*** cover image courtesy of Megan KJ at Craftspell ***
Way back when I was a young below-average height but “makes up in loudness” teenager, I have always wanted to get into medical school and………………………….
Wait for it……………………………………………
Own a laundromat. Yup, in that order.
One salient memory that sticks with me is something I learned in high School economics class. Businesses with low overhead have a better chance of survival. Who doesn’t love an excellent prognosis? In that exact moment owning a laundromat became a never-ending object of my desire.
I HEART Laundry!
I fantasized about working shifts at my laundromat? Minimal interaction with people and endless chances to be next to warm clean clothes.
Neatly folded piles of 100% cotton speak to me DEEP in my soul.
I’de have Paula Pant, Choose FI, YNAB, Popcorn Finance and Journey to Launch podcasts on repeat in between the banger Disco mixes. Ha! I could DJ there on Friday nights! Recruitment of fellow laundry-ophiles to share in the delight was an added bonus.
But is it enough to be obsessed with laundry to own a laundromat?
Seriously though, for ridiculously busy health care professionals where time is our biggest handicap, owning a laundromat could be a viable business.
Have you ever thought about opening up your ideal business, other than your practice or rental property?
Here’s the closest I got to owning my very own laundromat!
A Peak Into the DocToDisco C-Suite
Choosing an investment is a delicate balance of mitigating risk vs potential gains your business venture may produce.
When Mr. D2D and I think of investing in property, a small business, partnerships, or simply VTSAX, it pretty much has to be JUUUUUST RIGHT before we consider it at all.
Similar to when Goldilocks picked her bed…………………. it’s a whole vibe y’all.
I would be foolish not to mention that there is NO WAY I can tackle this process in one post, let alone one book, or maybe not even MBA course work – so please take all that you will read here with a grain of salt. It’s more to serve as an insider’s look on how we made the sausage and perhaps to inspire one of you to act on your own ideal business idea.
Secret Recipe Revealed
Here is where I’m NOT going to give you a Pro’s and Con’s, assets and liabilities, or fors and against list. Because spending your HARD-EARNED coin is MUCH more complicated than that and only YOUR decision to make. However, one must start somewhere.
We like to satisfy a few (ok 7) questions before embarking on any new project together. Going through the questions also quells my nervous feelings by serving as an intellectual exercise for me to feel comfortable proceeding.
When I perform my due-diligence in my megalomaniac, but really “no formal business-skills-having” big head to satisfy all the potential pitfalls regarding the investment, I know that I’ve exhausted all possibilities of doubt in my brain. Even if the project ends up failing, there are no regrets on my part.
The Goldilocks Guidelines
***D2D side note: for some of the questions, I’ll compare the investment to VTSAX so you get a sense of how I compare investments/projects***
1….. Experience
Do we have experience in “said” venture? How much background knowledge do we already have vs learning-curve that costs money and more importantly TIME?
2….. KIS
Where is the low-hanging fruit for us? With our skill-set and investment capital, what’s the path of least resistance? Is it an already established rental property, laundromat, or FroYo shop? Do we have “inside-knowledge” of a below-market property, etc.?
3…. Diversified AF
Are there any additional streams of income that can be made with the investment?
i.e. 4-car garage that could be rented out separately if we buy a rental property
vs.
VTSAX – diversified AF – right? J.L. Collins is smiling somewhere.
4…. In-Between the Lines
Think 2nd Act in a Play; not the most exciting part but crucial to the plot. Can we handle the inner workings of most if not all aspects of the venture from A to Z? And, what gives us pause?
These questions are always unique to the project and can get out of hand. I really have no answer for this, just do as much as you can. There’s always going to be the Rumsfeld unknown unknown’s. This is where the risk tolerance meter needs to be well-oiled before proceeding.
To give a simple example: Understanding the tax implications for VTSAX in a brokerage account or putting more in my “deferred comp” program at work vs. considering a shared-wall townhouse that needs work and the requirement of agreeable neighbors vs investing in making another apartment out of an unfinished basement of an already-owned rental property.
5…. Time-Cost
The amount of time before we make any money on the venture and the on-going time commitment monitoring and managing the investment.
6…. The Parlay
How will it get us to the next stepping stone or spring-board us to our next all-encompassing long-game? Less-so for owning VTSAX and more of a gamble but more rewarding for an investment property or small business.
7…. Plan B
Do we have a fail-safe if the core business goes left? More importantly, have we thought about a way out? This might be the most important one for my inner cautious D2D self.
