Walkthrough: The Purchase Process
When it comes to buying a business, sometimes you just need to step back and see the big picture.
Life can feel a little heavy when you’re neck deep in papers and figures and contracts and…well, I’ll just stop there because I’m getting stressed just writing that.
The key is to have a wide-angle lens on the whole thing; to know what’s coming next and have a solid grip on what’s already been accomplished. Not to mention doing things in the right order. And trust me, there is an order.
The purchase process can be daunting, but let’s break it up into manageable steps.
Before you even think about buying a business, there are a few housekeeping items to get out of the way.
- Check your credit report and fix any errors.
- Know what cash you have available. Whether it’s sitting in a bank account, or it’s a loan from a family member or friend, you need to have a ballpark figure of available funds.
- Determine what kind of buying power you have. In other words, the purchase price range you should be looking at when it comes to buying a business. (if you’d like help, a FREE Down Payment and Purchase Price calculator is available in our Online Store.)
- Once you’ve identified what you can afford, start looking at what laundries are currently for sale. At this stage, you’re just paying attention to basic information provided on the listing.
- For laundries that you’d like more information on, send an inquiry to the listing broker, letting them know you are interested in one of their listings.
- Review the additional information provided, including the monthly incomes and expenses and determine if the business is still a good fit.
- If so, visit the location and perform a thorough Site Visit. (if you’d like help, a comprehensive Site Visit Evaluation and Checklist is available for purchase in our Online Store.)
- Estimate the Net Monthly Income based on the income and expense numbers provided by the seller. (if you’d like help, a Net Income Calculator is available for purchase in our Online Store. It calculates the monthly net income for the store and alerts you if any expenses are above the industry average!)
- Compare the Listing Price to the Estimated Value of the laundromat. Valuation formulas for a laundry can be found online, or we also devote a section of our Laundromats101 Guide to Purchasing a Laundromat to this as well.
Now that the groundwork has been laid, and you’ve determined the laundry is one you’d like to own, it’s time to take some official steps toward making it yours.
- Before anything else, be sure you have some cash immediately available for a Good Faith deposit. $1-2,000 should be enough. For a more expensive store, the seller might expect a higher deposit, in the $5,000 range.
- Reach out to the listing broker and notify them that you are interested in making an offer.
- The broker will confirm a date/time to meet up with you to prepare the offer.
- Write up the offer and put down your Good Faith deposit. For help with what must be included in your offer contract, we highly recommend our Laundromats101 Guide to Purchasing a Laundromat, available in our Online Store. It discusses the clauses you must have in your offer contract in order to protect yourself, so that you can back out for any reason and get your deposit back. This topic is covered in our official Purchase Timeline and Checklist as well, also available in the Online Store.
This is one of the most critical areas when purchasing a business. This is where you verify the figures the seller has provided, and really start getting a feel for the ins and outs of the store. If there were ever a time to slack off, due diligence would not be it.
- Begin your due diligence process. Review prior year tax returns from the seller, profit and loss statements, utility bill history, and confirm details of the lease. (if you’d like additional information on performing the due diligence process, we recommend our Laundromats101 Guide to Purchasing a Laundromat, available in our Online Store.)
- Based on the results of your due diligence review, you may need to adjust your purchase offer accordingly. If the net incomes were lower than stated, that should be reflected in the purchase price.
- (Optional) Submit adjusted purchase offer.
- If your offer is accepted, have the broker arrange a meeting with the seller to go over any outstanding questions.
- Apply for a transfer of the lease with the landlord (if applicable)
- Apply for financing (if applicable)
- Determine new business name and branding (if changing)
- Research and obtain required business permits and licenses; begin at least 30 days prior to close of escrow. (if you’d like help understanding what permits and licenses are required and in what order, we recommend our Laundromats101 Guide to Purchasing a Laundromat, available in our Online Store.)
- Once business licenses/permits are acquired, open a business bank account
- Attend money collections with the seller (30 days minimum recommended)
Close of Escrow
It’s the day you’ve been waiting for.
- Wire final funds to escrow company
- Date of official ownership transfer is scheduled
- Transfer ownership – seller hands over all keys and access codes
- Final walkthrough of store operations
And with that, the store is yours! You’re an official business owner.
About Laura Dobbins
Laura is the founder and co-creator of Laundromats101.com, and owner of two laundromats in the Sacramento area. She’s a math geek (Calculus III was a breeze), and currently works as an Analytics Manager in the Healthcare Finance sector. When she’s not busy analyzing something, she loves cooking French food and blogging.
For more in-depth information, we’ve created The Laundromats 101 Complete Guide to Purchasing a Laundromat, which includes an entire chapter devoted to the details of the purchase process and protecting yourself.
Available NOW in our ONLINE STORE!
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