The laundromat industry has a 6 billion dollar market share and a whopping 95 percent success rate. While people search for the next big business idea, this old business model generates a 20-35 percent return on investment.
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Laundromats are a great business opportunity for entrepreneurs looking to start their business venture. With the right location, equipment, and marketing strategies, a laundromat can be profitable, providing much-needed community service.
This article will guide you through starting a laundromat from scratch.
Why Consider Starting a Laundromat?
Laundromats offer a unique business opportunity because they cater to a constant and evergreen need for clean clothes. Unlike many businesses, they often operate 24/7, generating income without investors’ active involvement. Here are a few things that’ll motivate you to open a laundromat:
- Low labor costs: Most laundromats are self-service, reducing staffing expenses. Newer machines are moving into a digital reloadable card that eliminates having to deal with coins or cash.
- Steady demand: According to IBISWorld, the US laundromat industry generates over $5 billion in annual revenue with a steady growth rate of about 1.5% per year, driven by population growth and urbanization.
- Recession-resistant: Laundry is a necessity, making laundromats less vulnerable to economic downturns. The essential business is resilient and adaptable to market changes.
- Potential for passive income: With modern payment systems and minimal staffing, many owners operate laundromats semi-passively.
How Much Does a Laundromat Cost to Start?
Understanding how much a laundromat costs is crucial before you invest all your savings. Startup costs can vary widely based on location, size, and equipment quality.
- Equipment: Commercial washers and dryers can cost between $1,000 $20,000 each, depending on capacity and technology. For example, Energy Star-rated machines cost more upfront but can reduce utility bills by 10–30%.
- Lease or purchase of space: Rental costs depend heavily on location. A prime urban location can command $2,000 to $5,000 monthly in rent.
- Renovations and utilities setup: Plumbing and electrical upgrades can range from $20,000 to $100,000, depending on the condition of the space.
- Permits and licenses: Expect to pay $500 to $2,000 for permits and inspections.
- Initial supplies: Detergents, vending machines, seating, and signage may cost $5,000–$10,000.
Average startup cost range: $200,000 to $500,000.
You can purchase this nifty spreadsheet on Etsy to analyze your laundromat business. The business analysis sheet has pre-loaded assumptions (that you can modify) with cash flow projections and revenue growth predictions.
How to Start a Laundromat With No Money
You might be asking, how to open a laundromat with no money? Can you even open a business with no money?
According to BizBuySell data, the median laundromat sale price in the US is approximately $350,000, often including equipment and leasehold improvements. Established laundromats often have steady cash flow, making them attractive for lenders.
- Small business loans and grants: The SBA offers loans up to $5 million with favorable terms for small businesses. These are federal low-interest loans that support small businesses. Besides loans, they also have special personnel who help draft business proposals, assist with legal issues, and provide counseling free of cost. These loans are not free, and the investors will still have to come up with a down payment, but they can get the business up and running with minimal out-of-pocket expenses.
- Partner with investors: Many laundromat owners raise capital through partnerships or family investors, sharing profits in return. People with cash in hand are willing to provide capital for a profit without active involvement.
- Seller financing: Some owners finance a portion of the sale price to ease buyer entry. These are the seller who have a love for their business and want to retire. A preferable deal for them is to leave the business to someone like them. Most owners agree on getting payment from the business profits for a scheduled number of years.
- Lease-to-own equipment: This can spread out the high upfront cost of equipment like washers and dryers over time.
A Deeper Dive on Starting a Lundromat
Research and Planning
Research and planning are critical components of running a successful laundromat business. They help identify opportunities, growth potentials, and set goals and expectations. It plays an essential role in the decision-making process.
Research and planning start with getting familiar with the industry. If you’re completely new to laundromat businesses, talking to those who already have one is the best way to get started. You can attend industry events, join professional associations, or contact the laundromat owners.
You should network with the current owner to understand the business model and requirements. The current owners will also have information about the existing laundromats for sale.
Most often, new business owners do not have the expertise to analyze the profitability of a new laundromat business during the planning and research phase. Some companies can assist in market research and perform benefit-cost analysis for a fee. It is best to leave these tasks to experts and make informed decisions.