Now I guess you’re asking, how did the Laundromat Venture pan out?
Here’s how it went down
Experience
Certainly we have experience in running a small business. But nothing related to a “widget” type business, where customers are receiving a “goods for purchase”; cleaned and dried clothing.
In an effort to address the uncertainty, I thought about being an apprentice at a laundromat secretly to see how the business is run. After all, there’s only so much I can glean from reading on the internet.
Shadowing an actual business owner/manager would check a lot of the “uncertainty boxes” I had and give me a sense of how much “hands-on” work would need to get done on a daily/monthly basis. Finally, it could be fun following “Flo” around (hehehe, I named her Flo).
In the end, neither one of us had the time to pursue educating ourselves on all the particulars we didn’t have a clue about.
Skin in the Game: aka Start-Up Capital
Determining how much time & money/debt would have to be shelled out in order to have an up and running laundromat mostly depended on our options.
Option A: Building with one small but deep store front and 6 residential units on top almost right across the street from a large hospital with lots of rental-dwelling customer foot traffic.
Option B: Already established “successful/busy” laundromat (machines, licenses, etc. included) several blocks away in a somewhat ‘better” neighborhood with less renters (more owners) but much more foot traffic. Although it had no other income potential associated with the business except for the built-in Wash & Fold service.
In the end, Option A was too expensive and required a serious learning curve and Option B was NOT diversified enough for us.
Low-Hanging Fruit Factor
Owning a laundromat has some huge attributes. First of all, any business that is self-serve results in much lower over-head. Cash flow is immediate. Two prominent features congruent with my K.I.S. principal.
Regarding Option A; we quickly passed on the building because the amount of infrastructure changes that had to be made to accommodate a laundromat were not worth the cost. Plus, we would have to invest in very expensive equipment that we couldn’t easily off load if the venture didn’t work out as planned. Although we did consider the already-established residential tenants giving us a “time-runway” from collected rents if we decided to wait on building out the laundromat at a later date.
The runner up, Option B was a hard-stop because it had no other potential income-producing fail-safe’s for us to feel comfortable investing that much capital in a single entity. What if the laundromat were to stop running? What were we left with, not much.
Diverse/Multiple Income Streams
Indeed, a laundromat is an essential business.
For the majority of renters and some home owners, one must wash clothes either at
Mommy’s, college or my laundromat ……………
Wash & Fold service, laundry pick up/delivery service were already up and running with a customer base for Option B. This served my not reinventing the wheel principle, but not much else.
In Between The Lines
Overall, what gave us pause ended up being a very long list. There were too many unknowns such as licenses, sewage and water fees, taxes, surrounding customer base, theft if we chose coin-operated vs investment in a card machine that can run between $40 and $80K, safety concerns, noise issues for surrounding neighbors both commercial and residential.
We just didn’t have the bandwidth to research all the detailed information needed to make a sound investment.
What broke the camel’s back were the water usage fees (as high as $8k/ machine) and the potential theft issues.
Coin operated could be a real safety concern if I was robbed at gun point, vs a kid who hacks into my system if I chose the card-machine schematic. Both made me very nervous.
Time Commitment
I don’t like waste and I especially don’t like wasting my time. Our answer; “too much”.
The Parlay
Probably the most exciting and where I got the biggest head (in my “and you KNOW this” Bee-Boy stance track-suit & gazelle-wearing voice). A great attribute to owning a laundromat is that we own the rights, the building and control all aspects of the business as much or as little as I cared to be involved.
It could mean a chain of successful laundromats. We could consider buying the entire strip-mall (this was a huge one for Mr. D2D).
Plan B
Our fail-safe was owning the entire property w/ rentals attached. In fact the ONLY way we considered it a viable investment. This would reliably off set the start up costs too.
Charity Potential
Finally, a new item recently added to our Goldielocks list. Owning a laundromat had great potential for a hybrid charity/business model. I could dedicate one day a week for the Homeless to do laundry. In fact, I would be very happy to do a wash & fold service for them.
It could also serve as a meeting place for classes such as STEM for kids. There could be a “reading” corner and I’de stock it with all of my favorite borderline propaganda-type children’s books that represent my views (resting Grinch face).
What do you think? I’m throwing it over to you reader. Should we go down the yellow brick road again? Does any one out there own a laundromat? May I live vicariously through you PLEASE?
Ok, who wants to sign up for Laundromat shifts? I’ll take that as a “Yes” if you subscribe today (hehehehe).
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