Laundromat Startup Cost: Financing Your Business

How much does it cost to open a laundromat?

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.

Location

Laundromats are deeply impacted by their locations, perhaps more than many other businesses. 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.

Buy, build, or rent?

Once you have a location in mind, you have three 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.

Utilities

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.

Equipment

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. Here is some of the equipment you will need to invest in:

• Washer – 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.
  
• Dryer – Dryers usually come stacked two 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.
  
• ATM or change machine – 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.
  
• Soap vending machines – Expect vending machines to cost from $500 to $1,500.
  
• Seating – Common laundromat seating, which should last a very long time, costs about $700 to $1,400 depending on the number of chairs per unit.  
  
• Water heater – A water heating system, critical for a laundromat, will cost between $15,000 and $40,000, depending on the size.

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 up front, 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 it 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.

Business insurance

You will need insurance to operate a laundromat—generally, expect to pay around $46 per month for $1 million to $2 million in coverage.

Marketing and advertising

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.

Reasons to open a laundromat.

In today’s fast-paced world, time is a commodity that many people find in short supply. This creates an opportunity for businesses that provide convenient solutions to everyday tasks. A laundromat business might not be the first idea that pops into your head when you think of lucrative investments, but you may be surprised at the benefits it offers.

1. Laundromats are a necessity.

Clean clothes are a household essential. Even in a recession, laundromats will see consistent business—perhaps even an uptick, as households wait to repair their own laundry machines. At most, laundries might see customers waiting longer between trips, but it’s unlikely people will stop doing laundry altogether.

2. Laundry is consistent year-round.

Almost all businesses have to deal with seasonal cycles, but not laundromats. Unless you’re in a town with mostly seasonal residents (like a beach community), customers will be visiting your business at about the same frequency in winter, spring, summer, and fall.

3. Americans have less time to do laundry.

With increased commute times, multiple jobs, and longer hours, Americans don’t have a lot of free time to do laundry. That means they are more willing to pay extra for wash-and-fold services, which more and more laundromats are offering. Some households with their own laundry machines are even choosing to go to laundromats to save time on multiple loads: a row of industrial-sized washers can go through a family’s dirty clothes in one cycle, while a home machine would take hours of separate loads to complete the task.

4. Laundry can’t be ordered online.

Customers can’t order clean laundry from Amazon. When you open a laundromat, you have a relatively captive group of consumers in your area.

The only exception might be laundry pickup and delivery services—however, these services are usually attached to a local laundry business. You can add a delivery component to your laundromat. Online-only services like FlyCleaners are still limited to major cities.

5. Laundry is local.

There’s not a single national chain of laundromats in the U.S. There are some small regional ones, but most laundromat owners operate just one or two locations—so you won’t have to worry about losing customers to the McDonald’s of laundromats. While some neighborhoods have two or three laundromats competing for business, others are dependent on a sole option. With the right location, you could provide a lifeline to a large apartment complex.

6. Laundromats are profitable.

We wouldn’t be discussing laundromats as a small business idea if they weren’t lucrative. According to Entrepreneur, most laundromats gross between $30,000 and $1 million per year, with about 35% profit if managed well. This couple describes a case study of $150,000 in annual revenue, with almost $50,000 in profit.

7. Laundromats can be (mostly) passive income.

A self-serve laundromat requires little active involvement. Someone needs to open and close the business each day, clean up, and collect quarters—and that last task is negotiable if you choose a card-based payment system. Equipment needs to be maintained and repaired periodically. Some owners choose to hire staff for these tasks, reducing their personal workload even more (but adding management responsibilities for the owner).

8. Laundromats have multiple revenue streams under one roof.

Dingy, cramped laundromats are a thing of the past. In recent years, coin-operated laundromats have been renovated to feature well-lit, comfortable waiting areas and other amenities. Owners have realized that many customers are happy to pay for diversions like vending machine snacks and arcade games while they wait for their clothes to dry. With fixed location costs, adding these revenue streams won’t affect your overhead much.

However, the most popular amenity addition to a laundromat is wash-and-fold service. This service will change the nature of your business from a self-serve, passive operation to one that requires much more hands-on work and constant attention. But many owners have seen a worthwhile investment and increase in revenue by courting customers too busy to do their own laundry.

9. No experience is required.

Few laundromat owners have experience in the business before they buy their first location. Some general familiarity with small businesses is recommended. 

10. You can work with your hands.

Handiness with machinery is also a plus. You can hire a repairman when needed, but many owners find they keep costs down by learning basic machine repair themselves.

11. You can use your people skills.

Laundry owners, especially those with wash-and-fold services, will be interacting with customers frequently. If you enjoy talking to people and learning their needs, this might be the perfect job for you. Soft skills for customer service can come from many industries, further lowering the barrier to entry for laundry workers. 

12. High up-front costs limit competition

There’s no way around it: Buying and opening a laundromat requires a lot of money. The industrial equipment is expensive, and many newer laundromats have a large real estate footprint. The Entrepreneur article estimates that laundromats require between $200,000 and $500,000 in starting costs. 

However, this barrier to entry is an advantage for those who can overcome it. The high upfront costs and relative security are what make laundromats so appealing to people who have saved a nest egg and are looking for an investment or second career.

How to get funding for your laundromat.

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 their 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.

But don’t worry if bank loans aren’t your thing. There’s also the option of Small Business Administration (SBA) loans. These are government-backed loans that can offer lower rates and longer repayment terms. SBA loans do require a more in-depth application process, but the favorable terms can be worth it.

Another avenue to explore is private investors or venture capitalists. If you can convince them of the potential profitability of your laundromat, they might be willing to invest in your business.

You could also consider crowdfunding or peer-to-peer lending platforms. These online platforms allow you to raise small amounts of money from a large number of people. Though this can take some time and effort, it is a great way to engage your future customers and turn them into investors in your business.

Remember, every business is unique, so what works for one might not work for another. It’s all about finding the best fit for you and your laundromat.

The bottom line

Starting a laundromat business is indeed a venture that carries a high initial cost, but it’s a solid, resilient business that serves an ever-present need: clean clothes. By carefully considering the location, utilities, equipment, insurance, and marketing expenses, you can create a feasible plan to finance your laundromat. Remember, the journey of becoming a laundromat owner might seem daunting, but with careful planning, a bit of time, and the right funding, you’ll be on your way to owning a successful, recession-proof business.