Any person with some experience
in this industry can tell revenues and expected
income of an operating coin laundry business by
analyzing its utility bill. However, because of
the fact that most people coming into the coin
laundry business are inexperienced, many fall
for scams and outright fraud. Coin Laundry
Businesses are evaluated based on a multiple of
net profit. This multiple will vary depending on
the age of the equipment, conditions of the
lease, and general store factors. But generally
the range is from 4 to 6 annualized next profit.
For example, if a store generates $35,000 in
annual net profit and the machines are newer and
has a good lease, the general going price would
be 5 or 6 X $35,000, which equals
$175,000-210,000.
Unscrupulous sellers will inflate income as much
as possible to get the a higher price. And
during the period of collections, these sellers
will "salt the mine" or in other words add coins
to the boxes when no one is watching to make
income match claimed income. This practice is
well known in the industry and any experienced
broker will spot it. However, sometimes brokers
are aligned with the seller and will look the
other way when fraud is taking place. Therefore,
as a buyer ALWAYS hire a third party broker or
expert in the business to avoid over paying for
a Coin Laundry Business.
As a rule of thumb, buyers should always do the
following during while performing due diligence
on a Laundromat;
- Demand four weeks of revenue verification
- Demand 2 years of water, electricity, and gas
bills
- Insist on bringing your own coin boxes to be
placed at the Coin Laundry during the revenue
verification period
- Check water meter usage and figure out how
much does 1 HCF generate in revenue at the
store. Extrapolate it to verify against claimed
gross revenues.
- Hire an expert or a broker with no connection
to the seller. Brokers who represent the seller
receive commissions from the seller so they have
a bias to help the seller NOT the buyer.
- Hire a lawyer to go over the lease
By taking the steps mentioned above, you will
avoid becoming a victim of a costly fraud.
