Laundromats are an essential service and can be a great business opportunity. Want to learn how to start a laundromat small business? Check out this complete guide.
If you are wondering how to start a laundromat small business, you’ve come to the right place.
Laundromats provide an essential service to the community, and many people with busy schedules or limited access to laundry facilities rely on them. And although the number of stores is shrinking, profits remain consistent, indicating that laundromats could be a safe and viable venture.
Starting a laundromat from the ground up requires that you take a lot of factors into account beyond location, equipment, and marketing.
Let’s get into how to start a laundromat and lay out the steps that will set your business up for success.
Is A Laundromat A Good Business To Open?
In a word — yes. Laundromats typically have a very high rate of success (a whopping 95%), and they can be quite profitable. In fact, between the 18,000 laundromats open and operating nationwide, they generate $5 billion in revenue before taxes.
Profit margins for laundromats are around 20% to 30%. On average, you can earn around $400 and $500 a day in profits. Some sources even claim that you could earn up to $24K a month or even $300K a year.
The other perks that come with a laundromat are that they’re low-maintenance and low-risk. It’s a type of business that will always have a market, which makes it recession-resistant. And the risks inherent to the laundromats are far more manageable than, say, general contracting, a car wash, or opening a restaurant.
Entrepreneurs who may be suited for this line of work have solid customer service and management skills in addition to knowing enough about plumbing, electrical, and machine maintenance to keep operations running smoothly (or at least to know when to hire someone to fix issues that could lead to bigger problems).
How Much Does It Cost To Open A Laundromat?
Now, don’t say we didn’t warn you — opening a laundromat is not cheap.
Numerous sources claim that it will cost in the range of $20oK to $500K to get a location working and ready to start providing services. Some state that it could cost upwards of 1 million dollars.
The two greatest factors affecting these costs are where you decide to set up shop and equipment costs.
Let’s take a look at those costs in more detail.
These costs are mainly affected by square footage, the age/condition of the building, and location. While there isn’t a strict one-to-one exchange between square footage and cost, you can expect to spend anywhere between $25 and $35 per square foot if you decide to rent.
During the duration of your lease, the condition of the building will also impact what you pay in rent. Should you decide to mortgage, you’ll need a 25% down payment on the value of the property in addition to about 5% for closing costs.
Bear in mind that it’s best to prepare yourself for higher overhead costs and prioritize buildings that give you the best combination of square footage and location. You’ll need the space for the number of washers and dryers you’ll store on site.
So, for example, although the states of New York, California, and Florida are the most expensive to operate in, laundromats in Los Angeles or Manhattan have a greater potential for reliable profits since they have better access to their target market and consistent foot traffic.
After you’ve found a prime spot, it’s time to start stocking up on washers and dryers.
The industry standard for laundromats is front-load washers. They do cost more than top-load washers — to be exact, in the range of $1,000 to $3,000 — there but are a few reasons to consider investing in these instead.
Front-load washers are better are removing stains and dirt from clothes because of the interaction between gravity and the water in the loads. What’s more, they require less water for cycles, and clothes washed in a front-load washing machine will dry faster.
You could always purchase top-load washing machines (which cost $500 to $700), but since they don’t have these same benefits, this could actually hurt you in the long run. Between longer wait times and dirtier clothes, customers might leave your laundromat for a competitor.
Although a vending machine isn’t necessary, it’s worth considering if you’d like customers to purchase snacks while they wait. Costs vary significantly but know in advance that they’ll cost thousands of dollars regardless. (And vending machines aren’t just for snacks! You can put laundry essentials in a vending machine, too: soap, dryer sheets, bleach, fabric softeners, etc.)
Lastly, to keep customers from bouncing if you purchase machines that only receive coinage as payment, you should pick up a bill-to-coin change machine. Again, though prices vary, you’ll be paying another few thousand dollars for this equipment.
Additional Startup Costs
Should you decide to provide laundry delivery services, you’re going to need a van to efficiently fulfill requests. This will cost you between $30,000 and $50,000 on average.
One of the neat benefits of a van is that it’s also free advertising space for your business. If you’re leasing the vehicle, ask the dealer to go over the terms of the lease with you to see if it’s possible to get a custom paint job.
There are other, smaller necessities you’ll likely need to invest in, too. These include:
- Ironing boards
- Laundry carts
- Security cameras
- Cash registers
- Laundry detergent and dryer sheets
Prices for these will vary. After determining what you’ll need, research the costs across different retailers and online vendors and factor this into your budget.
Startup Funding For Laundromats
If you don’t have that kind of money lying around, that’s totally understandable. Money doesn’t grow on trees…though we’ll have to get back to you on whether it grows inside the pockets of trousers you throw into the wash.
Thankfully, you don’t need to bear the brunt of these costs on your own. Different types of loans and funding are available for your laundromat startup. It’s also possible for some business owners to get a business loan with bad credit and even same-day business loans.
Let’s dive into the options:
Equipment loans, in particular, can help you secure funding for washer and dryer units, which are the bread and butter of your operations. There’s a bit of variety in the kinds of equipment loans you can acquire, so we recommend reading up on what equipment loans are and how they work.
