How to acquire a coin laundromat that generates $196k/year with $80k

Imagine owning a business that generates $196,000 per year with the possibility of management flexibility. A card + coin laundromat represents an attractive investment for both absentee owners and hands-on entrepreneurs. This guide outlines the critical steps to acquire an established laundromat with a strong community presence and how you can harness its full potential.

·      Asking Price: $835,000

·      Gross Revenue; $478,000

·      Net Cash Flow: $196,000

·      Listing URL: https://www.loopnet.com/biz/Business-Opportunity/card-coin-laundromat-absentee-owner/2220036/

1.   Assessing the Opportunity

Begin by conducting thorough due diligence. Confirm the laundromat's financial health by reviewing its records and financial statements. The $196k/year income should be consistent and verifiable. Investigate the customer base's size and loyalty
as well as the local market conditions. Consider whether there is room to grow
or potential risks such as new competitors entering the market.

2.  Understanding the Value Prop

Analyze what sets this laundromat apart—its unique selling points. Does it have an
excellent location? Is the equipment modern and well-maintained? How about
additional services that could be introduced or expanded, like wash-and-fold or
delivery services, to increase revenue?

 3.  Choosing a Financing Strategy

To minimize personal capital usage in acquisitions, many small business buyers opt for a leveraged buyout (LBO) structure, limiting equity injection to 10% through an SBA loan. The SBA's 7(a) Loan Program supports unique small business needs by providing loan guarantees to lenders.

When using an SBA loan for business purchases or partner buyouts, specific criteria apply based on ownership circumstances:

·       New ownership requires a minimum 10% equity injection towards total project costs.

·       For changes among existing owners, if the 7(a) loan exceeds 90% of a partner buyout price, remaining owner(s) must show active involvement in operations and consistent or increased ownership over the past two years. Financial records need to exhibit a debt-to-worth ratio not exceeding 9:1 pre-purchase. Otherwise, remaining owners must contribute at least 10% cash towards the purchase price.

Once you're confident in the business's value and potential, secure funding. Options include small business loans, seller financing, personal savings, or investment partners. Ensure you have enough working capital to cover any immediate improvements and operational costs post-acquisition.

a) Seller Financing

The buyer could propose a deal with 10% seller financing to align part of the
payment with the business's future success. This financing arrangement would
take the form of an installment loan repayable over time.

b) Equity Injection

Expect the buyer to invest 10% of the transaction value as equity. This amount can be sourced from personal savings or contributions from acquaintances.

c) Business Loan

The remaining 90% of the purchase cost will likely be financed through a business
acquisition loan. In this case, Jolene and her spouse are pursuing an SBA
7(a)-guaranteed loan known for its favorable terms compared to conventional
bank loans.

4. Negotiating the Deal

Engage in negotiations with the current owner. Aim for a win-win deal that respects the legacy of the existing business while positioning you for future success. A business broker can provide valuable assistance in navigating the complexities of the transaction.

6. Final Structure

Adjustments were made to the original proposal based on due diligence findings and financial assessment results. The final financial structure included a mix of bank financing, some seller financing, and a significant buyer's equity commitment.

Breakdown: Buyer's Initial Investment: 10% ($41,000), Seller Financing: 10% ($41,000) and SBA Loan Funding: 80% ($751,500) with a monthly payment of $9,117 over the next decade.

With the business generating an annual net cash flow of $1966,000, a new owner could expect a yearly positive cash flow exceeding $86,596 every year by investing
less than $45k.

7.  Transitioning the Business

After finalizing the purchase, plan for a smooth transfer. This involves taking over
leases, transferring utilities, and notifying suppliers. The transition period
is crucial for staff retention and customer reassurance. Don't overlook the
importance of maintaining service continuity during this time.

8.  Implementing Your Vision

With the keys in hand, start implementing your strategy to expand the business.
Modernize payment systems if needed, consider adding new amenities or services,
and perhaps refresh the marketing approach. Engage with the community to
maintain current customer loyalty while attracting new clients.Once you've established your operational rhythm, identify additional growth opportunities. This could include technological enhancements, extended hours, or even acquiring additional locations to create a network of laundromats under your management.

Acquiring a laundromat is more than just a financial transaction; it's a step into a
community staple that provides an essential service. By bringing enthusiasm and
a strategic approach to a well-established business, you can enjoy the rewards
of a lucrative income stream and a fulfilling entrepreneurial experience.

Happy Hunting 😊

Disclaimer

Cashflow Hub is a Bluelofts's newsletter that breakdown cash-flowing real estate and middle market opportunities that hit the market. Subscribe for free and become a savvier investor. Cashflowhub or its affiliates present this post solely for informational purposes. The information provided herein is not verified or confirmed by Cashflowhub. Moreover, Cashflowhub does not make any offers to readers to participate in any transaction or opportunity described in this post. This post is not intended to recommend any investment and should not be considered as an offer to sell or a solicitation of an offer to purchase an interest in any current or future investment vehicle managed or sponsored by Bluelofts Inc or its affiliates (collectively referred to as "Bluelofts"; each investment vehicle referred to as a "Fund"). Any solicitation to purchase an interest will only be made through a definitive private placement memorandum or other offering document.