First Business - Laundromat

Discussion in 'Starting & Running a Business' started by Goosehead, 10th Nov, 2019.

Join Australia's most dynamic and respected property investment community
  1. Goosehead

    Goosehead Well-Known Member

    Joined:
    19th Nov, 2015
    Posts:
    91
    Location:
    Qld
    I have just noticed a laundromat in the local area for sale. The owner has given rough figures for how much he wants, and what he is making, not formally so I expect it to be different.

    Questions is who would you go to to seek due diligence on the business? Accountant, Financial Planner, a conveyancer? I wouldn't know where to start to arrange finance and structure.
     
  2. Marg4000

    Marg4000 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    6,380
    Location:
    Qld
    You will need an accountant to verify the income and expenses are correct.
     
  3. Car tart

    Car tart Well-Known Member

    Joined:
    16th Sep, 2018
    Posts:
    917
    Location:
    Sydney-Melbourne
    It is unlikely you will get finance on a laundromat, as a lease and a few $$ worth of washers and dryers are not good backing for a loan. Also the old adage of 80% of businesses close within 5 years is especially true of non controlled businesses where anyone can set up next to you, charge less than you and see you go under if you don't have 2 years future expenses saved before you enter the business.
    You would generally borrow against your property, to finance a viable business.

    But more important than anything else is why would you be successful in this business if the current owner can not keep it run under management at a decent profit. What factors, skill or knowledge are you bringing in to the business?

    One of the easiest ways of making huge profits is selling unviable businesses to others. This is the actual business model of dozens of nationally renown businesses that have been reported for the last few years in the papers. Become familiar with how this business model works.

    I have friends who have bought pubs/nightclubs and restaurants turning over $X per annum for $X on the knowledge that they make a killing because they hide the cash under the table and its off the books so are earning 30% on TO. They buy to discover that they actually hid the payments not the receipts through a third party company and whilst the turnover was correct at $X the actual expenses rather than being 3/4X was 4/3X. They were losing money because of selling things on the cheap IE bringing in big name bands to inflate the turnover but paying them their fees through a third party company.

    To succeed in a new business you must have
    Enough money to survive at least 18 months with little to no income,
    Some factor that no one else can perceive to introduce to the business,
    No borrowing repayments of any consequence compared to the worst case scenario of operating the business,
    Have an exit strategy for getting out of the business quickly, medium turn and long term.
    Understand all the risks eg insurances, labour costs, future potential, length of lease, portability, time constraints, accounting, taxation, patience and family support.

    If you need to know how to finance a small business and you dont have decent equity in your home, then STOP HERE. Learn everything before you venture into a business.

    If you dont understand the difference between operating expenses being 4/3 of turnover or 3/4 of turnover then stay in a job.

    If you were not the best employee by far at where you worked and did not take on more work than you were given and turned up every single day without fail and occasionally turned up on days that you didn't need to..then owning your own business is not for you.

    So many of my friends, saw my success and ventured into a business without considering the consequences of losing everything, sometimes just their home and car but worse was their wife and family or their lives due to the depression that sets in.

    I may be brutally honest, but its better than being told "Why didnt anyone warn me?"
     
    Last edited: 10th Nov, 2019
    Padron, Lak, oracle and 27 others like this.
  4. TMNT

    TMNT Well-Known Member

    Joined:
    23rd Jul, 2015
    Posts:
    5,572
    Location:
    Melbourne
    Agree with everything you said except this bit.
    Thats a bit of a far stretch
     
    Car tart likes this.
  5. Car tart

    Car tart Well-Known Member

    Joined:
    16th Sep, 2018
    Posts:
    917
    Location:
    Sydney-Melbourne
    Might be.

    But try calling in sick if you’re a one man operation.
     
    Marg4000, Cousinit, NHG and 1 other person like this.
  6. datto

    datto Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    6,675
    Location:
    Mt Druuiitt
    If I were to buy the laundromat I'd be working in the business side by side with the current owner to see how much they're really making.

    You'd probably need to work for a month and it would need to be over school holidays as well.

    I think you need to find out why the owners are really selling. Are they washed up?
     
    Last edited: 10th Nov, 2019
    Cousinit, Beano, charttv and 2 others like this.
  7. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    10,258
    Location:
    Australia
    Op what is your work situation? Are you an employee looking for a business? Are you expecting to work at the business yourself or intending to stop after a while?
     
