How to start a laundromat business

Coin laundries are an evergreen business. During times of prosperity or recession, the public will always need clean clothes. Even exceptional circumstances like a pandemic can expand the laundromat market as homeowners struggle to afford appliance repairs and supply chain issues impact the availability of new washers.

If you’re interested in starting a laundromat business, here are some things to consider.

Decide on a business model

A laundromat can be operated in several ways. It may be attended, unattended, or partially attended.

Attended laundromats offer a wide range of services that can increase profitability, such as dry cleaning, wash-dry-fold, tailoring and alterations, commercial work, and residential collection and delivery.

Depending on your area and demand, you may choose to open regular business hours or 24-hours a day.

Another option is to buy into a franchise. This allows for a relatively speedy start-up and the ability to scale over time. A franchise model involves paying an upfront franchise fee and a share of monthly revenue to the franchisor. In return, you will benefit from sales, marketing, and operational support.

Write your business plan

To ensure your laundromat business is a success, you need a business plan. A well-thought-out plan can guide your strategy, identify risks, and help you secure funding to expand and grow your enterprise.

Here’s a suggested outline for your laundromat business plan:

• Executive summary: A brief overview of your business and why it will be successful
• Company description: Provides detailed information about your business and explains your competitive advantages
• Organization and management: How your company will be structured and who will run it. For example, will it be a partnership, LLC, S-Corporation? Who will be responsible for day-to-day management?
• Market analysis: What is the industry outlook? Who are your target customers? What competition are you up against?
• Financing plan: A description of your funding requirements, your detailed financial statements, and a financial statement analysis.
• Marketing strategy

Understand the startup costs to open a laundromat

If you are asking yourself "How much does it cost to open a laundromat?" then planning for the startup expenses and identifying ways to reduce costs is essential early on. Since you will need a significant amount of equipment, including commercial-grade washers and dryers, furniture and fittings, utilities installation, and more, the cost of starting a laundromat can be quite high.

Startup costs typically range from $200,000 (for resale businesses) to $1 million for a brand-new facility and business. Property prices in your chosen location will also factor into costs. But do your homework and look for ways of reducing your expenses wherever possible (such as purchasing used commercial laundry equipment washers and dryers).

Assess the ongoing expenses to run a laundromat

In addition to paying for utilities and supplies (detergent, cleaning products, etc.), you’ll also incur typical business expenses like payroll, employee benefits, insurance, rent, etc. upon opening a laundromat.

Depending on how you manage your budget, ongoing expenses can range from 65% and more of your gross income. Expenses are a big deal. To help estimate your ongoing expenses, plan for somewhere between $4,000-$8,500 per month. But carefully analyze your costs to determine a number that makes sense for your business and location.

Calculate how much your laundromat will make in profits

According to the Coin Laundry Association, coin laundromats can range in market value from $50,000 to more than $1 million. If managed well, you can expect your business to provide many years of relatively effortless income from its core coin-operated services and range of diversified offerings.

Determine how you will charge laundromat customers

Start by checking out what other laundromats in your area charge. You can then refine your pricing by understanding your operating costs.

Costs per load of laundry will vary depending on variable factors such as the cost of water and sewerage per gallon, how much it costs to heat water, electric consumption, and how many gallons of water are used per washing cycle. Your appliance owner’s manual should contain information about energy and water consumption.

Pick your business structure

Your choice of business structure – whether it’s a limited liability company (LLC), corporation, or partnership – will impact your daily operations, taxes, and the amount of risk you’re willing to take with your personal assets. Choose a structure that balances legal protections and benefits.

The four most common are:

• Sole proprietorship: This means that the business is owned and run by one person with no legal distinction between the owner and the business.
• General partnership: A general partnership is the simplest variety of partnerships and is created automatically when two or more persons engage in a business enterprise for profit. No state filing is required.
• Limited liability company (LLC): This is one of the most popular forms of a business entity for small businesses. An LLC offers limited liability protection (shielding your personal assets by protecting them from debts and liabilities associated with the company) and pass-through taxation.
• Corporation: A corporation is a separate legal entity owned by its shareholders, thereby protecting owners from personal liability for corporate debts and obligations.

For more information on business entity structures, read Comparing company types.

