QuickSTART™ Lesson #4 The Laundromat Business From A to Z”

[Pages:11]QuickSTARTTM Lesson #4

"The Laundromat Business ? From A to Z"

Hey there...nice to see you again!

We're now in Lesson #4. This lesson is the one we keep referring to as the "masters degree" of Laundry Business.

This lesson is packed full of stuff, everything from what makes a laundromat a unique and profitable business to washer/dryer basics to laundry business terminology.

And while that may not sound super exciting, we're going to do everything we can to keep you engaged and interested in what you're learning!

During this lesson, you will:

Understand the special benefits of owning a laundromat Learn the basics of washing and drying (yes, we're serious!) Become familiar with laundry business terminology Discover the different sources of financing Know how a commercial lease works

And with that...let's head to our virtual classroom and get started!

The Unique Benefits of a Laundromat Business

I'm sure you've heard us say it a few times by now. There are many benefits that make owning a business and a laundromat in particular very appealing. And they're all awesome.

Recession-Resistant

There aren't many business models that can thrive in a recession, but a laundromat is definitely one of them. Back in the Great Recession of the late 2000s, the economy seemed to be crumbling around us, but the laundromats hummed right along, not taking a dent.

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QuickSTARTTM Lesson #4 (continued)

Any time you have a business that is critical to people and daily living, it will continue to do well, even in a downturn. I don't know about you, but I like that. A lot.

Part-time A laundromat is one of the best businesses for those looking for a full-time income with only a part-time (or less!) commitment. This is why it's perfect as a side business or for those that want more flexibility than a 9-to-5 job can provide.

Tax benefits from business ownership Many people know about the amazing tax benefits of owning a business. But what's so crazy awesome about owning a laundry in particular is that it means you own a lot of washers and dryers. And for every single one of those machines, you can deduct a nice juicy chunk on your taxes each year. And, we can't forget the special tax-sheltered accounts that only business owners can open.

Cash Business Laundromats are run on a cash basis. Meaning there are no invoices to chase after, no late payments, etc. You retain full control over every dollar that comes in, and those dollars come in immediately at the time of use.

High Return-on-Investment A laundromat business provides one of the highest rates of return available. Coupled with relatively low time and effort, it's a "golden child" of the passive business community.

Rapid Equity Buildup For those that finance their purchase (and most do), loan terms are usually five to ten years. In just that short amount of time, you own your store free and clear. This is why laundromats are often called "forced savings accounts". You can go from zero equity to owning a $200,000 asset in just five to ten years.

I saved this equity point for last, because it's one of our favorite parts. We financed our first laundry and some new equipment, all on a 5-year term. This means that next year we will own a $275,000 business free and clear.

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QuickSTARTTM Lesson #4 (continued)

That alone makes us feel good about our financial future. We can decide to sell our laundries for a very large amount of cash sometime down the line. *high-five*

The Basics of Washing and Drying...(yes, I'm serious)

So are you thinking I've lost my mind at this point? "She's going to teach us about how things get clean? I'm confused."

Yes I am going to teach you how things get clean. Well, sort of.

But this is a research lesson, remember? And sometimes part of research is having a solid understanding of how the basics of the business works. I mean, a laundromat is a place to wash and dry.

As an owner, it would be good to know the science behind washing and drying, wouldn't it?

Yup.

The Wash Process

We'll start by asking the first trivia question of the day:

"There are four components you must have in order for laundry to be cleaned effectively. Can you name them?"

...thinking...

...thinking...

Answer:

Water + Detergent SOAP + Agitation

+ High Temperature

You can wash laundry with just water and detergent, but without agitation, they will not get very clean. You can have water, detergent and agitation, but only hot water is what allows the chemicals in the detergent to work its true magic.

My point is that each of those four things play an absolutely critical part in the wash process. I should point out however, that in some instances (delicate fabrics, deep colors, etc), it is best

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QuickSTARTTM Lesson #4 (continued)

not to use hot water. This is because the hot water makes the detergent work so much better it can actually damage delicates or wash the colors right out of your laundry!

And the standard commercial washing machine works something like this...drum roll...

1. Water enters the washer chamber 2. Detergent is released 3. Agitation begins 4. Soapy water drains 5. High-speed spin occurs 6. Water enters the washer chamber for first rinse 7. Agitation begins 8. Rinse water drains 9. High-speed spin occurs 10. Water enters the washer chamber for second and final rinse 11. Fabric softener is released 12. Agitation begins 13. Rinse water drains 14. Final high-speed spin occurs

And wa-la! Clothes are clean and the excess moisture is spun out. And the higher the spin, the more moisture is drained off, and that means less time in the dryer.

Speaking of the dryer...

The Dry Process

Alright, I won't quiz you this time. But just like with the washing process, there are components that are critical to the drying process:

Ventilation

+ Heat

+ Movement

And while that doesn't seem too complicated, many people believe you just stick the wet laundry in a dryer, it gets hot, and later everything is dry. But there is actually a lot more going on behind the scenes than most people realize.

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QuickSTARTTM Lesson #4 (continued)

Ventilation

A dryer must have ventilation to operate properly. It works much like a hair dryer, in fact. Did you ever notice that a hair dryer has a vent on the back? That's where the hair dryer sucks in air, heats it and spits it back out the front.

