The local neighborhood dry cleaner often becomes a hallmark of the community. Nearly everyone walks through its doors at one point or another, and a shop that does quality work with a high level of customer service is bound to collect thousands of satisfied customers over the years. That being the case, is there anything different about selling a dry cleaning business if the owner decides it’s time? What tips can an owner keep in mind to make sure he doesn’t get “taken to the cleaners” by an incoming buyer?
The basics apply
For the most part, there’s microscopic about selling a dry cleaner that strays from the basic best practices suggested for selling any business:
Maintain excellent records
Partner with professionals like a business broker, real estate agent, and accountant to prepare for and facilitate the sale.
Clean and maintain the equipment and premises so they’re attractive to a buyer. Consider getting a professional cleaner in to help out with this; they’ll be able to take an objective look at what needs to be done to make your business look a million dollars (or whatever price you’re looking to get for your business).
Consider an update of your external signage, perhaps external paint woodwork and other small jobs. Though a prospective buyer may have seen photos of your dry cleaners, this is your best opportunity to make a positive impact.
Be sure you’re personally and financially ready to sell before jumping into the process.
These basics apply to any business because they cover the most common areas a prospective buyer will be interested in reviewing: the financial records, the condition of the physical assets of the business, and the attitude of the seller.
If you currently own a dry cleaning business and believe you may want to sell shortly, start looking at these items right away and work on them at a reasonable pace, so you don’t need to rush and throw things together closer to the date of sale. There are a few other tips that are specific to selling a dry cleaner, so we’ll look at those now:
Review environmental regulations and confirm compliance
Because a dry cleaning establishment works with high volumes of potentially harmful chemicals, there are environmental regulations in place to control the business’s impact on the surrounding ecology. These regulations are different in various states and local municipalities, so it’s best to have a lawyer familiar with environmental law review the local statutes with you and confirm you’re in compliance before putting the shop on the market. If there’s room for improvement, it’s likely going to be a deal-breaker if you don’t resolve it before putting the company up for sale.
Review service and maintenance records on equipment
While nearly every business has some mechanical or electronic equipment required for some aspect of what they do, few rely as heavily on their machinery as dry cleaners do. Every time a machine goes down, money is disappearing from the bottom line until it comes back up again. Your buyer will certainly want to review maintenance records, but emotion can override logic in this area, especially if the buyer is new to these machines.
While well-maintained dry cleaning equipment can run for a long time, buyers may shy away from even the best-maintained machines if they are ancient. There’s no specific rule of thumb, but if the equipment even looks like it may soon require replacement, you may want to consider doing so as opposed to losing potential sales or seeing every offer come in thousands below your asking price as a result.
Use the income approach to valuation
We strongly recommend allowing a knowledgeable business valuation expert or accountant make the final determination for you, but historically the “income approach” to business valuation has been the most accurate valuation model for dry cleaning businesses because of their constant growth of earnings.
This method takes the annual cash flow projection divided by the capitalization rate to arrive at a value (and sale price) for the business. With these tips in hand, you’ll be in an excellent position to sell your dry cleaning business without getting taken to the cleaners yourself!