Host: Welcome to Acquiring Minds, a podcast about buying businesses. My name is Will Smith. Acquiring an existing business is an awesome opportunity for many entrepreneurs. And on this podcast, I talk to the people who do it. Today, I talk to Jeff Oliver all the way, all about the business of laundromats. Jeff acquired two laundromats about two years ago and has grown them nicely. He shares his numbers, the way to think about acquiring one, buying versus building laundromat strategy, industry trends, the concept of a zombie mat. We get into the weeds. Jeff really delivered. So if you've ever passed that laundromat in your city and wondered what it's like to own it, this interview with Jeff sheds a lot of light. Enjoy Laundromats 101 with Jeff Oliver. Jeff Oliver, thank you for joining me today on Acquiring Minds.

Guest: Excited to be here, Jeff.

Host: You are the owner of two laundromats outside Austin, Texas, and I'm very excited to have this conversation because laundromats are a hot topic on. On Twitter, on SMB Twitter, so. But I've never actually had a guest on or actually even talked to somebody who's. Who's the owner of. Who's a laundromat acquisition entrepreneur. So. So I'm eager to get in to how it works and the. In the laundromat business. Start us off, Jeff, just some quick history on you. What's your professional background, and what was the path that led you to go out and acquire a couple laundromats?

Guest: Yeah. Thanks, Will. So I started my professional career end of 2000 or middle of 2014 at a regional bank out of Houston, the commercial bank did a lot of rotations. So you did different types of lending, learned from some of the experts, and figured out what you wanted to do. One of the very first groups I went through was our SBA department, where we did exclusively SBA lending. And the very first deal that they let me put my hands on was a business acquisition for aftermarket parts for muscle cars. So think of the guys that love upgrading their Mustangs and Camaros. And it was fascinating. I got to touch every single part of the deal, and it opened my eyes to, wow, oh, my goodness, you can go buy a business. And so the leader of that group at the time, he was huge into the search fund model. This was 2014, so I don't think it got the same exposure that it did today in Houston. There's a couple of them. We got to meet them, stay close to them. And so I've kept in touch with these guys since 2014, you know, I've probably done. And throughout my history in the bank now, I've probably done upwards of 10 SBA business acquisitions. Some of them didn't go all the way through, some of them to the last minute, but really got an experience of what that looks like, what to look out for, how to structure a deal, how to talk to sellers and learn what is important to the seller, the buyer, and the bank. And in 2019, got the chance to do my own, so went through with it. And I think we'll get into the details on that as well.

[3:25] Host: Cool. So in seeing these SBA acquisitions, it wet your appetite and intrigued you, and you kind of said to yourself, I want in. Had you had any entrepreneurial inclinations before this in your life?

Guest: Absolutely. You hear about the guys with the lemonade stands all the time. One of my best friends and I started a. A bike repair shop where, I promise, we repaired every single bicycle in our neighborhood growing up. So we've definitely done a little bit of entrepreneurial stuff. Um, I've realized I've had a couple of opportunities that I started from scratch, and I just never really built something that. That could grow expansively. And so I thought, you know what the. The things that excite me are how to make something better, not just make it. And that's where I really kind of leaned on the SBA and the business acquisition side of, well, somebody's already found a product market fit. What are they doing that you think that your business or your finance expertise could come in and do better? And the acquisition world is rife with that.

Host: Yeah. Well, you are also seeing these models, your clients, who are doing it successfully. And I think in all of life, seeing other people do something successfully makes the path seem more available. And that's actually a big part of acquiring minds, is showing people success stories. I remember when I first got exposed to the idea of business acquisition. It just didn't seem. Yeah, of course I knew businesses were bought and sold, but I just thought it was, I don't know, private equity people or kind of really high level, lots of money being transacted. But this lower middle market, the fact that an independent acquisition entrepreneur would do it, I just needed to see a few real stories to believe it. Obviously, now I'm a believer. I talk to people all the time doing it, but it certainly helps get somebody excited about a path when there's a model in front of them.

Guest: Cool.

Host: All right, so the laundry. So did you go looking for a business to buy? Did you go looking Specifically for Laundromats. How did your search unfold?

