The coin-operated industry is undergoing a revolution representing a viable passive income opportunity. Gone are the days when laundromats were dingy boring and unsafe places we had to endure weekly. They are turning into attractive, fun, multiservice centers that customers enjoy visiting. The best part? laundromats perform well even in hard economic times because no matter what, people will always need to wear clean clothes.
Can you earn passive income from a laundromat? To earn passive income from a laundromat you need an ideal location, a large and loyal clientele and excellent business management skills. A laundromat can be a lucrative passive income source. According to Coin Laundry Association’s Brian Wallace, a laundromat annual gross income can range from $30,000 to $1M with expenses between 65 and 115 percent of gross income.
In this guide, we uncover the laundromat business and how you can turn it into a passive income source. Like most passive income ideas, running a laundromat will require dedication, patience, good business skills, and practice. With these, you can turn your business into a passive income source. With time, you can add complementary services to your laundromat and boost your passive income streams. Let’s jump in.
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Laundromat Business Stats and Projections
With the world population growing by the day (source), and the number of renters, which is the target market for laundromats, is likely to grow too (source). It is projected that the revenue of coin-operated laundries and dry cleaners in the U.S. will amount to approximately US$4.686,3M by 2023 (source). The prevalence of two-income families means that working parents will have little time for house chores. Therefore, convenient services like wash and dry will grow in popularity (source), which makes a laundromat a viable business idea for the future. According to inc.com, the laundry business is a $40 billion industry and successful businesses like Rinse, 2ULaundry, and Cleanly are proof that a laundromat can be a lucrative business.
In response to current trends, laundromat owners have realized they can make more income by offering convenient services like wash-and-fold (drop off services) and multi-services like snack bars, video games, kid centers, minimarts, free Wi-Fi and so on. On the downside, experts refer to the laundry business as a ‘mature market’ (source). Most neighborhoods already have one or more laundromats. So before you decide to own one, it is important to consider factors like location, customer base, extra services, and the initial investment.
Deciding if the Business Can Work For You
Compared to other passive income ideas, a laundromat is not the cheapest to start. Online passive income ideas like (blogging, copywriting, podcasting, flipping domain names, etc.) do not cost much to start compared to physical brick and mortar businesses like a laundromat. According to chron.com, starting a laundromat can cost anything from $200,000 to over $1,000,000. The actual cost depends on factors like commercial space, location, business incorporation, utilities, customer supplies etc. If you choose to buy and renovate an existing laundromat, it can cost over $200,000 depending on your location, amenities, and the current state of the business (source). With such a huge initial investment, it is important to consider if this business is right for you before you get started.
Identify a Niche in Your Area
For any business, identifying a niche helps you stand out from your competitors and boost revenue. In the laundromat business, you can identify a niche by visiting laundromats in your city and pinpointing their weaknesses. Some of the questions you want to ask yourself include
- What is your area’s target market and demographic?
- What would those customers want in their laundromat?
- Would it be a place where they would spend a lot of time or not?
- What are they missing from the existing laundromats?
- How can you improve laundry services in your area with your laundromat?
- Is there an ideal location to open a laundromat?
- What other services can you offer?
According to incfile.com, having Unique Selling Points (USPs) can go a long way in determining how successful your laundromat business will become. Effective USPs can include cheaper rates, better services, more amenities, better security, a more comfortable setup and so on.
Your unique selling points can be providing extra services like pick-up and delivery. You pick up laundry from clients, wash & dry it, and deliver it back clean & folded at a small extra fee. However, this is a much less passive business model, unless you hire employees and outsource the work.
Some laundromats offer more automated and passive USP’s like self-service vending machines, ATMs, cofee dispensers, free Wi-Fi, large spaces, lounges, arcade machines and more. In highly competitive areas, some laundromats are offering 24-hour services with completely automated systems (source).
Consider Offering More Services
The services you offer can differ per location. Maybe your area has small laundromats with small machines or does not operate for 24 hours. Your USP could be to have a 24h location with larger machines in such a case for example. So it is important for you to research how your laundromat can stand out from the crowd, offer better services and beat the competition. In short, you can identify an ideal niche for your laundromat business if you:
- Study and identify USP’s in market research reports about laundromat business locally, regionally, and internationally
- Learn from your local competitors as to what they are and are not doing in their business
- Talk to potential clients, friends, and family to understand what they are missing from existing laundromats
- Identify Unique Selling Points (USPs) you can offer to attract customers and minimize competition
- Take part in the business community in your area to know more about the laundromat business. You can do this by joining a local business incubator, business associations, the Chamber of Commerce, or by attending business meetups.
Budget for a Successful Laundromat Business
The amount of money you will need to invest in a laundromat business depends whether you want to start your own business or buy, renovate & expand an existing business. Whichever you choose, you can expect to spend hundreds of thousands of dollars.
