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Written by: Esther Strauss
Esther is a business strategist with over 20 years of experience as an entrepreneur, executive, educator, and management advisor.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on April 25, 2021
Investment range
$21,550 - $211,100
Revenue potential
$30,000 - $200,000 p.a
Time to build
3 - 6 months
Profit potential
$10,000 - $30,000 p.a
Industry trend
Growing
Commitment
Full-time
These are the key elements to think about when starting your laundry business:
Mort Fertel on Building Poplin into a Laundry Leader
Understanding the laundry industry is the first step you should take in starting your laundry business. First, let’s see what types of businesses you can open.
To give you a balanced view of the industry, here are the pros and cons of a laundry business:
The US is home to about 35,000 laundromats, which generate some $5 billion in annual revenue, according to industry expert Martin Ray Laundry Systems.((https://martinray.com/p-33942-key-statistics-laundromat-investors-should-know.html#:~:text=The%20laundromat%20industry%20sees%20about,between%2020%2D35%25%20ROI.)) With an impressive 95% success rate, laundry businesses boast an average return on investment of nearly 30%.
Dry cleaning is doing particularly well in recent years. Despite the recent pandemic-driven slowdown, market analyst IBISWorld expects the US dry cleaning industry to grow nearly 6% in 2021.((https://www.ibisworld.com/industry-statistics/market-size/dry-cleaners-united-states/))
These are among the latest trends in laundry:
The industry faces some challenges such as:
Costs vary, but if you’re starting a small wash-and-fold operation, you’d need as little as $20,000, while larger operations could cost $200,000 or more. The average startup investment for a laundry is $40,000.
Laundromats and dry cleaners, on the other hand, can cost $500,000 or more due to the significant equipment requirements. Here’s a cost breakdown for a basic wash-and-fold laundry, excluding the cost of the commercial space or building:
| Start-up Costs | Ballpark Range | Average |
|---|---|---|
| Setting up a business name and corporation | $150 - $200 | $175 |
| Business licenses and permits | $100 - $300 | $200 |
| Insurance | $100 - $300 | $200 |
| Business cards and brochures | $200 - $300 | $250 |
| 5 Washers | $5,000 - $100,000 | $52,250 |
| 5 Dryers | $10,000 - $100,000 | $55,000 |
| Other machines and supplies | $5,000 - $7,000 | $6,000 |
| Website | $1,000 - $3,000 | $2,000 |
| Total | $21,550 - $211,100 | $116,075 |
Laundromats generate revenue anywhere between $30,000 to $1 million each year, with profit margins running from 15% to 35%. Industry analyst AmericanDryCleaner.com estimates that most small dry cleaners generate about $200,000 a year in revenue.
The potential earnings vary widely, so it’s up to you to make your business a success.
In your first year or two, you could set up a basic wash and fold laundry with five washers and five dryers. If you could serve 20 clients a day and each spends $2 to wash and dry a load of laundry, you’ll be earning nearly $30,000 in annual revenue and more than $10,000 in profit assuming a 35% margin.
As you gain more clients and add more machines, your annual revenue could climb to $200,000 a year. At this stage, you’d rent a bigger commercial space and hire staff, reducing your profit margin to 15% and a profit of $30,000.
While laundry businesses are simple to operate, there are a few barriers to entry to be aware of:
Now that you’re up to date with the laundry industry let’s start refining your business idea.
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
A great part about laundry businesses is that your main competition will likely only be in your local area. This makes it easy to assess what your competitors are doing and keep a close eye on any changes to their business.
Before you create your offering, though, you should do some research to scope out the strengths and weaknesses of your competition. This will help you to create a better experience for your customers.
Here are some questions to ask about your competition:
Choosing a niche is important in the beginning. It will help you streamline your business processes, create effective marketing campaigns and start the process of finding who your target market should be.
While it’s possible to offer all the niche services under one roof, it’s a good idea to specialize in one service before branching out. This will save you money and help you make your first dollar faster. So now’s the time to do some deeper research into which niche will best fit your current situation and market needs.
There are three main types of laundry businesses — wash and fold, laundromat, and dry cleaner.
Wash-and-fold laundries offer busy customers a convenient drop-off service, accepting dirty clothes and having them cleaned and folded the next day and ready for pick-up.
A laundromat is a storefront offering washing machines and dryers for customers to use by paying coins, cash, debit, credit or mobile pay. Requires minimal oversight as customers do their laundry themselves, and is cheaper than other options. Some laundromats also offer wash-and-fold services.
