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Getting a Faster Return by Buying an Existing Operation

Robert J. Renteria |

CHICAGO — Many potential investors who do their due diligence before joining our industry sometimes get caught up and mislead into believing that purchasing an existing coin laundry is not a good deal versus buying and developing a new coin laundry simply because of the “used” condition of the washers and dryers.First things first: Every manufacturer makes a good machine, or they wouldn’t be in the business to begin with, so let’s all agree up front that no single brand is necessarily any better than the next. It would be great to have a new coin laundry with all new machines, and yes, many of these do very well, but washers and dryers last several years because they are commercial-grade, so buying a business with existing washers and dryers is not a bad deal at all.A serious concern for me personally is making sure that our investors are not over-leveraged from day one. There are two kinds of purchases one can make: building new or purchasing an existing coin laundry. Keep in mind that building a new coin laundry is a high-capital-gain investment and comes with a lot more risk. In addition, with a new coin laundry, you will need seed money to carry you while your store is ramping up to the break-even point. This could very likely mean you will need a cash reserve for up to eight months.I personally favor the purchase of an existing coin laundry because they carry less risk and cost a lot less money, and in almost all cases they have an immediate cash flow for the investor after debt service. In addition, approximately 80% of all coin laundries sold have a nice potential for financial growth. I have done consulting throughout the U.S. market and abroad, and I can walk into any of the laundries that fall into the 80% bracket and at least grow the bottom line from 10% to sometimes 50%, depending on the size of the laundry.The purchase of an existing laundry also opens the doors for many investors from all walks of life, with a variety of skills and various and sometimes limited financial resources, allowing nearly anyone to get into the business and take a shot at living out the American Dream.WANTED: NEW INVESTORSThe existing laundry market is actually ripe for a new investor because there are so many coin laundries that are mismanaged, and fortunately many laundry owners are “old-school” and tired, making it a very good opportunity for the new-era laundry investor/owner to light the fire under the pants of the business, as they say, and turn that dog with fleas into something very special and financially rewarding. Keep in mind that if 80% of the laundries are not playing their game in meeting the necessary standards and keeping ahead of their competitors, then you have the opportunity to make that money. Simply make the decision that you will be in the 20% group. Then it’s a no-brainer to slice off that much more of the pie for yourself, and you can add that to your bottom line. Show me the money!With fewer good locations available for the development of a new coin laundry, along with the high rent driven by big shopping center chains, not to mention the ever-rising costs of construction lease hold improvements, potential investors should seriously take a closer look at where one can actually get a bigger bang for the buck. The return on your investment (ROI) will shock you!An existing coin laundry has already had all of the costs associated with running the business grandfathered into the equation depreciated, and it comes with a pool of customers who do laundry at the chosen location. I have in past articles mentioned that marketing is the secret weapon for the success of a business. If you are serious about investing in the coin laundry industry, take a much closer look at the existing market of laundries for sale. You will have more from which to choose and will very likely pay much lower rent. It will also give you many more opportunities to purchase the property as well, which if you have the money, is always the best way to go.The existing coin laundries that are currently available for sale and many that will follow have several additional means of income available, which, if implemented, can and will without a doubt add some serious money to the already productive business. There are a variety of legitimate reasons why laundries are being sold today. The first is that many, but not all, of the old owners are simply not as hungry and aggressive as they once were and lack the tenacity to go out there and drive the business in order to generate more volume and bring home the bacon. There are deaths and retirements, partnerships dissolve, divorce rates are at an all-time high, and so on.One person's loss is another’s gain, so as you begin your search, don’t do it alone. Work with someone who specializes in brokering a coin laundry specifically, not just someone who has a license to sell anything. Choose a broker who has longevity in the coin laundry industry and a proven track record of success for their customers. Use someone who has an extensive list of credentials and who, because of their experience, can help you avoid stepping on any potential land mines. It’s important to attend industry-related workshops and talk to other coin laundry owners, and when you are fully armed and ready, go ahead and pull the trigger. Then I want you to remember that every day is a marketing day! 

About the author

Robert J. Renteria

Consultant

Robert J. Renteria is a national consultant based in Chicago. He has more than 23 years of industry experience, having helped develop more than 750 coin laundries nationally and abroad. The author of three books, he was named the 2010 Chicago Latino Professional of the Year and is the sole recipient of the 2011 International Outstanding Humanitarian Award. In 2013, he received two Dr. Martin Luther King Jr. Awards for his work in civil rights advocacy and educational reform. He can be reached at 312-933-5619 or robert@fromthebarrio.com.

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