The research and planning involve the following elements:
Identifying the Target Market
All businesses are customer-focused. Therefore, the first step in starting a successful laundry business is identifying your target market.
This can include individuals who do not have access to laundry facilities in their homes or apartments, students, and busy professionals. It also includes, but is not limited to, hotels, restaurants, and many other small business owners.
Conducting market research can help you identify the needs and preferences of your target market.
Analyzing the Competition
Competition analysis gives insightful information about products and services, their strengths, and weaknesses. You must be able to identify the competition first.
You can also analyze the competitor’s marketing strategy and identify gaps to better position your business plan. A quick look at your competitor’s customer feedback on social media platforms, review websites, and forums tells you so much about the business.
Competition analysis is an essential task one must not skip. It helps differentiate your business from competitors. You can keep track of their financial performance, revenue, profit margins, and growth rates. This can give you an idea of how successful they are and how much of a threat they pose to your business.
Finding the Perfect Location
When it comes to the laundromat business, location is everything. It is one of the most critical factors.
Laundry business location determines its accessibility to potential customers. Accessibility is correlated to convenience. A place that is easy to find and accessible by public transportation or personal vehicles attracts customers.
Similarly, a laundromat business location determines who it is targeted at. A laundromat located near apartment complexes will likely attract renters, while one located in a residential neighborhood may attract families or retirees.
Cost and competition are other factors that affect laundry businesses. The cost of renting or leasing a space fluctuates significantly depending on location.
You will need to find a location that is easily accessible, has ample parking, and is in a densely populated area. You should also consider the availability of utilities and the cost of rent or lease.
Calculating Costs
The equipment is one of the significant expenses in a laundry business. Depending on the quality of commercial-grade equipment like washers and dryers, the cost may vary.
Rent and utility costs are the next big expense. The water, electricity, and gas, along with the lease of the business space, are monthly recurring costs.
The laundry equipment also requires routine maintenance to ensure smooth operations and avoid unexpected breakdowns. The maintenance costs are usually small, but it is also a recurring expense.
Cost of labor includes employee wages, benefits, and payroll taxes. Depending on the number of employees and the size of the business, the labor cost varies. Supplies like detergents, fabric softeners, bleach, hangers, laundry carts, and packaging materials are small but necessary.
Marketing and advertising fees, insurance, and licensing also make up a significant business expense. The accounting, bookkeeping services, legal fees, software subscriptions, along with amenities and internet connections, are some of the miscellaneous expenses of a laundromat business.
Creating a Business Plan
A well-formulated business plan demonstrates the viability of a business venture. A business plan outlines the company’s objectives, products, services, target market, and competitive advantage.
A comprehensive business plan is necessary for the laundromat business. It showcases profit potentials and helps secure business loans. The financial projections help estimate revenue and set up company marketing strategies.
Obtaining Permits and Licenses
Starting a laundromat requires obtaining permits and licenses from the State and/or local government. From registering the business to passing the inspection requirements, you must comply with all the laws and regulations so that you don’t encounter any issues during operation.
The permits include a business license, zoning permits, a building permit, a signage permit, and all the health and safety permits. You should also check with your state and local government for any additional requirements.
You should always consult with local authorities for the most up-to-date information before opening a laundry business. You can also find reliable local agencies that help with the permitting process for a nominal fee. It comes in handy if you are new to the location or don’t have good knowledge about permitting requirements.
What Permits Do I Need to Open a Laundromat?
Knowing what permits you need to open a laundromat ensures your business is compliant. Common permits include:
- Business license: General authorization to operate from your city or county.
- Health and safety permits: Depending on local regulations, especially if offering wash-and-fold or drop-off services.
- Water discharge permits: Laundromats produce wastewater that may require special discharge permits or connections to municipal treatment systems.
- Signage permits: For exterior signs or branding.
Local government websites or business development offices are the best source for permit specifics.
Buying Equipment and Supplies
Equipment is the biggest expense of a laundromat business. But how much does laundromat equipment cost? Although the actual cost depends on a number of items, a new commercial washer or dryer could cost from $2,000 to $20,000. The cost boils down to the machine capacity, energy efficiency, features, and brand.
