5 Most Important Laundromat Numbers
Before I discuss the 5 most important metrics in evaluating any Laundromat let me ask, Why did you purchase a Laundromat? ...To make money, Right? ...How do you know if you are making any money (or not)? By looking at the numbers.
To run any business you need accurate numbers of what the business is doing or not doing. Accurate Numbers, "Real Numbers". If you are not collecting and analyzing with "real numbers" then stop reading this article and stop calling yourself a businessman. You may be an operator, but certainly no businessman.
We use numbers to compare everything around us. Whenever we go out to dinner in a restaurant, we tip the waiter a percentage of the total bill to compensating them for their service. The typically compensation is around 15-20% of the total bill. But what would you tip is you didn't know how much the food bill was? Without the total cost of the meal, you have lost your benchmark number for calculating the tip compensation. The same is true with Laundromats. If you pour your collection quarters into a 5 gallon pail and deposit money in the bank only when you need to pay some bills; then you are not a businessman, maybe an operator, but certainly not a businessman. My point is to keep and use "accurate numbers".
1.) Laundromat's Weekly Gross income is the first of the important metrics. This is the first question asked by any potential buyer? This is the benchmark that everyone measures your Laundromat. This expresses how busy is your store, and how much work you need to place in your store. Laundromat Gross Income is expressed by the week because the full week is the shortest interval in Laundromats.
2.) Length of your lease is second most important Laundromat number. Why? The value of your store 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 the lease. The length of your lease determines the value of your store. Why would anyone want to purchase a store with less than 5 years left on the lease? The long the lease the greater the value of the Laundromat.
3.) Utilities as a Percentage of (washer & dryer) Gross is probable the most important operation number and probable 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 expenses are the utility expenses. Utilities 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. Visit our website for my article on how & when to have a price increase. That why I rank UPG as my third most important Laundromat number.
4.) Turns per Day is another benchmark of your business and my fourth important number. Turns per Day (TPD) are not to be confused with Weekly Gross Income. They are related numbers but think of TPD as the RPM of your car engine and Gross Income as the Miles per gallon. They are related but different. By looking at your TPD you can determine how busy is your Laundromat and whether you need to expand or contract. By reviewing your Turns per Day per Size of machine you can determine which size washer is your busiest and which is your slowest washer. By going a step further it provides guidance if you plan to add more washers as to which size is most in demand. If all of the 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 loaders and replacing them with a couple of Huge washers. TPD provide you a benchmark for your entire store and also between each of your size washers.
5.) Profitability of each sector of your business (Self Service, WDF, and 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 business?
These figures are the vital signs of your business. I have been in the 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 Laundromat business has to come from other Laundromats within the market territory. Every Laundromat can Not 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 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 very best it can be.
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