How To Start A Laundromat: Minimizing Risk and Ensuring You Succeed
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Learning how to start a laundromat can be tricky at first. While it may not seem like a good money-making business, done right, it can lead to a solid and sustainable income.
To help you get up and running and ensure that you minimize risks, follow the steps below to learn how to start a laundromat the right way.
- How to Start a Laundromat Business
- 1. Conduct Local Market Research
- 2. Learn About The Industry
- 3. Create a Business Plan for your Laundromat
- 4. Set Up Your Business Structure
- 5. Open and Fund Business Banking Accounts
- 6. Get Your Accounting Set Up
- 7. Create a First-Year Marketing Strategy
- 8. Create Your Brand
- 9. Pick Your Location
- 10. Obtain financing
- 11. Acquire Necessary Permits
- 12. Get Business Insurance
- 13. Purchase Laundry Equipment and Supplies
- 14. Determine How You Will Charge Laundromat Customers
- 15. Create your business website
- 16. Find Employees
- 17. Create Standard Operating Procedures
- What Expenses Do Laundromats Have?
- Common Questions About How To Open a Laundromat
- Final Thoughts On How To Start a Laundromat
How to Start a Laundromat Business
The following steps will demonstrate how to start a laundromat business. While they are in order, this may not be the correct order for everyone.
1. Conduct Local Market Research
The first step when learning how to start a laundromat is to conduct market research. Typically, market research will include:
- Competitive Analysis
- Laundry Industry Trends (historical and forecasted)
- Customer Analysis
- Local Industry-Specific Challenges
- Customer Preferences
You need to understand the competitive landscape to ensure there is room for your business and not an oversaturation. It's also essential to understand the target customer and know whether they are looking for what you are offering.
This doesn't mean you should get discouraged if other laundromats are already in operation. It's actually a good sign if there is already some competition, as it means there is at least enough demand to support more than one business.
However, you want to avoid too many businesses in a specific area and not enough demand. If possible, try and learn what the local market is like and whether it's underserved.
2. Learn About The Industry
Once you know whether or not a new laundromat is sustainable, you need to learn a bit about the industry. The best place to start is forums or groups where other laundromat owners are likely to hang out.
Upon an initial search, here are some of the different groups that I managed to find:
- Laundromat Owners Forum – Facebook Group
- Laundromat and Self Service Car Wash Group – Facebook Group
- Coin Laundry Association – Forum/Community
- Laundromat Resources – Forum
The above are industry-specific forums and groups, but you should also check out broader business groups such as:
- Fastlane Forum
- Reddit Business
- Facebook Business Groups
You want to focus on insider tips and tricks and ensure you aren't missing anything in your industry research.
Many businesses have failed due to oversight during the planning and research phase. Ensure you do your due diligence and avoid being one of them.
3. Create a Business Plan for your Laundromat
Once you've completed the industry research and dug a bit deeper into the laundry business overall, you will need a laundry business plan.
Your business plan is your blueprint and guiding force during the first few years of your business. Any time you have problems or questions, you can look at your business plan for what to do to remain consistent.
While many templates and how-to guides are available for people to create business plans, I've always used LivePlan. This service walks you through the business plan creation process and can save you significant time and money.
One of the primary advantages of using LivePlan is that they offer a bundle with QuickBooks, which you will need for accounting as a small business owner.
The other advantage of LivePlan is the tremendous support they offer to help you develop the exact business plan you need.
Done right, a business plan will help you remain consistent when making decisions, ensuring you never waver from your intended goals.
Use LivePlan to easily create a business plan that can help your laundromat business succeed.Check Out LivePlan
4. Set Up Your Business Structure
To protect your personal assets, you will need to set up a legal business structure. The exact structure you need will depend on various factors specific to your situation.
One thing I recommend here is to avoid using cheaper online legal services. While they can be helpful in many situations, for setting up a business, it's best to work with a local attorney that understands state and city laws and regulations.
The last thing you want is to incorrectly set up your company and then run into trouble with your personal assets exposed later on.
Do not skimp when it comes to your legal and accounting, and you should find you are both protected and able to minimize any financial liabilities down the road.
