How to Start a Laundromat in Ten Steps

A laundromat is a highly profitable investment. The demand looks impressive, and running the business amounts to little effort. So if you want to invest money in one, how do you start it up?

Let’s look at this investment opportunity and develop the steps to start a laundromat, considering that experts believe the investment amounts to approximately $250,000.

Here are ten steps to starting a laundromat:

• Write a Business plan
• Raise the minimum investment
• Determine your IRS business model
• Name your business and register it.
• Inquire about business licenses and permits
• Make sense of the liability and insurance picture
• Find a location
• Think through a marketing approach and calculate profits
• Open a bank account and line of credit for your business
• Buy equipment and open your doors for business

Write a Business Plan

Once you’ve determined how much involvement you want in a laundromat, it’s time to write a business plan. Paraphrasing from the US Small Business Administration: Develop a mission statement, naming your business, for instance, “Jeff’s Laundry.” List the people involved in the business, starting with your name, and discuss other people involved and even list employees. Discuss your financing, information about the money you plan to put into the business, and whether you will look for a loan. If you’re looking for a loan, explain your growth plans. All this should be in your business plan.

What’s the Minimum Investment Amount?

This is a defining number that indicates how big your laundromat will be and how much you expect to make from it. It’s a sum you want to recoup from the actual operations of the business, especially if the funds are borrowed. Consider buying an existing laundromat and that cost, as an alternative to starting from scratch. 

If your laundromat makes $100,000 a week, do you want to pay debt service on the “loan” of about 15% to 25% of the gross receipts? So, you go to a lender who gives you a $250,000 loan. You pay back $15,000 to $25,000 a week plus an interest payment, and you should be able to judge loan terms. 

IRS Business Model

Legal and tax considerations determine your business model for your laundromat business. The IRS site explains that Sole Proprietorship is the model for a person who owns an unincorporated laundromat by themselves. Partnerships are when two or more people contribute to the laundry operation and investment in a business.

A corporation is when you exchange shares for money for the operation of your laundromat, so the laundromat has capital to work with and pays dividends to stockholders. An S corporation is a corporation that handles money differently to avoid paying high taxes. Check with the IRS about your IRS business model. 

Name and Register

If you give your business a name, you’ll have to register it. According to the SBA, it’s as simple as registering your name with state and local governments. Coming up with a name can even be easier. Start with the straightforward part, like using your topographic place, like the name of your town, “Your Town Laundromat.” It could also be a State, region, or even a Country, but topography and where you’re standing determines it.

Or a topographic name could be the top of a hill or a valley, like “Valley Laundry.” You can also use your name, like “Jill Jack’s Laundromat.” Or, consider a descriptive name, like “Suds laundromat” or “Soapy’s Laundry.” Use a suggestive name, like “Spotless Chores Laundry” or “Fresh and Clean Laundry.”

Or get grammatical, like “Front Loader Laundry,” “Coin Dryer Laundry,” or “Self-Serve Laundry.” Then there are also Acronyms like “ABC Laundry” or “FBCDE Laundromat.” Or get inventive, like “Righteous Scrubbed Laundry” or “Absolutely Laundry.” 

Check on business licenses and inquire about permits.

You should also check with your community to determine if you need licenses or permits. You can do this with a simple phone call. If you need a license application, ask for instructions over the phone. You can often get applications for licenses and permits sent out to an address. Business licenses in many communities may not be much of an issue, or licenses and permits may depend on the industry regulation you’re participating in. 

The laundry business is in the service sector and is considered personal care. Considering the discharge from the laundry machines, you may need a water pollution permit or license. You may need a health permit if you plan on using vending machines to sell food. Depending on what your laundromat offers for sale, you may need a sales tax permit. Contact your local and state governments for guidance. 

Figure out your liability and get insurance.

Calculating liability takes into consideration three factors: 

• Present obligations
• Past transactions you still owe on
• Future transactions you will need to make

You don’t want to go into business without insurance, and it’s really a matter of judging your liability and insuring accordingly. Businesses often calculate their liability, then divide that into their current assets number, including the properties’ value and their cash flow. 

