Entrepreneurship & Small Business

So many dry clean / laundry stores for sale?

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  • Aug 2nd, 2007 1:06 pm
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[OP]
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Aug 12, 2005
1632 posts
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Mississauga

So many dry clean / laundry stores for sale?

I have zero business experience and I'm just starting to do some research on purchasing existing small business and I saw many dry cleaners for sale on mls. Anyone know why? They all said they are very profitable and have a large client base and potential. If they are all doing so well, why would so many of them give up their own business?
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Mar 15, 2003
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I'd be awful concerned about environmental issues. They tend to use some harsh chemicals, and I read something a while ago about the industry reacting to this - negatively.

If you're looking to buy a business, consider the following:
- a franchise may be a good idea. Some pros, some cons to this.
- buy into something you really like doing. Or conversely, find something you really like doing and look for a related business.
- compare the cost of buying a business vs. the cost of starting the same business fresh.
Member
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Jul 4, 2005
262 posts
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Markham
your working hours are probably 8am-8pm
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Aug 19, 2001
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Drycleaning seems to be such an annoying job. It's a valid reason to sell.

However... MOST businesses for sale are NOT money makers. I have seen tonnes of businesses for sale right when they are about to default on leases, faced with expensive maintenance, etc. or just have been a money-pit since they opened and the owner is sick of it!

I looked at one laundromat for sale... it's a cushy job, but you need someone onsite all the time to keep the place clean, make change, sell detergent, etc. ... no way in heck I wanna do that!! it's good for some people though, like if they have otherwise unemployable family (really poor english etc.) they want to put in a job.
Jr. Member
Jun 5, 2003
145 posts
Toronto
If you buy a laundromat, make sure the ROI is not < 5%. If it is, you might as well be putting your money in a GIC where it'll have less risk and make more money.
All my life I wanted a computer. Now, all I want is my life back.
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Aug 19, 2001
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mf99 wrote:
Aug 1st, 2007 2:06 pm
If you buy a laundromat, make sure the ROI is not < 5%. If it is, you might as well be putting your money in a GIC where it'll have less risk and make more money.
Good advice for ANY business you buy!

I'd want to see at least 25% before even considering a business. 33% is more comfortable.

Don't get fooled by "returns" that don't include a healthy salary for an owner/operator... your time is valuable! If you can make $50,000/yr at a 9-5 job then you should calculate at least a "salary" of $75,000 to compensate you for all the overtime, holidays, and benefits you'll forgo as your own boss.
[OP]
Deal Addict
Aug 12, 2005
1632 posts
22 upvotes
Mississauga
I was thinking about getting a home equity line of credit to purchase some low cost but somewhat established business (and I don't mine a laundry store as long as it's making money. I'm thinking (just thinking in case my boss sees me here talking about this) of not returning to my position (although it does give me a decent salary) and I can still work to get some money while also take care of my baby. There are many laundry stores for sale cheap, only around 20K to 60K etc, and I think they are not very busy or demanding so I can look after my baby at the same time. In terms of profitability or ROI, I haven;t thought of that yet ... but 10%, 25% ROI, do u mean in a year or 5 yrs or what coz 25% ROI in a years seems like a very high expectation ... ?
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Mar 15, 2003
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ayeung wrote:
Aug 1st, 2007 4:30 pm
I was thinking about getting a home equity line of credit to purchase some low cost but somewhat established business (and I don't mine a laundry store as long as it's making money. I'm thinking (just thinking in case my boss sees me here talking about this) of not returning to my position (although it does give me a decent salary) and I can still work to get some money while also take care of my baby. There are many laundry stores for sale cheap, only around 20K to 60K etc, and I think they are not very busy or demanding so I can look after my baby at the same time. In terms of profitability or ROI, I haven;t thought of that yet ... but 10%, 25% ROI, do u mean in a year or 5 yrs or what coz 25% ROI in a years seems like a very high expectation ... ?
I had a loc for my first business, but to buy inventory. And it went well. So there's something to be said for borrowing to buy or build a business. Not sure if I would worry specifically about ROI on a loan like that though. The ROI needs to be enough to give you a paycheque, not any specific return on the loan. In other words, the ROI is your pay and the freedom of your own business. Not 25% of the amount borrowed.