Guest: Yeah, so to me, this question actually kind of reminded me that when I started this path, I wasn't looking for a business. I was looking for investment real estate with a friend that, you know, at this time it was probably 2000, late 17, early 18. Austin was definitely high on the map. At that time I was still down in San Antonio and I was saying, man, San Antonio is. I think we're here. Before the rocket takes off, let's look at real estate just outside of the major markets and see if we can kind of play the growth that's on its way. We actually found one of the two locations of the laundromat that I took over on LoopNet. Not even biz by sell. Dug through the financials, talked to the owner and realized, man, this guy thinks this is a real estate play, this is an operational play. He's, he's literally a landlord that is just got some laundry equipment in here. He has no idea how he could turn this thing around or nor any interest. So kind of talking through it with my buddy and the seller realized, I think I want to operate your business. I don't think I want to buy your real estate. Long story short, my buddy ended up backing out, said, if it's not real estate, I'm not interested. The seller said, well, if you're willing to buy the business and pay me rent because I need some cash flow for another business I've got, yeah, we can come up with a deal. Ended up structuring a business buyout with a long term lease. Took that to my SBA lender who was a friend of mine, who I actually used to work with, and said, look, I think this fits all of your criteria. It's going to give it to me at a, at a better multiple. I know there's no real estate involved. Can we get comfortable around that? And the SBA guarantee really helps banks get pretty comfortable with that and then gives a borrower like me longer terms. I'm sure we'll go kind of deeper into that. But honestly, I had no intention of getting into laundromats. I just fell in love with the idea of asset utilization. And I'll talk more about that later and just really love that idea. And the pieces kind of fell together so that here I am, a laundromat owner now.

[7:58] Host: But Jeff, if you really liked the business that was in this, in the real estate, but you'd initially been looking for real estate, why not grab them both? Did the economics not make sense for what he wanted for the building if that's the way you were going to go. So it only was an attractive deal if you just bought the business.

Guest: Spot on. Yeah. I think, to be completely frank, he'd probably agree with you on this. But his purchase price for the real estate was more like it was already part of San Antonio or Austin. And the. I think, to give an idea, I think the cap rate had come out to like six and a half percent on a single use facility. Out in the middle of this one was Blanco, Texas, if anyone knows where that is. Where is that?

Host: You told me 40 minutes outside Austin.

Guest: Yeah, 40 miles west of Austin, 48 miles dead north of San Antonio. So if you're following I35, it's the part that matches the triangle. 35 is your hypotenuse. I'm using that. Right.

[9:03] Host: I haven't heard that word for a while.

Guest: So, yeah, we basically agreed. He said, I like real estate. I really don't want to sell it. If I'm going to sell it, it's going to be at a premium, but I need cash. So if you're willing to sign a lease agreement with me, I'll make a deal with you on the price. And so I think everybody ended up winning on that.

Host: Okay. So you take it to your lender, a colleague and friend from your own lending days, and you get the loan and you buy the business. And this is just the one or this was the pair. As it was a pair.

Guest: Okay. Yeah. I should probably clear it up just a little bit during the negotiations. And by the time the seller is extremely friendly the entire time, his motivation for selling, which I think is a key aspect to any deal, is that he had actually moved out of San Antonio, moved down to the coast and was starting a completely different business that was growing so fast he needed a huge infusion of capital. He goes, well, I'm not here. I'm not really paying attention to these businesses that I've got over here. Let me sell them and just go ahead and focus on this business. So as we're talking, as he realizes I care more about the operations, he goes, hey, just so you know, there's another Laundromat that is also for sale about 30 miles away. If you're willing to take both, we can probably negotiate a deal. So we go from one teeny tiny little laundromat that's about 1500 square feet to 2 that are 30 miles away from one another. And now we're looking at it thinking, okay, how does this make sense? You know, I shadowed him for 30 days with a letter of intent in place and realized how he was doing it. Now his key employee was kind of getting it done and said, you know what, this doesn't make sense as a one off. I need to buy both of these. Well, we work. Can you work a deal with me that if I buy them together, you come up with a better price? He goes, you're saving me so much headache. We'll come up with a better price and let's just sign a lease on both of them and you handle the day to day and make it easy for me to be absentee and we're best friends. And so what that ended up looking like is I operate the laundromats now. He's a landlord on both of them. The one in Blanco's a single tenant facility. The other one's a multi tenant facility, strip center. I manage a lot of the general maintenance of the area, just kind of keeping the place. Okay. And so not all the entire.

Host: The entire strip center or just your. Just your. Your piece.

Guest: So I manage everything inside of my four walls, and then there's a lot of shared facilities. So think of the water, the electricity that kind of goes through to some of the it. I keep all of that on track, make sure it's maintained or call the professionals that can do a better job than I can. And so that in. In commercial real estate terms, it's a triple net lease. So he's basically hands off. He's not worried about if a roof leak happens, if we've got a power outage, or like during the freeze when some of the pipes busted. I took on the. The headache of managing that. And he pass that through to me with a better lease agreement and a better purchase price.

