How to start a laundromat. A simple step-by-step guide.

April 30, 2021
Posted in: Tips and Advice Guide
Quick Summary: Starting a laundromat business is a great way to make money! A laundromat can be profitable, but it does take some work and time. In this guide, we will go over all the steps involved in starting your own laundromat. We'll talk about things like what equipment you should buy for your facility, how much startup capital you need, and how to start generating income right away!

Table of Contents


Step 1: Do Your Research

Doing your research is arguably the most important step in the entire process. Adequate research will reveal whether or not the laundromat business is the right business for you. It can also show insights into possible business opportunities, local competition, startup expenses, and more. 

Before you jump into this industry:

  1. Do your research.
  2. Join laundromat associations
  3. Learn from current laundromat owners
  4. Read about the industry

I have outlined some of the top topics you should research in this step below. This will be the foundation that you grow your business from. Sufficient research will help you plan how to start, maintain, and expand your business. Do not skip this step!

competitor research

Competitor Research

Your competition is one of, if not the most important thing to research. This takes a lot of time and effort to do effectively. But, once complete, you will have identified your direct and indirect competition, their strengths and weaknesses, and certain business opportunities. To set your laundry up for success, you need to dive deep into your competition and the market. 

First, identify your competitors. Start with a simple search online through Google Maps. Look at the highest-rated laundromats in your area. Alternatively, you should also drive around town and take note of all laundromats in the area. Make detailed notes of each business and compare them with each other. Keep track of their business name, services offered, hours, prices, etc. Cast a wide net to get a comprehensive view of the competitive landscape. 

Next, categorize the competition—list other laundromats from primary competitors to secondary competitors. 

  • Primary Competitors: These are your direct competitors; the laundromats closest to you that have the highest chance of taking your customers. They target the same audience and offer similar products and services to those you plan to target and offer.
  • Secondary Competitors: These laundromats may offer similar services but target a higher or lower-end customer base or are located in a different part of town. These competitors are still good to track for potential opportunities and ideas. 

Now, reflect on your research. Ask the following vital questions to understand what you should do in your business venture to capture market share. 

  • Do other laundromats have an online presence?
  • What is their market positioning?
  • What are customers buying from them?
  • Are they focusing on affordable prices or convenient services?
  • How do they differentiate themselves from other laundries in the area?
  • What features and benefits do they highlight in their marketing copy?
  • How friendly are their employees? What is their customer service like?

Competitor research can consist of simple internet searches to secret shopping at their facilities. Doing this will help you understand who your competitors are and how they position themselves in the market. Through this process, you should see different opportunities that you can capitalize on. 

Location

Choosing the location for your laundry facility could make or break your business. First, decide who your target market is. Through competitor research, you should now understand which demographic brings the most opportunities for your business. Should you focus on low-income families who need affordable services or focus on high-income families who need convenient services? 

Once you decide on your target audience, you should pick an area that aligns with this. Also, it is critical to find an area with high population growth and low competition. When verifying locations, ask:

  • Does the local population match your target audience?
  • Does the community house a stable, healthy economic environment? 
  • Are there already too many laundromats in the area?
  • What is the median household income in the area?

Once you select a few potential buildings for your laundry business, it is time to consider accessibility, foot traffic, competition, and licenses and fees. 

Make sure the building is easily accessible to your customers, employees, and suppliers. If it is on a busy street, how easy is it for customers to get their cars in and out of the parking lot? Can they comfortably get their clothes out of their cars? Will vending machine suppliers and maintenance workers have enough room for their commercial vehicles? Take note of foot traffic around the building. Monitor the facility at various times of the day and week to see how demand for parking changes. Verify that the parking lot is well-maintained and lit. 

Look at local competition in the area. If there are already too many, it likely won’t be a good place to put a new facility in. However, if there aren’t any laundromats, it might be the prime location. 

Finally, look into the licenses and fees needed in your area. Each state and municipality has different laws for license and fee requirements. If these requirements are too severe, it might be a good idea to relocate your business venture elsewhere. Contact your local government agencies to find out what licenses you need. 

Common licenses need to start a laundromat business include:

  • A health department license
  • A fire department permit
  • An air and water pollution control permit
  • A sign permit

Common fees include public improvement fees, impact fees, and sewer connection costs. 

The largest fee will likely be sewer connection costs. This can cost anywhere between $200 to $8,000 per washer. So, if you have 30 washers, you could face up to $240,000 in just sewer connection costs! Do not neglect looking into this before finalizing a location. 

laundromat expenses

Expenses

Whether you are buying an existing laundry or are building one from scratch, you can expect to pay at least $200,000 to $500,000. Laundromat startup expenses include construction, washer hookup fees, licenses and permits, and equipment. Ongoing expenses include rent, utilities, insurance, employee payroll and benefits, and miscellaneous supplies. 

New laundromat owners typically spend between $150,000 to $300,000 to fill their laundromat facilities. This is highly likely for your business due to the high equipment costs. Front-load washers can reach $20,000 each, and your water heater system could cost as much as $40,000.

