How to value a laundromat, step by step
A laundromat is priced on the cash flow it produces, not the revenue it rings up. Two stores can both collect $360,000 a year, and one can be worth twice the other because it keeps far more of that money after rent, utilities, and labor. The value comes from seller's discretionary earnings (SDE) multiplied by a market multiple, then adjusted for the risks that make those earnings more or less durable.
Key takeaways
- Value = verified SDE times a multiple of roughly 3x to 4.5x.
- A long lease, newer equipment, and a strong location push toward the top of the range.
- Revenue multiples and equipment value are sanity checks, not the price.
- Never trust an SDE you have not rebuilt from tax returns and utility bills.
What multiple should you apply?
Start from a base band of about 3.0x to 4.5x SDE, then move within (or slightly beyond) it based on the factors that genuinely change how safe the earnings are. The calculator above does this automatically, but it helps to see what is moving the needle:
| Factor | Pulls multiple up | Pulls multiple down |
|---|---|---|
| Lease | 10+ years with options | Under 5 years remaining |
| Equipment | Newer, well maintained | 12+ years, near replacement |
| Location | Dense, renters, visible | Declining or oversupplied |
| Rent | Under 20% of revenue | Above 25% of revenue |
| Books | Verifiable on tax returns | Cash claims you cannot confirm |
A worked example
Say a store shows $132,000 of verified SDE. On the base band that is a value of roughly $396,000 (3.0x) to $594,000 (4.5x), with a midpoint near $495,000. Now layer in the specifics: a solid eight-year lease and an average location keep it mid-band, but six-year-old equipment at about 60% of new condition means real capital expense is coming. If the seller is asking $540,000, that is a 4.09x multiple, in the upper half of the range. It is not unreasonable, but you would want the lease, location, and machine life to justify sitting near the top rather than the middle.
What counts as a legitimate add-back?
SDE only means something if the add-backs are real. A seller rebuilds profit into SDE by adding back their own salary, personal expenses run through the business, interest, depreciation, and genuine one-time costs. The ones worth trusting are documented and would not recur for a new owner:
- Owner's salary and payroll taxes, if you will run it yourself.
- One-time repairs or a legal bill that will not happen again.
- Personal costs (a family phone, a vehicle) booked to the business.
- Interest and depreciation, which depend on the buyer's own financing.
Be skeptical of vague "unrecorded cash" add-backs. If income is not on the tax return or the bank deposits, you cannot finance against it and you should not pay a multiple on it.
How real estate changes the price
If the building is part of the deal, the asking price is buying two things: a business and a piece of commercial property. Comparing that combined price to the business's SDE will always make the multiple look inflated. Separate the real estate at its own market value, then compare only the business portion to the cash flow. The reverse matters too: a below-market lease you do not own is a hidden asset that can justify paying toward the top of the range, because your rent stays low while revenue grows.
Why revenue multiples can mislead you
Sellers often quote a price as a multiple of revenue because it makes the store sound cheap. But revenue says nothing about what is left after the rent check clears and the utility bills are paid. A store with a high rent-to-revenue ratio can look like a bargain on revenue and a disaster on cash flow. Always come back to SDE. The revenue multiple in the results panel is there only as a reality check against what comparable stores in your market fetch.
Checking the asking price against the range
Once you have a value range, put the asking price next to it. If it lands above the range, ask for the reason: a below-market lease, a recent re-tool, or real estate bundled into the price can all justify a premium. If nothing does, negotiate toward the range. A price below the range is not automatically a deal. It is just as often a warning that the cash flow is soft, the lease is short, or the machines are at the end of their life. Confirm the earnings first, then decide.
Treat every number here as a starting point for your own diligence. Rebuild the SDE from the seller's tax returns and utility bills, read the lease, and inspect the equipment before you rely on any estimate.
Common mistakes to avoid
- Paying a multiple on cash income that never appears on the tax returns or bank deposits.
- Valuing off revenue instead of cash flow, which hides a punishing rent or utility bill.
- Ignoring a short lease. Machines are plumbed in, so a store that cannot renew is worth far less.
- Forgetting the capital expense of aging machines when the equipment is near end of life.
- Comparing a price that bundles real estate against a business-only multiple.