I gotta tell ya. I’m proud of myself for reporting on our quarterly progress only a few weeks into July. At the end of this post, I’ll tell you why I thought it would take me longer. 🙂
Anyway…on with the show!
If you remember, 1Q 2015 was pretty good to us. Our goal was to reach $340,066.75. With great market returns, solid savings, and the new business, we passed it and ended at $357,873.30.
Our goal for 2Q 2015 was $361,450.50. And it turned out to be a landmark quarter for us.
We broke the $400,000 net worth mark!
So did we reach our goal?
In fact, we surpassed it by a large margin.
And…we’ve already reached our end-of-year goal…six months EARLY!
Our savings and asset increases were solid, but the stock market returns, eh, not so much.
How Did We Get Here?
With the financial crisis in Greece coming in right at the end of the quarter, I figured we would end on a sour note investment-wise. And I was right. Our investments took a little dippy doo downwards. But as we all (should) know, they eventually rise back up again, so if you can buy during the price dip, all the better!
On a brighter note, real estate has continued an upward trend in many parts of the country, my own neighborhood included. In just 2Q 2015 alone, our home value increased nearly $15,000. (We’ve got $65,000 left to pay on our mortgage, and that should be gone by the time we retire in 6 years. We may end up selling it at that point, so we’re enjoying watching this asset value go up, up, up!)
Profits from the laundromat continued to go up as did the condition of the store itself from improvements, so the valuation of the business increased by just over $11,000 in 2Q 2015. Yeah, bay-bay!
Wait just one dadgum minute…how do you know what the business is worth?
A few readers have asked me how we determine the value of the coin laundry business. If you don’t give a darn, then just scroll down until things look more interesting to you.
The valuation formula we use is an industry standard for existing stores; you take the annual net profit (cash flow) and multiply it by a ‘condition’ multiplier.
The ‘condition’ multiplier is usually a number between 3 and 5, where ‘3’ would be used for a store that has deferred maintenance, outdated machines, old or missing fixtures, an unfavorable lease or is in a poor demographic location. A ‘5’ would be applied for a higher-end store, with new or nearly new equipment, modern decor and fixtures, a favorable lease and is in a premium demographic location.
When we purchased our laundry, a multiplier of 3.2 was used to help determine the final price. We figure that our improvements are worth at least an additional 0.3 in condition rating, so we use a 3.5 multiplier to determine the value of the laundry business.
Annual Net Profit ($42,360) X Condition Multiplier (3.5) = $148,260 Current Value of Laundromat
So as the net profits increase or improvements are made, the value of the laundromat will increase correspondingly.
But even though we’ve enjoyed a nice spike in the business value the last two quarters due to profit growth and store improvements, the reality is the growth in business value may taper off a bit down the line. (There are only so many improvements we can make to increase the ‘condition multiplier’. However, we’re hoping that profits will continue to go up, which will continue to increase the business value. Only time will tell.)
And on a separate-but-related note…
We put in an offer on a second laundromat. For reals. We’re already busy reviewing the seller’s financials and verifying income/expenses.
More on that to come…stay tuned!
Yesterday (7/21/2015), we got word from the broker that our offer was accepted! We were up against one other buyer who put in a lowball offer. The seller allowed them to come back again with their “final and best” offer, and in the end he chose ours. And…he agreed to seller-financing to boot! That was our best case scenario, and that’s what we got. We couldn’t be more thrilled…