5. Open and Fund Business Banking Accounts
You won't be able to open a business bank account without a proper corporate structure. So, make sure you've completed the above steps before getting to this one.
Ideally, you want two accounts, one for incoming payments and another for outgoing. This will make accounting much easier when it comes time to reconcile all of your expenses in QuickBooks or Xero.
One other tip is to avoid big banks when first starting. Larger banks such as Wells Fargo often charge fees for business accounts. Try a local credit union if you can.
Larger banks can be good options for multi-location businesses or working with international clients. When starting, however, it will eat into your profits.
6. Get Your Accounting Set Up
This is best to do before you start running a lot of expenses or profits through your accounts. Accounting is one of those things that can quickly pile up, leaving you with tons of costs and profits to reconcile.
As with your business structure, make sure you speak with a professional. The last thing you want is terrible advice from the internet or a friend that leaves you with a massive tax bill. Or, even worse, it causes you to run afoul of the law.
Contact a local accountant who understands your municipality's laws and regulations and set up a consultation with them. They should help you set up your chart of accounts and let you know what they will need come tax time.
7. Create a First-Year Marketing Strategy
Your market strategy is a bit different than your market and industry research. While there will be some overlap, and many elements of your market research will be included in your marketing strategy, they are not the same.
Your first-year marketing strategy is a blueprint for how you plan on reaching potential customers. While you may rely on some foot traffic from the area, this shouldn't be your only strategy.
Look into the various marketing channels, including:
- Digital (online ads)
- Social Media (check out our guide on how to build a social media following)
- Newspapers (yes, they are still a thing)
- Other channels specific to your area
Each of these different channels will have various pros and cons, and not all of them will be right for your business. Most likely, you will want to focus on creating a website and hammering away at local SEO.
If you are unsure of how to create a market strategy, you can use various templates on the internet. However, it may be worth paying for an agency to develop a strategy for you, as this could give you a better ROI.
Remember that this is your first-year strategy. You need to revisit your marketing efforts and formulate a new plan based on what's worked, new trends, and your growing budget each year.
8. Create Your Brand
Get started on your brand after you have the basics out of the way and know what your business plan and marketing strategy look like.
For a laundromat, this doesn't have to be overly complicated. The key is you want everything to remain consistent. You will likely need logos, menus, and various signs drawn up. It's also possible you will want a new sign.
Of course, you'll need a catchy name for your new business. Check out our list of 1051 ideas for laundry business names.
You have a few options when it comes to branding. The first is to go with a professional branding agency. However, for a smaller laundromat, this is likely overkill.
9. Pick Your Location
You have a few options for picking locations for a laundromat. Either you can purchase an older laundromat business, renovate a building, or have a new building put up.
The cheapest of these options is purchasing an existing laundromat business for sale. However, if that option is not available, look for buildings that can be easily renovated and are already commercially zoned.
One final option is to buy into a franchise. This comes with many perks in that you will receive guidance from the company. Many vital elements such as your business plan, rules, operating procedures, and branding will already be taken care of.
However, the downside with a franchise is that you have much less flexibility in how you can run your business. You will also be paying out a portion of your revenue in franchise fees, which can quickly eat into profits.
10. Obtain financing
You need capital to start and run a business. Preferably, you will have enough starting capital to maintain an entire year while you work towards positive cash flow.
There are various ways that you can secure funding, including:
- Savings (owners capital)
- Small Business Loan
Many cities and states offer grants for new small businesses to help you save substantial amounts of money. Some examples may be facade grants to improve buildings in certain areas of a city, and others may be specific to minorities or disadvantaged business owners.
Check out your city and state websites and organizations such as the Small Business Administration for a list of grants you may qualify for.
11. Acquire Necessary Permits
Various permits will be essential for you to obtain to operate a laundromat legally. While these permits will be different for each city, they may include:
- Business License
- Fire Inspectors Permit
- Air and Water Pollution Control Permit
- Signage Permit (varies)
You will likely also need to pay various fees and obtain proof of payment, which should be kept with your permits. Some of the costs typical to laundromats include:
- Environmental Impact Fees
- Sewage Connection Fees
- Wastewater Fees
- Public Impact Fees
In the end, the laws in every state and municipality differ. So, make sure you speak with the right person in your local municipality to understand better what you need when first learning how to start a laundromat.
