Complete Guide to Opening a Laundromat Business in 2021
Listen, I'll be the first to admit a laundromat business isn't the sexiest business to start in 2021, but they can be extremely profitable and help you build a strong passive income portfolio.
Laundromats make money by charging customers to operate their washing and drying machines allowing them to clean clothing and other fabrics. For many operations, no staffing is required, making it a great option for those looking to generate passive income.
In this guide, I'll explain everything from how much money laundromats can make, how profitable a laundromat can be, and some options to help you open a laundromat and grow a successful business. Let's get started.
What is a Laundromat?
If you aren’t quite sure what a laundromat is, it’s pretty simple to understand. A laundromat is a business in which customers pay a small fee to use your washers and dryers to clean clothes, bedding, and other items for an assortment of reasons.
My laundromats are coin-operated, meaning they function whenever a customer inserts change into the machines. With today's technology, many laundromats have adopted to accept credit cards or other forms of payment.
Laundromats can commonly be found in lower-income areas where customers may not have the money to fund purchasing a washer and drier of their own. However, they are needed in other areas as well. In highly populated areas, many apartments may not have spaces for laundry units, making a visit to the laundromat a necessity.
In addition, washing large bedding items can be a struggle if not impossible for people with their own machines. For this reason, people will often visit a laundromat to utilize the commercial-sized washers capable of washing such items.
Need another reason to visit a laundromat? If you’re in a time crunch and have a large amount of laundry to do, you can often double the size of a normal laundry load at home by using these commercial washers. This can half the time you spend doing laundry.
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How Much Do Laundromats Make?
Before you get started, you’re probably wondering if it’s even worth it to open a laundromat.
The truth be told, laundromats can make a significant amount of money. And the best part, the majority of your income will be passive. This means you won’t have to be around to make money.
So how much do laundromats make? Let’s do the math.
The amount of money you can make with a coin-operated laundromat varies depending on a variety of factors including the location of your operation, your expenses, and the prices you charge.
For this example, let’s assume that you’ve opened a laundromat in a growing city that brings in $250,000 of revenue each year. It is common to have expenses ranging from 65% to 115%. This means that your laundromat would have a profit anywhere from – $37,500 to a gain of $87,500.
As you can see, this is a pretty large range. However, for most companies, you can expect to see a lower rate of profitability at the beginning stages of your venture as compared to your later years. As your business ages and you learn, you’ll become better at managing your business to become more profitable.
How Do Laundromats Make Money?
People choose to use laundromats for a variety of reasons. Sometimes individuals cannot afford to pay for a washer and drier of their own. Other times, people will use a laundromat to wash larger items such as bedding that cannot fit in their own.
The primary way laundromats make money is by offering coin-operated washing and drying machines for their customers to use.
Do Laundromats Make Money?
Customers will choose to visit your laundromat to clean their items for a fee. It’s common to charge anywhere from $1.50 to over $4.00 per wash and another $1.50 to $4.00 to use the drier.
This means you can expect to make anywhere from $3.00 to $8.00 per customer per visit. If a typical customer visits your laundromat once per week, this could add up to more than $30 per month just for one customer.
But that’s not the only way for a laundromat to make money.
By offering laundry products such as detergent, stain removers, and other cleaners, you can increase your business's revenue. These items can have large profit margins and many customers might see it as a convenience.
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Are Laundromats Profitable?
Laundromats can be extremely profitable. With low expenses and reoccurring revenue, laundromats can be an excellent way to build passive income.
Your most expensive costs as a laundromat owner is your rent or building costs and utility expenses. The size and location of your building can be pivotal to running a thriving laundromat. Because large commercial driers run on electricity, if you live in an area with high electric costs, you might need to charge more for your machines.
Many laundromats will operate without staffing. This will help to keep costs low and maximize profitability.
Cost to Open a Laundromat
You have several options when starting your laundromat business. You might opt to purchase an existing laundromat, start from fresh, or start a franchise laundromat business. Each will have different costs.
Starting a New Laundromat
Some people will choose to start a laundromat from scratch. This includes:
- Purchasing land to build laundromat or finding space to rent
- Purchasing equipment and supplies
- Marketing costs
- Startup costs
Starting a new laundromat from scratch can be extremely time consuming and demand a large chunk of cash or a strong credit score to get cash. That said, it can also become the most profitable model.
Purchase an Existing Laundromat
Purchasing an existing laundromat is most likely the easiest way to start your business. However, this can be more costly if the business is already in good financial shape. Because the business is already functioning with a profit, you’ll pay a premium for this. On the bright side, this business is more likely to keep producing income and less likely to fail, limiting your losses.
Before purchasing any business, you’ll want to do your due diligence to ensure the business is in good shape and the numbers have not been manipulated.
