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Dry cleaning shirts hanging

How to Buy a Dry Cleaners

Finding the right location, along with the potential to grow revenues if you’re on a tight budget, is a key consideration.

If you’re interested in entering the dry cleaning sector then attention to detail, organisational skills and a flair for customer service are all helpful attributes.

In terms of understanding the role, it helps if you have industry experience, but there are dry cleaning courses available if you’re new to the trade.

Some buyers might be put off the sector by stagnating demand, born of the rise of casual fashion and looser dress codes in the workplace. However, with the right business model, and the right location, these typically small storefronts, usually manned by just one or two employees, can still generate very healthy incomes.

Prime locations for dry cleaners

But what is the right location, the right business model?

A location’s promises lie less on footfall on the sidewalk and more in its visibility and accessibility. Dry cleaners rarely get passing trade as such, but it helps if customers are aware of your presence and have somewhere to park their car.

value dry cleaner

Other factors affecting a location’s favourability include the number of nearby competitors, population density and affluence, and the number of white-collar professionals living or working nearby.

Naturally, prime locations come at a premium, as do solid profits, larger premises and cutting-edge dry cleaning machinery.

Buying potential on a budget

If your budget is tight, it’s worth noting that a struggling operation can represent a bargain if you identify mismanagement, rather than an inauspicious location, as the primary cause.

In such a scenario, it’s worth imagining what steps you could take to boost takings.

Here are some ways you might boost trade, if the current owner hasn’t already done so:

  • Upgrading the machinery and cleaning chemicals to make the service faster, more effective and more eco-friendly (and energy-efficiency means lower running costs)
  • Shortening turnaround times through more efficient business processes
  • Introducing a pick-up and drop-off service for time-poor professionals
  • Diversifying into related areas such as clothes alterations, shoe repairs, formalwear rental and key cutting
  • Introducing or enhancing an online booking system
  • Improving the brand and marketing strategy, such as by revitalising the store front, enhancing social media output and revamping the website

A business broker can help you assess various dry cleaners for sale, as well as conduct negotiations and navigate the legalities and paperwork. They can also help you vet the vendor’s valuation of their dry cleaners.

Valuing a dry cleaners

You can’t get a fair deal if you don’t understand how the vendor arrived at the asking price. The valuation formula might be based on dubious inputs – for instance a ‘prime’ location that is actually in decline or profits that are misleadingly high.

Alternatively, the formula they used may not be appropriate for the sector.

Shirts

According to Howard Scott, a dry cleaning consultant, the trends that have dampened demand have

done likewise for valuations.

He says the multiple of profits for a solidly performing business is now typically about three, or potentially two or less if the business is in a suboptimal location or the machines are ageing and require an upgrade.

Conversely, if the neighbourhood is becoming more upscale, if there is evidence that nearby competitors are on the brink of closure, or the company has embarked on a persuasive strategy to bring in more business, then the multiple could rise to four.

The price at which comparable dry cleaners were sold locally in recent years could also be a useful benchmark.

If you and your valuation expert think any of the assumptions underpinning the multiple are overly optimistic, then you might have some leverage to negotiate a lower price.

Once you’ve negotiated a provisional price, it’s time for a deep dive into the business’s assets, paperwork and day-to-day operations.

Due diligence

Due diligence should examine areas like:

  • Financial statements disclosing revenues, operating costs and profits over recent years
  • Other paperwork such as tax records, lease documents, staff contracts, and maintenance and warranty records for machinery
  • The condition of the premises
  • Age, models and condition of dry cleaning machinery
  • The quality of the website and social media platforms
  • Analysis of local trading conditions and whether various factors – affluence, number of local competitors or pending property developments – are likely to materially affect its fortunes
  • Trends in the wider dry cleaning sector

due diligence

Closing the deal

If your due diligence findings justify the assumptions on which the provisional price was agreed, then concluding the sale should be relatively straightforward – especially with the help of a business broker and/or lawyer.

But if your investigations uncovered significant issues that you weren’t aware of – for instance,  another dry cleaners is about to open round the corner – then you’re advised to negotiate a lower price or more favourable other terms (such as warranties and indemnities).

Your due diligence findings may put you off altogether, and you are within your rights to abandon the deal at any point before signing the final purchase agreement.



Anthea Taylor

About the author

Anthea Taylor is Content Producer at Dynamis and writes for all titles in the Dynamis stable including BusinessesForSale.com, FranchiseSales.com and PropertySales.com as well as other industry publications.

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