[12:36] Host: Okay. And so give us a sense of the size of these businesses. You said that the first one is 1500 square feet. So how many washer and dryers does that equate to? And tell us what the other one is as well. And then revenue. What does that mean for revenue?

Guest: Yeah, so I think my deal is a little bit smaller than a lot of your other guests, but I think that's kind of a strength because I'm excited to share that if you don't mind getting your hands dirty. There's deals of all sizes. And I'm sure you'll hear a million people on the SMB Twitter say, sometimes you're not buying a business, you're buying a job. And I think I did. And so to Kind of organize my thoughts here. Revenue when I purchased was just north of 200,000 between the two of them. One was doing. The one in Blanco was just shy of 100,000, I think 95. And then the one in Startsville. For anybody who's really familiar with Texas, this is just south of Canyon lake, or about 20 miles west of New Braunfels.

Host: Okay.

Guest: That one was doing about 120,000 in revenue. And at the time, he was probably right around 65 to $70,000 of earnings after we adjusted for the rent payment. And so when I got in there, he really had become a passive owner. He had a key employee in place that was doing a lot, but that I didn't think that I could manage. So it was very early on that we had to figure some things out.

Host: So they're doing together just north of 200, and then you've got 60 or 70 in earnings. And that's after this employee. Did you say correct?

Guest: Yeah. So that's true. I would call it EBITDA or truly an SDE Settler's Discretionary earnings. During the time he was a schedule C. So he didn't pay himself a salary. He just took net income home for himself. And so One location has 17 washers and 11 dryers. The other location had at the time, 21 washers and 18 dryers. Can't do the math in my head right now on what that is. Together, but about just shy of 100 machines in total between the two of them. And so when we did the math, he was the metric that I think most people will use his turns per day. So how many utilization or how many times your machines are being utilized?

[15:16] Host: Yep.

Guest: And three turns per day is pretty low on any industry average. And being the only laundromats on the 25 mile radius, to me, it said, why, what's going on here? That this. You should be knocking it out of the park. Day one. You should be at five or six turns. So we get into the weeds a little bit and find out that just basically they're not doing as much as they can for customer service. So a few customers maybe would leave because, you know, the change machine would eat a dollar. And they'd say, well, we can't get there in time. Sorry, it's a dollar. And to that customer, it's not the dollar that matters as much as the. They didn't answer my call right away. I called three times and got sold anyways. I couldn't get a dollar. This. This doesn't feel great.

Host: Yeah.

Guest: So there Are some things day one that let us. That let me come in and say, okay, let's just win these customers back. Let's, you know, advertise that there's new management on site. Let's learn what the key employee is doing, right. What we can do a little bit better or find out why, what's stopping them from doing that. And so I'm excited to talk about kind of what that looks like and. And where we go from there. But, yeah, so the biggest things we did day one on that was.

Host: Wait, Jeff, let me pause you and just ask. So how did you. How did you learn what was wrong with the business? Were there, like, Yelp reviews for these Laundromats? Or was the. Was the seller transparent? And he's like, yeah, I don't, you know, take the best care of my customers so that, you know, if you did that better, you'd probably have more repeat business. Like, how did you uncover these opportunities for customer service improvement?

Guest: Yeah. Thank you. All of the above is probably the right answer. So, you know, I did. At the end of it, I was probably 65 days of shadowing between him and his key employee. So I got to see a lot of the operations as it happened. I came on site, I did my own laundry there a couple of times just to feel what it was like as a customer. Definitely found the Yelp, the Google reviews, and just, you know, talk to customers as, hey, how long have you been coming here? What do you like about it? And kind of learned about those pieces of it. So that day one, I pretty much formulated a plan of, okay, well, that needs to change right away, or, okay, that doesn't sound great, but it's not going to be business ending issues. So just, it gave me a plan to come in day one of the, okay, when I have the keys, what am I going to do differently?

Host: Yeah. And I imagine kind of the more you found out that was wrong with it, assuming nothing was so wrong with it that was unfix that it was unfixable. The more you found out that was wrong with it that was fixable, the better the opportunity seemed to you. Because that's. That's your upside.

