[This is the eighth in a series of early blog posts documenting the purchase process of our first laundry back in 2014. Enjoy.]
If only I had a blogging magic wand. I’d say an annoying little jingle, wave a cool-lookin’ stick and my blog post would appear. The truth is that posts like this one take a l-o-o-o-o-n-g time to pull together; numbers, calculations, reviewing records, Zzzzzzz.
So, sometimes it takes me a while.
But I realize that posts like this are where the meat is; the stuff that other finance and number geeks like me thrive on. I’ve had a few readers send me some friendly, gentle pushes to publish an update on the laundromat business and how it’s going so far. Fair enough, because if I were them, I’d want to know too.
You know those home decorating reality shows where they take an ugly-duckling house and make it fresh and wonderful? (Just nod and say yes.)
Well…that’s how I feel about the laundromat we purchased. It was decorationally challenged (yup, made that phrase up myself). Actually, that’s putting it nicely. It was a bit of an eyesore. The vinyl wall paneling was the color of used-to-be-white socks. Or dirty dishwater.
Oh, and it had forest green trim everywhere. Well, where there was trim, at least. In some places it had fallen off and never been replaced.
This is one of the only pictures I have of the inside before I got my grubby hands on it. This is when we were spying on the laundromat before we bought it. I know, it’s hard to see the details.
Years of grime had made its way into the crevices of the vinyl on all the walls.
I took the picture below after I’d already painted the forest green trim, and you can’t see the grime on the walls. But trust me, it was there.
There was no personality, no theme, no logo, nothing. Even the clock on the wall looked to be from a 1960’s school classroom, and it was hanging on the wall just off kilter enough that it generated some OCD in me that I didn’t know was there.
The crazy thing is that it still made decent money. Even looking like that. But in the 12 months prior to the purchase, business had taken a slight downward turn. Revenues (and thus, net profits) were down from prior years. But we figured that a basic, economical facelift would increase business and we knew we would take a more ‘hands-on’ approach than the prior owner, since we live just a short distance away.
Finally…Some Meat and Potatoes…
First I compared the average monthly expenses from the most recent year of business for the prior owner with our own first few months of business to see how things have changed…or stayed the same.
The rent is higher for us, since it increases every two years, and 2015 was an ‘increase year’. We had to assume the prior owner’s lease, which wasn’t that favorable. However, we negotiated our rent down so that when we renew in 2018, the base rent will drop down to $2,000 per month, which puts $6k back in our pocket for the year.
We also are seeing an increase in water costs, which isn’t a shock, given that business/usage has increased as well as the drought status in California right now. Water rates will likely go up again, but we just increased our prices on all washers by 25 cents to account for that. (I’ll talk more about the price increase in a later post. That’s a whole other discussion.)
We also gave our janitor a raise. He was underpaid, does great work, is reliable, and is pretty much the entire reason why we can go days without ever paying a visit to the laundromat. He cleans at night, closes up, and sets the alarm, 7 days a week. He has asked for only 1 day off in the 4 months we’ve owned it.
We ditched the expensive cell phone plan that the prior owner used, and went with Republic Wireless for $10/month. Haven’t had any problems. Every dollar saved counts.
More Meat and More Potatoes…The Big Picture
I also pulled together a summary of what our average income, expenses and net profits have been in the four months we’ve owned it (annualized), compared to the prior owner’s most recent year, compared to the prior owner’s 3-year-average.
As I said, business had taken a downturn the 12 months before we bought it. But during the purchase process, we had reviewed the financial records of the prior years, and saw what it could make. (We verified that the downturn was not because a new competitor opened up down the street, etc. It was really due to the owner becoming involved in other business ventures, and the laundromat was no longer a priority.)
Looking at the numbers so far, we’re doing pretty well! We initially put some of the profits back into the business to purchase remodeling materials, a video surveillance system, etc, but for the most part we’re letting our business checking account build up a few months worth of expenses so we have a solid reserve account. Oh, and Randy treated himself to an Apple Watch courtesy of the business. He earned it. 😉
It’s important to have a nice cushion in the business account; we don’t live paycheck-to-paycheck in our personal accounts, and it won’t be any different for our business. Once that reserves is met (3 months of expenses), we’ll start transferring most of the profits to our investment account. (I can hardly wait.)
Now for some Before and After…
But first a disclaimer. These won’t be quite as striking as I’d like. I forgot to take clear interior ‘Before’ pictures. I got excited to get in there the first week and paint, and next thing I knew, I had painted all of the trim white before I remembered to get out my camera.
So…it is what it is. But these will just have to do.
Week 1: I took off the week from work, and my momma came in and helped me paint. Thanks mom!
You can see the dirty, yucky-colored walls better in the one below. At this point, the trim had been painted white and the walls were in progress of becoming a calming blue-grey color. Randy installed the video surveillance system.
Next we installed a paper towel dispenser and a soap dispenser at the sink…exciting stuff, I know.
Next we installed the missing trim around the dryers and put up professional signage.
Logo signage was installed on the soap vending machine, and trim was installed around it and painted white.
The classic forehead-and-hat shot of the front of the store, with the new window and door signage. That’s my mom hiding behind the window signage. She’s so camera shy that one.
Randy starring in my after photo below (much to his dismay). The vinyl paneling and garbage cans were refinished, and we had a logo and instructional signage made to place on the walls. We also took photos of the surrounding neighborhood and Sacramento landmarks, selected four, and had them printed on canvas to hang on the walls.
So that’s the latest on our laundromat adventure. Now do you see why this post took me so long to write? 🙂
Thanks for tuning in.