Dry Cleaner Creative Financing

Sun, Sep 26, 2010

Dry Cleaning Marketing, Financing

Kris Anderson, Greener Cleaner, Sydney, Australia

One of my member’s, Kris Anderson of Greener Dry Cleaner in Sydney, Australia, sent me a story of how he purchased a dry cleaner with NO money down and how he made $115,000 within a year.

Owning your own dry cleaner is the only way to go. Mostly for the simple reason you get to keep the 10% to 20% profit the dry cleaner makes from the work you bring in. This can take your profit margin from 10% to a new leave of 30%. With this kind of margin you can really kick some ass.

You may have read that I cut all kinds of deals to buy businesses, but my all time favourite way of buying a dry cleaner is the “pay later” or “no money up front” deals.

You’ll love this storey it’s a cracker:

Every time tradies (tradesmen) or sales reps visit my shop I always ask them the same questions “What’s happening with the other dry cleaners?”.  About 4 years ago a rep told me – The owner of a nearby cleaner died and the business closed down. The sales rep gave me the phone number of the daughter who now owns the building and all the equipment. I made a deal with her to lease me the shop for 5 years at $700 a week and buy/pay for the equipment 12 months later for $65,000 on valuation of auctioneers. The shop was very big so I made sure that on the lease the permitted usage was as open to many uses as possible.

All the equipment was still working and I really just had to pay the rent ever week and started trading. It made money day one. A month later I sub-rented ¼ of the shop to a lawyer for $275 a week. Two months later I rented the rest of the shop to a dry cleaner who wanted to run his own business but didn’t have the money to buy a dry cleaner. So I sub-rented the other ¾ of the shop with equipment rental to him for $1,750 a week.  I also gave him the opportunity (lease to buy contract) to buy the business for a set price in 8 months for $180,000.

So after 3 months I sub-leased the whole building for $1,200 net clear a week in my pocket. 8 months later the dry cleaner borrowed $180,000 from the lawyer next door to pay me for the dry cleaning business that he built and I paid the owner $65,000 for the equipment she let me have one year for free, netting $115,000 profit.

All I can say is always try to do deals were you do not have to pay up front.

How did I come up to the sales price of $180k? It was around three times $65K of equipment.

How did I come up with $1,750 per week shop & equipment rental? – don’t know, it just sounded good.

Use your imagination like Kris did and you to can purchase your competitors. And now is a great time, because dry cleaners are dropping like flies!

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2 Responses to “Dry Cleaner Creative Financing”

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