[18:08] Guest: You nailed it. I can't remember which guest it was, but somebody came on not too long ago that said, you want to find something that's not running perfectly right. Yeah, you want to find and because that's your opportunity to grow it. So the more that I learned like those, the more I was excited about it, because to me, there were quick implementations that show the customers and show the employees, hey, we're serious about making this a place that you want to show up and do your laundry or, you know, just get out of the summer heat for a couple of hours, which is actually a big part of the business, too. Numb.

Host: Well, I guess you knew since each machine was just doing three turns a day and the industry average or your industry benchmark should be five or six, you knew where you should be and what that delta was that you could realistically achieve, which was almost twice in theory, you should be doubling the revenue. So that probably seemed like a giant opportunity for growth to you. And given that there weren't other laundromats for miles, like, you should be doing better than the industry average.

Guest: Probably spot on. Yeah. And so I know one thing that you wanted to bring up when we get into the details is how does an urban versus rural location really affect that? And yeah, I think even on a rural location like these small towns, even if you can't be better than the industry average just because the population wants it support it, you could still be right at the industry just because. I mean, the economics across the United States just show that if your population fits this demographic, you should be in this range. If you're not, that's not on the statistics. That's on you as the operator. So it gave me a lot of confidence to finally go forward and say, I think my downside for the most part is mitigated here. It's, how do I capture some of the upside?

Host: Yeah, great. Well, that's what you want in a deal. Limited downside, all upside. So can you tell us what the acquisition looked like, what the terms of the acquisition were?

Guest: Sadly, yeah. So originally we were looking at around, I think he wanted 350,000 for both of them at the same time. And his math was 1 1/2 times revenue. And so it was a little bit of explaining to him how I wanted to look at it as an investor, how anybody else would. And to be frank, this deal probably died three times before we got it done. Just because there was just between every. I mean, this was a friendly acquisition. We were friends the whole time. It was just, hey, these are my numbers, those are yours. Doesn't make sense. Let's move on. I think the market kind of told him, I'm probably the best buyer in that I know he received one or two other offers at maybe half of what we ended up on. And so makes me sound crazy, but I was just confident that I could grow this thing and my purchase Price was second in commit or second to what the cash flow could be. So we ended up at a final purchase price for both of them of 300,000. The bank wanted 20% down from me, so 60,000 day one. We knew that there was some equipment in there, so there was a little bit of a representation or a warranty I think is the right word for it, where he guaranteed that if the AC or two of the large machines broke within the first six months, he would cover half of the payment. And like clockwork, they waited until seven months to break. We actually put some working capital in place just to worry about anything like that. So the entire deal, total project cost was 330,000. So I funded the 20% and then I ended up putting the working capital in myself. So just shy of 90,000 out of my pocket for this. And the multiple is kind of strange because we bought off of mid year. So the year before he had done right at 60,000 after adjusting for the rent. And we're on pace to do about 75,000 for 2019 if I remember right. Yeah, I bought in 19, so 18 had done 60,019 was on pace to do 75. So between a 4 and a 5x multiple, which now being in the industry and understanding a business of this size, I would say is on the high end. But knowing what I knew I could do day one, knowing just how stable his revenue had been and kind of the growth mode that he was in due to the growth of population around the area, I could justify the price to myself. And just to give you guys an idea, since then, we've probably increased revenue 50 to 60% since then and it's just really helped kind of justify paying a little bit of a premium at what the time?

[23:31] Host: So you paid 4 to 5x and the kind of industry norm would have been more, I assume between 3 and

Guest: 4x, something like that of this size. Yeah. And I really think that more than earnings, the quality of the equipment you're buying matters at this size. Because if you buy an earnings but then you have to go basically spend twice the earnings to retool the entire facility, then the price doesn't matter as much as how much cash is coming up in total. So in this case all but three pieces of equipment, one being a non functional or a non revenue producing piece of equipment, were in great shape. So I was okay buying the premium off of that knowing that I didn't have a huge capex layout in the first few years.

[24:21] Host: So the machines were in good shape even though Some conked out right at seven months.

Guest: Yeah. Out of the, I think we're just shy of 40 machines and washing machines in total. I would say 38 of them were in great shape. Two of them had been, I joked with them, but they literally were old enough to be in college. So they, they had definitely gotten their money's worth out of those machines. And we got to the point that finding repairs or finding repair parts were getting more expensive. So within the, you know, like I said, around month seven, we just got them out of there, junked them and brought in two brand new machines and since then have upgraded some others, but those were the maintenance CapEx versus the growth CapEx, if you will.

Host: So what have you done? So you had your list of things that you were going to go in and improve that made you feel confident that you could pay a bit of a premium, that there was a lot of upside here. And indeed, two years later, you've increased revenue 50 to 60%. So what were some of those things? What did you get in there and do?

