Commercial Laundry and Linen Service Business

This acquisition opportunity centers on a commercial laundry and linen service company with a 32-year operating history in a major metropolitan region. The business serves a diverse client base of hospitality groups (hotels, inns, short-term rentals), medical offices, surgical centers, restaurants, gyms, and government facilities. Services include pickup and delivery, laundering, pressing, folding, inventory management, and emergency turnarounds.

The business owns its facility, operates five branded box trucks, and maintains a customer base of over 300 recurring accounts with weekly or daily service. Annual revenue is $5.1 million with adjusted EBITDA of $880,000. Approximately 85% of the revenue is tied to recurring service agreements, with a high retention rate and predictable seasonal variation.

This business model lends itself to an SBA 7(a)-backed acquisition because of its contract-backed revenue, route-based operations, asset-light delivery model, and defensible vendor relationships. However, the business’s success depends on precise operational efficiency, route density, equipment maintenance, and labor discipline making it essential that the transaction structure and post-close strategy address cost controls, turnover risk, and facility redundancy.

Proposed SBA 7(a) Transaction Structure

Given the strong EBITDA margin and long-term contracts, a well-structured SBA loan might follow this format:

• Purchase Price: $3.4 million (3.86x EBITDA)

• SBA Loan: $2.55 million (75%)

• Buyer Equity Injection: $340,000 (10%)

• Seller Financing (Subordinated): $510,000 (15%), amortized over 5 years with 18-month interest-only and clawbacks tied to route and revenue continuity

The seller note should include protections such as:

1. 20% reduction if recurring revenue drops more than 12% in the first 120 days post-close

2. Additional clawback if facility operations are materially disrupted due to equipment failures the seller failed to disclose

3. Revenue-linked bonus if buyer expands contract base by 20% in year one using seller's network introductions

The seller should be retained on a 6–12 month contract as a facilities and route advisor, especially to support equipment maintenance, driver route mapping, and client onboarding for new contracts.

Client and Contract Analysis

The customer base includes:

• Hospitality (hotels, vacation rentals): 41%

• Medical (clinics, surgical centers, dental): 29%

• Restaurants and gyms: 19%

• Government and industrial clients: 11%

Client contracts are volume-based, often priced per pound or per item (e.g., towels, sheets, gowns, tablecloths) with minimum monthly volumes. Many contracts include:

• Pickup/delivery schedule (2–6x/week)

• Emergency turnaround clauses (24-hour processing)

• Pricing tied to annual CPI or fuel index

• Equipment rental (linen carts, hampers, RFID tracking)

Retention is strong, with average client tenure of 5.4 years and top 40 clients accounting for 56% of revenue. No single client represents over 7% of revenue. The buyer should:

1. Ensure all contracts allow assignment and confirm renewal cycles

2. Offer immediate re-ups or multi-year extensions with service guarantees

3. Introduce digital reporting dashboards to give clients visibility on usage, loss rates, and credits

Facility and Equipment Overview

The company operates a 14,000 sq. ft. leased facility (rent: $12,500/month NNN) that includes:

• Industrial washing machines (3 tunnel washers, 4 conventional)

• Dryers and sheet folders

• Pressers and ironers

• Conveyor belt and sorting stations

• RFID scanners and linen tracking bins

• Delivery dock with three bay doors

Equipment has been well-maintained, with most assets under 8 years old. A recent CapEx investment ($280,000) was made in high-efficiency machines, reducing water and energy costs.

Buyers must:

• Review maintenance logs and warranty coverages

• Negotiate service contracts with OEM vendors

• Inspect drainage, floor grading, and fire suppression systems

• Confirm electrical capacity and backup generator specs

SBA lenders will likely require a third-party facility and equipment inspection as part of the underwriting process.

Staffing and Route Model

The company employs:

• 5 route drivers (W-2)

• 12 laundry staff (washers, folders, pressers)

• 2 facility maintenance techs

• 2 route managers (dispatch and customer care)

• 1 general manager and 1 bookkeeper

All drivers use company trucks and operate routes with daily pickup and dropoff schedules. Drivers are paid hourly with mileage and delivery stop bonuses. Most work 4-day or 5-day schedules depending on route load.

