How much does it cost to open a laundromat?
Opening a laundromat in 2022 requires a high initial investment. However, the industry is very stable, with an always in-demand service.
Opening a laundromat in 2022 requires a high initial investment. However, the industry is very stable, with an always in-demand service.
Are you looking for your new business opportunity? Opening a laundromat in 2022 requires a high initial investment in order to hit the ground running. However, the industry is very stable, with an always in-demand service. Learn more about this business venture by reading through our article!
Entrepreneurs are always searching for new opportunities to invest their money in with the goal of making a steady long-term income. While some business opportunities or more viable than others, a common venture that many entrepreneurs who have the money are pursuing is opening a commercial laundromat. A commercial laundromat is a type of business that allows you to wash-and-fold your own clothing if you don’t have an in-unit washer or dryer, which is very common in urban cities. Unlike dry cleaning, where you provide your clothing to people who will wash your items for you, commercial laundromats allow you have control over the process.
Therefore, if you’re thinking of starting a coin laundromat business but don’t know where to start? Keep reading to learn all there is to know, including a breakdown of the average costs you’ll need to spend upfront before successfully launching this new business venture.
The average cost of opening a mid-sized laundromat falls anywhere between $100,000 and $500,000. Your exact start-up costs will depend on the price of property in your city, and whether you’re buying an existing laundromat or starting from scratch. The numbers provided in this article are only estimates provided at the time this article was written, your actual costs may vary.
You also have the option to buy into an existing laundromat franchise. The biggest advantage of taking this route is that you’ll get lots of support and guidance from the franchisor, which can help your business take off faster. However, most of the big brands will want you to keep minimum liquid cash ranging from $75,000 to $300,000.
That’s a steep cash requirement for any small business, let alone a laundromat. Should you find it a turn off, then you can opt to purchase an existing, independent laundromat. In addition to stepping into a business that already has customer loyalty, buying an existing laundromat may help you avoid the pains of starting a small business from scratch. That’s especially true if the laundromat was run efficiently by the previous owners.
Of course, there’s always the excitement of starting a new business from the very beginning. The laundromat startup cost for a new establishment falls between the $100,000 and $500,000 bracket. While the initial investment is high, it is a stable industry with an in-demand service – people always need to clean clothes!
Unsurprisingly, there are about 35,000 laundromats in the U.S. generating cash flow of between $50,000 and $10,000,000 per year. With proper planning, you can set up shop and expect a reasonable amount given the $5 to $6 billion of revenue that coin laundry generates each year. This is especially true for entrepreneurs who are looking to open a laundry mat in a large city!
Laundromat startup costs (Utilities, property, equipment, etc.)
So, how much does it cost to start a laundromat? Here’s a breakdown of the costs when starting a laundromat from scratch:
The average laundromat in the U.S. takes up 2,170 square feet, but some use up as much as 5,000 square feet while smaller facilities can occupy a mere 1,000. These size requirements will give you an idea of the property costs to expect in your city.
Nonetheless, most coin laundry businesses require between $200,000 and $500,000 worth of physical space. If you’re going for a really big establishment in a city like New York where real estate is costly, that amount can shoot all the way to $1 million.
Most laundromats have 40 to 100 commercial-grade washers and dryers costing anywhere from $800 to $2,600 apiece when new. So, you’re looking at $32,000 to $260,000 in equipment costs. In case you don’t have this kind of money, you can look into equipment financing.
Also, keep in mind that laundromat washers and dryers require repair and maintenance, which will cost between $120 and $500 per service. The good news is that they don’t require frequent replacement. Most equipment will offer a solid 10 to 15 years of service. Other important pieces of machinery that you will need to purchase for your laundry mat are water heaters. Customers need to be able to wash their clothes in both hot and cold water, which is just as important as your washers and dryers. Accordingly, you can also expect to pay for repairs on these machines as well.
As you would expect, hot water and electricity are the biggest ongoing expenses in a laundromat and will set you back $4,000 to $8,500 per month. Depending on the neighborhood, you may also need to pay sewer connection fees (popularly known as tap fees).
You’ll also want to consider getting insurance to protect yourself just in case a customer trips or machines break. General liability insurance will cover most of your bases. That includes injury, property damage and even advertising injury. This type of insurance ranges from $350 to $750 per year for coverage of up to $1 million.
It’s standard to purchase and install coin laundry machines when starting a laundromat. They offer a great deal of help in collection of payments. However, with more people using cards even for small payments, you can also look into installing a card reader system. This will allow your customers to use their laundry card, much like a credit card, whenever they don’t have change. Laundromat card readers cost between $40,000 and $80,000.
The other alternative is installing a bill-to-coin change machine, which costs anywhere from $800 to $7,000. Remember, the more payment options you offer your target audience, the more likely they will choose to come to your location over others. People these days want convenience, and not everyone has cash on them as we shift to a more digital society. Therefore, if you have the ability to provide your target audience with options, then you are more likely to keep them as loyal customers in the long run.
