Well, Not Quite… But Here’s a Not-So-Secret Formula That Will Make It Almost Seem Like Those New Washers and Dryers Came Free of Charge
What if I told you I had the secret to getting brand new commercial washers and dryers for your laundromat? Would you be interested?
Yeah, I thought so.
No, it’s not a get-rich-quick scam. It’s just smart business, so stay with me.
Of all the crazy things I’ve come across with regard to laundromat ownership, nothing takes the cake like hearing an owner say, “I can’t afford to buy new laundry equipment.”
The reason why new equipment will pay for itself is actually fairly simple and straight forward. In today’s day and age, brand spanking new commercial laundry equipment nearly always pays for itself. However, way too many owners aren’t aware of this fact, or simply don’t believe it. Instead, they continue downloading how-to videos on YouTube to keep their 25- to 30-year-old washers turning.
Wait! Before you run away, please understand that I have nothing to sell, and I get nothing out of writing this. Simply put, it’s part of my obsessive mission to help raise up our industry. If you read to the end of this article, with an open mind, it could change your laundromat business, your bank account… and your life!
When I entered this industry in 2010, I started with virtually no capital. We’ve built our laundromat portfolio by borrowing, investing, growing, reinvesting, sweat equity… and then more reinvesting. I estimate that I’ve easily spent a few million dollars on commercial laundry equipment for my four stores since getting into the business. I’ve also had the pleasure of meeting hundreds – if not thousands – of other laundromat owners along the way, and what I’ve learned is rather astounding.
The operators with old equipment, struggling businesses and little to no income believe they “can’t afford” new equipment. They just scrape by – fixing their old machines and occasionally buying a few used pieces here and there.
Conversely, the store owners at the top of the industry don’t hesitate to invest in new equipment whenever it’s needed, because they know it’ll pay for itself. Whether they pay cash or use leverage is completely irrelevant. (For the sake of this column, let’s assume you don’t have enough cash and will require financing.)
First, a few caveats:
- This won’t work in all scenarios, but it will work in most.
- You must have a good or even great store location. After all, a poor location will be a deal-breaker for nearly any business, and new equipment most likely isn’t going to help.
- The laundromat must be run by someone who cares about it and is active within the business. If you aren’t willing to run your laundromats the right way, new equipment may help a little – but not enough and not for long.
- Run a competitive analysis on your sub-market. In some areas, a sub-market may be a radius of a half-mile, and in others, it could be five to 10 miles. This will be based mainly on population and demographics. (If you’re unfamiliar with what I’m talking about, find yourself a good mentor or business coach to help you out.)
Now, with the disclaimers out of the way, let’s talk! Are you ready for my Earth-shattering news?
The equipment will pay for itself!
Wait! Come back! Before you leave, please hear me out…
Here’s what I’ve done and, for that matter, what most of the leading laundromat owners in this industry do. It’s also what many at the bottom end of this industry think cannot be done.
The Not-So-Secret Formula
Since you don’t have the cash on hand to buy new machines, you’ll purchase the equipment with all or nearly 100 percent financing. If you have extremely bad credit, this may not work, but for the most part, it’s a very common practice.
In nearly every case, you will receive 90 days before your first payment is due on your equipment financing note. In fact, right now you often can get interest-only payments for up to 12 months.
And I’m not kidding when I tell you that, by then, the new equipment will have brought in enough new revenue to make the payment for you. Don’t believe me? Keep reading…
In almost all cases, buying new commercial laundry equipment for your laundromat will pay for itself in three important ways:
1. Increased Gross Sales
By adding new equipment, word will travel quickly that you have “brand new washers and dryers.” Better yet, if you spend a little on marketing, this fact will travel even faster.
People will come in and check out what your store has to offer. When they see the new stuff, they’ll stay and your turns per day will increase. Simply put, you’ll attract new customers, which equates to additional revenue.
2. Increased Vend Prices
Since you’re adding new machines, customers will come. And they’ll also be willing to pay more for the use of your shiny, new machines with all of their modernized bells and whistles. And this will produce another significant bump to your revenue. In fact, when top laundromat owners add new equipment, they nearly always increase vend prices substantially.
The beauty of these first two benefits of new equipment is that they are compounded. Increased revenue will come both in the form of increased margins from your current customers, but also from your new customers as well.
Research has been done on this subject, and it’s reasonable to justify as much as a 20 percent increase in vend prices when installing new equipment, even with machines of equal capacity.
Another positive factor is that new equipment can act as a market differentiator. You know that laundromat that was new 10 years ago?
Well, it’s not so new anymore. In fact, it’s dated and tired-looking. Add new equipment, and it’ll separate your store from the rest of the pack.
3. Utility Savings
As a laundromat owner, a large portion of your expenses comes in the form of utility bills – and older equipment is incredibly costly and inefficient. The older a machine is, the less efficient it will be. Even if your equipment is only 15 years old, it likely makes financial sense to retool your laundromat.
The manufacturers that serve the laundromat industry have made significant progress with regard to the energy efficiency of their products, especially in the last 10 to 15 years. So, by adding new equipment, not only will your revenue increase substantially, but your expenses also will decrease as a percentage of sales.
Bonus Time
There are two additional advantages to reequipping your laundromat with new machines – depreciation and amortization. However, I’ll leave the details of those to your accountant to explain.
Just know that – between write-offs, depreciation and ADA tax credits – the bonuses just keep coming. The government wants (and, therefore, incentivizes) us to reinvest in our businesses by installing new equipment.
In short, you not only can buy the equipment with “other peoples’ money” if you choose to, but then you can pay back the loan with pre-tax income from your business – and you can depreciate the equipment so that a portion of your other income is tax-free.
At a minimum, my hope is that this causes you to think a bit differently about your laundromat business. I’m hoping you’ll consider retooling your store when the time is right.
By constantly improving and reinvesting in your laundry business, you’ll be in a stronger position to serve your community and, in turn, elevate the reputation of this great industry.
[Editor’s Note: Before making any financial decisions about your laundromat, always be sure to discuss your options with your attorney, your accountant and any other professional business consultants on your advisory team.]
