If you own a coin laundry or plan to purchase a laundromat business, you are in good company: there are over 16,700 such businesses in the US alone. The annual revenues for the industry as a whole are just under $2.2B. Yet the average coin laundry is a typical small business: it employs 3 people and grosses around $100,000 a year.
What creates business value in a laundromat
Coin laundries are cash businesses which are prized for their ability to generate steady income and show considerable resistance to recession. It is relatively easy to find a profitable niche in this industry and most laundromat owners experience only moderate levels of competition.
If you study coin laundry sales data, you will no doubt spot a number of factors that contribute to a laundromat business value – and higher selling price:
- Stability of historic business earnings.
- Location. Customer access, exclusivity arrangements and presence of a reliable anchor nearby are very important.
- Rental expense within 10 – 20% of gross revenues.
- Labor expenses within the industry norm of 10% of gross revenues.
- Condition of equipment.
- Additional value added services, such as an on-premises mart, game and video rentals.
Business valuation methods for coin laundries
Laundromats are a frequent acquisition target. So there is plenty of comparable business sales data to price your business. Typical valuation multiples for coin laundries are based on the discretionary cash flow, plus inventory. These businesses are also priced using the multiples of gross sales. Again, the value of inventory is extra.
You can use ValuAdder business valuation Rules of Thumb to price a laundromat. Just provide the basic financial inputs about your business. Within seconds, ValuAdder shows you the business value range, median and average values.
Since coin laundry ownership is about cash flow, income-based business valuation is often used to price such businesses. For small shops, the Multiple of Discretionary Earnings business valuation method is a common choice. This method lets you determine the coin laundry business value based on the income and 14 essential financial and operational performance factors.
The Discounted Cash Flow business valuation method lets you determine the laundromat value based on the business income and risk. Since these businesses have a decent resale value, you can account for it directly in your Discounted Cash Flow business valuation.