Buying or selling: What’s it worth?
No matter what the reason for buying or
selling a drycleaning business, a fair and marketable value
must be arrived at before any buyer or seller is contacted. How
is this done? Upon what bases is it calculated?
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1. The resale value, or replacement value
in “like and kind,” of the total equipment,
furniture, fixtures, fans, cooling and heating equipment,
rails, pipes, valves and fittings, traps, office equipment,
baskets, carts, miscellaneous accessories, supplies on hand,
etc.
2. The additional value of all items
mentioned in above as installed, operating and producing the
gross revenue.
3. The condition of the equipment in
relation to its probability of replacement.
4. The intangible value of its goodwill
as computed to its:
• Length of time in the same
location.
• Reputation for quality and
service.
5. Personal, direct and on-site
management by the owner or family member.
6. Catering to the type of clientele most
desirable (professional, affluent).
7. The proportion of the previous
year’s gross volume in relation to its current
year’s proportion.
8. The net profit for the past year
capitalized five times (excluding any salary, or drawings, to
the former owner if he/she worked full time).
9. The number of years remaining on the
present lease, and the type of renewal option with its
corresponding rental amount.
10. The probability of the business
property’s road and customer access being detoured as the
result of a public road or street improvement program.
11. The overall appearance of the
customer service area, outside overall and plant.
12. The total number of sources
contributing to the total gross volume.
The smaller the number of sources (dry
stores, routes, wholesale accounts, valet accounts, etc.) the
more valuable and desirable the business.
This factor is most important since the
most profitable type of business is that coming across the
front counter of the main plant which does not depend on truck
service and additional employees and additional operating
expenses.
13. The base price structure compared to
the total pounds cleaned during the previous year, and the
proportion of men’s to women’s garments.
Men’s garments are easier to process.
14. The overall appearance, efficiency
and comfort rating of the plant:
15. Layout of the equipment. Is it
efficient or does it need to be rearranged?
16. Does the plant need a thorough
housecleaning and/or painting?
17. Does the equipment look clean and
operable? Is it outdated? Does it need replacement?
18. Is the plant well-ventilated?
19. Are all the steam and return lines
insulated?
20. The total amount of money deposited
each week compared to the amount of sales recorded each week
including charge sales.
21. If possible, the total dollar amount
of soiled work received each day, week or month compared to the
total dollar amount of cash and charge sales delivered. This
will tell you if the sales turnover is slow or quick.
Also, the number of orders filed on the
racks or conveyor with received dates of not over two weeks
compared to the average dollar amount of sales delivered within
the last two weeks. This will tell you the speed of stock
turnover.
The knowledge factor
There are many technical and management
factors to consider when purchasing or selling a drycleaning
business since you must possess a considerable number of
talents to be a successful operator.
You must be most of the following:
bookkeeper, mechanic, salesperson, sorter and bagger, personnel
manager, engineer, psychiatrist, office manager, customer
relations expert, textile expert, advertising person and
financier. A working knowledge of cleaning and spotting is a
great advantage.
Therefore, you should be familiar with
all aspects of this type of business.
The starting point is to attend one of
the general courses offered by the two main associations
(National Cleaners Association and International Fabricare
Institute) followed by the short management course.
The next step is to work in a plant for a
few months as a cleaner/spotter and customer service
representative at the front counter. The plant should be
well-managed and one that complies with the current methods of
operation.
If you don’t possess the required
knowledge or experience to handle a purchase of the business
you should then employ a consultant to advise you “along
the way.”
If you plan to employ a general manager
you had better be learned in the basics of the industry in
order to oversee that the general manager is complying with
your guidelines and that you understand what he/she reports to
you.
Normally, absentee management does not
work in this industry unless the person selected for the
position of general manager is schooled and experienced in both
personnel and production management.
And that person must be well-paid and
motivated to operate the business as though it was his or her
own. He or she must be free to use personal ingenuity and make
on-the-spot decisions without your interference. However, you
must exercise enough oversight to ensure his/her honesty and
performance ability.
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