If you have been brainstorming profitable business ideas to supplement your income, you have probably come across Laundromat. But you may be wondering how much Laundromats make.
But is owning Laundromat profitable? Owning a laundromat is profitable. Data from the Coin Laundry Association shows that an average-sized Laundromat in the United States can generate up to $300,000 in annual revenue. Other statistics also indicate that Laundromats are safe businesses, with Laundrylux showing that 95% of these businesses last beyond five years and provide returns on investment 25% higher than a mutual fund.
Unlike most businesses that struggle during the recession, Laundromats are recession-proof, which means that the industry will likely stay steady despite economic problems.
What to expect from this article, factors affecting the profitability of your Laundromat, pros and cons of owning a Laundromat, and whether or not owning a laundromat is profitable. If you are wondering how much you need to open a Laundromat? I wrote a whole article with a cost breakdown.
Factors Affecting The Profitability Of Your Laundromat
We have already established that a Laundromat is a profitable venture. However, the equation is more complex.
While many entrepreneurs go into this type of business because they desire to earn passive income as they work for other companies, Laundromats require dedication and attention. Several things can chew into your profits, and if you don’t plan well, your business may not be as profitable as you have heard.
And because I don’t want you to make bad decisions, here are some things that can affect the profitability of your Laundromat business.
1- Initial And Recurrent Cost
Let’s get one thing straight, starting a Laundromat business requires enormous investments. You will incur the cost of buying or leasing machines and renting a space for operations.
Other costs that will chew into your revenue include utilities, supplies, marketing, and insurance. So, you may run at break-even or even at a loss in the short run. However, in the long run, you will have a steady revenue that can cover the cost and leave you with high profits.
I assume you choose an ideal location, provide excellent service, and do good marketing. You can learn more about the cost of opening a Laundromat in the article “How much do you need to open a Laundromat.”
Laundromat businesses offer in-demand services because people will always need clean clothes. You can capitalize on their busy schedule and lighten their load by washing their laundry.
And because there is ready demand and the business is easy to start, expect to compete with other entrepreneurs who have also seen this opportunity.
Competition often shrinks market share and profitability. You may also need to lower your prices or provide huge discounts to retain existing customers and attract new ones.
These offers will likely reduce your revenue unless you find new ways to increase work volume.
You remember I hinted at choosing an ideal location for operation on the first point. This is because location affects the number of customers you serve and the general success of the business.
The Laundromat business is location restrictive. Your target market will want to carry their clothes up to a mile in search of a Laundry. Therefore, it is essential to choose a location near your customers.
Furthermore, your business premise should be easily accessible by car or foot. You want to encourage people to come to your premise.
So, location plays an essential role in your profitability. If your business is near a densely populated area packed with rentals or apartments with students, you will likely make more money than a business far from the target market.
4- Financing Options
You will need some financing to open a Laundromat business. The initial startup cost is challenging for many entrepreneurs to finance with their personal savings.
But how will financing options affect profitability? Credit facilities with high-interest rates can strain the business because you may use a considerable part of your profits to pay the loan and the interest.
On the other hand, a relatively cheaper loan from friends and acquaintances means you can keep more profit.
Therefore, before signing for the loan, evaluate its long-term effect on the business. If you have better alternatives like the U.S. Small Business Administration (SBA) loans, go for them.
Pros And Cons Of Owning a Laundromat
If you have figured out all these factors that could eat into your profits, you may be hell-bent on starting your Laundromat business.
However, before you begin this exciting journey, let me present some pros and cons of owning a Laundromat business.
Pros Of Owning a Laundromat
Let’s begin with the encouraging stuff. Here we go.
1- Good Return on Investment And High Success Rates
Very few businesses can guarantee high ROI and success rates in the world.
In the United States, the laundry business is estimated to have a 20-35% return on investment in the first 5 years. This means that if you invest in a Laundromat business, you have almost double the returns of most startups (Source: Laundrylux)
The Laundry business does not have inventory management- you will not be ordering and stocking items.
While the initial cost of investments may be high for Laundromats, you can be confident of high returns in the long run. The machines do not require daily servicing, especially with new equipment. This means your recurrent costs will be reduced once you start operations.
2- Ease Of Management
Entrepreneurs looking for a side hustle business that can generate income and do not require constant onsite presence should consider investing in a Laundromat.
You can simply install Laundromat management systems to ease your work. This system provides cloud-based monitoring and coinless payment options, thus reducing the need to be at the premise all the time.
And there is more; the management systems also help with record-keeping and accuracy. You will know how many people visited your business and how much you earned at the end of the day.
3- It Is Not Weather Or Seasonal-Dependent
People will always have dirty clothes, whether rain or sunshine. Therefore, your business will not experience a drop in sales because it is shining or raining.
Unlike other business products whose demands are affected by low temperatures or severe weather, Laundromat services are not affected by seasons or weather conditions.
4- A Laundromat Business Is Recession Resistant
Even during the great recession in the 1930s, people still wore clean clothes.
Unlike tourism, hospitality, and real estate, which are often affected by severe economic conditions, the laundry industry is resistant.
5- Potential For Expansion And Growth
The Laundromat business is versatile, flexible, and necessary in the community. This gives it the opportunity for growth and expansion.
You can open as many branches of your business as possible in various places with high demand and low competition. You can also expand your current facility and increase your revenue with minimum capital expenditure.
6. A Laundromat Business Is a Simple Business
Laundromat is a simple business that involves washing and drying clothes. Training workers in a relatively short time compared to other companies is easy.
Furthermore, customers pay upfront, so accounting and record keeping is easier. You will only spend a little money training your staff and managing your business.
Cons Of Owning a Laundromat
Things are not always bread and butter with the Laundromat business. Here are some cons of this type of business you should consider.
7- You Need Substantial Investment
The initial capital to get a Laundromat business off the ground can be substantial. You need money to buy commercial-grade equipment, rent premises, and cover utilities. The large upfront cost can discourage many entrepreneurs.
Running a business can be time-consuming and take a lot of energy and emotional investment.
8- A Laundromat Business Can Be Competitive
Like most businesses, there is stiff competition in the Laundry industry. We mentioned that a Laundromat business is a profitable venture with a high return on investment.
You are one of many who want this piece of cake, so you will have to deal with the competition.
9- High Operating Costs
A Laundromat business incurs rising expenses such as rent and utilities.
With the rising gas, water, and electricity prices, you may need to keep energy efficient when buying equipment to remain profitable.
10- You Become a Jack Of All Trades
As a Laundromat owner, you may want to be an electrician, plumber, marketer, business person, customer support, etc.
Although you may not be an expert in all of them, you at least need basic knowledge of these roles.
11- Unpredictable Demands
You need a guarantee of customers coming to your establishment. Sometimes customers may opt to wash their clothes at home, thus reducing your revenue.
What to read next:
Is Owning Laundromat Profitable?
Yes, the Laundromat business is very profitable. It can provide you with a stable passive income. Laundromat is also recession-resistant since customers will continue washing clothes regardless of economic pressures.
And because it is easy to start and operate, any entrepreneur can reap huge returns from this business.
What is your journey with a Laundromat business? Share with us in the comment section below.