Laundromat ROI and Cash-on-Cash Calculator

By Jason Taken, business broker · HedgeStone Business Advisors · Updated 2026-09-04 · 10 min read

How Does the Calculation Work?

Total project cost is purchase price plus closing costs plus working capital plus any capital spending funded in the loan. This matters because the SBA equity injection requirement — at least 10% on a complete change of ownership — is calculated on the project, not the price. Buyers who budget 10% of the purchase price are consistently short.

Total cash in is the injection plus any reserve you hold outside the loan. Closing costs, working capital, and funded capex are already inside the project and therefore inside the injection calculation.

Cash flow starts from normalized SDE, then subtracts the market value of your own labor, then debt service, then a replacement reserve. Each subtraction is a real economic cost, and each one is routinely omitted from advertised returns.

DSCR is cash flow before debt service divided by annual debt service, computed after your labor is deducted — which is how a lender computes it, because they assume someone has to run the store.

The downside test applies a revenue decline at the contribution margin you specify. A laundromat's rent and much of its utility base are fixed, so a large share of any revenue swing reaches earnings directly. That is what makes the upside real when volume grows and the downside sharp when it does not.

Why Three Cash-on-Cash Numbers

All three describe the same store. Listings quote the third and call it a return; underwriting uses the first two.

Setting the Inputs Honestly

Normalized SDE should come from the filed tax return, with a source document behind every add-back. Test what happens when a lender strikes $10,000 of unsupported add-backs — that single change often moves DSCR across the approval threshold.

Owner hours is the input buyers most often set to zero and most often regret. Collections, cleaning oversight, repairs coordination, supplies, pricing, and customer problems are real hours even at an unattended store. If you genuinely will not do them, set the hours to zero and add the cost of the people who will.

The replacement reserve should reflect the equipment schedule, not a rule of thumb. The CLA's valuation discussion frames retools on a 15-20 year horizon and notes they can exceed $200,000, so a store with a fleet halfway through its life is accruing a real liability every year whether or not anyone books it.

The contribution margin defaults to 62%, meaning roughly 38 cents of each revenue dollar is variable cost. Adjust it from the store's own cost structure: separate genuinely variable costs (utilities partly, supplies, card fees, some labor) from fixed ones (rent, insurance, base utilities, most payroll if attended).

The interest rate should be a quote you were given, not an SBA ceiling. The program caps variable rates at base plus 3.0% above $350,000, but that is a maximum, not an offer.

What This Calculator Cannot Tell You

• Whether the SDE figure is real. It takes your input at face value; a lender will not.
• What the exit is worth. Cash-on-cash ignores resale, which for a laundromat is a large part of the return, and exit value depends on the lease term remaining when you sell.
• When the machines fail. The reserve is an average; failures cluster.
• What a competitor will do. New capacity in the trade area does not appear in any input here.
• Your tax position. All figures are pre-tax, and entity choice, depreciation, and state treatment all change what you keep.

Why Does the Denominator Matter as Much as the Numerator?

Because shrinking it is the easiest way to make a return look better, and it is the error most advertised figures make.

You did not invest the purchase price and you did not invest the down payment either. You invested every dollar that left your account to make the store yours: the equity injection, closing costs and fees, any independent valuation, working capital, a repair reserve, the near-term capital spending the inspection flagged, and transition costs.

On a typical financed acquisition, the down payment is a minority of that total. A calculation using only the injection therefore reports a return two or three times the honest one, without anything in it being false — the number is simply answering a different question from the one you asked.

The same discipline applies to the numerator, and there the omissions are debt service, your own labour, and a replacement reserve. Leave out all three and the figure roughly doubles again.

That is how an advertised return of nearly forty percent and an honest one in the mid-teens describe the same store in the same year. Nothing was hidden and no number was disputed. The gap is entirely in what each calculation chose to count.

What Should You Test Before Relying on the Result?

Four scenarios, and they matter more than the base case.

Revenue down 10%, then 20%. Rent and much of the utility base are fixed, so margin moves sharply. Does the store still service its debt in the downside case? If not, the good-case return is not the number that matters.

Add-backs struck. Test what happens when several thousand dollars of undocumented adjustments disappear. A lender will make that deduction regardless.

A machine failure in year one. Does the reserve absorb it, or does it come from the loan or a credit card?

Your labour priced properly. If you intend to work in the store, either deduct the market cost of that work or report both figures and say which is which. A return plus a job is two things.

One further caution about what this cannot capture: cash-on-cash ignores the resale, which is a large part of the return in this business. Exit value depends on the same drivers as entry — lease term remaining, documentation quality, equipment condition — and one of those decays while you hold. A store bought with eleven controllable lease years and sold five years later has six, which is a different asset commanding a different multiple.

How Does This Compare With the Alternatives?

A return figure only means something next to something else, and the comparison has to be like for like.

Against an index fund. Fully passive, daily liquidity, limited leverage. A laundromat's excess return over a passive alternative is compensation for the work, the concentration and the illiquidity. That is a reasonable trade for many buyers, and a model showing a laundromat beating a passive alternative on a risk-adjusted, labour-adjusted basis has probably left something out.

Against a rental property. Cheaper, longer, easier debt on an asset that appreciates and yields modestly, versus higher leverage and higher current yield on an asset that does not appreciate by itself. Which is better depends on whether you want yield now or appreciation later.

Against a salaried job. Relevant if you will work in the store, and the honest version deducts the market value of your hours. What remains is the return on capital; the rest is wages.

Two structural facts belong in any comparison. The leverage available here is unusually high — under current SBA rules a complete change of ownership requires at least 10% of total project cost as equity injection (Source: SBA SOP 50 10 8). And the liquidity is poor: the median store took 139 days on market to an accepted offer (Source: BizBuySell, 2021-2025), before diligence and financing.

What Moves the Return Most?

Six things, roughly in order, and only one of them is about operating the store well.

The price you paid. The multiple you pay is the return you give away, and no amount of subsequent effort recovers an overpayment.

Lease term at entry and at exit. It sets both the multiple you pay and the multiple you get, and it decays every year you hold.

Documentation quality. It decides the multiple, the financing available, and the resale — which is three effects from one input.

How much of the work you do yourself. Delegation is real cash out, and treating your own hours as free makes every other figure in the model wrong.

Utility cost trajectory. Utilities were the most-cited operator problem in the CLA's 2024 survey, and rate increases do not pause.

Equipment timing. A retool inside your hold period changes everything; one falling after your exit changes nothing for you.

Note what is absent from that list: marketing, hours, machine mix, and most of what an owner spends their attention on. Those matter for the business and they move the return far less than the six above — which is why the acquisition decision deserves more scrutiny than any operating decision that follows it.

Limits and Disclaimer

This tool produces illustrative figures for discussion. It is not an appraisal, a financing commitment, or investment, tax, or legal advice. Loan terms shown are calculated from the inputs you provide and are not an offer of credit. Nothing here guarantees a return, a financing approval, or a sale price. Confirm tax treatment with your CPA and financing terms with a lender.

What Should You Do Next?

Run the base case, then run it again with a 20% revenue decline and $10,000 of add-backs removed. If the store still services its debt in that scenario, you have a margin of safety. If it does not, the base-case return is not the number that decides this purchase.

The Next Step

This page is general information about laundromat transactions, not legal, tax, or investment advice, and not a guarantee of sale price, timing, or financing approval. Verify current rules with your own CPA, attorney, lender, and the relevant state or municipal agency before acting.