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Home Running A Business Laundromat Startup Cost: Financing Your Business
For the right entrepreneur, laundromats can be an exciting business opportunity!
Sure, laundry might not be your passion, and if you run a laundromat, you should expect to work long hours in a very humid space. Laundromats might not be as glamorous or exciting as brand consulting or NFTs, but the fact remains that many people use laundromats on a consistent, repeated basis—which means consistent, repeat revenue for the laundromat owner.
Laundromats, interestingly, are a recession-resistant business, especially in urban areas where people don’t have the space or money for bulky laundry machines in their living spaces. And everyone wants clean clothes.
Laundromats are also scalable—you can offer a few machines or many. You can hire staff or run the operation by yourself. These days, you can even do on-demand or delivery-only laundry through mobile apps, which wouldn’t require a storefront.
Laundromats are a great field for small business owners. Plus, fabric softener smells great.
Laundromats have some specific startup costs due to the specialized nature of the equipment. This is a good thing—you can have a solid plan for your startup capital needs. You can calculate an accurate approximation of the amount of funds you need to pull from your personal savings, or you can submit a precise application for outside business funding.
Laundromats are deeply impacted by their location, perhaps more than many other b
usinesses. Some areas will naturally have more potential customers—college towns, for example, or cities with lots of renters. Your first step toward laundromat success is choosing a fertile location.
Once you have a location in mind, you have 3 choices: buy an existing laundromat, build your own, or find one to rent. Buying an existing location will be very expensive because you’re buying a ready-to-open business, but you will also have an existing customer base. Building a location might actually require less capital up front because you can apply for commercial mortgages and equipment financing. Depending on your location, you might be able to work out a rent agreement with an existing laundromat or landlord—renting would be the least cost intensive, but you would also have less ownership over the business.
Your customers will expect your laundromat to be bright and safe, and they will want their washers to fill with really hot water. Utility costs, especially electricity and water, are critical for laundromat operators. Utilities usually cost a few thousand dollars a month—experts say you should expect to spend 20% to 24% of your gross receipts on utilities.
To run a laundromat, you need the right equipment or you don’t really have any business at all. Your equipment costs will likely be the highest barrier to entry for starting a laundromat, but there are ways to pay for your equipment over time.
As a small business owner, you have several options when it comes to equipment. You can buy it upfront, which requires high amounts of startup capital but you own your equipment outright. You can lease equipment, which means you never own it unless you opt to buy at the end of your lease agreement. However, depending on the agreement, you can usually get brand new equipment under a new lease when an old lease ends.
Many laundromat owners opt to finance equipment, because these agreements don’t require huge down payments and you own the equipment once the financing is repaid. With equipment financing, you can obtain the washers, dryers, and change machines a laundromat requires without a huge initial investment. The equipment itself usually serves as collateral for the financing, and you can get approved in as little as 24 hours.
Depending on the type of washer, expect to pay between $500 and $5,000, although some systems can cost as much as $20,000 per unit. More expensive washers generally require less energy and can hold more laundry. Commercial washers have a lifespan of about 10 to 14 years.
Dryers usually come stacked 2 in a cabinet, which is called a “stacked dryer.” These stacked dryers cost around $5,000 each. Like washers, commercial dryers have a lifespan of roughly 10 to 15 years.
You can typically work out an arrangement to have an ATM company install an ATM in your business in exchange for the ATM fees. Change machines are fairly cheap—often $1,000 to $3,000 each. Nowadays, credit card systems are the most convenient for customers, but these systems can cost around $40,000 to $80,000.
Expect vending machines to cost from $500 to $1,500.
Common laundromat seating, which should last a very long time, costs about $700 to $1,400 depending on the number of chairs per unit.
A water heating system, critical for a laundromat, will cost from $15,000 to $40,000 depending on the size.
You will need insurance to operate a laundromat—generally, expect to pay around $46 per month for $1 million/$2 million in coverage.
You want people to know they can come to you and wash their clothes—marketing is very important for laundromats. The Small Business Administration estimates that consumer-focused businesses spend an average of about 12% of total revenues on advertising.
While it varies widely from location to location, Entrepreneur reports that the average laundromat costs between $200,000 and $500,000 to open. Laundromat operators can expect annual revenues of about $30,000 to $1 million per location, with expenses taking up about 65% of gross receipts.
When starting your laundromat, you will need funding to get your business germinating before revenue starts flowing in. This is true for almost every business—startup cash is essential for businesses to expand and thrive beyond its infancy.
Consider startup loans, which can serve as an engine to drive your young laundromat forward. While some small business owners opt to tap personal savings to get a business off the ground, this can end in personal catastrophe if your business doesn’t turn enough profit for you to pay yourself back.
Startup loans typically function like traditional term loans from banks—you can find some with repayment periods that span decades. Depending on your business needs, you can get loans ranging from $500 to $750,000 with interest rates from 6% to 24%, as of April 2022. It is free and easy to check out your options—this could be the first step toward opening the doors of your own laundromat.
Barry Eitel has written about business and technology for eight years, including working as a staff writer for Intuit's Small Business Center and as the Business Editor for the Piedmont Post, a weekly newspaper covering the city of Piedmont, California.
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