Knowledge is power: the well informed do better at everything.

Your author, Gary Ruff, is a coin-laundry analyst/consultant and legal representative with twenty-six years experience in the laundromat industry, including: coin-laundry construction; laundry equipment modification and improvement; ownership of six coin-laundries in the N.Y. Metro area; wide experience as a consulting analyst; expert witness as to valuations; and as an Attorney at Law specializing in commercial laundries.

Some laundry equipment basics can be downloaded here .

Although the coin operated laundry industry enjoys fundamentally sound demand, it is not as easy as it looks. There are pitfalls and significant fine-points to beware of.

(Client Testimonial) Mr. Ruff Thank you once again for your time this morning. I cannot tell you how much I appreciate the conversation we had today. I was telling my wife, what an eye opener it was just speaking with you. I admit I am jumping into this with blinders on and unfortunately I trust people too much and take their word (which is really stupid). I told her the best thing we did was spend the money for your expertise. I would have had no idea all the items to look for which you pointed out. Once again thank you for the education. Best Regards Thomas B. Orlando, Florida "Prior results do not guarantee a similar outcome.” N.Y. CLS Jud §1200.6(a)1 forbids attorney use of false or deceptive advertising For More Testimonials click here

SOME POINTS FOR THE CAUTIOUS BUYER:

"Price is what you pay...Value is what you get"… Warren Buffett

You must buy value; which means you need to understand exactly what you are buying, being very careful not to pay too much. One of several major keys to price is gross sales. In fact, it is fair to say that a 10% misrepresentation as to gross sales can impact the overall value of a coin-laundry business by some 20%, and maybe considerably more; therefore, you must ask the right questions, and be able to assess the accuracy of the answers.

Of all the business models one might consider, coin-laundries are probably the most alluring. Being deceptively simple looking, they are also among the most beguiling.

Although they may appear straight-forward (part of their appeal to investors) laundromats are not transparent - they lend themselves well to fraud and significant omission. Therefore, seller representations - especially those as to gross revenue must be verified by independent means.“Financial Statements” are representations of the seller - they are not independent means.  One ill-advised means of independent verification, which is commonly promoted by coin-laundry touts (both on-line and as half-learned authors of books on the subject), is the comparison of claimed revenue to water usage.

I consider it ill-advised for several reasons: Firstly, it is a relatively inexpensive method by which a seller can perpetrate a fraud by simply running-off water. Secondly, issues such as leaking water and mineral deposits within water meter mechanisms (water meter maintenance tends to be neglected by water providers) can significantly effect the accuracy of an analysis. Thirdly, many commercial washers now offer surrepticious programing which can significantly impact water usage (e.g., Wascomat "Generation 6" washers can be adjusted to utilize 1.2 to 1.9 gallons of water per lb. of laundry - a maximum differential of 58.3%!).

If you insist upon analyzing water usage, you should at least be alert for leaks. One common source of leaking is the water inlet valves in the washers (mineral deposits will prevent the valve from closing properly).  Choose a time when there is no washing machine activity and check the waste-line outflow to ascertain that water is not leaking through the machines. As most machines sit idle with the dump-valve open, any water leaking into the machine from the leaking water inlet valve will pass undetected through the machine and into the waste-line. Moreover, accidentally running water, as may be caused by a stuck-open toilet tank flap (especially if it frequently runs all night), can significantly distort  a water usage analysis.

A far more reliable, but more complex, alternative to water bill analysis is analysis of fuel usage. It is more complex because it involves more variables, but more reliable for three reasons: Firstly, as fuel is far more expensive than water, willful distortions (sometimes implemented by running-off hot water) are cost prohibitive to effect. Secondly, as fuel is never permitted to leak, one need not allow for leakage. Thirdly, as heating the hot water to a certain point and getting the laundry dry requires a relatively uniform amount of fuel, fuel economy initiatives are less effectual, with a correspondingly narrower range of consumption differentials, than those associated with minimizing water use.  

When analyzing a laundrymat for a client, I use my exclusive formulas to verify gross sales based solely upon fuel consumption.

Be alert to seasonal weather changes when evaluating a coin laundry. Both the first week of warm weather in the Spring, and the first week of cold weather in the Fall can excite a 10% to 20% increase in coin laundry business.