In addition to property, equipment, utility and payment system costs, a laundromat also requires laundry carts, furniture, supplies for your office, detergent, fabric softener and garbage bins. Combined, these extras cost between $1000 and $2000. If your budget allows, you can look into installing security cameras for safety as well as Wi-Fi and TVs for your customers’ entertainment. If you can make your laundromat a place where people don’t mind waiting when they do their laundry while still remaining profitable, then you can have a competitive edge over traditional commercial laundry mats in your area.
How much does a laundromat make a month?
On average, a laundromat nets between $10,000 and $40,000 per month. But again, it boils down to location. In NYC, for example, a laundromat can bring in $50,000 or more per month.
So, how much do laundromats make per day? The average laundromat earns anywhere from $300 to $1,300 a day. Weekends are the most productive because that is when most people do their laundry.
With additional streams of income like a vending machine, you can increase the income from your laundromat by up to $400 a month. Just make sure that the vending machine is well stocked and placed strategically so that people can access it even when they don’t necessarily want to do laundry.
With a return on investment (ROI) of 20 to 35% and success rate of 94.8%, the laundromat business is pretty safe. You’re pretty much guaranteed success with a profit margin of between 20% and 35%. For every $1,000 dollars you invest, you get $200-$350 as profit, which is far better than other industries. And it explains why coin laundry businesses generate between $15,000 and $300,000 in cash flow per year.
There are few ways of pushing your laundromat profit margins higher. For one, you can choose to adopt a 24-hour model so that people who are occupied during the day can still get the chance to do laundry at night. And of course, that means more money to you. Or maybe you can do 24 hours on Friday and weekends and 12 hours on the remaining days.
Ultimately, your model of choice will possibly come down to whether you have enough employees to keep the business running for long hours. Speaking of which, 70% of laundromats have two or fewer employees. The business is not heavy on human resources, which is good news for your profit margin. You only need to market it effectively to attract the right audience.
Coin laundry businesses that perform well generally get the highest traffic from low-income renters. 87% of customers live within a mile away from the laundromat and 90% of them will become repeat customers. Besides, 60% of laundromat clients are women, with men making the minority. Therefore, when creating a marketing campaign for your new or existing laundromat, make sure to take these values into consideration. In addition, you should also research further into the types of demographics of people who rely on laundromats as it can help you understand your target audience, which is important when making a marketing campaign.
Remember, in the digital age we live in, businesses, regardless of the type of business and business model are successful, not only because they offer excellent products and services, but also because they have strategical digital marketing techniques and online branding.
How much does a load of laundry cost at a laundromat?
If you’re completely new to the laundromat business, then you’re probably wondering how much you should charge per load of laundry. The average cost per load (washing and drying) starts from $2.50 all through $10. The national average stands at $6.20.
Prices vary depending on the capacity of the washing machine as well as water temperature. The bigger the machine, the costlier it is. Similarly, the hotter the water, the higher the cost of doing laundry. In case you want to introduce additional services like ironing, folding and delivery, you can charge between $1.50 and $3.00 for them.
Laundromat financing: how to get a business loan for a laundromat
After figuring out your laundromat startup cost and how much you can make from the business, the next step is determining how to finance the startup. And you’ll be glad to know that while using personal savings is a viable possibility, it’s not the only available option. Your best bets are equipment financing and small business loans. Either option makes sense because you don’t lose any part of equity or bring in an investor.
Equipment financing is a type of loan designed specifically for the purchase of business equipment and supplies. It is a self-secured loan, which means that the equipment you’re purchasing acts as its own security. Thus, in the case of a laundromat, your washers and dryers will act as collateral for the loan. If you default, the lender may seize them.
Because of their self-secured nature, equipment loans are generally easier to qualify for. You may get approved with a credit score of 600 or even lower. However, most lenders will ask that you make a down payment of between 5% and 20%. The upside is that a majority of creditors won’t look at your years in business when qualifying you for funds. This makes equipment loans excellent for a new startup.
Small business loans are exactly what they sound like – loans created for small businesses. The most common small business loans are SBA-backed loans; specifically, SBA 7(a) and SBA 504 loans.
SBA 7(a) is ideal for starting a new business, but you can also use it to acquire an existing business. SBA 504, on the other hand, is more suitable for those who are looking to finance commercial real estate and high-cost equipment.
Therefore, if you’re thinking of acquiring property for setting up a laundromat, it makes sense to apply for SBA 504. But if you’re comfortable with renting or leasing space, or perhaps you want to buy an existing laundromat without acquiring the property in which it sits, then it makes more sense to consider SBA 7(a).
