Posted by Marcel Sim in Business Ideas
Article Contributed by Steve Sutherland
As far as business models go it doesn’t get much better than a Laundromat. While there are some barriers to entry such as high start up costs there are also many advantages.
This industry has quite a low failure rate compared to other small business opportunities and the return on investment (ROI) is usually very good. A coin-operated laundry business also offers excellent lifestyle prospects for owner operators that don’t want their business to rob them of all their free time.
There are many ways to get into the Laundromat business and once you are in there are many directions to take. In this article I examine some of the possibilities and opportunities in this unique industry.
Start a New Laundromat
The first option is to start up a new Laundromat. Start up costs here are considerable as you will need to organize a commercial space and pay for renovations that will include a proper plumbing, sewerage and electrical set up. Compliance costs can run high, especially for sewerage hook-up fees which are often charged per machine. Washing machines, dryers and a boiler system for heating water are expensive as well.
You also have to keep in mind that your risk level with a new business will be high unless you have done some careful research.
Other difficulties that you will be facing will include limited cash flow in the early days of your business. It may take some time to establish a customer base and reach a profitable level of operations. Due to the uncertainty of a new project you could also have trouble getting the huge amount of funding that you need to get started
On the bright side, if you do get everything right and the business runs well your ROI will be impressive and you’ll be paying down your debt in no time. Your new set up should give you few headaches in the way of breakdowns and maintenance and you will be able to take your business in any direction that you like.
Buying a Profitable Laundromat
A much safer play for industry newcomers is to buy an existing Laundromat that is for sale. If you do your due diligence and pay a fair price for the business you should be able to walk straight into a profitable operation. This lower level of risk will make it easier to secure financing.
There are many other advantages too. You will be purchasing an existing brand, a customer base and relationships with employees and suppliers.
The downside is the lower ROI. The profit level of the business will be reflected in the sale price. Nobody just gives away a profitable business with an established clientele without asking for a considerable sum of money.
You could also be inheriting problems from the previous owner if you are not careful. The machines or layout may be out of date and need replacing or the store may be run down and in need of renovations.
A Small Chain of Coin Laundries
Many Laundromat entrepreneurs are absentee owners as they are not required to be on the premises. This makes it easy to scale up and become the owner of multiple stores. After all, once you know how to run one profitable store you should be able to easily replicate your success. According to the ‘Coin Laundry Association’ the average number of stores owned by each Laundromat business owner in the US is 2.5.
Some owner-operators divide their time up between three or four Laundromats throughout the day. Others hire attendants to do the dirty work and they can just stop by occasionally to check on things and collect the cash.
The Franchise Model
What about starting a ‘McLaundromat’? Surprisingly, the coin laundry industry has been quite fragmented up until the present time. There are only a few regional franchises and chains and there are no famous brands at the national level.
Depending on your area you may be able to start up under the umbrella of a franchise. You would benefit from getting access to a proven brand name, operating systems and marketing systems. However all of this typically comes with a high price tag which can drive your ROI fairly low.
If you spend time developing a business model and systems that work then you could look at franchising your own brand somewhere down the line.
Buying Distressed Laundromats
Once you feel that you have mastered the business you can look at buying run down Laundromats that are currently losing money for their owners. If you analyze each opportunity carefully and apply your knowledge you may find that some of these stores can be turned around with the right investment and a change of direction. The best thing is that you can pick up these kinds of Laundromats for next to nothing and in some cases the owner will thank you for taking the business off their hands.
Once you work your magic you can then look at adding these locations to your portfolio or you can flip them on as profitable businesses. A profitable Laundromat is fairly easy to sell and business brokers will be delighted to help you in the process of finding a buyer.
Once you are set up with your first Laundromat business you will have opportunities to increase your profits by fine-tuning your business operations.
This can be done by bringing in new business and there are many ways to do so. You can also maximize your Laundromats potential by adding premium services such as ‘wash and fold’, ironing or stain removal. Aside from washing powder and fabric softener you can sell other items such as drinks and snacks from vending machines on your shop floor.
Savvy Laundromat business owners also handle laundry accounts for other businesses such as hair salons and restaurants that need their towels and linens to be washed regularly. Commercial accounts like these can keep machines and attendants busy during times when your Laundromat is quiet.
There are also numerous opportunities to cut costs and run a more efficient operation. Savings in energy and water consumption can be quite dramatic if you have the right machines and systems in place.
Become a Consultant
Lastly, once you have become somewhat of an expert in the Laundromat game you could look at sharing your years of knowledge and experience with others. Industry newbies often require help from consultants to assess the value and prospects of Laundromats that are for sale. Consultants can advise newcomers on every aspect of starting a Laundromat and running it efficiently.
About the Author:
Steve Sutherland runs OpeningaLaundromat.com, a site dedicated to helping beginners buy a laundromat or start their own from scratch.