The laundromat industry is one built upon the backs of small businesses. According to industry reports by IBIS World, over 80% of laundromats in the United States are owned by small business owners. This means the laundromat industry is fragmented and very competitive. The laundromat industry is expected to decline over the next few years. This decline makes it more important to ensure that your business stands out. Understanding how laundromats create value is important. This is true whether you are buying, selling, or maximizing the value of a laundromat. In this article, we discuss some of the key value drivers for a laundromat. In another article, we discuss how a valuation analyst calculates the value of a laundromat. See, Valuing a Laundromat. Learning the value of your laundromat and what drives the value of a laundromat can help you make more informed decisions.
Key Value Drivers for a Laundromat
In the following paragraphs, we discuss key value drivers for a laundromat. To better understand the value of a laundromat, get a business valuation. Peak Business Valuation, a business appraiser, is happy to provide you with a business valuation. We are available to answer any questions you have. Schedule a free consultation!
Disposable Income and Economic Forces
Believe it or not, increased disposable income weakens the outlook of laundromats. This is because as families have more money to spend, they tend to increase their luxuries such as owning a personal washer and dryer. Factors such as unemployment and consumer confidence may improve demand for laundromats.
Efficient, Updated Equipment
As one would expect, busy laundromats can use quite a bit of electricity with most dryers rated at 240 volts. Using newer equipment that uses less electricity is an important key value driver. All things equal, a laundromat using more efficient equipment will use less electricity and experience higher margins. A similar key value driver is providing customers with larger, family-sized equipment with larger holding spaces. These larger machines handle larger loads more efficiently. Customers appreciate having the extra space and quicker cycles these larger machines provide. When valuing a laundromat, the valuation expert will look at efficiency ratios and compare your business’s financials to similar laundromats. Peak Business Valuation, business appraiser, is here to help. Schedule a free consultation today!
Location, Location, Location
Location is essential to most businesses, but even more so for laundromats. It can be a challenge to differentiate your laundromat as the services do not drastically change from location to location. An effective way to differentiate your laundromat is to position the laundromat close to individuals in need of its services. The location of your laundromat largely impacts demand and drives higher revenue. A valuation expert will look at these factors when valuing a laundromat.
Customer Diversification
Diversifying your customer base can help increase the value of your business. Below are a few ideas of how to do this for a laundromat.
College Students
College students are some of the most likely customers to visit laundromats. Being away from home puts them in need of reliable washers and dryers. Providing this service close to student housing can increase your client base which can contribute to growth. It is important to note that due to COVID-19, online schooling grew tremendously. As such, many students are opting to study from home. This reduced the demand from college students for laundromat services. It is hard to know if this trend will continue or if in-person college attendance levels will return to pre-pandemic levels.
Renters
Being located next to rental complexes can also increase demand. Many rental units do not provide dryers and washers, so many renters are required to use other means such as laundromats. The United States is expected to continue its upward climb to higher urbanization rates over the next few years. This means that renters, a key urbanization demographic, will likely increase in population. Providing these renters with close laundromats will help meet this needed service. And, will likely contribute to your laundromat’s growth.
Extra Revenue Streams
Differentiating your laundromat can be challenging, but it is not impossible. Laundromat owners have found ways to differentiate themselves by providing extra services. Such services may include providing free WiFi, televisions, or free coffee dispensers. These services make the customer’s visits to the laundromat more enjoyable. Providing extra services encourages customers to spend more time at the laundromat and spend money on other goods or services. Adding extra revenue streams such as vending machines can increase revenue and drive the value of your laundromat. When valuing a laundromat, the valuation expert such as Peak Business Valuation, business appraiser, will analyze your revenue streams.
Summary
Understanding what drives the value of your laundromat will enable you to set goals to maximize the value. Whether you are looking to buy or sell a laundromat, the value of your laundromat business! Determining the value of a laundromat can be complicated. As such, a business valuation professional uses their judgment, experience, and relevant information to determine a fair market value.
The first step to finding out how much your laundromat is worth is with a business valuation. A business valuation will not only help in determining fair market value but will also analyze your strengths and weaknesses and assess how you compare to your competitors.
Peak Business Valuation, business appraiser, works with laundromats across the country. We are happy to answer any questions you have about how to value a laundromat. Please reach out by scheduling your free consultation below.
See also How to Value a Laundromat, Valuing a Laundromat, and Valuation Multiples for a Laundromat.