If you’re renting a commercial space, this is going to be a major portion of your ongoing expenses. Consider rent prices at different potential locations for your business. Also, take into account utility costs. These may be included in the lease, but if not, you should ask the utility company for estimates or the previous year’s billing for the site. 

Create an itemized list of everything you will need to start your business. Talk with other laundromat owners, contractors, and accountants to get a grand total. Then, add a “cost cushion” so that you have room for expenses that might go over your budget. (this can and likely will happen) 

Keep all of your research organized, and try to network with other laundromat business owners as much as possible. Join different laundromat owner associations, reach out to other owners, read books about the industry, and do deep research online. After your research, you should be confidently ready to begin writing your business plan. 

Step 2: Write A Business Plan

A business plan will help you articulate strategies and goals for your business. It provides insights on exact steps to be taken, specific goals, resources required to achieve those goals, and a timeline of anticipated results. 

The objective of a laundromat business plan is to define objectives that will help your business prosper. Do not shrug this off; it’s important! Writing a detailed, easily executable business plan can lead to years of success and profitability. 

Step 3: Form A Business Entity

The next step is to form your business entity. This is pretty simple but takes some time dealing with government agencies and paperwork. First, pick a name for your business and choose a business structure. 

After you decide on your name and structure, head to your state’s business filing website, each state is different, but they all offer comprehensive guides on how to form your business entity. 

Finally, open a business bank account. It is important to keep track of your business expenses and profits. To do this, you need to stay organized and keep your business expenses separate from your personal expenses. Document everything and try to understand basic accounting procedures. 

A separate bank account for your business will help you keep your expenses separate. If you purchase anything for your laundromat, it should go through the bank account and NOT your personal account. 

laundromat construction

Step 4: Buy or Build Your Business

After your business entity is set up, you need to purchase an existing laundromat or build one from scratch. Either way, you are going to need those licenses and permits I mentioned before in Step 1. Once all of your licenses and permits are granted, you are ready for construction.

Buying An Existing Laundromat

Buying an existing business has its unique pros and cons. First, it likely is already generating cash flow. If you do your research, you might find a laundromat that is already profitable. If this is the case, it is less risky compared to building a laundromat. Having pre-existing financial information and a business plan in place allows you to focus on growing that business rather than starting it. 

It is also easier to get financing for an existing business. Lenders love seeing existing collateral, steady cash flow, and a proven business model. However, purchasing a laundromat does have its downside. Since it is already established, it likely doesn’t look or operate how you want it to. 

You will likely need to renovate the facility, make repairs or replace current machines, and deal with inherited employees. It might also be more expensive to purchase a laundromat. This is because you are paying for every part of the business: the building, equipment, customer base, branding, marketing, business plan, design work, renovations, and upgrades.

Building A New Laundromat

Building a new laundromat is more common but takes a lot more work. Unlike an existing business, your new laundromat will have no customers, marketing, employees, or existing cash flow. It’s up to you to put in the work to grow your business to gain these things. 

But, for some business owners, this is the best part. If you enjoy starting a new business the way you’ve always dreamt of it, this is the way to go. Plus, it might be a cheaper option anyway. This option allows you to put everything in place how you envisioned it from the get-go. You won’t have to worry about any employees, customers, or processes that have ties to a prior laundromat owner. 

Consider both options and compare how they align with your business goals. This will help you decide which option is best. 

Step 5: The Next Steps

Next, you should get business insurance for your laundry or dry cleaning company. This helps ensure that you are protected against the unexpected. Here are different types of coverage that you should consider.

  • Business Property Coverage – This coverage can help you cover the costs to repair or replace damaged property. This can cover your equipment and the building that the equipment is in. Washers and dryers are notorious for breaking down, especially when used daily. Business property coverage will help cover unexpected costs to fix any breakdowns. 
  • General Liability Coverage This is the main insurance that every company needs regardless of the industry. If a customer slips on water from a broken washing machine, this coverage may help pay for damages and protect your business assets in a lawsuit. 
  • Equipment Breakdown Coverage – Your laundromat business relies heavily on the uninterrupted functioning of your laundry equipment. This coverage helps pay for repairs to washing machines, dryers, soap dispensers, phone systems, and more.

After you have insurance for your business, you should decide whether you will hire employees. Some businesses are open 24/7 without anyone working there. Depending on your location and target audience, this might not be the way to go. 

When hiring employees, you want the friendliest people with the best customer service experience. Hire people who are hardworking, honest, reliable, and happy. During the interview, look for people who show up on time with a smile. 

Finally, consider marketing your laundromat. A great way to grow your customer base after establishing your business is through marketing campaigns. The online presence of service businesses is becoming more and more important.

To increase traffic to your store, engage in social media, create a Google My Business listing, post-physical ads, or invest in a marketing agency to handle the work for you. Once you get customers to your store, you have to impress them. 