Guest: Yeah. So day one, we installed automatic locks. The key employee was waking up and driving up to each of these laundromats every day at 7am to go unlock the doors and then come back every day at 9pm to lock the doors. And poor gal, she was working. I mean, she could not take a vacation because she was responsible for, for this key aspect of the business. And so day one, we installed automatic locks that let us open earlier, close later to get those extended hours for folks that maybe work different shift work and needed to come in at 9.30pm we put in an automated call system so that if somebody called and one of us wasn't available right away, they got a text response and a callback number so that it felt like even though customer service couldn't be there all the time right away, that somebody was listening back. So that helped with our customer retention, customer service.

Host: And those, those calls just would go to your phone and you just call people back as soon as you could.

Guest: Or so we've got three people now that the calls would route to, depending on location or issue. So we've got a system called Grasshopper, which, yeah, you can just partner with your phone or do it from your laptop and as, oh my goodness, it has saved us so much headache on dealing with customer issues. And so we've done those two aspects. Day one, we included a mobile payment because if somebody jams a quarter or something like that, it would require somebody to show up and physically return a quarter or Unjam the change machine. So now we've partnered with a company online called Pay Range that lets you pay directly from your phone and more importantly lets us send refunds from the phone so we don't have to drive somebody to a location and allows us to still be partially attended versus a full service attendance.

[27:33] Host: Are you still accepting quarters?

Guest: Oh, yeah. That's one thing I think any laundromat person should look at is what is the norm for your customers. And if you, if you are in a quarter heavy industry, maybe just the people use a lot of cash in the area. If you're going to switch to card, just know how that may affect their user experience. So the machines are able to accept quarters. We still have an ATM and a change machine on site, but for the quote unquote tech savvy folks, we do offer the mobile payments just as easily.

Host: Okay, all right. Were there, were there other things or was that your list?

Guest: So those are the big things. I think over time we are transitioning more into. So when I took over them, it's self serve. We've started doing washboards. And then the one other aspect that I think not too many people think of, but the sheer amount of lost and found clothes that we had was becoming overwhelming. People would, I guess, you know, go run an errand, leave six loads of clothes in the dryers and just be gone for six hours. And you know, sooner or later somebody's going to take those clothes out. And fingers crossed that they don't decide that they need their clothes more than you did. So we put in some lost and found lockers where if the employees were cleaning, they noticed that those clothes have been sitting in there 20 minutes. We put them in a locker and if somebody called and said, hey, I was here last night, I totally zonked out and forgot my clothes. No problem. Describe them to us. Yep, they're in this locker. Here's your code. Hope you have a great day. Cool. And so just tiny things like that that have really made customer service very different.

Host: And so did you. In addition to growing revenues, did you start to see positive reviews show up on the Internet?

Guest: Yeah, we're not perfect by any means, but I think the prior owner had like a 2.4 star review on Google.

Host: 2.4, you said 2.4.

Guest: Correct. Has consistently been above 4.4, as high as 4.9 for a while too. So I think we're doing some things right.

Host: Nice. So you've pushed up revenue quite a bit. How are you margins? Has the margin increased? As well or decreased or what.

Guest: This is my absolute favorite part about this business is I think asset utilization as a function is you have a very fixed set of costs. And then every time that something else is increased on that, it usually goes right above that. So for washers, your only variable costs are the few gallons of water it uses and, you know, a little bit of electricity. And since we're out in the hill country, we use propane for our heating supply. And then, you know, I put 10% of every sale we get, I put in towards a repair and maintenance or capex fund. So for me it's, you know, let's call it 18% in utilities, another 10% in the repair fund, which is still cash right now. Right. Because we haven't spent it today. And the rest of it is, I use the term contribution margin, which means that out of that 28 cents, the other 72 cents can go to pay fixed costs. So, you know, I've got my loan payment, I've got rent, we've got labor, which is a fixed expense in my mind because regardless if you got one person in there or 50, I still want the same amount of labor. Kind of keeping an eye on the place.

[31:19] Host: Yep.

Guest: So once you get over your hurdle rate of fixed costs now, for every additional dollar you make, 72 cents can be used to kind of figure out what to do next. And so basically that 50% revenue growth is all going to contribution margin, which lets us really focus on what can we do to really grow these things, where can we expand? And that's what I love about asset heavy businesses or businesses where you focus on the utilization of the asset is once you get over those fixed expenses, it really starts to generate some serious cash.

