Complete Guide to Selling Your Laundromat - Jordan Berry's 2 Cents

There are a lot of resources now for people who are buying their first laundromat. 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. 

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.

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. 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.

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. I have a couple of suggestions to help you find some qualified candidates.

1. Check laundromat listing sites like Laundromat Marketplace for agents who are listing laundromats for sale regularly. 
   
   

2. 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. 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. 
   
   

3. Referrals are a valuable source of information to find people to work with who have been valuable to other people you trust. 

I highly recommend talking with multiple agents if they are available to you and to choose to work with the best one.

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.

1. In-Depth knowledge of the industry

A knowledgeable broker is going to help you position your business optimally to sell it quickly and for the most money. Ask lots of questions to determine if the broker is knowledgeable about the laundromat business.

2. Trustworthiness

To determine trustworthiness, I’ll give two quick tips. First, listen to how the broker 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.

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. 

4. Systematic approach.

Can the broker tell you what the process is of selling your laundromat? Does the broker have tools or resources like checklists, to help you know what to do and when to do it? Does the broker have a system to market your laundromat once it hits the open market?

Information to Gather

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. 

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.

2. Expense Report

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.

3. Laundromat Details

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.

Preparation is the Key to Success

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.

1. Preparing your laundromat 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.

1. Raise Prices

2. Advertise

3. Promotions

4. New Services

5. Add Income Streams

   
   

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.

1. Staffing

2. Lease

3. Efficiencies

4. Unnecessary Services

5. Insurance

2. Preparing your laundromat aesthetics to sell

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.

1. Keep It Clean

2. Keep It Fresh

3. Maintain the Outside 

4. Appeal to All of the Senses

5. Pay Attention to the Details 

6. Represent Your Laundromat Well Online

7. List it For Sale on Laundromat Marketplace

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.

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

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.

2. Length of the lease

Lease length is critical to the value of your laundromat. Longer leases make laundromats more valuable. 

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.

3. Terms of the lease

The terms of the lease refers 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.

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. 

Schedule a free demo to see how Cents can assist you in all stages of your laundromat journey.