So it’s been a few quiet months (for the blog, at least). However, behind the scenes it’s been far from quiet. More like a herd of elephants all wearing tambourines and blowing those annoying birthday horns while a rocket takes off in the background. Yeah. That’s about right.
Last you heard, we were in escrow to buy our second store. And on January 1st, just as planned, we closed escrow on what is now called Lincoln Village Thrifty Wash.
I can tell you that it was/is a major fixer, but we were able to get the price down to $28,000. Because it was so cheap, we paid cash. But it needed a LOT of work, as you can see below.
And it’s profitable, but not by much. We essentially bought the customer base and sewer hookups, because not much else was worth anything. Most of the machines are 30 years old, but we knew we could get in there, rehab it and make it a successful location.
So we’re slowly getting it fixed up…and there will definitely be “after” pictures…at some point!
And as to our first location, things are going very well. Our remodel is almost complete. We had the floors done, and we also built new bar-style seating with integrated outlets so customers can charge their devices while they sit and enjoy the free wi-fi.
A New Competitor
But as life goes, just as we were counting down to a romantic holiday in Paris for Valentine’s Day, we got some bad news. It actually gave us a knot in our stomachs. The broker that helped us buy this first store called us with an inside scoop that a competitor was looking to build a new store just down the street from ours. Seriously? No bueno.
So as soon as we returned from our vacation (and even while we were on vacation), we started brainstorming ideas to make sure we either convince them our store is so awesome that it’s not worth competing with us, or make sure they aren’t successful if they do decide to go through with the build.
The good news is that an owner in our position is already ahead of the game. The new store isn’t going to be that big and we already know what they are paying for it. $750,000. Yes, that is a 6-digit figure, and not a typo. They will have to bring in so much money just to break even that it’s going to be difficult for them to stay in business. And they have a very strong competitor, ahem, right down the street. We’re in a more convenient location in a major shopping center and our customer base is established.
Are we worried? Not anymore. At first we were, but after talking to other owners who have experienced the same thing (and their stores aren’t as nice as ours), we don’t think the competition will hurt us too bad. Even if 15% of our business went to them, we’ll still be making good money, and they will be struggling to survive. The new store isn’t supposed to open until early 2017, so we’ve got plenty of time between now and then to improve further and build up our customer base even more.
The Latest Laundromat Numbers…
We’ve now owned the first laundromat for over a year, and the other for only 5 months. I haven’t run the numbers for the second location yet, but the first location I have some updated figures for you. (And with everything going on, I’m lucky to even have those.)
In our first 12 months in business, our gross income blew past the prior owner in both his last 12 months, as well as his higher 3-Year Average. And our net profit just surpassed his 3-year average as well.
Net Profit is NOT Cash Flow!
A reminder, however, that Net Profit is not Cash Flow. Net Profit (aka Net Income) is just the Gross Income minus the Operating Expenses. It does not take into account any debt payments an owner may make. This is because debt is unique to the owner, and not to the operation of the store itself. This allows for an apples-to-apples comparison of profitability between stores because it eliminates the effects of financing.
Once we account for the debt payments we made towards the purchase loan and the new equipment loan, the Cash Flow is closer to $31,000 for the 12 months. And technically, we also rolled a portion of that cash flow back into the business as part of our ongoing improvement efforts, which then increased the value of the asset itself. But thankfully, those are one-time costs.
So when you go to compare one store’s profitability to another, you’ll only compare net income figures. Then from there you can determine what your actual cash flow and ROI will be after financing (if any).
Well…I think that’s enough for tonight. I’m sure your eyes are starting to glaze over, and my fingertips are getting a little numb.
Until next time…