What to Look for When Buying a Laundromat

I was on the phone the other day with a guy named Mark, a sharp guy in his late 40s, who was tired of the corporate grind. He told me, “Craig, I’m done building someone else’s dream. I want something of my own, something real.” He was looking at buying a laundromat, and he had a ton of questions. And for good reason. A laundromat can be a fantastic, cash-flowing business, but you can also get taken to the cleaners if you don’t know what you’re doing. So, I walked him through what I’ve learned over 25 years of helping people buy and sell businesses. Here’s a look at what we discussed.

The Due Diligence Checklist You Can't Ignore

Due diligence is a fancy term for doing your homework before you write a big check. And with a laundromat, it’s everything. A miscalculation of just a few hundred dollars a month can mean you overpaid by tens of thousands. I’ve seen it happen. You need to be thorough. I break it down into four key areas:

• Income: How much money is the business really making?
• Expenses: What are the true costs of running the place?
• Trajectory: Is the business growing, shrinking, or stagnating?
• Value-add opportunities: How can you make it better and increase your income?

We’ll dig into the details of each of these, but this is the framework. Don’t skip a single one.

Kicking the Tires: The Physical Inspection

You wouldn’t buy a used car without popping the hood, and a laundromat is no different. You need to get in there and do a thorough physical inspection. Here’s your checklist:

• Equipment: This is the heart of the business. How old are the machines? Are they well-maintained? Ask for maintenance records. A well-cared-for, 10-year-old machine is a better bet than a neglected 5-year-old one. Run a few loads of laundry yourself. See how they work. Note how many machines are out of order. A couple might be normal, but a whole row of dead machines is a major red flag. Look for reliable brands like Speed Queen, Maytag, or Dexter. The cost of a new commercial washer can be anywhere from $1,000 to $15,000, so you need to know what you're getting into.
• Plumbing and Electrical: Water and power are your lifeblood. Look for leaks, signs of water damage, and old, faulty wiring. A major plumbing or electrical issue can be a huge, unexpected expense. It’s worth getting a qualified plumber and electrician to do an inspection. Check the water heating system. Is it big enough to handle the demand? A new boiler can cost $10,000 to $30,000.
• HVAC: Is the heating and cooling system in good working order? A hot, stuffy laundromat in the summer or a freezing one in the winter will drive customers away. An uncomfortable environment is a sure way to lose business to a competitor down the street.
• Lease Terms: If you’re not buying the building, the lease is one of the most critical documents. How long is the lease? Are there options to renew? What are the terms? You need a long-term lease, at least 10 years, to make your investment back. And watch out for restrictions that could impact your business. For example, some leases might have restrictions on operating hours or the types of services you can offer.

Verifying the Numbers: Revenue and Utilities

This is where the rubber meets the road. Laundromats are often all-cash businesses, which can make it tricky to verify the income. Don’t just take the seller’s word for it. Here’s how you can get a more accurate picture:

• Utility Analysis: This is a great way to get a ballpark estimate of the revenue. Get the water bills for the last few years. You can figure out how many gallons of water each machine uses per cycle, and then, based on the total water usage, you can estimate the number of washes. It’s not perfect, but it’s a good cross-check. For example, if a machine uses 20 gallons per wash and the water bill shows 20,000 gallons used in a month, you can estimate 1,000 washes. At $3.00 a wash, that's $3,000 in revenue.
• Coin Counts: The most accurate way to verify the income is to do your own coin counts. Ask the seller if you can be present for the coin collections for a few weeks. This will give you a real-world picture of the cash flow. Be there when the machines are emptied. Count the money with the owner. Do this for at least two to four weeks to get a reliable average.
• Tax Returns: Ask for the last three years of business tax returns. This is a must. If the seller is hesitant to provide them, that’s a huge red flag. The numbers on the tax returns are what they’ve reported to the IRS, so they’re more likely to be accurate.
• Demographics and Foot Traffic: Who are the customers? Are they college students, families, or renters? Look at the demographics of the neighborhood. Is it a growing area? Spend time at the laundromat at different times of the day and on different days of the week to get a feel for the customer traffic.

Common Traps and How to Avoid Them

I’ve seen a lot of people make the same mistakes when buying a laundromat. Here are a few of the most common traps:

• Falling in Love with the Idea: Don’t get so excited about the idea of owning a business that you ignore the warning signs. Stay objective and let the numbers do the talking. I once saw a buyer so eager to own a business that he overlooked a major plumbing issue that ended up costing him $50,000 in the first year.
• Not Verifying the Income: This is the biggest one. If you can’t verify the income, walk away. It’s that simple. A seller might show you handwritten ledgers of income. Don't trust them. You need to see the proof in the utility bills, tax returns, and your own coin counts.
• Underestimating Repair Costs: Old, neglected machines can be a money pit. Get a good idea of the condition of the equipment and factor in the cost of potential repairs and replacements. Create a budget for capital expenditures. A good rule of thumb is to set aside 10-15% of your revenue for future equipment replacement.
• Ignoring the Competition: Who are the other laundromats in the area? Are they clean and well-run? You need to know what you’re up against. Visit your competitors. See what they charge, what services they offer, and what their customers are like.

Financing Your Laundromat Purchase

There are a few different ways to finance a laundromat purchase. You can get a traditional bank loan, an SBA loan, or sometimes the seller will be willing to finance a portion of the sale. The best option for you will depend on your financial situation. Be prepared to have a good down payment, usually at least 20-30%. SBA loans are a popular option for first-time business buyers. They are partially guaranteed by the government, which makes them less risky for lenders. Seller financing can also be a good option, as it shows that the seller is confident in the future success of the business.

How NexLvel Helps

Buying a business is a big decision, and you don’t have to go it alone. At NexLvel.com, we’ve built a community to help business owners like you succeed. Here’s how we can help:

• AI-powered answers 24/7: Have a question at 2 a.m.? Our chatbot is there to help.
• Expert videos from real operators: Learn from people who have been in your shoes.
• Live webinars with Q&A: Get your questions answered by experts in real-time.

Go to NexLvel.com — a business help community built by a real business owner to help others succeed.

By Craig Renard, YourBizRep.com