Host: That's great. That's really cool. Thank you for that explanation. That was exactly the sort of breakdown that I was looking for. What are some of the other things that we can talk about, other ways that you can break down this industry for people? Jeff, so here in my notes that we exchange in advance, we talk about the types of. I talked about the types of laundromats size, but I'll let you break it down. Like how, if I'm someone interested in this business, how should I think about this? What are the most important factors? Location, size, all that stuff. Break it down for me if you would.

Guest: Yeah, so I think the very, very first thing that you should look at on one of these things is the sheer size of the laundromat that you're going to buy. I have tiny laundromats so there is literally no more growth that I can do. The only thing I can hope is that more people are patiently waiting to use the washing after the last person. Right. I can only grow through more turns. Yeah. I think the industry has moved towards big box. So if you come to Austin and you just Google search laundromats, you'll see that anything built in the last 10 years is massive, meaning probably 5 to 7,000 square feet. What that allows you to do is take advantage more of those contribution margins that you know, if you've got a fixed cost, you've got rent, maybe rent doesn't go up as much and maybe the distributors give you a better price per washer so that your fixed costs on a unit basis are much lower. And that if you've got employees that are able to kind of run that shop, you're going to have some awesome unit economics. But with the size also comes the price. Right. So if you want to stay smaller, definitely just make sure it's in an area that can support a minimum of five turns per day. Which I think is a really interesting aspect of how to look at these. I think that the second most important part is you'll hear the term self service versus full service laundromats. And what does that mean? And so for me right now we are partially attended, so we're moving towards a full service as the demand allows us to. And so a self service is customers come in, they wash, they fold their own clothes, and maybe they buy some detergent from you, but they get out. They really don't have a need for any type of interaction besides maybe customer service issues. Full service is they're dropping their clothes off, you're washing, separating, treating stains, cleaning. Some people even do dry cleaning, which is separate from laundromats, but it adds a high level of service. If you do it right, it can be very high margin, but it requires a lot more employee labor, a higher level of insurance, and just a lot more cost day one and a lot more operating excellence because now you're managing not just machines, but managing people from a customer and an employee perspective. So I think anybody coming into the industry really needs to understand if I'm acquiring full service, do I have that management experience and expertise? Or if I'm coming in and doing self service, do I have a way that I can hold on full service laundry to really grow this? So to me, those are the two biggest aspects. The last part that I don't think is talked about enough is acquisition versus building and laundry. Is a really unique piece because large cities, Austin, I'll give you as an example, has a lot of regulation on permitting right now. So it's actually cost prohibitive to go build a brand new laundromat. I think anybody who's out there searching should look up the term sewer impact fees and.

[35:58] Host: Sewer impact fees.

[36:00] Guest: Yeah, sewer impact fees. And what that is is the city, or maybe the water regulator of the city is going to make an estimate based on what you provide them of how much water you plan to use and how much water they're going to have to bring into their treatment facility. And they're actually going to charge you for that up front before you even build your building. And right now it's been a while since I've checked the numbers, but I think it was something like $25,000 per washing machine or some just astronomical number where it just doesn't make sense to build these things anymore. So there's a little bit of a floor on the existing locations because it's a lot cheaper to retool than versus build out the infrastructure. So anybody who's looking in the industry, I would think just make sure to talk to a distributor or somebody who's actually a general contractor that's built these things and can kind of guide you in the right direction of just how expensive it may be to start from scratch. I think those are really the big key aspects of it. The only thing is location. Again, I've built out in the rural areas, but since then I've looked at more urban areas. And what does that demographic change look like? How does that affect the type of service you're going to provide? And I honestly looking at both, I think I prefer the rural areas.

Host: Now why is that?

Guest: For me, the competition piece of it, it just doesn't make sense to have two laundromats in a small town. So especially as a first time acquirer, knowing that mistakes would be made, it I don't know a better way to say it, but it kind of stink. It felt nice to say I messed up, but what are you going to do? Drive 30 miles or forgive me? And so it really helped to get me comfortable with acquiring these things to know that you kind of have some pretty sticky customers and you can make a mistake or two along the way.

Host: You know, I wonder though, in like a city. So I live in San Francisco and there's a laundromat on Ocean Avenue which is near where I live and say I used that laundromat and something bad happened at the Laundry, like, whatever I was, it was a bad experience. The next to nearest laundromat is still, While it's not 30 miles away like it would be in your case, it's still as an urban dweller, probably too far away for me, for me to want to like. It's the difference between having to get in my car and not. And that's a big, you know, that's a big point of friction. So even though the distances aren't as, you know, 30 miles, you know, like in Texas, in a city that, you know, even the difference of a half a mile can be. Can basically mean a captive audience or not.

