Latest / The Buyer & Seller Podcast with Fexingo: Business Brokers, Exits, and Private Sales Explained / How a Small Family Laundry Sold for 10x EBITDA
Transcript
- Lucas: So there's a two-location dry cleaner in a Chicago suburb that sold earlier this year for 10 times EBITDA. That's right in the range of what a decent SaaS company trades for. And I think the story is worth unpacking because it has nothing to do with technology. Luna: 10 times for dry cleaning — that's unusual. What made it different? Lucas: The owners, a husband and wife who ran it for about 17 years, had built a route-based subscription model. Instead of relying on people dropping off clothes at the counter, they had about 40 percent of their revenue coming from weekly pickup and delivery subscriptions. Customers paid a flat monthly fee for two bags of laundry or dry cleaning. Luna: So the recurring revenue was the key. Lucas: Exactly. A typical dry cleaner might sell for 3 to 5 times EBITDA because the revenue is unpredictable — it's tied to weather, local events, foot traffic. But this business had a subscription book with an average retention of 14 months. To a buyer, that recurring stream de-risks the whole operation. Luna: Was the subscription more profitable per customer? Lucas: Actually, the per-item margin was slightly lower because they included pickup and delivery costs. But the predictability more than made up for it. The business went from about $1.2 million in revenue to $1.8 million over three years, almost entirely from subscriptions. And EBITDA grew from $180,000 to $320,000. Luna: So the multiple expansion alone — from 4x to 10x — added about a million dollars to the sale price. Lucas: Roughly, yes. The business sold for $3.2 million. If it had been a conventional cleaner doing the same EBITDA, it might have fetched $1.3 million. The difference was entirely the contract book. Luna: Who bought it? A larger competitor? Lucas: Actually, it was a local family office that had been looking for small service businesses with sticky revenue. They liked the route model because it had low customer acquisition cost — word of mouth, referrals, some Facebook ads. And the subscription structure meant they could integrate it with an existing delivery network they owned. Luna: So the buyer wasn't even in dry cleaning. They were buying the subscription base. Lucas: Exactly. They saw it as a recurring revenue platform in a niche they could scale. They've already added one new route since acquisition. Luna: That's the dream for a small business seller — to attract a buyer who isn't looking to run the business, but to own the revenue stream. Lucas: Right. And I think a lot of business owners underestimate how much contract structure matters. This wasn't a tech company. It was a dry cleaner with a simple weekly subscription. But the buyer valued the contract duration and the predictable cash flow. Luna: What was the average contract length? Lucas: month to month. But the average customer stayed 14 months. The owners had a dashboard showing lifetime value, churn rate, and acquisition cost. That data — just having it — made a huge difference in negotiations. Luna: The buyer could model future cash flows with confidence. Lucas: Exactly. And that's the lesson. Even a low-tech service business can engineer a much higher multiple if it builds recurring revenue and measures it properly. Luna: Let's talk about a specific number: 10 times EBITDA. How does that compare to other recent small business sales you've seen? Lucas: For a service business under $5 million in revenue, 4 to 6 times is typical. You see 7 to 8 times if there's a strong recurring element. 10 is rare, but it happens when the contract book is deep and the churn is low. Luna: And the buyer has to believe the revenue will stick post-sale. Lucas: That's the key. In this case, the owners had a non-compete and agreed to stay on for six months to transition routes. That gave the buyer confidence. Luna: If the owners had just walked away, the multiple would have been lower. Lucas: Probably. The handoff period is part of the valuation. The buyer wants to know the revenue doesn't walk out the door. Luna: I love that this example shows you don't need a tech product to get a tech-like multiple. You just need recurring revenue and data. Lucas: And the willingness to change your operating model. The owners had run a conventional cleaner for years, then two years ago they started the subscription service. It took time to build. Luna: What were some of the challenges in that transition? Lucas: The biggest was logistics — routing the pickups efficiently. They used a simple software to optimize routes, but mostly it was trial and error. They also had to retrain staff to handle the subscription customers differently. Luna: And the customers themselves? Were they skeptical of a subscription? Lucas: Some were. But the owners offered a free trial week. Once people experienced the convenience, retention was high. Luna: So the subscription wasn't just about valuation — it also improved the business operationally. Lucas: Absolutely. Revenue became predictable, they could schedule labor better, and they reduced waste. It made the business better to run, not just easier to sell. Luna: That's the ideal scenario. Lucas: And it's replicable. I think a lot of service businesses — lawn care, house cleaning, pest control — could do something similar. Luna: The dry cleaner is a great case study. But I wonder how many owners even think about exit when they're running the day-to-day. Lucas: Most don't, which is why when they decide to sell, they're often disappointed by the offers they get. Luna: If you're an owner listening and thinking about selling in the next few years, start building that recurring revenue now. Lucas: Exactly. It doesn't have to be a subscription — it could be a contract or a retainer. Anything that locks in repeat business. Luna: And track the data. The owners in this case had a simple spreadsheet at first, then moved to a basic CRM. Lucas: Buyers love data. A business with three years of churn and LTV data is worth more than one with just revenue history. Luna: On that note — we do a lot of episodes on business valuation and exits, and a handful of listeners chip in monthly to keep this show ad-free. If these conversations have helped you think differently about your own business, you can support us at buy me a coffee dot com slash fexingo. It's a small group, but it makes a real difference. Lucas: Yeah, and we appreciate it. It lets us keep doing deep dives like this without commercial breaks. Luna: Back to the dry cleaner — one last takeaway. The sale closed in February, and the buyers are already expanding. They added a third route in April. Lucas: That's the proof that the model works. The business wasn't just sold — it was primed for growth. Luna: So for any owner listening, the question is: what can you do today to make your business more subscription-like? Lucas: Even one recurring revenue stream can shift your multiple. That's the lesson from a dry cleaner in the Chicago suburbs. Luna: And it's a lesson worth acting on.