If purchasing a vehicle for laundry delivery services is on your mind, a business auto loan will give you a head start with that.
One type of equipment loan that may be suitable for your laundromat business is an equipment lease. With this arrangement, you “rent” the equipment you need for a fixed time period, and at the end, you have the option to renew the lease or purchase the equipment outright.
This could work for you if you want to give different washers and dryers a try before doubling down on a purchase.
Lines Of Credit
With a business line of credit, businesses can access a set amount of funds on an as-needed basis. It works similarly to a credit card, but it comes with much higher limits and lower interest rates.
This could be a great way for you to gain access to short-term funds without having to go through the process of applying for a new loan every time you need money. And with a revolving line of credit, you can borrow cash again once you’ve paid off any debts.
Unfortunately, first-time business owners are usually at a disadvantage when the time comes to seek out loans. Your business credit history probably isn’t established, and you have no prior records to show that you can be trusted to repay what’s lent to you.
Taking out a personal loan for business may be a better option in this case. Of course, the downsides are that you’re personally liable if you aren’t able to repay what you borrowed, and the borrowing amounts are typically lower.
Business Credit Cards
Business credit cards can be used similarly to loans if securing one proves to be difficult. As an added bonus, nabbing a card and staying on top of your payments will increase your business credit score over time, making it easier to access other sources of business funding in the future.
It’s possible to get a business credit card with only an EIN. Plus, the best business credit cards currently available also have welcome offers, cash back, and rewards programs.
Opening A Laundromat Step By Step
Now, let’s go over the steps you need to take to open your first laundromat business.
Step 1: Write A Business Plan
Every business owner in the making needs a business plan to put their goals, experience, strategies, competition, and budget to paper. Your laundromat is no exception.
In fact, as you’re seeking startup funds, potential lenders and investors will likely ask you for your business plan. This helps them assess the riskiness of your venture.
Traditionally, business plans span pages upon pages filled with detailed market analyses, financial projections, startup requirements, product descriptions, and in-depth business strategies aimed to demonstrate how the business will achieve success.
Depending on the kind of business you want to start and your experience as an entrepreneur, you may want to take this route to draft your business plan. However, a one-page business plan may be better suited for your purposes in the very beginning.
A one-page business plan will help kickstart the process of planning your startup’s success without drowning you in minutiae. But just be aware that if you plan on seeking large amounts of funds from outside sources, they may expect a longer business plan.
Step 2: Select Your Business Structure
There are a few different types of business structures, each having their own legal and tax benefits.
Sole proprietorships are the easiest to get off the ground, requiring minimal fees and registration steps. However, if you wind up sued or default on your loans, you’re personally liable for the debts, and your personal assets could be seized.
An LLC provides you with more financial protection since it separates your business and personal financials. Coupling this with LLC business insurance makes that protection even more comprehensive.
In the end, you may find that the tax and legal benefits of one structure better align with your short- or long-term business goals. Do your due diligence and research what’s best for you, and definitely consider speaking with an expert to help you make a decision.
Step 3: Look Into Business Insurance
Every business is prone to risks and mistakes, many of which you may not even be aware of.
At the very least, you’re going to want a general liability plan. This will protect your business from the financial burden of medical fees and legal costs when customers or their property ends up damaged on your property.
Next, you’ll need commercial property insurance. A commercial property plan will reimburse you for damages to your equipment or building that result from physical causes, such as fires, vandalism, wind, and theft. You can also purchase endorsements that provide coverage for earthquakes, storms, and flooding (in short, flood insurance).
If you’re looking to cut down on costs, business owners policy bundles commercial property and general liability at a discounted rate. And depending on which carrier you purchase through, it could also include business interruption insurance and other useful endorsements.
In every state (excluding Texas), you’ll be required to get workers’ comp as soon as you hire your first employee. Workers’ comp will assist with paying medical bills and time off should your employees get hurt on the job.
Lastly, say you start a laundry delivery service. When you or your employees travel to customers’ homes to pick up and drop off laundry, you’ll certainly need to be covered by garage liability insurance in the event an accident happens, and you’re at fault.
Step 4: Secure Funding
At this point, you should follow up on the sources for funding mentioned above.
Sort through which options are the best fit for you and go from there. If you’d like to know more, check out our article on the types of startup funding and how to get them.
Step 5: Register Your Business
Registration requirements vary depending on your business structure and state. Regardless of whether you need to register your business with your state government, your local government will most likely require it.
Registration is inexpensive and should be one of the first steps you take. Check to see if your city or state government websites allow you to register your business from there.
On that same note, look into whether you must register to be considered eligible for any necessary licenses or permits.
If you plan on hiring employees — realistically, you’re probably going to have to — you’ll need to register for a federal Employer Identification Number for tax-related purposes.
Lastly, make sure to register a DBA to operate your business under a name that showcases the service you provide. Come up with a name that isn’t already taken and will keep your business in the minds of customers.
Get more detailed info in our guide on how to register a business.
