really want to do
    is help out the grade agents and and you
    know help them make a lot of money by
    helping you guys make a lot of money so
    uh laundromat marketplace.com there’s a
    link to that in the show notes in the
    description sorry for dropping a little
    commercial for that in the middle here
    uh richard
    that’s all my questions i don’t know if
    there’s anything else that you want to
    uh want to talk about before we head out
    but this has been awesome so far
    no it’s i think we’ve covered most of it
    we have covered a lot of ground and i
    have
    four pages of notes that i’ve been
    taking as you’ve been talking and
    uh this has been
    seriously incredible we’ll have to do
    some more stuff together and talk more
    my last last question for you is
    probably the most important one is if
    somebody is listening to this today and
    is like
    this guy knows his stuff i have got to
    have a conversation with him maybe i’m
    interested in him helping me out with my
    taxes saving me money stepping up to bat
    uh you know for me against you know as
    the coin laundry warrior or whatever the
    case may be what’s the best way for
    people to get a hold of you
    at uh probably my office number which is
    310-432-4037
    my
    email address
    is
    at rw co spelled like the baby food
    company g-e-r-b-e-r-c-o-dot-com
    and
    typically uh
    voicemail will pick up
    and i return that call i i check in
    multiple times a day like true with a
    lot of businesses i’m working remotely
    right now so
    um
    and i’m happy to answer uh any questions
    that anyone may have
    and just to clarify because we got we
    have listeners from all over i mean do
    you
    you know do you talk with people outside
    of california also oh all over the
    country awesome
    in fact i know it’s one of the niceties
    in this industry
    is i know a lot of the fine operators
    throughout the country
    and
    they have
    a wealth of information they really
    don’t have any different problems
    where they are
    than what we have here
    so
    uh
    it’s one industry
    and uh what’s good for one is generally
    good for all
    yeah i
    love that well richard i mean this this
    has been cert i mean seriously
    you know you never know what to expect
    when you start talking taxes but this
    has been great because it not only was a
    bunch of great tax advice but you know
    as a former operator and as someone
    who’s working with operators from like
    you said all over the country uh just a
    lot of great practical tips practical
    advice
    really really appreciate you uh coming
    on and spending your time with us my
    pleasure
    and happy to do it again anytime you’d
    like oh well we’ll definitely do some
    more stuff together too and especially
    if you’re listening to this and you know
    you’re interested in maybe doing
    something uh or hearing from him some
    more just let me know drop me a line i
    would love
    uh to facilitate that because like i
    said this is probably
    you know
    monetarily the most beneficial podcast
    episode we’ve ever done for the majority
    of us so thank you again richard and
    can’t wait to do the next thing with you
    all right i hope you loved that as much
    as i did because richard’s just a wealth
    of knowledge about both the laundromat
    industry and taxes and how those two uh
    interact with each other and i
    literally have pages of notes um on my
    remarkable uh i literally have pages of
    notes
    uh that i’ve taken so
    man i hope you got a lot too as always i
    want to encourage you pick one thing at
    least just one thing
    to put into action this week we make
    progress towards our goals when we take
    action don’t just be a passive listener
    get out there and take some steps
    towards your goals that’s how you’re
    going to get there okay so for me
    this week
    uh my
    my main kind of takeaway that i really
    was like an aha moment was that concept
    of bunching that he talked about
    and i am going to be looking for ways to
    implement that bunching concept i loved
    it and uh as you know i am
    buying and selling laundromats but also
    equipment all kinds of different things
    i think that there is some great
    applications for that punching concept
    so that’s my takeaway i’m looking for
    ways to bunch um and help myself out on
    some taxes what’s your takeaway let us
    know over on the forums laundromat
    resource.com forums and uh have some
    conversations about how
    we are taking action towards our goals
    all right until next week or
    the next webinar or whatever the case
    may be i will see you at whatever the
    next thing you’re at is peace
    [Music]