The laundromat is a classic business model that’s maintained its popularity for many decades. Laundromats represent a time-tested, low-maintenance business with a near-guaranteed demand and opportunity for expansion. In this article, we’re evaluating this opportunity in full, and walking you through the main steps in pursuing this business model yourself.
What is a Laundromat Business?
You’re surely familiar with what a laundromat is, but you might not know exactly what goes into running a laundry business yourself. A laundromat charges customers to do their laundry. It generally either operates via self-serve coin-operated machines (the most popular model, and also the focus of this article), or through a service desk, in which customers drop off their clothing and it is washed for them.
A laundromat is popular because it is a relatively low-maintenance service business with a consistent demand – provided that it is accessible and that competition does not eat into too much business. Laundromats generally have very high start-up costs, due to the need for land and laundry equipment, such as coin laundry machines (i.e. a dryer and a washer), as well as ongoing operational costs. A successful laundry service is able to offset these costs with a consistent stream of customers.
Below, we’ll examine these variables in more detail, and show you how to set up your laundromat business for success.
How to Start a Laundromat Business
Step 1: Research & Plan
Your first step in starting a laundromat business is extensive research, on which you will base a comprehensive business plan. Luckily, laundromats are a highly standardized business with a well-established formula for success. As such, you can access many resources for successfully starting and running a laundromat, but you’ll still want to be aware of key variables, including the following:
- Up-front Costs: Up-front costs to start a laundromat generally total hundreds of thousands (or millions) of dollars, depending on where you are planning to open and how big your laundromat business will be. You’ll need to secure land, purchase new laundromat equipment, and pay to have these machines installed, amongst other cosmetic improvements to the property. On average, the startup cost for a small-medium-sized laundromat business will total between $100,000-300,000 USD.
- Operational Costs: In order to properly budget your plans, you also need to consider the ongoing costs for running your laundromat business. An average small-to-mid-sized (about 2000 sq. ft.) laundry business can expect about $4,000-$8,000 per month in operating expenses, which include utilities (especially water), leasing, insurance, ongoing maintenance, payroll, and miscellaneous expenses.
- Margins: On average, successful laundromats net about 30% gross profit, but it depends on how much gross revenue it generates and how efficiently it is run.
Based on this information, you’ll want to make a comprehensive business plan for how you want to operate your laundromat business. This includes the size, location, number of machines, and how you want to organize your daily operations.
Step 2: Reaching Your Target Market
Once you’re aware of the expenditures and investments that go into starting a laundry business, you need to start planning how your laundromat will differentiate itself for success. In general, a successful laundromat is a combination of two factors: efficient operations and effective business generation.
Generating business is mostly about picking the right location. Often, people simply choose the most accessible laundromat to their location. This also means it’s necessary to set up shop in an area where people require a laundromat, such as near property developments that don’t have on-site laundry or in low-income/student neighborhoods. You also want to be sure that you are accessible within their schedule, which is a major reason why many laundromats stay open 24 hours.
Additionally, you must price competitively. An average laundromat will charge roughly $3 for a complete wash/dry cycle. Some laundromats also sell additional goods, including snacks from vending machines, laundry supplies, etc. You can further improve the customer experience by providing them with entertainment while they wait (showing movies, providing or selling magazines/books, etc.)
Basically, you want to give customers a reason to choose your location over competitors. Your marketing efforts will be directed toward this goal of developing a loyal customer base.
Step 3: Form Your Business
Once you’ve done comprehensive research and planning regarding your business idea, and you’re confident in the feasibility of your laundry business venture, then it’s time to start putting your plan into action. The first step is to form your business as a legal entity. The specifics of this process will change depending on your location, which is why you may want to contact a business lawyer. Generally, laundromats are operated as corporations or limited liability companies (LLC).
You’ll also want to register your laundry business for taxes and open a business bank account to manage your finances.
Step 4: Licenses, Permits, and Insurance
Next, you’ll want to secure the necessary licenses and permits to operate your business. Once again, this depends on your area, and you’ll likely want to retain the help of the same professional.
Specific licenses and permits might apply to your region, and you’ll need to be sure you’re in compliance with these regulations. Typically, these are related to Occupational Health and Safety. If you don’t want to hire someone to help you, see if your municipality has a small business help desk or online resource.
You’ll also want to be sure to get your business insured. A laundromat typically needs general liability insurance, which protects it against unforeseen events in the course of business. There are many other types of insurance available to small businesses, and it will likely be worthwhile to retain the help of a professional to help you navigate this area.
Step 5: Finalize Location
Once your laundry business is registered, licensed, and insured, it’s time to start finalizing the physical aspects of your laundromat. Realistically, finding a location for your business is an ongoing step, rather than one step in the process. You can start surveying locations as soon as you decide to open a laundromat.
In accordance with our advice above, you want a location that will allow you to remain competitive. This means it should be convenient for enough people who require this service. It also should be big enough to efficiently run as a laundromat. Also, keep in mind that laundromats in denser urban areas will tend to be more expensive, as is the case with most property.
Step 6: Secure Equipment
Much like finding a location, you can start looking for laundromat equipment as soon as you decide to go forward with your business plan.
As mentioned above, you want to find new machines, or machines that function “like new.” It might be tempting to save money by purchasing used coin laundry machines, but an experienced laundromat owner will tell you these machines often quickly catch up in maintenance costs. When you consider how often your customers will use your laundry equipment, it’s often most economical to spend the money up front for quality machines
Step 7: Funding
As you consider your land and equipment needs, you’ll need to sort out funding at the same time. You can rent your property, and you can sort out your equipment to be paid in monthly installments, but you’ll still likely need capital to get your business off the ground, including any initial renovations and equipment installations.
Many laundromat owners apply for a small business loan for this reason, which is another reason that we started this list with a comprehensive business plan. You can use this plan to secure funding, by showing the lender that you have a feasible, reliable plan for success.
Step 8: Plan Day-to-day
Once everything is set up and ready, it’s time to plan your day-to-day operations. Using all the information you’ve considered above, it’s time to generate procedures for handling the day-to-day operations of your business. This allows you to standardize the way your business is run so that your time is better spent reacting and planning for the future.
These plans include how you will handle payroll (if you hire employees), insurance claims, routine maintenance, customer inquiries, etc. Basically, anything you’d encounter in the routine of daily business. Of course, this is subject to change as you go and as you learn, but starting with a plan will make it much easier to hit the ground running.
You’ll also want to handle any final administrative details, such as setting up a phone line, making a website, registering on Google Maps, etc. Consider everything that makes it easier for customers to find and contact you.
Step 9: Launch
Once everything is in place, it’s time to launch. By following our advice above and making a detailed plan that works for you, you will give yourself the best chance to succeed in this industry. Laundromats are competitive, but there’s a reason they remain a popular business model. With careful planning, effective marketing, and efficient operations, you can take a piece of this lucrative pie.
Conclusion
Thanks for reading our comprehensive guide to starting a laundromat business. For more popular business models, check out our guide to starting a sticker business.