The goal is to retain customers as much as possible. You do this by setting yourself apart from the other laundromats in the area. Provide more services, cleaner facilities, reliable machines, friendly staff, etc. This alone will greatly increase your number of returning customers and, through word of mouth, can increase your number of new customers as well.

laundromat vending machine

Step 6: Running Your Business

That’s it! You now have an operational laundromat business. The next step is to handle the ongoing, daily tasks of being a laundromat owner. These tasks could include:

Opening and Closing Your Laundromat Business

Laundries are generally open from 6 am to 10 pm. Weekends are usually the busiest days, so it is a good idea to stay open on those days as well. If you aren’t opening a 24/7 coin-operated laundry, you will need to open and close the business every day. 

It is important to do this promptly because your customers will base their schedules around your business hours. If you are late to open, they will get frustrated and go somewhere else. If you are late to close, they will keep coming late. 

You might also opt for an automatic locking system. This only costs around $1,500 and can save you a lot of time. You will still have to lock up at night, but it will automatically unlock the doors in the morning. 

Cleaning Your Store

Customers want a nice, clean space to do their laundry in. Whether you clean or you hire someone to clean, it should be done at least once a day. See that your store is thoroughly cleaned each and every day. If you have employees doing this, routinely drop in unannounced to make sure they are doing their jobs. 

The best time to clean is before or after open hours. If you have a larger store, you might need to clean twice a day. 

Collecting The Money

Collecting the coins from the machines should be your responsibility. Do not outsource this to your employees or even a facility manager. Empty each machine daily and record everything. Record which machines are being used the most, which are most profitable, etc. Also, the coin machine should be refilled every day as well. When it’s empty, your customers can’t do their laundry, and you miss out on more money.

You might consider investing in a card system. With a card machine, customers pay money to put credit on a store card that is unique to your facility. Then, they can just swipe that card to pay for all of their laundry needs. This makes your job much easier because you don’t have to deal with all of the coins. Simply empty each card machine of bills, count them, record the totals, and deposit them in your business bank account. This is much easier than dealing with coins.

Filling Vending Machines

Lastly, you should make sure that all vending machines are full every day. If you contract with a vending machine company, they should fill the vending machines for you. But if not, an empty machine could lead to you missing out on additional profits. Customers who wait for their laundry without leaving have a higher chance of purchasing snacks and soda from your machines. 

inside laundromat

Tips for A Successful Laundromat Business

Location, location, location

The most important decision you’ll make is your laundry’s location. It needs to be close enough for people to reach on foot or by public transportation but far away from any competing laundromats. That way, customers will have no choice but yours when it comes time for washing their clothes – which means more profit!

Increase Customer Lifetime Value (CLV)

Customer Lifetime Value represents the sum of all profits from a customer over their lifetime. It is calculated by looking at average spend and frequency, multiplied by retention rate or conversion rate to purchase again.

The more you invest in your customers, the better their experience will be and they’ll keep coming back. This will increase the long-term revenue from that customer for your business.

Keep Costs Low

One of the most important considerations for a laundromat business is cost. As such, it’s essential to keep costs low in order to make more profit and stay competitive. The most effective way to reduce costs is by using energy-efficient equipment. Another cost-saving measure that many laundromat owners swear by is customer self-service. This reduces the need for staff and allows customers to sort their own laundry, which saves time and money on labor.

Set Yourself Apart

One way to make your laundromat unique is by offering amenities that set you apart from competitors. This not only gives customers a reason to come back, but it also leaves them with an impression of why they should choose your business over others in the area. With this strategy, there are many things you can do such as providing free Wi-Fi or hosting events for kids on laundry day (such as drawing and coloring). These types of activities will help create a sense of community at your establishment and show potential newcomers what sets you apart from other laundromats nearby.

Build Relationships With Your Customers

It’s important to make friends with your customers. The best way to do this is by being friendly and establishing a personal connection so that they will come back in the future. Building relationships with your customers will also help you understand their pain points. You can capitalize on these to offer better services and create happy customers that bring you more money.

Promote Your Laundromat Online

You can use social media outlets such as Facebook and Twitter to promote your laundromat business. For example, create a hashtag related only to your business (such as #laundryday) which users can search for more information about what you offer at your establishment or share pictures of themselves washing clothes at your facility.

Also, look into creating a Google My Business listing for your business.  You can upload an address and phone number, add photos of the inside and outside of your laundromat, include hours that you are open for business (and any specific services offered), as well as being able to see how many people have checked out your listing.

This is the perfect medium to connect with new customers online. There are over 100 million businesses that have a Google My Business listing. These local businesses receive 26% of their online views from their GMB listing and 16% of these get more than 100 calls each month. This search volume should not be ignored when it comes to promoting your laundry service online!

Conclusion

Do you need financing for your laundromat business?

Opportunity Business Loans is the leading online lender for laundromat businesses. If you need financing, fill out our online application form today. We offer competitive rates and flexible terms to help you grow your business. Apply now and see if we can be a part of your success story! 

Click here to apply for an opportunity business loan today!




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