Dry cleaning is a specialized way of cleaning clothes without water so as to avoid shrinkage. Most people use dry cleaners for delicate garments such as suits or fancy dresses, but dry cleaning is suitable for any garment. It’s also more expensive than a traditional wash.
How much you charge will depend on what your costs are and the type of services you offer. To find a starting point, you can look at what your competitors charge for their various services.
But at the end of the day, your prices are up to you. As long as your margin is acceptable to you, that’s a good place to start. You can always adjust based on demand. Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
Once you’ve got your niche, you should decide who your target market will be within that niche. For example, if you notice that local university dormitories lack laundry services—or have subpar services—you can make students your target market.
Once you know who your target market is, you’ll be able to craft an experience that’s exactly what they’re looking for. This is what will differentiate you from your competition.
When it comes to opening a laundry business, your location will be determined by your target market. If you want to target university students, then you’ll need to have your store near university dormitories or places that they frequent. For example, you could choose a location that is close to many student apartments, or you could open a store in the local shopping village.
You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.
When choosing a commercial space, you may want to follow these rules of thumb:
Here are some ideas for brainstorming your business name:
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Here are the key components of a business plan:
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states offer real advantages when it comes to a laundry business.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your laundry business will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
Choose Your State
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist, and taxes can be filed online.
It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.
Securing financing is your next step and there are plenty of ways to raise capital:
Bank and SBA loans are probably the best option, other than friends and family, for funding a laundry business. You might also try crowdfunding if you have an innovative concept.
Starting a laundry business requires obtaining a number of licenses and permits from local, state, and federal governments.
Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.
If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your laundry business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
Your software needs will change depending on the type of laundry company you decide to run. But you may use industry-specific software, such as iLaundry, CleanCloud, and Starchup.
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.
You can create your own website using website builders. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
Here are some powerful marketing strategies for your future business:
Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your laundry shop meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your laundry business could be:
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a laundry business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in laundry for years and can offer invaluable insight and industry connections. The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in laundry. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business.
If you’re starting out small with a home-based wash and fold business, you may not need any employees. But as your business grows, you’ll likely need workers to fill various roles. Potential positions for a laundry include:
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
A laundry shop can be a great source of steady income if you can build a solid customer base and earn your customers’ loyalty. One way to do this is to offer amenities, such as free wifi and free coffee. You can also provide a lounge where customers can engage in great conversations while doing their laundry.
There are many other creative ways to attract and retain customers. You did the right thing by seeking guidance first. Now that you have the knowledge to start a business, you’re ready to begin your entrepreneurial journey and make money with your laundry business!
Laundromats certainly are! They offer high rates of success and a straightforward business model. It’s estimated that 95% of laundromats succeed based on a five-year evaluation window. The business is also recession-resistant as everybody needs clean clothes no matter what’s happening in the economy.
While profits will vary depending on your location, costs, and your prices, the median revenue for a dry cleaning business is $80,000 per year. So yes, dry cleaners make money, but it’s up to you to turn that money into profit.
There is a range of options for financing a laundry business. You can ask friends and family or apply for a traditional loan through a bank. Another option is through SBA guaranteed loans such as 7(a) loans and microloans.
Implement proper waste management practices, ensuring trash bins are emptied regularly and disposed of properly. Keep the floors and surfaces clean by sweeping, mopping, and wiping them down regularly. Regularly inspect and clean the washing machines, dryers, and other equipment to remove lint, debris, and detergent residue. Use appropriate cleaning agents and disinfectants to sanitize surfaces and maintain a hygienic environment.
While laundry businesses can be profitable, it’s important to conduct thorough market research, assess the local demand, and carefully manage expenses to maximize profitability.
Starting a laundry business at home is possible, but it may have limitations and considerations. Check local regulations and zoning laws to ensure operating a business from home is permitted in your area. Consider the space available and whether it can accommodate the necessary laundry equipment and supplies.
Some common customer segments include busy professionals, college students, apartment dwellers, and households without access to laundry facilities. Additionally, hotels, hospitals, and restaurants often rely on commercial laundry services due to the large volume of linens and uniforms they handle.
In a laundry shop, you can sell various products and services to complement your core laundry offerings. This can include detergent and laundry supplies for customers to purchase, vending machines for snacks or beverages, laundry bags or baskets, fabric softeners, stain removers, and ironing services.
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It’s great that you mentioned how laundry businesses usually have high success rates and solid profit margins. I was checking out some popular types of businesses earlier and I learned about laundry businesses. It seems like a good choice if you want to start a business, and it looks like there are finance my laundry services now too, which makes things even easier.
https://financemylaundry.com/