How to land best deal when time comes to sell your business
CHICAGO — No two coin laundries are alike. While some owners may find the coin laundry business a lucrative venture, others may not be as successful.
Some may have been in the industry for decades and believe that it’s time to retire from their business.
(Image licensed by Ingram Publishing)No matter what an operator’s reason for putting his/her coin laundry up for sale, all have one goal in mind when drafting their exit strategy—getting the best price/offer for their business.
But where should one start? American Coin-Op reached out to experts in the financing and commercial real estate industries to find out what operators should consider when they make the decision to sell their coin laundry.
CHICAGO — No two coin laundries are alike. While some owners may find the coin laundry business a lucrative venture, others may not be as successful.
Some may have been in the industry for decades and believe that it’s time to retire from their business.
(Image licensed by Ingram Publishing)No matter what an operator’s reason for putting his/her coin laundry up for sale, all have one goal in mind when drafting their exit strategy—getting the best price/offer for their business.
But where should one start? American Coin-Op reached out to experts in the financing and commercial real estate industries to find out what operators should consider when they make the decision to sell their coin laundry.
RECORDS IN CHECK
“There are a couple of things to be done before selling a business,” says Joshua Prager, business broker and founder of FloridaCoinLaundryBroker.com.
“The owner must gather all of the books and records, utility bills for the past two years, tax returns, profit and loss statements, and a copy of the lease,” says Prager. “Buyers will be requesting this information when inquiring about the business and will need to verify the information during due diligence.”
Brian Grell, executive vice president at Eastern Funding, stresses the importance of having records of your store’s cash flow among these documents.
“You must know what your net cash flow is—revenue minus expenses,” says Grell. “You must know what that is so that you could come up with an estimate of what you’re going to sell your store for.”
Collecting these documents ahead of time will not only speed up the selling process, but also show buyers that “you’re serious about selling,” says Prager.
“There are a couple of things to be done before selling a business,” says Joshua Prager, business broker and founder of FloridaCoinLaundryBroker.com.
“The owner must gather all of the books and records, utility bills for the past two years, tax returns, profit and loss statements, and a copy of the lease,” says Prager. “Buyers will be requesting this information when inquiring about the business and will need to verify the information during due diligence.”
Brian Grell, executive vice president at Eastern Funding, stresses the importance of having records of your store’s cash flow among these documents.
“You must know what your net cash flow is—revenue minus expenses,” says Grell. “You must know what that is so that you could come up with an estimate of what you’re going to sell your store for.”
Collecting these documents ahead of time will not only speed up the selling process, but also show buyers that “you’re serious about selling,” says Prager.
‘A TURNKEY OPERATION’
In addition to these records, also of importance to consider is the quality of the laundry’s equipment, according to Dave Nolan, assistant vice president, commercial laundry, at Firestone Financial.
“The equipment has to be in good working order, so that it’s essentially a turnkey operation,” says Nolan. “[Sellers] want to make sure that any repairs have been made [and] any deferred maintenance has been taken care of.”
Prager agrees, saying, “Repairing broken equipment, a fresh coat of paint, new decals on washers and dryers, installing new soap dish lids, repairing broken tiles, and replacing blown light bulbs go a long way when selling a business. Laundromats with great cosmetic appeal will sell faster.”
In addition to these records, also of importance to consider is the quality of the laundry’s equipment, according to Dave Nolan, assistant vice president, commercial laundry, at Firestone Financial.
“The equipment has to be in good working order, so that it’s essentially a turnkey operation,” says Nolan. “[Sellers] want to make sure that any repairs have been made [and] any deferred maintenance has been taken care of.”
Prager agrees, saying, “Repairing broken equipment, a fresh coat of paint, new decals on washers and dryers, installing new soap dish lids, repairing broken tiles, and replacing blown light bulbs go a long way when selling a business. Laundromats with great cosmetic appeal will sell faster.”
THE SELLING PRICE
When assessing store value, the experts advise operators to consider factors such as the age of equipment, condition and size of the store, competition, net profit after expenses, and the length of the store’s lease, the latter of which Nolan stresses.
“The true value of the laundry is the lease,” says Nolan. “If you have a lease that only has two years left on it, and no options for renewals, you’re not going to get much value for your location.”
In addition to these considerations, the experts also turned to industry standards.
“A coin laundry should sell between three to five times the net profit after all expenses,” says Prager.
“Stores that are typically over 2,000-3,000 square feet [will] sell anywhere up to five, and maybe even six times, the annual cash flow,” says Grell.
When assessing store value, the experts advise operators to consider factors such as the age of equipment, condition and size of the store, competition, net profit after expenses, and the length of the store’s lease, the latter of which Nolan stresses.
