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Equipment Replacement Cost/Benefit Analysis: Change or Die

Jason Hicks |

NEW ORLEANS — Coin laundry operators often wonder if they should replace their current equipment with something newer and perhaps more energy-efficient. How do they know if it’s worth the cost?Richard Weisinger, a Los Angeles CPA for the Coin Laundry Association (CLA), ran Clean Show attendees through a cost/benefit analysis in a Saturday-morning educational session to help answer this question.Weisinger firmly stated that more often than not, from a purely economic viewpoint, it’s better to upgrade equipment than to wait. A business must change and adapt to survive, so waiting today might create a gap that’s impossible to overcome tomorrow.“If you’re not changing, you’re dying,” he said several times over the course of the session, reminding the audience of companies in the auto industry and other firms such as Sears, Roebuck and K-Mart that used to be industry giants but fell hard after their business practices stagnated.He pointed out that new equipment comes with a lot of benefits, including the ability to charge more for larger machines despite their not using much more utilities, variable pricing, and greater appeal to customers. This all translates into more revenue from existing customers and more revenue from new business, he explained.When measuring the impact on expenses, Weisinger balanced the down side, which basically amounted to one thing — debt on the new equipment, to all of the advantages and savings. These included:

  • New equipment uses less electricity, water and gas.
  • The cost of repairs on new machines is lower.
  • The time spent making repairs is lessened.
  • The store reduces lost business due to customer dissatisfaction.
  • New equipment discourages new competitors.
  • Tax advantages.

Weisinger really hammered the benefits of the available tax advantages home, listing a variety of ways that coin laundry owners can take advantage of tax breaks to ease the burden of paying for new equipment. He pointed out that a coin laundry owner can write off the entire cost of a purchase with even just a small down payment, and reminded the audience that under Section 179, a coin laundry owner can write off up to $250,000 in a single year.One tax break that many operators may have overlooked is a $5,000 credit for upgrading to allow better access for the disabled. He pointed out that he has successfully argued with the IRS that the lower pocket of a stack dryer is more accessible to someone in a wheelchair than a single-pocket dryer, so upgrading from singles to stacks should qualify for the disabled access credit. The same holds true for converting top loaders to front loaders, lowering change machines, and other similar upgrades.The bottom line, according to Weisinger, is that most of the time, when a laundry replaces equipment, it can actually make money in the process. Throw in the additional benefits of having new machines, and it doesn’t make sense to not upgrade.“You either change, or find yourself out of business,” Weisinger said. 

About the author

Jason Hicks

American Drycleaner

Jason Hicks was assistant editor for American Trade Magazines, which publishes American Coin-Op, American Drycleaner and American Laundry News, for more than nine years, and web editor for three years.

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