A Tale of Two Perspectives

The following story takes place somewhere in New Jersey.

Names have been changed to protect the somewhat innocent 😉.

I sat quietly across from Bob in his small office at the back of "Suds & Coins,” the local laundromat he'd owned for fifteen years. The washers hummed in the background as he shuffled the financial documents between us.

“What?” he said, noticing my face. “What's wrong?”

He repeated, “I know you will make a ton of money here if you spend more on advertising and add PUD. This location has so much potential.”

After a moment I asked, “Don't you see the issue with that?”

“Nope,” he said, slightly angered. “If you spend more money on marketing and add PUD, sales would take off.”

“You're sure?!” I blurted out.

“Absolutely,” he said. “The younger people in those apartment complexes down the road barely know we exist. With targeted ads, monthly subscription plans, and a pickup service, you could double the business easily.”

“You think that I as the buyer should pay you more for the business because you believe that?” I asked.

“It's the truth,” he said . “That potential is here. It's real. I built the business that makes that possible, so I should get paid for it. Fifteen years of goodwill and loyal clients. The foundation is solid.”

“And it can happen by spending more money on marketing and adding PUD?” I asked.

“Definitely,” he said, leaning back in his squeaky chair.

“Ok...then...why didn't you spend that money and launch PUD?” I asked.

“What do you mean?” he said.

“Why didn't you buy more marketing? Start the pickup service? Launch the subscription model?” I asked.

“I didn't have the money,” he replied. “Running a laundromat isn't exactly printing money. The machines need constant maintenance, utilities are through the roof, labor ain’t cheap, and competition is picking up.”

“But why didn't you go out and get the money? If it's a sure thing, why didn't you find the money to make that investment?” I asked.

Thinking about the thinking of laundry:
Their vision of the laundry business is different than yours, and you should only be paying for the most viable vision, yours!

He paused, staring at the framed photo on his desk from when the store was newly renovated fifteen years ago. 

“Because it's risky to borrow money to spend on marketing and to launch PUD,” he said, then added, “and I'm not sure the bank would go for it. They see laundromats as old school businesses.”

“I agree,” I said. “And that's the problem.”

“How's that?” he asked.

“You're asking me, the buyer, to pay for the opportunity to do the thing that you weren't willing to do,” I responded. “If I buy your business at this price, I’ll need to take out a loan, plus bring extra money to increase the marketing spending, launch these new services and update the store. And you expect me to do that because you believe that the potential is here?”

I took a breath and concluded by saying, “Why would I do that? Why would I take a risk the owner has been unwilling to take for years, based on something that same owner believes? Why would I pay you, for the chance to take that risk?”

The hum of the washers seemed to grow louder as Bob sat quietly, turning and staring at the asking price.

Moral of the story?

It’s not about what the seller or their broker believes can be done with the business. 

It’s about what you KNOW you can do with the business, and you shouldn’t be paying the seller for it.

That's all I got for you today.

Waleed

Join me on Linkedin, YouTube, X (Twitter), or Instagram

Echoing the thoughts of Warren Buffett.

It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.