Choose a business name

Naming your business may not be as simple as it seems. When selecting a name, try to make the name short, easy to remember, descriptive of the business, and capable of drawing attention. Depending on the business form you choose, you may have to register and/or receive approval from the local or state government where your business is formed.

For more information on naming rules for different entity types, read Naming your startup business.

Register your business

Based on your location and business structure, you may need to register your new laundromat business with your state and/or local government.

To do this, LLCs, corporations, and general partnerships must register (online or through the mail) with the Secretary of State or business agency where they conduct business.

Importantly, if you choose to operate your business under a name other than your personal name (even if you are a sole proprietor), you will need to register that business name with state and/or local governments in a process known as filing a “doing business as” (DBA) name.

Get federal and state tax IDs

Before you can pay business taxes, you may need to register your business with the IRS and obtain an employee identification number (EIN). An EIN is the equivalent of a social security number for your business and is required on your state and federal tax filings. (Note: If you’re a sole proprietor without employees, then you don’t need an EIN. Instead, you will file your taxes using your social security number.)

An EIN is also needed to open a business bank account and ensure the separation of your business and personal finances.

You may also require a state tax ID. Typically, you’ll need to get an EIN before you apply for your state tax ID. Check with your state or a business lawyer, as the process will vary by state.

Open a business bank account and credit card

A business bank account and credit card keep your personal and business transactions separate and afford certain legal protections. For example, if you operate an LLC or corporation, maintaining a business bank account helps you maintain liability protection and the security of your personal assets in the event your business is sued or found liable.

A bank account and credit card also help build business credit – something that suppliers and vendors will verify before transacting business with you. For this reason, consider opening your business accounts as soon as you start incurring business expenses or accepting money.

Get licenses and permits

Most small businesses need some form of business license or permit to operate. These vary by business type, location, and regulations.

State governments typically regulate dry cleaning businesses. But you may also require the following:

• general business license
• fire department permit
• environmental permit
• sign permit

Some authorities also impose fees on laundromat businesses, such as

• public improvement
• sewer connection
• sewer/wastewater
• impact fees

Visit your state and local websites to determine which licenses and permits you need. And be sure to manage your licenses over time, keeping track of when you’ll need to renew them.

Obtain business insurance

Business insurance protects you against damage or costs incurred at your place of business. Coverage varies wildly and it’s wise to consult a broker to determine what policy and addendums you may need to protect your business.

Furthermore, if you have employees on payroll, you must also pay workers’ compensation insurance and unemployment insurance.

Find a location

Location is key to the success of your laundromat business. Things to consider include residential density, accessibility, demographics, and income levels. Conduct market research to determine these factors. Also consider your competition. If there is another laundromat in the area, can you compete with them? Do you have a unique differentiator that will draw customers to your establishment?

Review your budget to determine if you can afford the commercial lease in your desired location. Your operating space will be your largest investment, so plan carefully.

Obtain financing

Starting a laundromat business involves a degree of upfront investment and may require you to obtain financing. A business bank loan or SBA-backed loan are common sources of small business financing. These funds can be used to procure equipment and other capital expenses.

Your business will also need funds to accommodate ongoing and unexpected expenses, such as equipment maintenance and repair. A business line of credit is a potential option to cover these costs. This form of financing allows you to draw on funds only when you need them.

Use your business plan to help increase your chances of securing funding. Include your budget, projected profit and losses, and financial projections. With these tools, you’ll have a good sense of how much funding you need and your plan to repay the loan.

Stand out with targeted marketing

As you think about marketing your laundromat business, conduct a strengths, weaknesses, opportunities, and threat (SWOT) analysis. This exercise can help you define your value proposition, target the right customers, and focus your marketing messages and tactics. Once you have this in place, you can develop a targeted plan for reaching and engaging your audience.

Word of mouth and referrals are a powerful tool so be sure you have a plan to claim your business listing on Google, Bing, and Yelp — and manage it over time.

Small business marketing can be challenging. Check out the many resources in your community that can help, including your Chamber of Commerce and Small Business Development Center. You can also get help from SCORE, which offers free business advice from experienced mentors who have stepped in your shoes.

Start a laundromat

With the right planning, you can build a successful laundromat business. There are several options to choose from, and the potential for growth is evident.

Ready to form a corporation or LLC? Learn about BizFilings incorporation and LLC formation services.