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?
Um, YEAH!
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multiplier is usually a number between 3 and 5, where ‘3’ would be used for a store that has deferred maintenance, outdated machines, old or missing fixtures, an unfavorable lease or is in a poor demographic location.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!
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UPDATE!
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…
Joan says
Awesome on the 2nd laundermat!!! Good Luck! Please keep us updated on the laundermat biz!
Laura aka Mrs. Nickels says
Thanks Joan! We did not see this one coming. But then again, we didn’t really see the first one coming either. 😉 My next post is going to talk about the reason why we’re pursuing another one already…thanks for stopping by!
Lisa Phillips says
Really enjoy reading your posts. I’m fascinated by your purchase of the Laundromat. So impressed with how you made cosmetic changes to make the space more welcoming to your customers. Congrats on your progress in all areas!
Laura aka Mrs. Nickels says
Thank you thank you! Can I admit that turning an ugly duckling into a swan gives me an adrenaline rush? Some folks hate the process. But I love it. The second one we’re interested in needs some TLC too, which is just how I like it!
The Milspouse Foodie says
Do you think that you will adjust the goals as you continue to pass them? I mean, if you continue to reach them and go over by so much, do the goals become irrelevant? Maybe these goals are your minimums and then you have a second set of “well it’d be great if” goals.
Laura aka Mrs. Nickels says
I thought about that briefly last quarter when we were several thousand past the mark, but now that we really blew past it, I’ve been thinking even more about it.
I think it may be too soon to revise the goals just yet, I’ll probably give it another quarter or so. But I’m definitely looking at how I should handle it if the trend continues upwards.
Add a second set of goals like you said? Maybe I create a new goals grid that shows what each annual benchmark would need to be if we wanted to retire in 6 years from now (current plan), 5 years, 4 years, etc, etc.
Then I could quickly see how much the ‘overage’ has shortened our timeline. Hmmm…thanks for bringing this up. Now I’m motivated to get working on it!
Mr. 1500 says
The second laundromat is soooooo great to hear about. Reading about people like you and Randy kicking some serious ass gets makes me all tingley inside. You both work your asses off and deserve every bit of your success. Hard work + brainpower + more hard work + entrepreneurial spirit + even more hard work = $$$$$. That beach in Kauai is getting closer.
Tonight, I’ll raise a box of Tide* to Laura’s Laundry Lair! Keep killing it!
*One of those little boxes like you sell in the machines.
Laura aka Mrs. Nickels says
Dude, you get the “comment of the week” award. I had to pause while I laughed in between sentences.
That beach in Kauai does feel closer, in fact I think I’m starting to smell the coconuts from here. Wherever we land when that time comes, Kauai or otherwise, you and the fam will always have a place to stay when you visit. 🙂
Mr. 1500 says
The beach doesn’t feel as close to me, but then again, you are geographically closer to it. I can smell no coconuts. Wait, maybe I can? Nope, that’s just some icky kid shampoo.
“Wherever we land when that time comes, Kauai or otherwise, you and the fam will always have a place to stay when you visit.”
YES, and now I have it in writing! I’ve taken a screen capture, so deleting the comment will do you no good. 🙂
Uncle Cheese-it says
Hi,
congrats on your goal and on the 2nd laundry mat. I just found you because you were mentioned in 1500 Days to Freedom’s last post. I love your writing style too btw. My wife has always been curious and bugged me about laundry mat business. Now, I just can’t wait to read about how you got into that and how you make it work. Thanks!
Laura aka Mrs. Nickels says
Thanks for stopping by! I try to write about what I’d want to know if I was thinking about buying a laundromat, and go with it. If it helps others, sweet. And I try to save up some questions from readers and publish a Q and A on occasion, so if you have any questions, let ‘er rip!