“The true value of the laundry is the lease,” says Nolan. “If you have a lease that only has two years left on it, and no options for renewals, you’re not going to get much value for your location.”
In addition to these considerations, the experts also turned to industry standards.
“A coin laundry should sell between three to five times the net profit after all expenses,” says Prager.
“Stores that are typically over 2,000-3,000 square feet [will] sell anywhere up to five, and maybe even six times, the annual cash flow,” says Grell.
Ensure price, payback terms listed when drafting sales agreement
CHICAGO — No two coin laundries are alike. While some owners may find the coin laundry business a lucrative venture, others may not be as successful.
Some may have been in the industry for decades and believe that it’s time to retire from their business.
No matter what an operator’s reason for putting his/her coin laundry up for sale, all have one goal in mind when drafting their exit strategy—getting the best price/offer for their business.
But where should one start? American Coin-Op reached out to experts in the financing and commercial real estate industries to find out what operators should consider when they make the decision to sell their coin laundry.
CHICAGO — No two coin laundries are alike. While some owners may find the coin laundry business a lucrative venture, others may not be as successful.
Some may have been in the industry for decades and believe that it’s time to retire from their business.
No matter what an operator’s reason for putting his/her coin laundry up for sale, all have one goal in mind when drafting their exit strategy—getting the best price/offer for their business.
But where should one start? American Coin-Op reached out to experts in the financing and commercial real estate industries to find out what operators should consider when they make the decision to sell their coin laundry.
BROKER CONSIDERATIONS
When it comes to the selling process, should operators manage it themselves, or seek professional counsel?
“It really depends upon the educational level and the sophistication level of the seller,” says Dave Nolan, assistant vice president, commercial laundry, at Firestone Financial. “If the owner has the capacity to do what is necessary, they could probably sell a store on their own.”
However, the experts interviewed agreed on the benefits of consulting with a broker.
“A seller should look for a broker who has a lot of experience selling coin laundries, because they have a much better handle on the business,” says Joshua Prager, business broker and founder of FloridaCoinLaundryBroker.com.
“Brokers and [professionals] generally have a network of people, and they can sell [the business] faster for you,” says Brian Grell, executive vice president at Eastern Funding. “If you don’t have the time, then you could let the broker go through all the financial information and let [them] weed out the possible candidates.”
When it comes to the selling process, should operators manage it themselves, or seek professional counsel?
“It really depends upon the educational level and the sophistication level of the seller,” says Dave Nolan, assistant vice president, commercial laundry, at Firestone Financial. “If the owner has the capacity to do what is necessary, they could probably sell a store on their own.”
However, the experts interviewed agreed on the benefits of consulting with a broker.
“A seller should look for a broker who has a lot of experience selling coin laundries, because they have a much better handle on the business,” says Joshua Prager, business broker and founder of FloridaCoinLaundryBroker.com.
“Brokers and [professionals] generally have a network of people, and they can sell [the business] faster for you,” says Brian Grell, executive vice president at Eastern Funding. “If you don’t have the time, then you could let the broker go through all the financial information and let [them] weed out the possible candidates.”
TIME TO SELL
To begin the sales process, Prager advises operators to first draft an “advertising information sheet.”
“The information sheet is a summary of your business, including your coin laundry income, expenses, lease information, equipment information, hours of operation, employee schedules, etc.,” says Prager.
When drafting the sales agreement, the most important items to include are the price and payback terms, he says.
For this document, both Prager and Nolan advise seeking professional counsel.
“I recommend hiring a professional, because the purchase agreement survives the closing,” says Prager.
“[A sales agreement is] something that either an attorney or a broker will be better suited for,” adds Nolan. “What we look for in those [include] a defined purchase price. … If there’s any holdback that’s going to be maintained, that should [also] be defined.”
To begin the sales process, Prager advises operators to first draft an “advertising information sheet.”
“The information sheet is a summary of your business, including your coin laundry income, expenses, lease information, equipment information, hours of operation, employee schedules, etc.,” says Prager.
When drafting the sales agreement, the most important items to include are the price and payback terms, he says.
For this document, both Prager and Nolan advise seeking professional counsel.
“I recommend hiring a professional, because the purchase agreement survives the closing,” says Prager.
“[A sales agreement is] something that either an attorney or a broker will be better suited for,” adds Nolan. “What we look for in those [include] a defined purchase price. … If there’s any holdback that’s going to be maintained, that should [also] be defined.”
VETTING A PROSPECTIVE BUYER
What should a seller look for in a buyer?
“You need to look for someone who’s financially viable,” says Nolan. “Whether you get a sizable down payment up front, or you have a short window on when they’re supposed to get their financing, or proof of their purchase price.”
In addition to the drafting of a confidentiality agreement, Prager also recommends providing a personal financial statement for the prospect to complete.
