Before you buy an existing business you need to learn about the industry a bit. No business is an automatic success, no business is guaranteed, and no business is recession proof. Whenever I hear one of my small business consulting clients tell me this, I stop them and explain the realities of small business to them. You see, before retirement I was a franchisor, I know what it takes for franchisees to succeed, and I know for a fact no matter how great the business plan or business model there is always risk involved; trust me on that one.

Not long ago, a client told me they wished to purchase an existing Laundry Mat Near Me. Anyway, I had a good friend Airline Pilot who owned a laundromat, and he’d go on trips and always complain; “while the cat is away, the mice will play,” explaining how you really have to keep an eye on those businesses. Attendants would help customers take the money, rather than putting into the machine, they’d flip the panel up and hit the reset switch for it to go again; pocketing the money.

Interestingly enough, when I looked at the financials for the Laundromat in question there was no expense listed for insurance, I thought “hmm, that’s rather odd.” You see, fire insurance has increased in those types of businesses, if you do not remove the lint under the dryers, it can catch on fire, lazy employees hate that job, it’s messy and no fun. And due to all the “Jewish Lightning” with small business owners in-debt more have mysteriously burned up, raising insurance rates for everyone.

Don’t get me wrong a Laundromat can be a nice business, but it is not as absentee as you might think. And if it has a fluff-n-fold service, well that is a very nice profit center, however you must realize that these things run best with a “very nice, caring type” woman who runs the show, customers love them, and they always refer them. It’s the only way to make the fluff and fold business work. It’s all service, please read this book: “Customers for Life,” by Carl Sewell. That is how you can win in that line of business.

Financing such a business in this economic climate is equally as tough, community banks are not lending right now very much, and one must realize that their best bet might be to have the owner carry paper on half of it – say $100K. Additionally, be very weary on costs when buying a business, what are the other costs, the ones they didn’t list? You must watch the “fluffing up” of the numbers on the fluff and fold with delivery profit center. And don’t let the seller tell you that they keep two-sets of books and they are going to “show you” the secret books, because if they are cheating the IRS, they’ll cheat you too.

Another item to consider is this, when you switch owners you will lose 20-30% of the fluff and fold customers, many choose to leave when it changes ownership or the lady that has been serving them leaves. But you can get new business by borrowing a trick from new Realtors, canvas and walk the neighborhoods with flyers and discount coupons, it works! Anyway, take off 20-30% of his gross off the fluff and fold side of the business when figuring your numbers. Not off his projections, off of his last years gross fluff and fold receipts.

I’d further recommend that anyone buying a Laundromat read the IRS Laundry Mat Business Plan, it’s online for enrolled agents for instance, you can find it by searching on Google. You see, I study small business models, not only for the small amount of consulting I do, but because before retirement our company worked for all types of businesses and industries.

Now then, you might find an investor or angle partner who might lend you the money to buy such an existing small business but remember in our economic recovery this is a really good year in the market. My client told me that the owner of the business said that he “expects” the business to make 135K this year, and that’s fine but well, what did he make last year? And forward looking statements are not something I’d take to heart. Have you ever read that famous line in a business plan or a start-ups PR press-release; “Such and Such Co.


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