Buying a dry cleaning business? Keep these tips in mind and you’ll get the most from every dollar you spend. You’ll also make a smart decision that increases your chances of long-term financial success!
Thorough preparation will make the rest of the process easy. Before you dive into buying a dry cleaning business; before you even shop around, remember these important tips.
Hire Your Own Lawyer
It’s often convenient to simply use the same lawyer for both the buyer and the sell, but it will benefit your search and buying experience, as well as the final results, if you hire a lawyer to represent you personally. Having your own lawyer will increase the chances of getting the best results from all legal documents, including the sales contract.
Conduct Thorough Market Research
Much of the success and failure of your dry cleaner will hinge on factors like location, access, and area income levels. Do your research and make sure you are identifying locations that will provide the best possible results. You can talk with current owners, look at income levels, and find information on the population, foot and car traffic, and the types of jobs in the area.
Now we’re at the phase when you are actively searching for and inspecting dry-cleaning businesses. Remember these tips when you shop around and enter a potential location for your purchase.
Visually Inspect the Business for Cleanliness
The level of cleanliness says a lot about a business. Are the floors clean? Are the machines free of dust and grime? Is the paint new or is it starting to chip? If the store is dirty, it says a lot about the general upkeep of the machines and records. While a dirty business can be cleaned, you don’t want to purchase a facility that’s been neglected, and uncleanliness is evidence (although not proof) of neglect.
Make Sure Maintenance is in Order
Every business has some form of machinery and equipment, but your dry-cleaning operation will rely entirely on the performance of your machines. Request maintenance records and ask for the age and model information on all equipment that will be part of the deal. Broken down machinery can ruin your profit margin, so be sure that all records reflect diligent maintenance and upkeep. If maintenance records can’t be provided, you should request a significantly reduced price or consider leaving the machines off the purchase.
Check Employee Records
For many businesses, including dry cleaning, payroll can be the difference between failure and success. Request employee records and payroll expenses so you know how much it will cost to keep the operations staffed. The records should include who is currently employed, how much they work, and the terms of their employment. (For example, part time vs full time.)
Request Environmental Records
The dry-cleaning industry uses a large amount of chemicals, many of which are potentially harmful. There are strict environmental regulations, so be sure to inspect the company’s records and verify past compliance. You don’t want to buy a business with past indiscretions, which may not be your doing but could become your problem.
Check the Business Valuation and Appraisal
How to determine the value of a dry cleaners? It’s extremely important that you have an independent valuation and appraisal of the business. Make sure you have a valuation based on the income approach, which is often the most consistent and accurate method. You should also have an appraisal conducted to verify the value of the property where the business is located. You will need to request the dry cleaners income statements among other documents.
When you are ready to buy, these tips will make the process more convenient for both you and the seller.
Ensure Your Finances are Organized
Take the time to make sure every penny of financing is organized and documented. From personal financing to investors to business loans, you should ensure that everything is in place before you make an official offer.
Set a Specific Closing Date as Soon as Possible
When you and your lawyer tell the seller that you are ready buy, be clear about setting a specific closing date. Let them know that you want everything finalized by a certain day and do your best to keep this date.
At any phase of the purchase process, these tips will ensure you are getting what you expect and not wasting a single dollar.
Read Every Document Meticulously
There will be a lot of documents to sort through, but reading each piece thoroughly will protect you from any unwanted surprises.
Work with an Experienced CPA
In addition to a lawyer, a Certified Public Accountant (CPA) can help you stay organized through the purchase process. They will also provide tips and guidance to make sure the purchase is properly conducted.
Don’t Accept Verbal Promises, Get EVERYTHING in Writing
If it’s not in writing, it didn’t happen. It’s great to get promises for this machine or that delivery vehicle, but it has to be in writing. No matter how much you trust the other party, always have the entire deal in clear, legal documents.
With these tips, you’ll be able to find the right location and make a smart purchase when buying a dry cleaning business!
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