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Just received basic financials from the broker for a laundromat. Need help to know if its a good deal.

Hi I am new to the BBS community and I wanted to ask for some advice. The laundromat is selling for $39,500. Broker said it's mis-managed with an absentee owner and financials show just breaking even, not sure if that is true since it is a coin-op laundromat. Seller is motivated, and will significantly drop the price (per Broker). I could use some help...Should I get the P&L for the last couple years... Also machinery age range is 1992-2002. Cheap rent, no NNN, lease up in 2 years. I would re-neg the lease for at least 5yrs with a 5yr option as contingency. There is competition in the area that I have not checked out yet. Looking for a "gut check" Maybe walk away...or offer extremely low price and see what shakes out. Please help....thanks for your time. Jason

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Answers (1)
Bill Gardam
EarthStuf, LLC
Polk County, IA

Jason - here is a good gut check for you.
1. If you add up the value of all of the existring equipment is current market value of the equipment equal to or less than purchase price? 1992 to 2002 equipment in a well located laundrymat with high use could be pushing longterm usability. Do you have another $30,000 to $50,000 to invest if the equipment all goes south on you? Any maintenance contracts in place on this equipment? With who? Call them and ask them what their takes is on the equipment - will it last, can it be serviced, etc?

2. Cheap rent could mean cheap location... under going a transition, high crime area, on outskirts of newly developing area which could mean no traffic or use very soon. Check out the neighborhood quickly! Can you keep it open 24/7 or only during daytime because of crime area or zoning requirements?

3. I went to buy a bakery in a mall location several years ago. Was cheap rent, good location... when I pushed the building owner he said he was going to triple - yep, I said triple the rent for the next owner. That deal fell through. Meet with property owner and negotiate up front before siging a deal and make the new lease contibgent on you buying the business.

4. Get the personal tax returns and corporate tax returns for the business - definately.

5. Ask yourself a simple question... is this a business I want to do and that I will proudly tell my girlfriend, wife or grandmother that I own? If you hesitate on this one, you are done and don't proceed.

All this said, a laundromat can be a good business in the right location. You could add in additional services, such as doing the laundry and folding for a fee, etc.

I'm a small business owner too - so I have been there and done that with asking questions just like you are now... keep asking until you are comfortable with all of your answers. if the seller or broker starts to get anxious, remind them you are new at buying a business, but also consider that as a potential sign for you to pay attention to.

Good luck!

Bill Gardam

Nov 4, 2011

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