Laundromats typically make anywhere from $5,000 to $25,000+ per month in income. The actual income of a particular laundromat depends on a variety of factors, including size, location, population density, local competitors, and more. In this article, we’ll dive into how much laundromats can really make, how to value your laundromat, how to estimate income, why laundromats are typically a great investment, and why some aren’t successful.
Since the price you pay for a laundromat is tied to its profits, your laundromat should be making money. But how much money will your laundromat make? The answer is, of course, it depends. A laundromat should start out making somewhere between 20-30% (3.5-5x multiple of the net income) unleveraged. This is a great return on money for any investment. It can really allow you to grow your laundromat revenue and wealth very fast.
So, when you purchase a laundromat, you should expect somewhere between a 20-28% return on your investment at a minimum. Laundromats make very good money when bought correctly and run well.
How are laundromats valued?
The valuation of a laundromat is tied to how much money a laundromat makes. Let's do a quick overview of how they are valued and how that valuation translates to laundromat profits.
Laundromats are valued by taking the net operating income (total income minus expenses, not counting loan payments or taxes) and multiplying it by a multiple, the average between 3.5-5x. Because the value is based on the net operating income (NOI), buying a healthy laundromat should yield you a profit from day 1.
For example, if a laundromat nets $100,000 and you buy it for $400,000, you will return a 25% return on your money (not counting tax benefits, equity growth, and more). That is a valuation of 4 times the net income. At 5 times multiple, which is near the top end of valuations, you would purchase the laundromat for $500,000 and return 20% on your money.
How to estimate the income of any laundromat
1. Calculating washer income
You can get an estimation of any laundromat's income with a fairly simple math equation.
[# of washing machines x vend price x turns x days in the month = estimated income]
"Turns" refers to the average number of times a machine is used each day. The average turn per day is around 3, so we'll use 3 to estimate our income. I also use 30.4 as days in the month, as that's the average number of days per month (365/12).
If you want to estimate the washer income of a laundromat, you'll need to gather the 2 missing variables in our equation: the number of each size of washing machine and the vend price of each size of the washing machine. Let's look at an example.
Say you do some recon work on a laundromat and find out that a laundromat has 10-20lb washers, 6-40lb washers, 4-60lb washers, and 2-80lb washers. The vend prices are $3, $5, $7, and $9, respectively. Here's how we would calculate the estimated washer income for the 20 lb machines:
10 x $3.00 x 3 x 30.4 = $2,736
When we use this equation for all the washing machines in our laundromat, we can estimate our total income from the washing machines to be about $9,666 per month.
2. Calculating dryer income
We're able to calculate an estimate of the dryer income using the same formula for the washer income that we calculated above. The typical dryer income is usually between 33% and 50% of the washer income. In most cases, I use 33% in my calculations as I find it generally more accurate. Our estimated dryer income, then, is:
$9,666 x .33 = $3,190
3. Estimate total income
Now that we have our estimated washer and dryer income, we can estimate our total income. In our example, our estimated income of the laundromat we're considering is:
$9,666 + $3,190 = $12,856
I want to emphasize that this is an estimate, but it will give you an idea of how much money a laundromat is making. Now you know how to estimate any laundromat’s income quickly and easily!
Are laundromats a good investment?
Laundromats make great cash-flowing investments. With an average, unleveraged return of 20-30%, the average laundromat investment is far superior to the average real estate investment, which will produce between 7-10%. The average dividend yield for the financial sector is just 4.7%. The return from laundromats outperforms just about every other investment average.
Let's dig into why laundromats have high cash flow.
1. Laundromats are a stable business
Every person has a few essential needs to maintain a basic level of life, and without them, the quality of life dramatically decreases. Those essential needs include food and water, shelter, and clean clothes. Laundromats provide essential clean clothes to their customers. The essential nature of clean clothes ensures an ongoing need for a way to wash clothing no matter the state of the economy or what is going on in the world.
If stability is your main focus, be sure to explore laundromat franchise options.
2. Laundromats produce high cash flow
The typical return on investment is between 20%-30% (5 times the net income to 3.5 times the net income).
One of the tools available to laundromat owners to help improve the performance of their business and manage the business better is a laundry business management system. The increase in the availability of these tools like Cents makes it much easier to make increasingly sophisticated business decisions with ease in order to increase cash flow.
3. Laundromats are a relatively simple business
As far as businesses go, laundromats are on the simple end of the spectrum. Laundromats have a few qualities that make them much simpler to operate than most other small businesses. First, laundromats generally don't carry too much inventory, if any at all.
Second, laundromat customers generally pay upfront. This means there is no invoicing, following up on missed payments, tracking down delinquent clients, etc. Card payment systems and integrated business solutions make processing customer payments simple and easy as well.
Third, laundry businesses usually have relatively few employees.
4. Laundromats can be improved
One of the great things about laundromats is that they can be improved. By adding new equipment, raising prices, implementing better marketing, and managing the business better, laundromats can increase their cash flow output to the wise investor. Implementing a laundromat management software can stabilize a failing business, increase laundromat revenue, or even scale your business.
5. Laundromats can utilize the power of leverage
Laundromats are powerful, profitable assets, but that power is compounded through the use of leverage. You can leverage your money by taking out loans for the acquisition of your laundromat or the purchase of new equipment.
Why some laundromats don't make money
While laundromats can be incredibly lucrative investments, not all are successful. There are three common reasons some laundromats don't make money.
Buyers don't do thorough due diligence and purchase the laundromat at an incorrect valuation.
New owners sign a lease that is too high relative to gross income, too short, or has hidden "gotchas" that are overlooked.
The final reason many laundromats don't make money is due to poor management.
How to grow your laundromat business
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