A typical liability insurance for a laundromat would include insurance against bodily injury, damage to property, personal harm, and fraudulent advertising claims. Once you have the dollar amount, an insurance company will fill in those categories, then shop around for insurance you like.  

Find a location

Location is essential in many successful business stories, or so conventional wisdom runs. It’s purely a subjective opinion. I’ve seen laundromats one door down from the main streets, but they are entirely hidden behind a building and have no signage whatsoever, and they operate successfully. 

The deciding factor about location may be the level of competition in the area. Location may matter if your competition is much easier to find than you and your laundromat. 

On the other hand, you will probably find a location with ease just by doing a little homework in your community. So, pay attention to the apparent advantages of place according to Martin Ray Laundry Systems: 

• High Visibility area
• High-traffic area
• Easy parking availability
• Easy access

A storefront in a strip mall is designed to meet all these criteria without your input, so consider moving into a storefront in a strip mall where laundromats are in short supply. If ever there was a shortcut, that sounds like one. 

Also, consider the demographics of your location. If it’s a neighborhood full of apartments and startup housing, including rentals, chances are there’s a demand for laundry services. Be sure to contact a professional to have someone check your work when considering location. 

Think Through a Marketing Approach and Calculate Possible Profits

Getting into the weeds with marketing is not everybody’s cup of tea, but that doesn’t mean you can’t discover a marketing approach. Find the inner salesperson. Give away free laundry services, like using the drying machine for free for one day of the week, like a Monday, to promote the business. 

Other ideas include throwing a grand opening with a raffle. Start a website and link it to social media accounts. Give free services for referrals on social media. If customers use the laundry regularly, pitch them with a loyalty program that rewards them with occasional price cuts or free services. 

Do something fun with social media, like offer prizes for the dirtiest garments photographed and put up on the laundromat’s website. 

Open a Bank Account and Line of Credit

Go to your bank, open a bank account with your laundromat’s name, and apply for a line of credit for your business. Sometimes, that requires a small business loan from a bank. When it comes to loans, you need to shop around. 

If you need financing, your bank may only be the first place you shop for a bank account and a small business loan. If you’re starting without much capital for your laundromat business, apply for a business line of credit. 

A long-term loan from a bank will require more than a simple credit check. The bank will likely want to review your business with a fine-tooth comb, so be ready to provide any information they want. The conventional wisdom is only to borrow as much money as you need. The second rule is to pay it back as quickly as possible. If your profits allow you to pack away a couple of months expenses in your bank account to get you through tough times, you should not need a bank loan. Pay a loan off as quickly as possible. Be careful. You may have to pay a pre-payment penalty.

A more important question to ask might be whether to buy a working laundromat or start from scratch. With an existing establishment, you can look at the books and understand the risk involved. Starting from scratch is riskier.

Buy Equipment and Open Your Doors for Business

If you didn’t outright buy a laundromat, you’d choose the laundry equipment to buy, whether you go with new, used, or refurbished machines. Used equipment lowers the cost of your investment.

Experts say commercial equipment lasts twice as long as a residential washer/dryer. So, with a new purchase, your laundromat machines may be good for the next 15 to 20 years.

There comes a day when you must install laundry machines and open your doors to business.

Here’s a list of equipment you may be interested in buying:

• Front Load washers
• Top load washers
• dryers
• Hard or Soft mount washer extractors
• Coin and Bill changers
• Vending machines

Decide whether you’re buying new or used. Buying equipment is a one-time purchase and a business write-off, so many operators believe it’s the way to go.

Laundry machines are not pieces of furniture like a couch or a table. They must be installed. For instance, sizeable front-load extractor washers remove as much moisture from the clothes as possible to reduce drying time, so the spinning cycle is aggressive. Most machines are bolted to the floor.

Professionals do the installation, so you don’t sweat anything but the price. 

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