With such a huge investment, you will be concerned about the chances of success for your business. It is important to research and learn from the operations of existing laundromats in your area. What are the starting and running costs? The best equipment? Are there any applicable fees? Our ideas in this guide are general, but the answers to your questions will vary with your location. Here are some general expenses associated with this business.
Registering Your Business
It is important to determine the type of business registration that works best for your laundromat. Is it a sole proprietorship? a LLC company? a partnership? The process is uniform across all States and you can do it yourself or have it done by your lawyer. According to incfile.com, registration costs depend on the type of business registration you choose and your location. Typically, startup paperwork costs range between $200 and $1,000 (source). If you choose to buy a laundromat, the registration process and costs will differ. It is best to talk to a lawyer to make the process easy, fast, and legit.
Buying Equipment and Accessories
A laundromat business is as good as the equipment it has. The reason for this is that there’s always a risk of your machines breaking down. If your machines do not work, you will not be making any money. This issue can actually be a big turn-off for potential customers. Imagine them coming all the way across town with their laundry to find out the machines are out of order. However, if you have reliable machines and extra services that are useful, your business can run. Some of the equipment and accessories you will need include the following.
Washers and Dryers
Estimate the number of machines and dryers that can fit in your designated space. Top-load washers cost approx. $500 to $700, front-loaders $3,500 to $20,000 each and stacked dryers between $5,000 and $6,000 – depending on the brand and size you choose (source). If you choose to buy a laundromat, chances are it is fully stocked with machines. However, it is important to budget for new machines if needed, as well as repairs and maintenance costs for older machines. The cost goes up if you would like to use card readers (between $40,000 and $80,000 source).
A water and heating system is an essential part of any laundromat business. A water heating system can cost between $15,000 and $40,000 (source). Utilities such as water and heating can cost an average laundromat (2200 sq. ft. in size) between $200 and $2,000 per month (source). This cost can go up depending on the services offered (for example Wifi and so on). It is best to budget for utility costs for a couple of months beforehand (preferably 6 months or more). This will help you run your business efficiently for some time before you establish your customer base and start making a more viable income.
Supply costs vary depending on the size of your business and clientele. Factor in costs for cleaning equipment, laundry carts, signs, trashcans, and more. An average laundromat should cost you between $750 and $1,000 in basic supply costs (source).
Accessories and Services
There are over 30,000 coin laundries in the US alone (source) and offering unique services can help you beat the competition – this is where accessories and extra services come in. Depending on your budget, you can install accessories like vending machines, TV screens, massage chairs, WIFI and more. Coffee machines can cost $100-$1000, security systems are necessary and can cost $6,000-$10,000, TV screens $200-$500 each and Wi-Fi around $40 minimum (source). Although accessories will raise your initial costs, they can provide more monthly recurring revenue, help you beat the competition, maintain a loyal customer base, and ultimately boost your revenue.
Licenses, Permits, and Fees
You will require a number of licenses and permits to operate your business. Most of these will extra costs will vary with your location. For local permits and licenses, talk to your city’s chamber of commerce to determine your local licensing and permitting requirements. For statewide permits and licenses, you can check out your state’s Secretary of State Website or state-by-state guides for company formation. For federal permits and licenses, you can check requirements from The Small Business Administration Consult a lawyer or a certified professional in your area to cover the specifics of your situation.
Like every business, you will need to file tax returns from your laundromat business revenue. You will need to pay federal, state, and local taxes. Tax obligations differ with location and can be complicated so it is best to consult your certified accountant to find out the taxes you are liable to pay.
Laundromats face various risks like fire, flooding, theft, accidents and more. It is important to take a comprehensive insurance policy to shield your business from such risks. Some risks can devastate your business or even force you to close shop. Although it is expensive, insuring your laundromat allows you to operate your business while reducing worrying about risks.
Insurance agents and personal underwriters can be helpful with insurance matters. However, it is best to insure your business with renowned insurers in the laundromat business. According to testimonials from coinlaundryinsurance.com, you can get better rates and save a lot of money with industry insurers.
Promoting Your Business
Even before you have established your laundromat business, it’s important to consider how you will promote it. You will need to grow and maintain a good customer base and an excellent way to do this is by promoting and marketing your business.
Creating suspense amongst your target audience is an effective way of boosting traffic and sales for your business. Hype is an advertising strategy that helps you secure and establishes an audience long before opening day. You can create hype on different platforms like social media, TV, Radio, and local papers. When creating hype, consider things like:
- Features and benefits that make your business stand out
- Pinpointing the interests and specific needs of your target customers
- Addressing your target market’s pains and fears related to your business
- Creating a sense of urgency to encourage your audience to act quickly
Once you launch your laundromat business, you still need to promote it to grow your customer base. You can promote it on social and print media, through word of mouth, by offering free services and giveaways to customers etc. Moreover, you can also use family members, relatives, and friends to help you promote and advertise your business.