SBA loan amounts start from $50,000 through $5 million, making them more-than-sufficient for startups and acquisitions. But you need a good credit score of at least 720 to qualify. Plus, the SBA has a mandatory down payment requirement of 10%.
Should you fail to qualify for SBA loans, you can look at traditional commercial bank loans for small businesses. Being a new business, the bank won’t consider its revenue or the years it has been in business. However, you’ll need excellent credit, a solid business plan and possibly a down payment to qualify. The bank will use your business as collateral and will likely ask that you put more personal assets up as security.
You can open a laundromat with no money by starting the laundromat business at home. This makes sense if you already have a washer and dryer. You can land neighborhood clients through marketing – particularly by word of mouth. But of course, there are other free platforms like social media and Craigslist where you can advertise your home-based laundromat. Just make sure that your home is easily accessible so that customers can drop off and pick up laundry conveniently. Alternatively, include picking up and dropping off loads of laundry in your service packages so that customers don’t find it necessary to come to your place.
Besides that, you can also work with an existing home laundry service like Laundry Care. Laundry Care is a national network of entrepreneurs who provide laundry services from their homes. While anyone can join, you’ll have to pay a joining fee of $39.99, which is negligible compared to the cost of starting your own fully-fledged laundromat. In addition to that, you have to offer pick up and drop off services, so this makes sense if you have or can get a vehicle.
In any case, joining the network and advertising yourself in your neighborhood will certainly land clients. Use the profits as down payment for a laundromat franchise loan or a small business loan.
Further, for more information on how to start a laundromat business in your area, entrepreneurs can also look for guidance from the Coin Laundry Association. This association helps been helping people run successful laundromats across the country since 1960. With different membership options, events, marketing opportunities, and other resources you may find helpful!
How much does it cost to buy a laundromat? Expect to pay between $100,000 and $500,000 to acquire an average-sized laundromat. Most of the amount goes into property and goodwill, both of which are likely to cost more than when you’re starting from scratch.
The good news is that an existing laundromat comes equipped with machines and other equipment to offset the cost of property and goodwill. But you may still need to invest in renovation and additional equipment, more so if the current equipment is outdated.
Having known the cost to expect, how do you buy a laundromat? Here’s a step-by-step guide:
Find a suitable laundromat: ideally, you want a laundromat that’s located in a low-income neighborhood where residents don’t have built-in washers and dryers in their houses. You can either search internet listings or speak with real estate brokers who are well-versed and can point you to where laundromats for sale are located. Don’t be afraid to speak directly to laundromat owners and ask them if theirs are for sale.
Value the laundromat: once you’ve found a suitable laundromat establishment to buy, do an initial appraisal. This will give you a reliable idea of how much money you need to raise. Plus, an appraisal is a necessity if you’re going to apply for a loan. The most accurate method of valuing a laundromat is the Net Operating Income (NOI) method.
File your paperwork: Once you have found a laundromat, you will then need to file your business documents including your business name and any other legal documents and licensing. In addition, entrepreneurs will also need to determine whether they are going to operate as a sole proprietorship, LLC, or other business model. This will help you determine whether further steps need to be made before going to the bank to get a business loan or find other business funding before you start.
Fund the purchase: there are several ways of financing a small business like a laundromat. As already mentioned, loans and savings are among the most common. However, you can also apply for grants, approach venture capitalists and angel investors, try peer-to-peer lending, or do a crowdfunding campaign. That said, if you have a solid business plan, you’re more likely to get approved for a loan than any other financing facility. Of course, you can combine multiple streams of financing – like savings and loans – to meet your target.
Do due diligence: once you’ve identified and appraised a laundromat, and you’ve also figured how you’ll get financing, the next thing to do is make an offer. The seller may take time to consider you offer; perhaps even weigh it against other offers that might already be on the table. Meanwhile, you will enter escrow. This is the perfect opportunity to do some due diligence. Check the business’s books to see if it makes what the owner says it does. Examine expenses as well to ensure that the owner hasn’t understated them. You’ll also want to run numbers and see whether the laundromat has a profitable future, and if it presents easy ways of growing income. For example, does it have enough space for a vending machine? The last thing you want is to be stuck with a stagnant business.
Close the deal: if everything checks out, complete the purchase.
Starting a new business can be an exciting new venture regardless of what route you take. If you are serious about starting a laundry mat in your area, you’ll first need the funds to purchase a location to run your business. Nonetheless, with there are numerous funding options available if you are unable to pay upfront.
Furthermore, you’ll also need to set up operational accounts for your business. And that’s where the Nearside debit card may be of help. With no monthly fees, no minimum deposit requirements and no NSF fees, the Nearside debit card does away with most banking fees and charges that eat into small business profits. It also comes with 2.2% cash backs on all purchases, ensuring that you earn more whenever you buy supplies and equipment for your laundromat.
Sign up for a Nearside account today and enjoy modern checking for small business owners.