Guest: You were spot on to give a reference. Here in Austin, where I live, I don't want to give away too much, but I bet somebody familiar tell exactly where I am. There's a laundromat walking distance from me. But the owner has absolutely zero interest in running this thing. It's the true definition of a zombie mat. I think he's got.

[39:07] Host: Is that an industry term?

Guest: It is, yeah. You'll hear the distributors use that term a lot too. And it basically means it's not quite dead, but it ain't quite living either. And so those are usually the places that are ripe for opportunity for a serious investor to come in and turn it around because the infrastructure is good, but the machines need work. But they're usually already in a solid location. But to give you an example, he's got maybe three out of his 15 washers that work. So not even half of his machines are on. And sure enough, every Sunday he's still got people using those three machines. But not even a half mile away, there's a large, let's call it the big box retailer version of laundromats. And I mean, they've got their own parking lot. They're right next to a grocery store. And they, they are the chick fil a of washing. I mean, they've got people in and out all day long. And so I really do think that competition matters on an area like that. But you are right that there is even a half mile distance can mean the difference for somebody saying, I'm still going to come here.

Host: The other thing that strikes me about what you just said is that the fact that there is a phrase in the industry for super absentee, super passive, underinvested in laundromats, this zombie mat concept tells me that it's probably pretty common. And so that would seem like there's opportunity. If this is an industry where you have a lot of where some significant percentage of the businesses are just neglected. That seems like that's an industry ripe for ambitious people to come in like you did and do interesting things with these neglected businesses. Going back to the very top, you had said the thing about buying a job and in your case, you did buy a job. You. So how should somebody think about that? To do this right, to do it well and not become a zombie? Mat yourself, do you need to be doing this as a job, doing it full time?

Guest: I come back and forth on that and I think for me it made sense to quote, unquote, buy a job. And I consider myself the general manager. But I also like learning how these things work. So for the first three months I enjoyed tinkering. I still do, but it was a lot more fun when it wasn't. So not methodical. But I end up doing a lot of the same repairs now. But as I learned how the machines worked, I was really fascinated. I'd find myself up there at three in the morning just because I wanted to fix one more thing instead of letting myself go to sleep. But realistically, these, as an owner, if you can really separate yourself from a general manager, if you're willing to pay for it, right now, I'd rather just be both. So you can, if you have somebody on site that's great at customer service that knows a little bit about maintenance and is willing to, you know, just eat crow if something happens with the customer, you can kind of separate yourself as a passive owner. The thing is, what does that look like from a cash flow perspective? And what kind of required return do you need? Because at this size, I think we can kind of allude to the math here that you're not going to become a millionaire if you're having to give away most of the free cash flow to another salary. So for me it makes more sense to be in the day to day, at least until I find the next best thing. Right? Like I currently enjoy being in there, learning about other industries, kind of passively searching for another opportunity. But the day will come where I would feel confident giving my next employee the keys to everything, giving him a raise and saying, look, only call me if this place is on fire. I trust you. I'll see you in a month kind of deal. So I think if you've got the operational excellence, you're willing to take a little bit of a haircut on cash flow. Yeah, you can really run these things. I would call it semi passively because you still want to be in charge of, you know, the Finances, customer, just customer review, some of those things. But you don't need to be boots on the ground every single day to run these things successfully.

[43:41] Host: Okay. And let me just understand the employees. You've now touched on this a number of times. So you have somebody on site, site all, all for all opening hours. Somebody is there.

Guest: No, no. And that's the, that's probably one of the benefits of being in the rural town right now is I don't know that this is completely replicable. But my key employee lives three minutes away from one of the locations and then he's a 20 minute drive from the other location. And then we've got part time help that keep the place clean, that kind of do some of the wash and fold. And if they want to, none of them have stepped up to the plate. But they can also do some repairs for extra hours if they're ever interested. And so the key employee is really kind of what's helped me get comfortable not living so close is that he's trustworthy enough that if there's an issue with the change machine, he opens it up. We've got procedures in place that, you know, if he's feeling well, we'd find out pretty quickly. But he's able to kind of do a lot of that. That lets me be off site but also be the general manager. So still kind of get the majority of the. I don't know the right way to say it, but as general manager, just make sure that all the decisions are still in my hand.

[45:02] Host: Yeah.