12. Get Business Insurance
Check into what insurance you will need as a laundromat owner when first learning how to start a laundromat. Some of the most common insurance types include:
- General Liability Insurance
- Commercial Property Insurance
- Workers Compensation Insurance
- Crime Insurance
- Commercial Umbrella Insurance (similar to gap insurance on a vehicle)
Many types of events, from employee injury to fires or water damage, can quickly put you out of business. Don't go cheap on insurance hoping for the best.
Some of these insurance types, such as general liability insurance, may also be legally required in your city or state. Find out what you need and make sure to stay compliant with local regulations.
13. Purchase Laundry Equipment and Supplies
Unfortunately, when first learning how to start a laundromat, you will need to plan for quite a bit in startup expenses.
The equipment for commercial laundromats isn't cheap. The average commercial washing machine and dryer averages around a thousand dollars. This is for traditional coin laundry machines.
Setting up a card-operated system will run you quite a bit more. In some cases, enabling a card system can be tens of thousands.
The other major equipment-related expense you need to think of is a commercial-grade water heater. Aside from these, common equipment will include:
- Laundry Detergent
- Fabric Softener
- Dryer Static Sheets
- Laundry Carts
- Furniture (chairs, tables, etc.)
- Office Supplies
- Fire Extinguishers
It's best to create a list of items that are absolutely necessary to start your business and a secondary list of important but non-time-sensitive things. Work through the secondary list as you begin to turn a profit.
14. Determine How You Will Charge Laundromat Customers
While the most obvious way you will make money is through the use of washers and dryers, you need to explore all revenue-generating options.
For starters, you will need to figure out early on if you want traditional coin-operated laundry machines or card-operated machines.
The major downside to card-operated machines is they are expensive and require payment processors that will take a fee. However, you may be able to increase sales and minimize waste via lost or stuck coins.
It would help if you also looked into other ways to make revenue, such as:
- Detergent and softener
- Dryer static sheets
- Laundry bags (customize them for brand outreach)
- Snacks and drinks for waiting customers
You can also offer a subscription laundry service for people who would rather drop off their laundry and have you do it. This creates a predictable revenue stream and allows you to diversify your offerings.
15. Create your business website
Another expense you need to consider when learning how to start a laundromat is online marketing. While having a website was once a luxury, it's now essential.
There are many platforms that you can utilize to create a business website, including:
However, as the co-owner of a marketing agency, I would recommend working with a professional.
You need to ask yourself if you want to own a laundromat or have a full-time job marketing for a laundromat.
While it may seem expensive, ROI for online marketing averages at 5:1, with great returns as high as 10:1. That means you make $5 – $10 for every one dollar you spend.
If you'd like to get started with your website check out Bluehost. As a Niche Pursuits reader, you'll get cheap, quality hosting, plus a free domain name.
16. Find Employees
This is a decision you will need to make early on: do you want to run a laundromat or pay someone to free up your time?
If your goal is to create semi-passive streams of income, then you will have to hire at least one person to manage day-to-day operations.
There are various ways to go about hiring someone. You can accept referrals from friends and family or go the traditional route and put up want ads.
However, no matter how you choose to hire, make sure you have all the proper documentation and compliance issues sorted out. Speak with your attorney and accountant to understand your obligations and what paperwork you will need.
17. Create Standard Operating Procedures
Once running, the final step is to begin optimizing operations to minimize waste and maximize profits.
You will need to create standard operating procedures for your staff. These are guides for how to do things and will ensure your business stays organized and profitable.
Make sure you have everything covered, from equipment maintenance schedules to how money should be handled. Strong and well-thought-out SOPs can help save your business tons of money each year.
What Expenses Do Laundromats Have?
Some of the expenses you need to consider are outlined above. However, when learning how to start a laundromat, it's essential to consider the complete list of expenses.
Property For Your Laundromat
Property is going to be one of your most significant expenses. You will need a decent amount of space to install enough machines to turn a decent profit.
A good range for the average laundromat is between 1,500 and 5,000 square feet. Make sure the price you are paying compared to the size of the building will leave you room for profit.