Step 6: Acquire Licenses and Permits
For starters, you’ll need a business license issued by your local government. Neglecting to obtain one could result in hefty fines, or worse, a full closure of your business.
Even if you don’t sell goods on your premises, the money you earn through providing laundry washing services counts as taxable income. As such, you’re also required to have a seller’s permit.
Other licenses and permits you’ll likely need include:
- A water pollution permit
- A fire department permit
- Zoning permits
- Sign permits if you plan on using signage for your business
- A food permit if you want to sell food at your establishment
Look into your state and local laws to see what’s necessary.
Step 7: Arm Yourself With The Best Small Business Software
Once your shop is set up, and you’re ready to start cleaning clothes, there are a few other needs you’ll still have to address.
For example, how will you accept payments? How will you manage orders and keep track of customer information? Keeping track of inventory and your finances is important as well.
Step 8: Spread The Word About Your Laundromat Business
You can’t expect customers to come to you if they don’t know you exist. To have them show up, you’ll need to promote your business and highlight what makes you stand out.
Online advertising is definitely an option. Social media ads, paid search engine ads, and display advertising are all great ways to get your message in front of potential customers. Once your business is open, signage is also key, as this could grab the attention of foot traffic and drivers passing by.
Additionally, consider running promotions, discounts, or giveaways to incentivize people to check out your business and spread the word. With the right mix of advertising and promotions, you can create buzz and attract a steady stream of customers to your business.
Best Software To Manage Your Laundromat
As mentioned in the steps to start your laundromat business, there are several key software programs that may help your business run more efficiently.
Here are our biggest suggestions:
Wash-Dry-Fold is a POS platform designed by laundry service professionals for laundry service professionals. At a glance, just a few of the notable features it boasts are:
- Organizing and viewing orders by wash cycle and due date
- Notifying customers when loads are finished via text
- Log special requests/notes for orders
- Price loads by weight
- Inventory management
While Wash-Dry-Fold does offer a cloud-based data storage system that allows you can view and manage documents and reports online, note that the hardware itself requires internet in order to function at your store.
The ways in which this POS can streamline your operations and capitalize on order turnover are very impressive to say the least. And while this is a POS system designed for laundromats, any of the best POS systems will help you manage your store.
Shopify might not be the first thing you’d expect, but it’s worth considering.
Say you plan on taking payments in person, Shopify’s POS gives you a fair amount of customizability with the types of orders customers can place through the system, effectively allowing you to ring up customers based on the washer they’re using and any additional services they might need.
Shopify also logs how long a customer has been loyal to your store, how much they’ve spent over time, and their contact information. Paired with a loyalty program integration of your choice, keeping return customers in your store is a breeze.
Should you decide to sell custom goods online, such as craft soaps, t-shirts, candles, and other handy knick-knacks, Shopify gives you the tools to build your own custom website with ease and market your business.
Square’s POS is another option for physical storefronts looking to expand into the online territory, though it’s admittedly not a great fit for laundry-based businesses.
You need a platform to track the money that’s coming in and going out of your business. This will help keep you in control of your profits, identify where you can cut back on costs, and prepare tax information when the time comes.
QuickBooks allow you to view customer credit memos, track expenses, keep tabs on customer refunds, and access receipts across all from your computer or laptop. And if you’re worried that it won’t track the financial activity on the POS you choose, truth be told, it has so many integrations that it most likely will. Check out our comparison of QuickBooks’ suite of solutions to determine which version best addresses your business’s needs.
Diversifying Your Laundromat’s Income Streams
A laundromat’s business model may seem straightforward, but there are extra measures you can take to get the most out of your earning potential.
Again, perhaps you may want to expand your business by offering new and potential customers a laundry delivery service. The convenience this offers could very well justify the price point for customers with busy lifestyles, and you may be able to draw in more sales by making the process hassle-free for those who would prefer to spend their time in other ways.
Selling extra services such as ironing, folding, and hanging clothes might be something you want to consider, too.
Additionally, there are types of franchises you can partner with that allow you to sell their products, whether through vending machines or over the counter.
Don’t be afraid to get creative as you seek out more opportunities to provide stellar service to your customers and earn your work’s worth.
How To Start A Laundromat FAQs
How do I start a laundromat with no money?
Laundromats can be expensive to start — between $200,000 and $500,000 on average. Your best bet if you want to avoid paying out of pocket is to secure startup funds through sources such as equipment loans, business loans, business credit cards, and personal loans for business.
Is it hard to own a laundromat?
Owning a laundromat is simpler than many other types of businesses; your greatest responsibilities will be keeping track of your financials, managing customers, and maintaining your equipment. But don’t let the ease of running a laundromat tempt you into becoming an absentee manager, in which case, your business will suffer as a result.
How profitable is a laundromat?
Laundromats have profit margins of around 20% to 30%, and they can earn $400 to $500 a day on average. Some sources even claim you could earn up to $24K a month or $300K a year.
How do I start a laundromat business from scratch?
Your location and the equipment you invest in are your fundamentals, so start there and be on the lookout for startup funding. Next, you’ll want to register your business, obtain licenses and permits necessary for your operations, and start planning how to attract and retain customers.