And, a clothes dryer is very similar! Fresh, dry air is pulled in from behind the dryer, the air is heated and funneled into the dryer, that air absorbs the moisture from the wet laundry and the moist hot air gets vented back out a pipe through the roof. And the cycle goes on like that continuously.

Now, let's get a tiny bit technical, shall we?

The fresh air that comes into the dryer is called "makeup air". And the reason it's called "makeup air" is because the dryer needs fresh, dry air to "make up for" the air that was vented out.

So if the dryer vent pipes get clogged at all, your dryers will "suffocate" and have a very hard time drying anything. The ventilation pipes must be kept clean on a regular schedule.

Heat

This one is fairly obvious, so we won't linger too long on this one. Obviously heat eliminates moisture, and we want dry moisture-free clothes. Moving on.

Movement

This is the other piece that many people don't fully understand. The clothes must be able to move around in order for the hot dry air to reach all of the laundry.

In fact, when clothes "tumble" just the right way, that makes for optimal drying. Did you know that?

The dryer should be filled no more than halfway. This allows enough room for the clothes to rise up the side of the dryer as it turns, reach the top, and drop (or "tumble") to the bottom of the

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QuickSTARTTM Lesson #4 (continued)

dryer. Over and over again. This constant rise and drop movement exposes all of the surfaces of the wet clothes to as much dry hot air as possible. And trust me, we have seen s-o-o-o-o-o many customers overload their dryers to the point that the clothes can barely breathe. Then they wonder why it took two hours for their load to dry. Sigh. But hey...now that you're a wash and dry science expert, go off and wow your friends with your new knowledge. You'll blow their minds.

Laundry Business Lingo You Should Know

There are quite a few terms that, once you know them, will make this journey a whole...lot...easier. Some are general business terms and others are more specific to the laundry industry.

But in order to avoid this lesson being 20 pages long, I created an article on our website that lays out all the lingo for you. The link is below.

And if you need to break it up into sections and take it a few words at a time, then please do it! Better to do that than to blow through the entire list at once and only remember 10% of what you read.

You know that happens. You're reading some book or article and next thing you know you're thinking about your grocery list or tomorrow's doctor appointment.

So just take it a little bit at a time, and let the terms soak in. I start the article with a quick story about the time a few laundry business terms really came in handy when we were purchasing our first laundry. So don't skip this part.

Click HERE to read the Laundry Lingo article

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QuickSTARTTM Lesson #4 (continued)

Know Your Financing Options

Alright, we're moving on from laundry lingo to money, money, money. And how to get your hands on some so that you can purchase or build the laundry business you're after.

And depending on your personal financial situation, you may be limited as to what financing options are available and whether you can build new or buy existing. We'll go through that in a moment.

But one thing I often tell our coaching clients is that in order to get a laundry business, they need to have some money, good credit, or both.

If you don't have great credit, but you've got cash, you've got a few options. And if you've got good credit, but no cash, there's a few options there too. And if you've got both good credit and cash, then you've got every option out there available to you.

(But if you have poor credit and you don't have much cash, then you may want to consider changing at least one of those two issues if you want to make your entrepreneurial dreams happen. Either (1) work on your credit, or (2) start putting cash aside. )

Below I've created a scale ranging between "Cash" and "Credit" For those with more cash than credit, you'll land towards the left side of the scale. If you have good credit but low on cash, you'll be on the right side of the scale.

Find your scenario below and circle it. Or if nothing matches your scenario exactly, then just choose the one that is the closest.

(BUT...if you have excellent credit and significant cash available, then you don't need to complete this exercise!)

CASH

Poor Credit Significant Cash

Fair Credit Good Cash

Good Credit Some Cash

Excellent Credit Low Cash

CREDIT

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QuickSTARTTM Lesson #4 (continued)

If you circled number one, and have a nice cash savings but poor credit, then you will want

to focus on paying cash for the business with little to no financing at all. And because you're paying cash, you have the flexibility of deciding to build new or buy existing.

If you circled number two, and have a good cash savings but only fair credit, then you can

probably still build new and make a substantial down payment (30-50%). Or, you may be able to buy existing and negotiate with the seller to finance it for you and pay him or her a significant down payment. Or, you may be able to buy existing and use a private lender with a significant down payment (50% or more), but the interest rate may be a bit high.

If you circled number three, and have good credit but only some cash savings then you will

likely need to focus on buying an existing laundry, and finance through either a private lender or a traditional bank, with a down payment in the 25% range. Or, negotiate with the seller to finance it for you for a small down payment (10-20%).

Lastly, if you circled number four, and have excellent credit but very little cash savings, then

you will likely need to focus on buying an existing laundry, and negotiating with the seller to finance it for you with a very small down payment.

Be aware, however, that sellers that are willing to finance will likely charge a higher interest rate. Or, because you have excellent credit, you may be able to get one lender to finance one portion, and another lender to finance the other portion, and not require any cash from you at all!

If you have both excellent credit and significant cash savings, then you can do any or all of the above. You can pay in cash, or you can finance part of it or all of it through either the seller or a traditional lender. You also have the ability to build new or buy existing, depending on your preference. Every option is available to you!

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