Utilities tend to run high at laundromats. You should expect monthly utility bills to run around 15% of revenue.
To help bring down expenses, try to purchase energy-efficient washers and dryers. Also, make sure that your water heater is an energy-efficient model.
Your equipment costs are the other significant expense behind the property. You will need waders and dryers as well as a commercial-grade water heater.
None of these will be cheap and, unless you are buying an existing business, will constitute a good portion of your upfront investment.
Repairs and Maintenance
Your washers, dryers, and water heater will inevitably need to be repaired at some point. The longer you put off repairs, the more money you are losing.
You will need a repairs and maintenance fund to help you minimize equipment downtime. Make sure you consider replacement parts, labor, and total replacement costs.
Detergent and Softener
While many people will choose to bring their own detergent and softener, you will need to have some on hand for those that don't.
The nice part of detergent, softener, and even dryer static sheets is you can add them to your list of revenue-generating products.
Business insurance is essential and, in many cases, a legal requirement for operating a business.
Laundromats, in particular, have a few risks involved, such as fire and water damage hazards and employee or customer injuries.
Make sure you have sufficient insurance that covers everything that could go wrong. You may need to carry multiple types of insurance, so speak with a professional to be on the safe side.
If you plan to run your laundromat yourself, you will only need to factor in your salary. However, if you plan on hiring people, you will need to have the funds to clear payroll.
Other expenses involved in hiring people include workers' compensation insurance and various state and federal taxes. Make sure you are aware of everything to avoid nasty surprises later.
Marketing and Advertising
One final area you need to think about allocating expenses for is marketing and advertising. Ideally, your marketing and advertising budget should be between 5% – 10% of revenue.
Remember that the point of marketing and advertising is to drum up more business. So, this is an essential expense for growing your laundromat.
If you can, try and work with a professional for maximum return on investment.
Common Questions About How To Open a Laundromat
To further help you understand how to start a laundromat, here are answers to some of the most commonly asked questions on the topic.
What is the growth potential for a laundromat?
There is significant growth potential for a laundromat located in the right city. The global market for coin-operated laundromats was $14.6 billion. This is expected to grow at a compound annual growth rate of 9.4%.
Factors that will affect growth include the location of the laundromat, profit margins, and how successful you are with marketing and advertising.
Should you consider joining a laundromat franchise?
You should consider joining a laundromat franchise if this is your first business and you need more guidance.
Business franchises can be an excellent way for new business owners to learn the ropes with an already established company. The only downside is margins will be lower.
What are some insider tips for jump-starting a laundromat?
Some insider tips for jump-starting a laundromat include picking the right location and keeping your utility expenses low.
Choosing a location near numerous apartment complexes or universities can ensure you have a steady stream of customers.
You should also consider offering managed laundry services to busy individuals and businesses such as small hotels and restaurants.
What is the startup cost for a laundromat?
The startup costs for a laundromat will vary greatly depending on where and how large the laundromat is.
On average, a new laundromat owner should expect to spend between $200k and $500k to get up and running.
Other factors that will affect startup costs include whether you are buying into a franchise, setting up a new business, or buying an existing laundromat.
Are laundromats a dying business?
Laundromats are not a dying business and are on a growth trajectory. Cities experiencing a population decline may not be the best place to open a laundromat.
However, if you are in a college town or a city experiencing rapid population growth, you can expect to do well opening a laundromat.
Why do laundromats fail?
The most common reasons that laundromats fail are due to poor management. While a laundromat can be a semi-passive income source, you will need to take a somewhat active role in ensuring your laundromat remains profitable.
It's essential that you make sure your customers stay happy and that your equipment is properly maintained and operational.
Final Thoughts On How To Start a Laundromat
While learning how to start a laundromat isn't complex, there are quite a few things you need to make sure of and get right.
It's key to plan out the details before your business is up and running. The last thing you want is to get busy with customers without having a proper laundromat business plan to fall back on when problems arise.
You should also make sure your location is suitable. Don't jump into the first building you see out of impatience. Getting your location and planning right in the beginning will ensure your laundromat sees long-term success and remains profitable.
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