DON’T PAY TOO MUCH:

This site generates a fair amount of email response. With alarming regularity I receive emails from desperate people who are seeking my help. Typically, they had a lifelong dream to be in business. Then someone died and left them a little money, or they retired and received an associated sum of money. Then they purchased a laundermat without knowing how to figure out what it was worth and they paid too much; after they make their note payments and pay their expenses, there’s no money left - no return on their investment – and frequently worse. I’m sorry, but the time to correctly evaluate what the business was worth was before it was purchased. Usually, it’s too late for me to be able to help.

"There is no substitute for knowledge" ..... W. Edwards Deming  
 
People are frequently misled (usually by self-serving business brokers or sophomoric website pundits) to rely upon imprecise valuation "formulas" that are based solely upon or over-weigh the value of gross or net revenues, while overlooking or under-weighing other important factors; or "reference manuals" which urge the use of "guestimate" formulas.  ("Guestimates" are ideal for figuring out how much hay to feed your pony, but they are certainly not suited for the accurate evaluation of a potential investment.)

YOU NEED A COIN LAUNDRY EXPERT: 

In the evaluation of any business, competent assessment of risk versus reward is not possible until all significant issues have been identified and accurately analyzed. Laundry mats are no different; however, it’s difficult for newcomers to get the help they really need - certainly, neither the seller, nor the broker, will point out any problems with the business. The average lawyer is no help- their only job is to get you what you are paying for- not to reach the issue of whether or not you are paying too much. An accountant’s evaluation is only as reliable as the accurate information you can present him or her with. In fact, I recently represented an accountant who had made a careful analysis of a coin-laundry business based upon information given him by the seller; after reviewing his analysis with me (I identified one misrepresentation and one very significant omission), he drastically revised what he was willing to pay for the business. 

"Risk Management" commences with a detailed study of the underlying uncertainty as to a given course of action..

WHOM CAN YOU TRUST?
 
Even if you wisely elect to seek professional advice, unbiased professional advice is very hard to find. That’s because brokers, authors, promoters, and salespeople are primarily interested in seeking their own profits. Business brokers have an obvious self-interest (commission only upon sale) and they work for the seller - not you.  The half-learned write incomplete coin-laundry books. Then there are the “pitchmen” who produce and promote coin-laundry DVD's and sell them via "blue-sky" website presentations.

Don't get bedazzled. Pitchmen induce impulse buying by sparking excitement – but a good consulting analyst will spark improved comprehension and better business judgment. One can invest in significantly improving one's knowledge - or one can pay to join an electric light parade to nowhere or worse.

It is also worth noting that much coin-laundry industry publishing is by or on behalf of people who sell laundry mat equipment. Trade magazines are published by those who sell advertising space to those who sell equipment; and “consultants” are usually laundry equipment salespeople.

An honest "consultant" cannot serve two masters: both you and the vendor he or she works for.


HERE’S WHAT I CAN OFFER YOU:

If you have read to this point, you are seriously considering buying a business you don’t understand. That’s OK – and it’s where I come in, for the key to success is to secure impartial expert advice. This is exactly what I offer. My loyalty is solely to my client. I do not broker coin laundries. I do not benefit from the sale of laundry equipment. I even forbid advertising on this site (thereby giving up considerable income); and, I do not offer referrals (experience has taught me to avoid responsibility for the performance of third-parties). My only source of income is the fees I receive from my clients. Therefore, my economic survival depends upon my reputation, which in turn depends upon assessments that are both honest and accurate.

For a very reasonable fee, I will empower you with information you must have in order to screen-out the inferior deals (and there are a great many of them out there), and I will “walk through” the first coin-laundry with you to make sure you understand all of the important issues (there is very much more to a laundromat than meets the eye). You will learn to ask the right questions of the seller and I will assist you to verify the accuracy of the answers. With reliable and complete information, we can properly evaluate the purchase, and if it survives scrutiny, commence legal acquisition.

MY LEGAL COUNSEL IS ALSO AVAILABLE TO YOU:

My consultation fee includes my showing your local attorney how to incorporate laundromat specific terms of purchase which will significantly improve your deal and make it much harder to cheat you. It makes no difference where, in the U.S.A or Canada, he or she practices, my purchase agreement clauses will enable him or her to protect you, get the equipment transferred to you in excellent running condition, and ensure your success

In some cases, I am available to personally represent you. Information on legal representation is available here . You can verify Gary's N.Y. State Bar membership here.

