The laundromat world has been on fire lately.
They’re popping up on “businesses-to-buy” lists with sky high valuations that, in my opinion, are often misleading and out of touch with the reality of the core business.
With all the social media buzz about laundromats earning “easy, passive money,” it’s no wonder people are flocking to buy, start, or invest in them. Content creators and influencers love to show off their overflowing buckets of quarters and sell courses about how laundromats are the ultimate “side hustle.” Clients serve themselves, and the owner generates revenue simply by making machines available and keeping them running.
The idea of owning a business that “runs itself” is enticing, but this picture glosses over the nuances of how laundromats are valued and what makes them profitable in the first place.
A true self-service laundromat is self-explanatory. People bring their clothes, pop some quarters or swipe a card, and the machines do the work. But when you start adding services like WNF, pickup-and-delivery (PUD), and dry cleaning, it changes from a self-service operation to what I like to call a “laundry business.”
A laundry business is a multi-service operation that caters to a wide range of clients’ needs. These add-ons boost revenue, but the additional services also add more risks, challenges, and opportunities that buyers and sellers need to think about. Let’s be real, running a self-service laundromat is relatively straightforward. Running a laundry business with multiple service lines? Not so much.
Thinking about the thinking of laundry:
Why should you have to pay for the buried treasure they didn't want to dig up?
I’ve noticed that most of the sky-high laundromat listings emphasize wash-and-fold (WNF) income, and this makes me wonder:
- If you strip away the WNF income and focus solely on the self-service side, does the laundromat still stand on its own two feet?
- If not, what does that say about the valuation?
- Should a self-service laundromat’s value be based purely on its self-service income, or should it account for WNF services and other add-ons?
- Is it even fair to call a business with add-ons a self-service laundromat anymore?
As I’ve been diving deeper into self-service, I’ve been thinking about what really makes laundromats tick, and more importantly, how they should be valued. I’ve discovered three main complexities that can impact the value:
Staffing
WNF and PUD services require team members to handle the laundry, coordinate pickups, manage customer relationships, and more. Finding and retaining good staff adds a whole new level of complexity and costs.
Space
You’ll need additional things like equipment,supplies, and space to accommodate these new services. If your facility isn’t built for that, you could face significant upfront expenses.
Management
More moving parts equals more management overhead. Whether it’s you or someone you hire, you’ll be spending more time or money on management than before.
Next time you see a listing for a laundromat, think about what went into that valuation. A laundromat that looks great on paper because of high WNF revenue and other revenue-generating services might be a nightmare to manage. And the more diversified a laundromat becomes, the less clear its value proposition.
That's all I got for you today.
Waleed
Echoing the thoughts of Bill Miller.
Most companies that sport lofty valuations fail to generate results that justify them.