Turnover in the facility is low due to:

• Shift flexibility (6 AM to 2 PM; 2 PM to 10 PM)

• Clean, air-conditioned workspace (unusual for the industry)

• Weekly team bonus program tied to error rate and volume processed

Buyers should implement:

1. Route optimization software like OptimoRoute or Routific to reduce mileage

2. Performance-based retention bonuses for top drivers

3. Quarterly reviews for process innovation (e.g., folding improvements, bin redesign)

4. Shift-lead incentive structure for floor employees

Financial Breakdown

Trailing 12-month P&L:

• Revenue: $5.1M

• COGS (labor, fuel, chemical, utilities): $2.95M

• Gross Profit: $2.15M

• SG&A (rent, insurance, admin): $1.27M

• Adjusted EBITDA: $880K (17.3% margin)

Revenue segmentation:

• Per-pound laundry (hospitality): $2.1M

• Medical and compliance-based linen: $1.48M

• Restaurant/gym towel and cloth: $740K

• Gov/industrial: $560K

• One-off emergency work: $220K

Gross margin is higher on medical linen (38–41%) due to specialized handling and bundling. Hospitality margins are lower (~30%) due to competition and bulk pricing, but offset by long contracts and high volume.

AR is stable, with 94% of clients under net-30. Annual bad debt averages less than 1%.

Software and Technology

The company uses:

• QuickBooks Enterprise for financials

• LaundryLogic for processing and volume tracking

• RouteOptix for delivery scheduling

• Slack for internal team communication

There is no CRM for sales or contract renewal automation. This is a key upside lever for post-close operations.

Buyers can implement:

1. HubSpot or Zoho for contract lifecycle and client contact management

2. Digitized bin tracking and billing tied to RFID scanners

3. Client portals for usage review, invoice downloads, and feedback

Sales and Marketing

The business does not currently have a dedicated outbound sales team.

New clients come from:

• Word-of-mouth and referrals (42%)

• Local B2B networking (21%)

• Google Ads and SEO (18%)

• Partnership with equipment suppliers (e.g., selling services alongside chemical vendors): 11%

• RFP submissions for government and schools: 8%

Buyers should prioritize:

1. Hiring a B2B sales rep focused on Class B hotels, private surgical centers, and restaurant groups

2. Partnering with regional health networks for long-term compliance-driven contracts

3. Expanding into uniform laundering (mechanics, trades, schools)

4. Launching bundled flat-rate offers for short-term rental operators

Legal and Regulatory Diligence

Key diligence items include:

• OSHA compliance: clean track record, documented safety meetings

• Environmental review: drain water filtration and chemical handling logs

• Insurance: $2M general liability, $1M commercial auto, $1M umbrella

• Vehicle inspections and maintenance records

• Labor compliance: all I-9s, timecards, and handbook documentation available

There are no pending lawsuits, customer contract disputes, or environmental fines.

Working Capital and CapEx Needs

• Payroll reserve: $85K–$100K

• Inventory: $25K for chemical and linen restocking

• Software upgrade: $15K–$20K

• Vehicle repair reserve: $35K–$40K

• Seller transition consulting: $25K

Ideal Buyer Profiles

• Route-based service operators (e.g., waste hauling, linen supply, water delivery)

• Entrepreneurs with operational or logistics background

• Family offices looking for multi-generational, stable cash-flowing businesses

• PE-backed platforms in B2B facility services

Post-Close Execution Plan

1. Secure customer contract assignments and meet top 25 clients

2. Retain GM and route managers with new incentive plans

3. Upgrade scheduling and CRM infrastructure

4. Launch outbound sales strategy for medical and hospitality verticals

5. Standardize pricing review process to lift underpriced legacy clients

Conclusion

This commercial laundry business offers a compelling blend of contract-driven recurring revenue, route-based logistics, and operational scale within a defensible service niche. The SBA 7(a) framework enables strong leverage at acquisition, while operational improvements route optimization, CRM implementation, and contract renewals unlock margin and revenue upside. For buyers seeking low customer churn, equipment-driven durability, and cash flow predictability, this business provides both stability and growth opportunity.