Water Bill Analysis – 3 Easy Steps
If you are considering buying an existing laundromat, one of the most important tools you will want to use in making the decision is a water bill analysis. By using the monthly water bills of a laundry business, you can estimate a ballpark figure for the revenue that the establishment generates in a given month. This can be compared to the estimate given by the owner in order to check for authenticity.
Step 1: Reading the water bills
Water bill analysis is fairly standard, so the owner should not hesitate to part with the bills. While some water companies give figures in gallons, the majority choose to use Hundred Cubic Feet (HCF), as this is the unit they sell it in. There are 7.48 gallons in one cubic foot of water, so 1 HCF is equal to 748 gallons.
Step 2: Determine the machine type
Washing machines vary significantly in water usage. Older machines tend to use a lot, while newer, more energy-efficient models may use much less. Determine the exact type of laundry machine present in the establishment and search online for its water usage per load. This is generally available from the manufacturer, though third-party sources may be useful as well.
If there are multiple types of machine, you can count the number of each, find each machine’s water usage and calculate the average. Keep in mind that this results in figures that are less accurate, especially if there are different prices for each machine.
Step 3: Calculating revenue
Assuming that there is only one type of machine, it should be fairly easy to divide the amount of water used by the amount of water that each machine uses per turn. This will result in the number of turns (approximately) sold in that month. Multiplying that number by the price of a turn will result in the amount of revenue from the washing machines in that establishment.
According to Coin Laundry Information, the standard used by agents is to assume that dryers will generate between 25 percent and 40 percent of the income from washers. When considering a purchase, we generally recommend that potential buyers use the more conservative estimate.
Some unscrupulous laundry business owners may leave the water running in a back room prior to a sale in order to inflate figures from water bill analysis. Ask for bills from the previous two years and you will also see any seasonal trends.
Buying a laundromat requires some serious legwork, but is often worth it in the long term.