If you borrow $250,000 to buy a business, and that pays you say $50K (or whatever you need to earn) plus pays back the loan over 5 years, then I don't care about the ROI of the original loan. I'm getting my own pay and my own business, and living comfortably (not that I can live comfortably on $50k :) ).

If I plunk down $100K of my own money for a business, and it pays me the same $50K per year salary (and assuming that's enough for me to live on), then again, I'm not too concerned about ROI on the original $100K. I'm buying a paycheque, not an ROI.

Really what you might consider is whether the money to buy a business might be better spent building a new business, i.e. a competitor. Is it cheaper to buy a laundromat? Or start a new one? These are the things I'd be comparing instead of ROI.

Be careful however about assuming that running a laundromat or dry cleaning is easy work. I doubt it's as easy as it looks. Sure, sitting on your tush making change is easy work, but that's what your employees are going to be doing. You, you'll need to be worried about making sure the employees are on time, the machines that just broke down and getting it repaired, doing payroll, balancing books, running to the bank, finding good deals on tide to stock the machines, deciding if you want a pop machine in the place, if so where to get one, and so on and so on. These are just some of the minutea that business owners get into when you hear them/us complain about all the work and the headaches. In short, I really, really doubt you'll find it's less work for quite a few years - it'll almost certainly be more work.

What it is though, is more freedom. No boss. Make all the decisions, all the time. Time off when you want time off mostly. I don't have to plan anything if I need to go to the dentist, I just make the appointment. More stress as you realize that your pay isn't steady - you'll have some bad months likely where money doesn't quite make enough to pay the mortgage/staff whatever :) .
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Aug 19, 2001
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ayeung wrote:
Aug 1st, 2007 4:30 pm
but 10%, 25% ROI, do u mean in a year or 5 yrs or what coz 25% ROI in a years seems like a very high expectation ... ?
I mean annual ROI.. e.g., if I buy a business for $100,000, i expect to see annual earnings of ~$25,000. This is for an established business with relatively low risk.

running a business takes work & stress, no matter how hands-off you are. A small business is always going to have risk... risk that the premises will be destroyed, risk that your lease rate will jump, risk that some big operation will move in across the street and destroy you.

I expect to be compensated for that effort & that risk. Is 25% high? maybe, that's just my standard, if i'm not getting that return then I'd rather put my money someplace safe & easy.

If you buy a laundromat for $20-$60k, then getting that kind of return should be easy. That's only $5,000-$15,000/yr.
[OP]
Deal Addict
Aug 12, 2005
1632 posts
22 upvotes
Mississauga
Just to clarify, I think they are not coin wash laundromat that I saw many for sale as I think with machinery, they should cost more than 20K to 60K. I think they are more like drop off/pick up dryclean/laundry store where they contract out the actually cleaning off the premise. Not very sure as there are no pictures and I didn't call the agent to dig into details. Just wondering why are there so many of them for sale and I can't think of the reason.

The 25% ROI seems reasonable if you say it's only $5000-$15000 of the 20K to 60K investment. But since the investment is funded from a borrowed source and I'd think it's pretty hard to achieve the 25% (and paying back the loan in 4 yrs) after salary, rent, supplies, interest on loans etc etc ...

I do know running a business takes work & stress, and all I have is energy at this point of life.
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I calculate my target ROI based on EBITDA. i.e. interest expense doesn't affect the returns. Choosing "do I borrow money or not" is a totally different question from "does this business make enough money".

Repaying principal is NEVER an expense. It's actually PROFIT... it just so happens that you received that profit EARLY, when the bank cut you the cheque which you quickly spent on acquiring the business.

So many businesses are probably for sale because they are not making money. I hate to see ads that say "excellent room for growth" etc. cuz they're trying to snow the fact that it's in the toilet.

If i had a business I was thinking about selling, i'd make sure all the possible growth happens BEFORE I sell... you do 2 month's hard work, double your profits, and suddenly your $50,000 business turns into a $100,000 business! Only a fool wouldn't try to maximize profits just before selling.
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