  8. marmot

    marmot Well-Known Member

    Joined:
    23rd Jan, 2018
    Posts:
    1,215
    Location:
    N.S.W , W.A
    Is it just a customer walk in type where they do their own laundry or where the owner will do most of the work and can pick up extra work from short term holiday rentals when they do linen changes.
     
  9. Morgs

    Morgs Well-Known Member Business Member

    Joined:
    7th Dec, 2017
    Posts:
    1,791
    Location:
    Sydney NSW
    I'd imagine OP is looking at it as a passive opportunity, rather than something you'd need to be sitting in customer facing 24/7?

    If you're buying it as a leasehold business then a lend is going to be expensive (unsecured). If you're asset backed with equity this will be a much cheaper way to fund. Either way your first inquiry should be with your accountant in regards to structure and assisting with DD.
     
  10. TMNT

    TMNT Well-Known Member

    Joined:
    23rd Jul, 2015
    Posts:
    5,572
    Location:
    Melbourne
    I think people adjust their attitude pretty quickly,
    What i mean is often before they buy the business they are thinking of doing 4 hrs per day, plus sick leave, plus annual leave, plus time in lieu, plus public holidays, plus birthday holiday, weekends off, christmas off,
    but reality sets in very quick;y:), especially if they are opening the shop up!
     
    Last edited: 10th Nov, 2019
    Car tart and alicudi like this.
  11. gach2

    gach2 Well-Known Member

    Joined:
    29th Jun, 2015
    Posts:
    1,895
    Location:
    sydney
    As an non motivated (or if you feel under appreciated in an organisation) you will call sick at any opportunity while as a business owner your well motivated not to call sick and excel in what your doing
     
    TMNT likes this.
  12. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    10,258
    Location:
    Australia
    Unless you really are sick.
     
  13. gerege

    gerege Well-Known Member

    Joined:
    23rd Mar, 2018
    Posts:
    94
    Location:
    Qld
    Pimpama laundry mat?? If so I checked it out a couple weeks a go it’s in a bad area with way to high rent. There’s another larger laundry mat around the corner. Frankly it’s had to much spent on set up in a shop where the rents to high with yearly increases I wouldn’t touch it, you want a business that makes money from day one.
     
  14. Goosehead

    Goosehead Well-Known Member

    Joined:
    19th Nov, 2015
    Posts:
    91
    Location:
    Qld
    Thanks for the information, plenty of things to consider. FYI it is a self serve type where customer use change to pay for laundry and wash it themselves. Owner has suggested attendance of twice a week to clean and check so minimal time but I would probably visit more regularly. The work would be for my partner, stay at home mum and just finished Uni.

    Car Tart, thanks for all the background considerations. These are the main reasons for considering the opportunity. I have worked in government my career. However have a lot of mates that have small business that have learnt the lessons you have described. This would seem a relatively safe opportunity compared to some other options.
     
  15. Goosehead

    Goosehead Well-Known Member

    Joined:
    19th Nov, 2015
    Posts:
    91
    Location:
    Qld
    Hi mate, it's actually in St Agnes, a little centre off smart road.
     
  16. Brady

    Brady Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,561
    Location:
    Adelaide, SA
    Just up the road from my office.
     
  17. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    27,101
    Location:
    Sydney or NSW or Australia
    So you're a regular?
     
  18. Brady

    Brady Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,561
    Location:
    Adelaide, SA
    Haha never used it, don't know where it is - but know St Anges and Smart Rd...
     
  19. lettert

    lettert Well-Known Member

    Joined:
    25th Oct, 2019
    Posts:
    99
    Location:
    Vic
    @Goosehead - what a case of grass being greener! I run a business and would happily trade with you.

    And, I'm fortunate that (knock wood) my business does pretty well. It's all the stress, the fear, the early years of self-doubt and minimum profits, etc - even though I earn quite well I would probably trade that for a lower paycheck, easier work, and less stress. Not to mention, paid time off and sick leave. Oh, and maternity leave or paternity leave.
     
    James_w and Goosehead like this.
  20. James_w

    James_w Well-Known Member

    Joined:
    10th Aug, 2015
    Posts:
    72
    Location:
    Maryborough, Qld
    seek advice from an accountant to check over figures check lease and age of machines they are expensive to replace. In saying that we should of bought 5 laundromat instead of salons with employees :)
     

Build Passive Income WITHOUT Dropping $15K On Buyers Agents Each Time! Helping People Achieve PASSIVE INCOME Using Our Unique Data-Driven System, So You Can Confidently Buy Top 5% Growth & Cashflow Property, Anywhere In Australia