With uncertainty in the markets and rate increases likely coming, it’s now more important than ever for laundromat owners and investors to reflect on their current situation and prepare for a change in the financial landscape.
The year 2021 proved to be one of rather low interest rates and a bustling economy; highly welcomed after a rough 2020 and the COVID-19 impact. But this year, inflation may be taking center stage.
While this initially may bring fear and ambiguity to the laundromat industry, there are pros and cons to consider with the changing market.
When managed appropriately, high inflation is not necessarily a major cause for concern because low unemployment and rising wages equals a booming economy. With high wages and strong demand, people have more disposable income to pump into businesses. On the flip side, challenges are unavoidable. With the costs of goods and services rising, business owners need to evaluate their rising expenses, that will in turn affect profitability. Properly managing expenses and staying ahead of the curve is imperative during this shifting financial year.
From a finance perspective, laundromats will need to consider the rising interest rates and weigh their options accordingly. Ideally, a fixed rate option will insulate the business from rate increases, allowing an easier way to budget based on a monthly payment. A variable rate can pay off in the long run, but there’s risk and uncertainty there. Each investor and business owner has unique goals and objectives, so it’s important to lean on financial partners and lenders during this time.
In addition, working with a lender that has industry knowledge will not only offer the business additional, unmatched support but gives the client peace of mind knowing they’re looking out for the industry as a whole.
- For existing laundromat owners, it’s important to look at the business’s expenses and see the potential impact inflation is having. From there, make a determination on pricing strategy (will it be passed on to customers?) to decide on how to continue making a profit.
- For investors, from a rate perspective, the best plan is to do the due diligence of talking with lenders and knowing all the options.
Will this current environment then create opportunity in the industry? With a strong economy, comes strong demand. As costs go up, business owners and investors need to focus on what’s happening to their costs and profitability, from a pricing standpoint as well as efficiency in operation. There’s plenty of opportunity to be had for both laundromat owners and investors in 2022.