“There’s no sense in spending your time with prospects that can’t afford your laundry,” he says.
Grell agrees with this, stressing that operators should require this from a prospect when it’s time to go into contract.
“The only thing I would put in a contract for a seller [is] that if the buyer is going to require financial assistance, they must get approval within no more than two business weeks,” says Grell. “You don’t want to go into contract and find out that the buyer can’t obtain the financing.”
“The seller wants the right to cancel the contract if [the buyer] doesn’t get financing approval in [a certain] period of time,” he adds.
What should a seller look for in a buyer?
“You need to look for someone who’s financially viable,” says Nolan. “Whether you get a sizable down payment up front, or you have a short window on when they’re supposed to get their financing, or proof of their purchase price.”
In addition to the drafting of a confidentiality agreement, Prager also recommends providing a personal financial statement for the prospect to complete.
“There’s no sense in spending your time with prospects that can’t afford your laundry,” he says.
Grell agrees with this, stressing that operators should require this from a prospect when it’s time to go into contract.
“The only thing I would put in a contract for a seller [is] that if the buyer is going to require financial assistance, they must get approval within no more than two business weeks,” says Grell. “You don’t want to go into contract and find out that the buyer can’t obtain the financing.”
“The seller wants the right to cancel the contract if [the buyer] doesn’t get financing approval in [a certain] period of time,” he adds.
Setting clear expectations, preparing financial records ensures smooth sale
CHICAGO — No two coin laundries are alike. While some owners may find the coin laundry business a lucrative venture, others may not be as successful.
Some may have been in the industry for decades and believe that it’s time to retire from their business.
No matter what an operator’s reason for putting his/her coin laundry up for sale, all have one goal in mind when drafting their exit strategy—getting the best price/offer for their business.
But where should one start? American Coin-Op reached out to experts in the financing and business brokerage industries to find out what operators should consider when they make the decision to sell their coin laundry.
LEASE, LANDLORD CONSIDERATIONS
As the buyer and seller approach a deal, Brian Grell, executive vice president at Eastern Funding, advises operators to withhold any financial information until after the deal has reached the contract stage.
“You don’t want to release any private information; you don’t want to hand over water, gas and electric bills until you’re ready to go, and that’s when you sign the contract,” says Grell. “Once that contract’s signed, you’re obligating the buyer … to a due diligence period.”
But before even approaching the contract stage with a buyer, both Grell and Dave Nolan, assistant vice president, commercial laundry, Firestone Financial, stress the importance of knowing the terms of your lease and involving the landlord in the sales process.
“You should have an understanding of how long your lease is and what your lease allows you to do,” says Nolan. “Before you even put your unit up for sale, you should have somebody … review that lease and make sure that the terms and conditions are favorable to you selling the property.”
“You need to bring the landlord in right away, because you have to read the lease to make sure that the lease is assignable to somebody and that the landlord is not going to reasonably withhold,” says Grell.
Lenders require an assignment of lease document, Grell adds, which “gives permission to the finance company to take over the lease and sell it if it defaults.”
“If the landlord does not cooperate, then the business is no longer financially viable,” says Grell. “So, you limit the number of people who can actually purchase this store if you do not have a landlord that cooperates.”
ROUNDS OF NEGOTIATION
Realistically, how many rounds of negotiations should a seller and buyer go through before passing on the offer?
“I recommend negotiating until you come to desired terms,” says Joshua Prager, business broker and founder of FloridaCoinLaundryBroker.com. “Negotiations may take one day [or] can take up to three months. A lot depends on the personalities involved.”
“Negotiation can take anywhere from three to four weeks before it actually gets into contract,” says Grell. “Once you get into contract … the negotiation stops, unless something new materializes during the due diligence period.”
“If you’re a seller and if you’re offering your store for sale at a fair, reasonable price, then that negotiating process shouldn’t be that significant,” says Nolan. “If you’re trying to get far more than it’s worth, and the buyer’s coming in and telling you all these different things that are wrong with it, that process is going to take longer.”
A SMOOTH CLOSING
Setting clear expectations ensures the selling process goes smoothly, says Nolan.
“The seller needs to be honest and diligent about the sale price of his/her store. They need to understand the market, and whether or not they could get an asking price that is reasonable,” he says.
“To ensure the closing process runs smoothly, have all of the books and records in order,” says Prager. “The buyer will need this in order to verify the accuracy of the information presented.”
Grell agrees, adding, “It’s so much more credible when you’re buying from someone who has good records.”
Prager also stresses one final point: “Polish the apple; nobody wants to buy a headache.”
“If prospects are visiting your store and there is broken equipment, light bulbs out, peeling decals, chipped paint, and broken tiles, then they will not purchase your business … at any price.”
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