NEW LOCATIONS:

If you are considering building a new laundromat, first contact one or two laundry equipment distributors in your area. Distributors usually offer “turn key” (they will build the whole thing for you) proposals. Generally, a distributor proposal will include  demographic data, a “radius map”, estimates as to prospective gross and net, a sketch of the proposed facility, a list of recommended equipment,  and an estimate of construction costs. Familiarize yourself with the proposal and then consult with me.

MORE IMPORTANT ADVICE:

Funding: Be it a coin-laundry purchase, or the purchase of some other small business, your very best source of funding is the seller (no origination fees, fully negotiable terms, and immediate availability). However, if seller financing is to be part of your deal, avoid personally guaranteeing notes. A personal guarantee not only renders you personally liable, it has the effect of reducing the sellers financial incentive to see you do well and give you whatever help you may need.

Beware the "Term Sheet", "MOU" ("Memorandum of Understanding"), or "LOI” ("Letter of Intent"). These are essentially non-binding expressions of intent that fall short of a final agreement and are generally used in very large and complex transfers, or in the world of academia. They are not appropriate to a coin laundry transfer and you will squander a lot of money on expensive attorney time in order to produce an essentially non-binding agreement. Or, if you are unrepresented, you can inadvertently bind yourself (which is exactly what the broker would have you do) to your disadvantage (to which the broker will be indifferent).

“Due diligence”: Of course, a prospective buyer must do it. Moreover, generally accepted accounting principles can be universally applied to various types of business. The misunderstandings arise as to both method and application, that is: as to a coin-laundry, what should one be concerned about and how does one apply those concerns to the business being studied. In any event, I offer you the key point: coin-laundry “due diligence” methodology is not inborn or instinctual - one must learn it. In fact, I have never had a new client who first came to me with all significant issues identified, including those clients with substantial experience in other types of business and those who had read various laundromat books.

To the successful entrepreneur, "due diligence" is far more than an idle "buzz phrase"; instead, it anticipates a well informed and comprehensive inquiry into all aspects of a business.

Beware of business valuation “formulas”: These formulas best serve sellers and reliance upon them is generally ill-advised for purchasers. Devised by business brokers, the typical two or three variable “formula”, while not necessarily accurate, does offer ease of estimation as to price – and of course, the seller will leave the closing table with only cash and notes; but the buyer will leave with a business. The astute buyer, therefore, is equally concerned with value (what he or she will get for the price). In the end, each business is unique. Determinations as to value demand evaluation of less obvious, yet important (and frequently irregular) issues that a “formula” cannot encompass. Think of a valuation “formula” as analogous to a very large circular waxing machine. It just won’t go into the corners.

Recognize that prospective purchasers must enable themselves to identify and evaluate all the significant details of a business before buying it.

A FEW WORDS IN CLOSING:

As laundrymat principles are universal (in my consultant practice, I decline to do site inspections - they are unnecessary to my analysis) the above is applicable to any laundermat in any area. However, although this piece was calculated to be informative, it should not be regarded as comprehensive; it is not.  Fundamentally important issues such as: business analysis techniques that are unique to laundromats; specific terms of sale that are unique to washateria transactions and necessary for the protection of launderette purchasers, including the transfer of laundry machinery in excellent running condition; laundry mat marketing and demographics; and many other issues unique to laundromats are not even touched upon here. Please don’t use this limited information to go out there, buy a coin-laundry, and get yourself into trouble.

Be it stocks or coin-laundries: if you want to make money you must buy value

The above is presented as a public service by the author, Gary Ruff. It is based upon his wide experience in the coin-laundry industry, including coin-laundry construction, his ownership of six coin-laundries in the N.Y. Metro area, his experience as a coin-laundry analyst and consultant, and as an Attorney at Law specializing in coin-laundries.  As the information contained herein is based upon his own experience, the author reasonably believes it to be reliable. However, you use the information at your own risk. You are invited to download more information on Gary’s availability as both a consultant and lawyer .

"Fact Sheet"Analysis Express:  If all you have is a broker "fact sheet", this service is offered at a significantly reduced fee throughout the U.S.A. and Canada.

Full Consultation Service Package:  Full analysis and consultation services are offered throughout the U.S.A. and Canada.

Legal Representation Agreement: For a business located in N.Y. State.