Enjoy Your Passive Income
Do not expect to start earning passive income from your laundromat overnight. Like any other passive income idea, you have to be patient, dedicated, resilient, and willing to put up with long working hours in the beginning. Successful laundromat entrepreneurs like James Joun (COO and Co-founder of Rinse attribute their success to patience, hard work, and good business management and practices.
It possible to earn passive income from a laundromat business so long as you break even and appoint the right people to run your business. You will need a reliable cleaning and security company, and a trusty on-call mechanic. Your business should also be as automated as possible with coin or card-operated machines. If you offer extra services that require someone to carry them out, you will need trusted employees to do the work. It’s important to keep these things in mind if you do not want to be stuck in operations on a daily basis.
How Much Money Can a Laundromat Make?
The amount of money you can make from a laundromat varies significantly. According to Coin Laundry Association’s Brian Wallace, a single store’s annual gross income can range from $30,000 to $1 million. You should expect to incur expenses that range between 65 and 115 percent of your gross income (source). So for instance, if your store grosses $30,000 per year, your net profit can be between $10,500 at it’s best, or $4,500 at it’s worst. If you gross $1 million/year, your profit can be $350,000 at its highest, or $150,000 at its worst, depending on expenses.
How Passive is a Laundromat Business?
If you intend to work in your laundromat, the idea won’t be passive at all because it requires your constant supervision. However, you can hire employees to run it for you and make your business more passive. Although the business may require frequent supervision, you can do remotely using a remote security system and cloud-based software. But if you hire the right employees, they can make crucial decisions on your behalf thereby making the business even more passive.
A laundromat is scalable by location and customer base. If you find an ideal location where your clients can access your services easily, you can cash in on loyal customers. Your loyal customers are the main promoters of your business and can help you grow your customer base fast. With proceeds from your laundromat, you can open another one and multiply your passive income sources.
Starting a laundromat can be expensive. Whether you buy or build one, you can be sure to spend between $200,000 and $1,000,000 (source). Other costs like equipment, supplies, utilities, and fees run into thousands of dollars. However, if run efficiently and in the right area, you can recoup these costs within several months or years of starting your business.
You will experience a few difficulties at the beginning of your venture. To minimize these challenges, you need to do prior research about the idea, identify a niche and the best business model, choose the ideal location for your business, hire the right employees, work closely with the right qualified professionals such as lawyers, contractors, and accountants. However, you would experience similar difficulties with other brick and mortar business ideas as well. They can be overcome with the right counsel, so be sure to work with qualified and competent professionals in your area.
Your laundromat business might take a couple of months to a few years before it is popular and profitable. It may never make any money! However, if you establish a reliable customer base, you can continue to grow your sales steadily until you break even and start earning passive income.
To start and run a successful laundromat, you need a large financial investment so take note of this large financial risk. If it does not work out, you could lose all the money you invested. The risk is heightened by the fact that you have to hire someone or fully automate your business to make it passive. Be sure to hire qualified staff that relates to your business vision.
Also, ensure you buy high-quality equipment and take a comprehensive insurance policy to prevent damage and unforeseen costs. All businesses carry some risk. In case of any challenges or mishaps, make sure your insurance can take care of them during the course of business, including flooding, theft and so on. There is always risk of substantial time and money loss in any business.
One of the best aspects of a laundromat business is that it is not affected by seasons or poor economic performance. People will always need clean clothes regardless of the season. As the world population grows, the demand for clothes and laundry services will rise. This makes a laundromat a viable idea for a person looking to earn a passive income well into the future.
Return On Investment
A well run, popular, successful laundromat can be profitable and offer a great ROI. To determine your laundromat’s ROI, subtract your monthly expenses from monthly income. If the business makes $20,000/month and incurs $10,000 in monthly expenses, it is making $10,000/month in profit.
How can I make my laundromat business more passive? A laundromat business can be made more passive by employing the right people to run it on your behalf. You can hire a cleaning company to clean the premises. You can hire a security company to keep an eye on the place. An on-call mechanic is essential for any breakdowns. You and your accountant can also keep an eye on your books remotely with cloud SAAS software.
How can I increase my income with a laundromat? You can earn extra revenue from your laundromat by offering multi-services like vending machines that serve laundry-related necessities like detergent and softners, an ATM, selling coffee and other beverages within your premises. Any idea that can fit in your business and earn you extra income can be offered alongside laundry services to boost your income.
How much does it cost to start a laundromat? Purchasing a location, equipment, fees, employing people, maintenance costs and so on, vary per location. To build an average laundromat business (2200 sq.ft.), you should expect to spend between $200,000 and $1,000,000 upfront (source). If you choose to buy, you might spend between $200,000 and $500,000 upfront (source). You will also need to consider ongoing monthly fees in the future.