Guest: But I guess to say another way, if, if the time ever came, I think he would be the right person to step in and be general manager.

Host: And this individual is full time.

Guest: It works a little bit like that. Yeah. So I've got him paid at 40 hours a week, but realistically he can go home in between. It's really more like he's on call, I guess is the right way to say it.

Host: Yeah.

Guest: So he goes and fixes issues as they come up, but there's no reason for him to be there from 6:30 in the morning to 10:00 every evening. And so that works for him because he's got a steady paycheck. Hopefully he feels like he's getting paid well and it lets him have a lot more flexibility.

Host: And is there basically running one of these or operating one of these? Is there does something come up every day at each location or multiple times a day or can weeks go by and the thing is just humming along and no human intervention was required?

Guest: You know I think it's. It's so funny how that happens. It's like, we'll go. My girlfriend and I were just talking about how the phone hadn't rang in three weeks, and we thought, okay, that's strange because usually you get one kind of call about once every two weeks of just something silly like, I don't know, somebody clogged a toilet or a machine is spitting out bubbles, and it turns out the person used dishwash soap versus laundry detergent. But this week, as soon as we left town, we had three calls back to back to back, including a change machine issue. And again, these aren't things that I need to touch. And so fortunately, my key employee was able to get those things resolved. But it's just funny how those kind of aspects come up all at once or not at all. So it's very lumpy on. On when they come in. But, yeah, it's depending on what you would consider a fire alarm, I would say about twice a month, the general manager needs to step in and do something.

Host: Okay. But of the 40 hours a week that he's working for you, he. He really is not working 40 hours. I mean, it's a pretty comfortable 40 hours.

Guest: Yeah. Yeah. I would say about 15 of them are sweaty work. So he. He likes to kind of fix the machines. He cleans up a lot. He's got an eye for detail like nobody else. To where he basically elbowed me aside one day and said, you're not allowed to clean up. So really lucky to have him on that aspect. Yeah. But about 15 hours of sweaty labor. I would say five hours of quote, unquote, customer service. And then the other, quote, unquote, 20 hours are. Yeah, just customer service if needed, or realistically, a lot of that time is just have your phone ready if I need you.

Host: Cool. Okay. Jeff, you've given a lot of intel here in the laundromat business. Are there any other tips or maybe pitfalls that we haven't already touched on that somebody interested in buying a laundromat should know?

[48:08] Guest: I think I just want to make sure that we reiterate two points that we briefly talked on. I love talking laundromats. So there's quite a few people I've reached out to in any sphere of social media. And what I think every time that I want to make sure that they focus on is the location that the laundromat's being bought in, whether that's a strip center, standalone, what's the half mile and two mile radius around that look like. More importantly, what's the quality of that location? Because what I've learned since starting in here is machines run great most of the time. It's the real estate that I have issues with. So leaky roofs or, you know, busted pipes during the freeze that we experienced down in Texas or even something as silly as electrical that got wired wrong because I'm in the country and permits aren't a thing out here. So just small things like that that you know, if you're brand new to business acquisitions and you've never experienced real estate, be very, very comfortable with that piece of it. And then the other item is. Quite often I hear people think that they're going to add a credit card machine and this thing's going to become a cash generating passive item. I don't think that's the case for a lot of them. You really have to understand your customer preferences and so forth. We've had the pay range for about two years now. We're still maybe at 20% adoption on that thing. People just love to use cash importers. It's easier for them. So making sure that you are very well aware of your customer preferences can give you a head start on the learning curve.

Host: That 20% though is probably specific to your demographic. So the point is to just don't take it for granted that it's going to be one way or the other. You really got to understand your customer to know what that ratio is going to be for credit card to hard currency.

Guest: Spot on. Yeah, even just go check the Google reviews because some of the customers will tell in the reviews. Man, this guy still uses quarters. Would be great if they had a credit card machine on site. Well, you know, there's some demand for it they want so yeah.

Host: Jeff, if people have other questions, how can they reach you?

Guest: Twitter's probably the best place to find me. And that's Jeff Oliver atx. Jeff spelled the funny way. G E O F F Oliver ATX. Otherwise I think I'm on LinkedIn. Think I'm pretty easy to find. Not too many people with my name.

Host: Cool. Well, I'll put links to all of that in the show notes. Jeff, thank you for the breakdown on the laundromat business. This was super fun and congratulations on, on, on getting into the business and your 50 to 60% revenue increase in two years. So future looks bright in your laundromat empire.

Guest: Very excited. Thank you so much.