Observe the people walking around your city, town, or village, and you will realize that the majority have one thing in common- clean clothes.
That would explain why Laundromats are lucrative businesses, generating between $15,000 and $30,000 annual cash flow. This prospect makes starting a Laundromat business an excellent idea.
But how much do you need to open a laundromat? You will need to invest between $200,000 and $500,000 to get a medium-sized Laundromat off the ground. The good news is that laundromat businesses are recession resistant. With a success rate of 94.8 percent and a Return on investment (ROI) of 20 to 35 percent, laundromats are an excellent investment, regardless of the economic landscape (Source: Speed Queen by Alliance Laundry Systems)
This article provides a breakdown of Laundromat’s startup costs and recurring expenses needed to run the business month after month. This knowledge helps with creating a sound business plan that can enhance the chances of success. Keep reading to learn more.
If you are still wondering whether owning Laundromat is profitable? I wrote a whole article discussing the top 11 pros and cons of owning a Laundromat business.
How Much Is a Laundromat?
Generally, the cost of opening a medium-sized Laundromat range from $200,000 to $500,000 (Source: NerdWallet). Some entrepreneurs may also decide to take the franchise route. However, major players in this space often require that you have between $75,000 and $30,000 in liquid cash before you are accepted.
The cost of opening a Laundromat depends on several factors, such as:
- Are you building a new business or buying an existing one?
- The size of the business
- The area or region of the business
Starting a brand-new Laundromat business has its own benefits and challenges that we will discuss briefly. We will also discuss the challenges and benefits of buying an efficiently running company.
The advantage of franchising is that you can rely on the franchisor for business support and guidance. They are experienced in the business and can improve your chances of success.
If you buy an existing Laundromat business, here are some pros and cons.
Pros Of Buying An Existing Laundromat Business
Below are the advantages of buying an existing laundromat business:
- Loyal customers: Acquiring loyal customers takes a huge chunk of marketing and branding expenses. You will avoid these costs if you buy an efficiently running business.
- No startup costs: One thing that most entrepreneurs will want to avoid is the frustration of wooing startup capital. But if you buy a running Laundromat business, you have most things figured out and start making profits immediately.
- Proven Business model: An efficiently running Laundromat has a proven successful business model. This can give you confidence that the business is viable and has the potential to be profitable.
- Potential growth: Unlike a new business that takes time before it picks, an operational Laundromat business allows you to focus on development through expansion or increasing efficiency immediately.
Cons Of Buying An Existing Laundromat Business
Like anything in life, buying an existing laundromat business has a few drawbacks; here are the cons of buying an existing laundromat business:
- High initial investment: You will part with a lot of money for the business, goodwill, premises, and brand name.
- High maintenance cost: Since the machines are not brand-new, they will need regular maintenance, which could be costly.
- Faulty machines: Some machines could be faulty and would need replacement. You will incur these costs.
Due to these challenges, some entrepreneurs opt to create brand-new Laundromat businesses. As promised, let’s consider its pros and cons.
Pros Of Opening a Brand-New Laundromat Business
If you decide to open a brand new laundromat business, here are the advantages of opening a brand-new laundromat business:
- Up-to-date equipment: You have the advantage of bringing new equipment with warranties. The new equipment ensures efficiency that could attract more customers to your shop.
- You build what you want: Unlike buying an existing business created by someone else, starting your own business allows you to design it the way you want. You take pride in choosing the location and equipment for the business based on your research.
Cons Of Starting a Brand-New Laundromat Business
Similar to buying an existing laundromat business, starting a brand new laundromat business has also its cons:
- Challenging to get financing: Since you have not started operations, investors are always skeptical about new ventures.
- High startup cost: New machines, permits, rent for premises, and labor costs can be overwhelming. Furthermore, you will run at breakeven for a while before realizing profits. This waiting period can break you if you are not prepared.
Breakdown of Laundromat Costs
Now let’s consider what constitutes a Laundromat cost.