You should also find reliable suppliers for detergent, fabric softener, and other supplies.
Hiring Staff
Hiring staff is not always necessary for a laundromat, but having employees can help you provide better customer service and maintain the facility. You should hire employees who are reliable, friendly, and knowledgeable about laundry.
Marketing Your Laundromat
Once you have set up your laundromat, it is important to create a brand and market it effectively to attract customers. Here are some tips for marketing your laundromat:
Creating a Brand
Your laundromat’s brand should reflect its unique selling proposition and appeal to your target market. This includes developing a logo, tagline, and color scheme that are memorable and recognizable. You should also consider the interior design of your laundromat and make sure it is consistent with your brand.
Advertising Your Laundromat
Advertising can be an effective way to attract customers to your laundromat. This includes online advertising, such as social media and Google AdWords, as well as traditional advertising, such as print ads and flyers. You can also partner with other businesses in your community to cross-promote your laundromat.
Building a Customer Base
Building a customer base requires providing excellent customer service and offering promotions and incentives. This can include loyalty programs, referral bonuses, and special discounts. You should also consider offering additional services, such as dry cleaning or alteration services, to attract more customers.
Managing Your Laundromat
Managing a laundromat requires ongoing maintenance, financial management, and customer service. Here are some tips for managing your laundromat:
Maintenance and Repairs
Regular maintenance and repairs are essential for keeping your laundromat running smoothly. This includes cleaning the machines and the facility, as well as repairing any broken equipment. You should also have a contingency plan in place for emergencies, such as power outages or equipment malfunctions.
Managing Finances
Managing finances involves tracking revenue and expenses, paying bills, and creating financial reports. You should also consider hiring an accountant or bookkeeper to help you with financial management.
Providing Customer Service
Providing excellent customer service is key to retaining customers and building a loyal customer base. This includes being responsive to customer complaints and concerns, providing assistance with the machines, and creating a welcoming and friendly environment.
Are Laundromats Profitable?
Many wonder, are laundromats profitable? The short answer: yes, but profitability depends on several factors.
- Location: High-traffic, densely populated areas with low household laundry ownership typically yield better returns.
- Operating costs: Utilities represent a major expense, accounting for 30-40% of operating costs, so energy-efficient machines can improve margins.
- Pricing strategy: The average cost per wash ranges from $2 to $5; dryers often cost $1.50 to $3. Pricing must balance competitiveness and profitability.
- Additional services: Adding wash-and-fold services can increase revenue by 10-30%.
- Industry averages: Laundromats typically earn $30,000 to $100,000 in net profit annually. According to Coin Laundry Association surveys, the median laundromat revenue is approximately $60,000 per year per 20 washers.
Tips for Running a Successful Laundromat Business
- Maintain equipment regularly: Proper upkeep reduces downtime and repair costs.
- Invest in energy-efficient machines: They can reduce utility bills by up to 30%.
- Use a reliable payment system: Mobile pay or card readers improve customer convenience and reduce cash handling.
- Create a clean, welcoming environment: Bright lighting, clean floors, seating, and free Wi-Fi encourage repeat customers.
- Offer value-added services: Wash-and-fold, dry cleaning partnerships, vending machines, and loyalty programs increase revenue streams.
Frequently Asked Questions (FAQs)
How much do laundromats make annually?
Net profits range from $30,000 to $100,000, depending on size, location, and management efficiency.
Can I start a laundromat with no money?
Yes, through buying an existing business, seller financing, partnerships, or SBA loans.
What permits are required to open a laundromat?
Business license, health permits, water discharge permits, and signage permits are commonly required.
Are laundromats a good passive income business?
Yes, laundromats offer steady cash flow with low labor demands, making them ideal for passive income.
Conclusion
Starting a laundromat is a promising opportunity for passive income seekers. With initial investments ranging from $200,000 to $500,000, or creative financing options for those with limited capital, laundromats can generate consistent, recession-resistant revenue. Understanding how to start a laundromat, including costs, permits, and buying options, sets you up for success in this evergreen industry.
Are you ready to take the plunge? With thorough research and smart planning, your laundromat can become a steady source of passive income and financial freedom.