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Laundry Ownership Growth Through Acquisition (Conclusion)

Lease, financials, demographics can set up location for long-term profitability

RIPON, Wis. — Perhaps you are a vended laundry owner with a year or so under your belt, or maybe a seasoned veteran with operations, marketing and maintenance soundly in hand. Is it time to think about a second store?

How do you know if you are ready? How do you know if it’s financially feasible?

The bottom line is if you manage your store effectively and have a vision of scaling operations, today’s manufacturer-financing packages can make adding a second store far more possible than you think. But financing is only one aspect of duplicating your success in a second location.

In Part 1, we looked at the importance of timing, the benefits of buying an existing business versus building new, and how to get started. Let’s continue with location:

LOCATION, LOCATION

Deciding just how far away your next store will be is mainly governed by your own business plan. Today’s laundry management systems make operating over longer distances much simpler than in years past. I’ve seen stores as near as within a half-mile, while others are 25 miles away or more.

Again, the only limiting factor is the owner’s technology infrastructure. Operating a couple stores in close proximity can be done, but as you approach three or more stores, you multiply the issues that arise and the only way to effectively scale is by leveraging technology. The more technology in place to stay in tune to revenue, equipment issues, and operations data at multiple locations, the more efficiently the business can be run from afar with minimal presence on-site.

SETTING THE PRICE

Once you have found a location and an owner who is open to selling, now the hard part begins: agreeing on a purchase price. The key word here is “verifiable.”

Verifiable income is what drives everything. You’ll want to see 12 to 24 months of profit and loss statements and taxes. This can often be a challenge, as exiting owners often rely on less organized financials.

Valuation will always be a multiplier of net cash flow. That multiple can range between three and five. However, all this is also dependent on lease terms of the facility. This is foundational, no matter if it’s store No. 1 or 100. You still should be shooting for 10 years with two five-year options. Bottom line, a long lease is a must-have; without it, you are basically setting up the end of your business.

RETOOL OR WAIT?

There are a couple schools of thought on whether to retool immediately or wait. Some acquisition finance programs make it quite attractive to roll the complete retool into the package. So there is a definite financial advantage to doing it immediately.

I would also make the case that from a marketing standpoint, retooling immediately creates a dramatic effect from the start. Retooling, adding larger capacities and cutting-edge controls are tangible representations that ownership has changed and customers will be well-served. Plus, new equipment enables you to increase vend prices as well.

The flip side is that by waiting to retool, you can listen to customers and let those conversations drive equipment capacities and the like. Staggering the retool — a bank of washers at a time — is the middle ground, but it also puts the store in a seeming continued state of disruption, which can annoy customers.

IN SUMMARY

With the right approach and considerations, growing your laundry business through acquisition can go even smoother than building store No. 1. Plus, today’s technology has helped owners stay completely tuned in to the business off-site, which makes running a store from a greater distance possible.

The keys to success are a solid lease, reality-grounded financials and the all-important demographics that set the location up for long-term profitability. From there, it’s about leveraging all the tools and learnings from your previous locations.

Miss Part 1? You can read it HERE.


 

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(Image: Kzenon/Depositphotos.com)

Have a question or comment? E-mail our editor Bruce Beggs at [email protected].