1- Space For Your Business
We can all agree that you need a physical space to run your Laundromat business. You want to ensure that your chosen location is ideal for your business. It could be rich in apartments, but the residents lack washers and dryers. They can drop their laundry at your business, or you can pick them up.
You will incur some costs researching potential competition in the area, the services they offer, and how you can beat them. Once you have established that the location is ideal and the business will likely turn profitable, you can look for an operating space.
Renting a space is a viable option over buying, but the cost range widely depending on the market. For instance, renting a Laundromat space in San Francisco will high than in other cities with a lower cost of living.
Renting a space is one of your major expenses when opening a Laundromat.
Before we dive into what constitutes utility bills for your Laundromat, ensure that the space you have selected has the proper water line and plumbing infrastructure needed for this type of business.
If it does not, you will need to install these facilities in the room, adding to the utility cost. You could also incur sewer connection fees for using a neighbor’s sewer and water system. The cost varies from one place to the other.
Charges for hooking Laundromat on water and sewerage lines for most cities range from $200 to $8,000 per washer. You can know the cost for your area by contacting the local water authority.
3- The Laundromat Equipment
A Laundromat requires several pieces of equipments, as discussed below:
Washers And Dryers
The most obvious equipment- commercial-grade washers could cost between $700 and $2,000.
You can buy used commercial dryers at a cost ranging from $600 to $5,000. In comparison, brand-new dryers’ prices range from $1,000 to $5,000 or more, according to their abilities.
But for the purpose of budgeting, you can budget equipment costs for a new establishment at $2,500 per machine. This cost should cover the purchase and installation.
Soap Vending Machines
A soap vending machine is an investment that can generate income for your business. A used machine will cost as low as $300, while a new one can go up to $3,000.
If you keep the machine clean, stocked, and presentable, your customers will be enticed to buy the soap whenever they come to clean the laundry.
While using a coin Laundromat is convenient for those who want to pay using coins; it is not ideal for the majority with plastic money. An ATM provides an ideal solution to this problem, allowing your clients to withdraw money using debit or credit cards.
They can then convert this money into coins using a coin or bill changer machine. Besides providing your customers with a convenient way to access cash, it is also a way your Laundromat business generates more income from the withdrawal fees.
ATMs range from $2,000 to $7,000 if you want to own one. It may require some extra dollars to fill the machine, but it will soon rack up earnings and provide valuable service to your clients.
Alternatively, you can include a card reader system in your business, allowing clients to use prepaid laundry cards. They don’t have to carry a money bag to use at the Laundromat; customers just need to swipe their cards.
This convenience can retain customers and improve your profitability. Card readers cost between $40,000 and $80,000.
4- Business Insurance
Several states require that you insure your business, but it is for your benefit. Since you have high-valued machines, they are subject to various risks, including theft and vandalism.
Other risks you can insure against your Laundromat business include storms, floods, customer slips and falls, and fire. Commercial property insurance that covers these risks ranges from $1,000 to $2,000 per annum.
Insurance will help you get on your feet in case of a major loss from accidents or disasters. And if you have employees, you may want to buy workers’ compensation insurance.
5- Marketing And Advertising
Although most Laundromat startups ignore marketing and advertising, they are valuable in enhancing your sales. Your business can only stand the test of time by attracting and maintaining customers- a goal you can achieve with a good marketing campaign.
If you have a 10% net profit margin and revenue under $5 million, you can dedicate at least 7% of your gross income to marketing.
Your goal is to attract your target audience from relevant marketing platforms. You can use social media marketing, posters, local billboards, email marketing, and print ads to lure potential clients.
Just ensure you monitor the effectiveness of each marketing strategy so that you don’t waste valuable resources on what doesn’t work.
Another cool way to market your business is to offer a free wash after several servicing many clients. This tactic can move customers to choose your business over the competition.
What to read next:
A medium-sized Laundromat costs between $200,000 and $500,000 because of the machines involved, renting space, permits and utilities, insurance, and marketing and advertising.
Whether you buy an existing business or create a brand-new one, a Laundromat business is profitable. With a good business plan, you will cover the initial cost and start making profits.
Do you have a Laundromat? If so, how much did it cost?