The COVID-19 pandemic, with the subsequent Great Lockdown, has caused a massive and unprecedented disruption across industries worldwide. About 94% of workers live in countries with workplace closure measures, says ILO in May. In the Philippines, at least 2,068 companies have closed, including laundry businesses. For the rest of companies, the prolonged crisis is causing continued financial difficulties.
Yet for some who have stayed liquid, the crisis also presents opportunities. One only has to visit a laundry industry Facebook group to see the extent to which many small laundry businesses are now up for sale — an opportunity for investors looking to buy laundry businesses in distress. There are many reasons why investors and business owners will want to expand through acquisition, including franchising, hedging, and expansion. The question now is: How do you choose which one/s to buy?
The key is caveat emptor, a Latin term that means “buyer beware”. The buyer should exercise the necessary due diligence activity to understand what they are buying.
Reflecting on my experiences in advising entrepreneurs, investors, and laundry operators, here is a list of considerations one should have before buying a laundry business.
For laundry shops, location can make or break the business. It largely pre-determines the customer base, especially for DIY laundromats. Checking the neighborhood must be done ahead. Look at the competition, market behavior, and accessibility.
Equally critical is to understand the lease arrangement and the general situation of the building where the laundry shop is. Check scenarios such as, what if the building is sold? When it comes to location and real estate, caveat emptor is of utmost importance.
Utilities are essential in laundry operations. Is the source of water stable and of quality (deep wells have mineral-heavy water, which affects laundry quality)?
Another issue is the use of LPG. LPG is a cheaper way of powering laundry machines versus electricity. However, some properties do not allow the use of LPG within their buildings.
You should be buying a business with good running machines. Check the brand, after-sales service, warranty, setup, history, and efficiency. Beyond machinery, a good TPM (Total Plant Management) system preferably should have also been established within the business.
Why is the business being sold? There could be regulatory and legal challenges (taxes, labor issues, etc.) that may affect your operations upon assuming control of the business. Due diligence is extremely important to uncover any hidden issues.
This list does not exhaust all considerations, but this can add to one’s due diligence activity to ensure one is getting a good and fair deal. Remember to cover all bases before making a final decision.
And after conducting the necessary checks, keep in mind another Latin term – carpe diem, or “pluck the day”. Don’t be paralyzed with too much analysis, as the opportunity of buying these businesses may not last long.
Join my upcoming Laundry Masterclass series in August about laundry business profitability, cost management, operations, and troubleshooting in the “New Normal”. Slots are limited for this rare lecture series. Get more details by emailing firstname.lastname@example.org, or check the modules here: Laundry Masterclass Series