Open a Laundromat Franchise
The third option when starting a laundromat is opening a franchise. This will offload some of the work upfront, but you'll be faced with paying royalty fees on your business's profits.
Many franchises will also offer financing options and additional support to help you open your laundromat business.
Some laundromat and clothing cleaning franchises include:
- Speed Queen Laundry
- Comet Cleaners
- Zoom Express
How to Open a Laundromat
As with any business, there are certain steps you should take to start your business.
Create a Business Plan
The first step in starting any business is creating a plan on how your business will function and become profitable. This should be outlined in your business plan.
Finalize Business Structure
After you've created a business plan, you'll need to examine and determine which business structure you'd like to proceed with. Depending on how many people are involved in the business, it's often most simple to form a single-member LLC for a business that is owned by one individual. You can examine other business structures here.
Brainstorm a Business Name
The next step in forming your business is to determine the name of the business. For a laundromat, you likely won't need to think too long on this step.
Register Your Business
Once you’ve finalized your business structure and have continued to pursue your venture, the next step is to register your business with state and local officials. You can find the details of how to register your business here.
Apply for Permits or Licenses
For a laundromat, you likely won’t have to worry about obtaining any permits or licenses for your business. But it’s always smart to do some analysis and ensure you have the right permits before opening your operation.
Open a Business Bank Account
The last step in starting your laundromat business is opening a checking account and possibly a credit card. This will help you to separate your personal and business spending, something critical come tax season.
Start Your Business
Now that you have all of these steps checked off, it’s time to start operating your business. You’ll want to get the word out that your laundromat is open and operating to those living close by.
How to Open a Laundromat with No Money
Now that you can see how much money a laundromat can make, you might be inspired to open one today.
But what if you have no money?
Well, you’re not completely out of luck. In fact, most people who open a business will do so with some borrowed money.
Here are a few options to help you open a laundromat with no money.
Take Out a Business Loan
Business loans can be an excellent way to obtain cash in order to start your business.
There is a downside, however. These loans can have hefty interest rates that can cost you thousands if you cannot pay them back. You’ll also need to have a strong credit score and some down payment for most all lenders.
Before taking out a business loan, you’ll want to consider a few things:
- Do I have a path to profitability for my business?
- Am I protected as an individual?
- Do I have a plan to pay off the loan?
If you don’t want to take on a large debt on your own, you can choose to partner with investors to start your business.
By doing so, you’ll be forced to give up some equity in your business, but the influx of money will enable you to open your business.
If you choose to partner with other investors, you’ll need to structure your business is the correct format and ensure that every detail of your business and how it will operate is communicated.
Opt to Open a Franchise
As previously mentioned, opening a franchise can help your business get the financing you need as well as making it simple to get started. This will cut out a majority of the work you’ll need to complete upfront, but it will cost you in royalties over the years. Opening a franchise is a great way to start a laundromat with no money.
Tips to Open a Successful Laundromat Business
There are some things that successful laundromat businesses do better than others. Here are a few tips to help you get started or boost your profitability.
Increase Average Revenue Per Customer
One of the best ways to increase your revenue as a laundromat owner is by offering other supplies and services to your customers. This could include things like detergents and stain removers or other services like dry cleaning or clothing repair.
These products and services can range in price but can have a drastic impact on your revenues and profits.
Keep Costs to a Minimum
Because your income per customer can be low when compared to other business models, you'll want to keep your costs to a minimum. If you plan on starting your laundromat from scratch, you might search for more eco-friendly machines that use less electricity than others. These machines might cost slightly more upfront but can save you thousands over the years.
Most small businesses lack the time or money to fund a successful marketing campaign, but this can be the difference between you and your competitors. For many households, you might visit the laundromat that is closest to you. For that reason, you'll want to spread the word in the miles surrounding your operation.
This can be achieved through several methods:
- Flyers and brochures
- Direct mail marketing
- Social media marketing
You can easily get started by printing out flyers and delivering them to local neighborhoods and apartment complexes. Another option is to post your business online through social media platforms as well as Google.
Complete Market Research Before Opening
Before starting your business, it’s always a good idea to complete some sort of market research to get a better understanding of your competition, your customers, and anything else that could affect your business.
For example, if there are multiple laundromats all placed close together, it might be wise to find another location, unless your laundromat can offer a greater experience or lower price than the others.
By completing market research, you’ll also get a better idea of how much to charge your customers. This will help you to better estimate your revenue and profits when constructing your business plan.
Conclusion: How Much Can You Make With a Laundromat?
Laundromats can make extraordinary amounts of money and be extremely profitable. With reoccurring revenue streams and little ongoing work, they are the perfect business to start for investors looking to grow a passive income stream.
With financing options available, it’s possible to open a laundromat with no money by partnering with a franchise or attracting other investors.
Have you thought about opening a laundromat business? Comment your thoughts below!