SUN CITY WEST, Ariz. — There are many reasons why one might sell a laundromat. Illness, retirement, owner relocation, or even the owner’s death could be behind it. Or the seller is doing great and just wants to sell so they can buy or build a bigger mat.
Whatever the reason, let’s examine what you can do to make your mat ready to sell for the best price and at the least cost to you. I covered the benefits of early planning in Part 1. Let’s continue:
HIRE A GOOD LAWYER
And not your cousin, or a friend of a friend. Get a lawyer who specializes in small-business sales. This type of attorney can put together contracts that will protect you in more ways than you realize.
Yes, in some cases, a business lawyer can cost you more, but a professional like this could help you save tens of thousands of dollars in protection. The peace of mind in knowing that you are well-protected is worth it, and a good business attorney can protect you in ways people don’t even think of.
How about help in negotiating a longer lease if there is one? Just a few more years on the lease can add thousands of dollars to the value of your mat.
How do you know if your buyer has the proper resources to buy your mat? How do you know they aren’t someone who has cheated sellers in other transactions? After all, you’re selling a laundromat possibly worth many hundreds of thousands of dollars, not a bicycle. Don’t be penny-wise and pound-foolish.
Having a good attorney on your side is especially helpful if you plan on taking promissory notes from the buyer (I'll address them in my conclusion on Thursday).
Your lawyer will protect you from lawsuits, make sure you don’t get stuck with spurious fines or fees, and, most importantly, make sure your notes are structured so that the proper penalties are in place if you don’t get paid.
They can also guide you in drawing up a non-disclosure agreement (NDA) to help protect your business secrets from being spread around, before you let anyone in on your mat’s details. After all, you’re going to have to open up your books to strangers, so there should be consequences to anyone who tries to sell your hard-earned business secrets.
Yes, you can find these contracts online as boilerplate documents, and your attorney may even use one. But a good business attorney will add or subtract language in your favor that could make a big difference in the agreements.
For instance, I sold a mat with a 50% promissory note agreement for five years, meaning the buyer put half down and I personally financed the rest. So you’ll want to know this person’s credit rating, and if he/she has successfully run a business in the past. Your attorney can check things out.
If the buyer doesn’t pay you, you could ultimately repossess the mat plus keep whatever the buyer already paid in previous notes.
One thing my lawyer told me that I did not know was that in New York City, promissory notes must be renewed by the seller after a couple years. My notes went out longer than that, so he earned his fee with that alone!
And just as important, you want to continue to be paid if the buyer sells the mat, so language must be included for that, too.
BROKERS AND SUPPLIERS
Like everything else, there are good brokers who will have your back and bad brokers only interested in the sale and not much else. Keep in mind that business brokers typically can charge as much as 10-12% of the sale, making home brokers look cheap by comparison.
Don’t forget to tell your suppliers you plan to sell. Like brokers, parts suppliers, equipment distributors and local detergent vendors will know all the laundromats in your area, and maybe a few buyers, too.
They’ll want a piece of the action for matching you with a buyer. Maybe not as much as a broker, but you still need to pay them something. And it’s only right. If I were to go this route, I’d probably agree to pay up to 5%.
Here’s a tip: If you know your market well, look at who in your market is buying mats. If you notice people of certain ethnicities buying up a lot of mats in your area, advertise your store for sale in the classified section of their newspapers.
For example, I sold one in 1993 by placing a New York Times classified ad under “Business Opportunities.” Back then, that was the way to go. Even the equipment distributors placed ads in the Times to bring in people interested in building new stores.
After it became clear that Asians were beginning to dominate my market, I looked up the Chinese- and Korean-language newspapers in my area. Their classified ads were cheap compared to those in the Times but drew a lot more serious buyers. The foreign-language newspapers would even translate your ad for you, and have their national editions broken down into local circulations!
I sold two more mats that way and saved a ton of money on brokers. I never paid anyone a commission to sell my mats.
Coming in Thursday’s conclusion: Promissory notes, and what about the lease?
Have a question or comment? E-mail our editor Bruce Beggs at [email protected].
