To Buy or Build: The Pros & Cons of Buying an Existing Laundromat vs. Building Your Own

January 15, 2015 | Investment

Opening a Laundromat can be a rewarding investment that is both profitable and gives you the freedom to run a successful business without being tied to the office all day. This is a great fit for professionals and investors looking for a more hands-off investment opportunity or for those who simply want the freedom that comes running a business that doesn’t require being onsite or managing a large number of employees.

When deciding to go into the Laundromat business there are number of decisions to be made—location, type of equipment, technology, financing, etc. We address many of these topics in our free Laundromat Investment 101 Download. One of the first decisions to make, which we’ll address in this post, is whether to purchase an existing Laundromat or build one from scratch.

Is it better to buy an established business or build a new one from the ground up? What are the risks of each? What are the costs of each, both in the short and long term?

If you’re thinking about getting into the Laundromat business, there are several key factors you need to take into consideration when weighing your options. In this post we’ll point out key things to look for that will help you determine the best fit for you.

 

Proven Sales History vs. Exactly How I Want It

Purchasing an existing Laundromat comes with a proven history of sales. For better or worse, you know how well the location has been performing and have a built-in customer base. This is certainly a pro for purchasing an existing location as the risk is lower because you know exactly what you are getting into. That said, people rarely sell profitable Laundromats that are continuing to grow. There are cases of owners selling well-performing businesses in order to retire, but those instances aren’t as common. Aside from these few instances, it’s more likely that as the new owner, you will be looking for a diamond in the rough.

If by chance you do happen to find one of what seems like a great deal, beware of seemingly successful laundromats selling at bargain prices. Ask thorough questions as to why the seller is looking to get rid of their Laundromat. What may look like a successful Laundromat may be plagued by debt, improper managementor in some casesquestionable accounting.

It’s more likely that as the new owner, you will be looking for a diamond in the rough. Most owners who purchase an existing Laundromat do so because they believe that the current Laundromat is underperforming and that with some changes and under their ownership they could improve the performance of that location. Sometimes this means simply cleaning up the store, adding new signage and a fresh coat of paint, or perhaps some new amenities like free WiFI and flatscreen televisions.

Or maybe it’s a more impactful change of improved technology with a digital smart card laundry system.

These two high-tech laundry card systems are a great way to attract new customers and build loyalty. So while you have that proven sales history with an existing location, you’re going to want to make sure you see the opportunity to make changes that will improve upon those sales and make the Laundromat even more successful.

While building a Laundromat from scratch doesn’t come with the proven track record of sales, you have the freedom to start fresh and make it exactly how you want it. This includes the public perception, or brand image, of your Laundromat as well. When a new owner takes over an existing Laundromat and it was poorly run, dirty or had older equipment, even if you make improvements in these areas there may be an existing negative perception about the Laundromat that can be difficult to change.

For many, a major benefit of building your own business is the satisfaction that comes with setting it up and branding it exactly how you want. In the case of building from scratch, implementing a card operated system is a given. Customers will be expecting everything to be new and modern, including the payment options and loyalty incentives.

 

Cost/Financing

When you build your own Laundromat generally the equipment is financed—meaning less cash up front. A lower start-up cost will give you more resources to start building your customer base and generate income. You’ll also have new equipment, which comes with warranties, so your operating and maintenance costs will be lower for several years. (Compare this to the costs of running a Laundromat bought from a previous owner, which may be a lot higher initially because of costly renovations.)

 

Distributors & Brokers

Choosing a distributor will be an important part of starting your new Laundromat regardless if you buy an existing Laundromat or build one from scratch. Demographic reports detailing things like how many renters are in a particular area are easy to come by, but a good distributor can give you much more than that. For example, if there was a Laundromat in the area three years ago that failed, a good distributor might be able to tell you what happened and advise you on ways to avoid the same fate. Finding a distributor that provides that type of consultative information and isn’t just selling you equipment is crucial.

Most established businesses are sold through brokers. Should you decide that purchasing an existing Laundromat is the best fit it’s important to thoroughly vet a broker before doing business with them. Most importantly—speak with the broker’s past clients. Any reputable broker should be more than happy to provide you with a list of references.

Whether you decided to buy an existing Laundromat or start your own, a laundry payment system can help attract new customers and retain existing ones. The convenience and benefits of an easy-to-use card system encourages customer loyalty and can play a major role in the success of your new or revamped Laundromat.

Welcome to the Laundromat business!

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Contact us if you have any questions regarding the laundromat business or payment systems!