Five Important Numbers in Evaluating Laundromats

The financial health of any business is revealed by financial statements, both income & balance sheets as prepared by your accountant. The financial health of any Laundromat can be expressed with five sets of numbers. There are five sets of numbers that you should know cold for each of your Laundromats. These numbers reflect the profitability of your business; compare the profitability of your Laundromat to other laundry stores and also give you a benchmark value of your coin laundry business. 

I don’t like numbers, I like quarters.

So, does it matter if your Laundromat is making money? Does it matter if you’re losing money with your WDF program? If you want to add more commercial washers, wouldn’t be nice to know what size washing machines to add? What is your coin laundry store worth? Is all the stocking vending machines worth your time?

Before we look at the numbers, have you ever heard of GIGO? GIGO is an old computer expression meaning Garbage In = Garbage Out. GIGO means that the numbers are only as good as the quality of the numbers going in. With accurate numbers you now can start to make intelligent decisions about your Laundromat business. Accurate record keeping is mandatory and required for any business. I hear most of the old timers say “I will only keep good records a year or so before I sell the business”. The fallacy of this thinking is that how can you run a successful business unless you know what you are doing? How can you correct a failed promotion unless you know what it is doing? Keep accurate records; it’s the only way to make intelligent business decisions.

Your Laundromat’s Weekly Gross income is the first of the famous numbers. This is the first question asked by any potential buyer. This is the metric that is just the first question asked but certainly not the last. Weekly gross income is the benchmark that everyone measures your business by. This expresses how busy your coin laundry store is, and how much work you need to place in your store.

Length of your lease is second most important Laundromat number. Why? The value of your Laundromat and the cash-flow stream is limited by how long the business will be around. A store with a 15 years lease has a lot higher value than a store with only 3 years left on their lease. The length of your lease determines the value of your Laundromat. Why would anyone want to purchase a store with less than 5 years left on the lease? When do you need to have a heart to heart talk with your landlord?
 
Utilities as a Percentage of (washer & dryer) Gross is probably the most important operation number and probably the least used figure. I use Utilities as a % of Gross (UPG) to make sure that my machine pricing is in synch with my utility expenses. Vend prices need to keep up with your costs and the most volatile expense are the utility expenses. Utilities for your Laundromat have a tendency to creep up and become a higher & higher percentage of expenses. By routinely checking the UPG you can determine when and how much to increase your vend prices. That is why I rank UPG as my third most important Laundromat number.

Turns per Day is another benchmark of your Laundromat business and my fourth important number. By monitoring your turns per day you can determine how busy is your Laundromat and whether you need to expand or contract. By reviewing your Turns per Day (TPD) per Size of machine you can determine which size machine to add to add the best value to your business. If all of the commercial washers have similar TPD, then you have a great balance of washers. If your TPD are high on your big washers and low on your top loaders, then it’s time to consider pulling some top loading washing machines and replacing them with a couple of giant washers. TPD provide you a benchmark between each of your size of machines.

Profitability on each sector of your laundry business (Self Service, WDF, Vending) is the fifth and final important number. Keeping track of each and every profit sector is just good business responsibility. Why should you struggle to keep a Wash Dry & Fold business operating unless you’re making money? You may be surprised that the profitability of the vending is not what it should be and you may be having inventory shrinkage problem. How can you tell if you have an inventory control problem unless you monitor your profitability of each of your sectors of your coin laundry business?

These figures are the vital signs of your Laundromat. I have been in the laundry business since the 70’s and the entire industry has evolved from a “growth” industry to a “mature” industry. In a mature industry whenever a Laundromat gets built, the business has to come from another Laundromat within the market territory.  Every Laundromat cannot afford to be run or managed as a part time (sometime) business. To succeed now days you need to know your numbers and manage your laundry business both externally and internally. External is all the other Laundromats and competitors within your market. Internally is managing you staff, controlling your expenses, controlling your inventory and making sure the Laundromat is the best it can be.

Call toll free today 1-800-229-4572 to schedule your complimentary Comparative Savings Analysis. By requesting a FREE HK Comparative Savings Analysis, we can provide you with solutions to reduce your energy costs, increase your labor productivity, and reduce your replacement costs. Please give HK Laundry a call if you require assistance in the New York & Connecticut area.