Making money off of other people’s dirty laundry is one of the best boring businesses you can find.
Up to 85% of Americans have a washing machine in their homes, but that leaves nearly 51 million people who need places to wash laundry.
And, while many people have machines at home, they don’t use them for everything. Many go to a laundromat for especially dirty items, bulky bedding, or to get caught up on many loads at once.
No business is foolproof. But with a success rate that might be as high as 95%, there are a lot of possible gains for a laundromat owner. And I’m not just talking about the laundry detergent Gain, either!
Want to see the real potential in laundromats? Here’s Brandon from Investment Joy breaking down his laundromat purchases with Codie Sanchez:
While you may not have to sit there all day and watch spin cycles, you will still need to put in the work to see the returns.
Some estimates show that the laundry industry generates an ROI of 20-35% for owners. It’s not that hard to start, especially if you buy an existing laundromat and look for operational efficiencies.
What’s The Appeal of Owning a Laundromat?
One of the best things about laundromats is that customers do all the work.
They wash the clothes. They fold them. And they haul everything in and out.
No physical labor for you. That’s not all, either.
Chese out these 9 other reasons why a laundromat is a killer option for an entrepreneur seeking recurring revenue and an easy business model:
- Low overhead costs (yes, you’ll need good machines, security, and to pay the rent/utilities, but there are few other big or ongoing expenses).
- With an operator in place and good security measures, you’re not needed on-site much.
- You need only a few key contractors on call to help with most maintenance needs.
- Money comes in up front from customers in the form of cash money for the machines.
- Unlike other businesses with long-ass ramp-up times and a huge learning curve, laundromats don’t take much training or onboarding.
- Laundromats are recession-proof—people will always need to do laundry.
- They generate a solid, non-seasonal ROI (AKA year-round money for you).
- Outside of your machines, you don’t need much physical inventory to thrive.
- Laundromats make excellent businesses or assets to pass down to your kids or grandkids (multi-generational wealth for the win).
Get your foot in the door with one location, and it won’t be long before you’re scoping out multiple locations.
The Financials: Understanding Costs and Revenue
Before you build or buy, make sure enough people live nearby to justify your work. Plenty of locations will work, but you want at least 10,000 people in a one-mile radius of the facility.
Typical laundromat operating costs include:
- Fixed costs like rent and utilities
- Parts and labor for maintenance/repair
- Salary for an onsite operator
- Security (including someone else to collect the coins and deposit them)
You’ll also want to have some reserve cash for things like replacement washers and dryers.
With a good idea of fixed and variable costs, you’re ready to start the process of finding a laundromat to purchase.
Steps to Buying a Laundromat
You can buy your own space, add machines and other necessary technology, and open a laundromat. Plenty of people do this.
The easier route?
Find an existing laundromat to buy.
You’ll start earning money much more quickly and can often systematize and improve things while building on the location’s existing success.
To open or buy a laundromat, follow these steps:
- Find laundromats that are for sale
- Evaluate your purchase options
- Finance the purchase
- Negotiate/close the deal
1. Finding Laundromats for Sale
The first place to start is by looking for businesses where the owners know they want to exit. A few of our fave websites to check out include BizBuySell, and Flippa.
You can also find off-market deals using BizScout. This is a tool we built to help entrepreneurs to find a wide range of businesses, including laundromats.
But don’t sleep on looking at laundromats in your area. It’s good research, and it may open up a deal with an owner who hadn’t thought about selling yet.
2. Evaluating an Existing Laundromat
Finding a prime location is key!
Access and foot traffic are important for people hauling heavy bags or baskets of laundry. In general, look for decent neighborhoods where you’ll worry less about crime.
Just because a laundromat is for sale does not mean that it’s perfect for you.
If you spot an ideal laundromat to purchase, evaluate it by looking at the numbers day-to-day and year-to-year. Know the ups and downs and the business’ actual performance. Check out the age and wear/tear on current machines, since this is likely the biggest upfront cost for someone stepping into the business.
Identify areas for improvement early on, such as:
- Upgrading the machines
- Remodeling for a newer or friendlier design inside
- Adding enhanced security
Look for ways to repurpose empty floor space for a revenue-generating activity or more machines.
If you see potential to add more machines, look into the used market to keep startup costs low while pushing revenues higher.
3. Financing Your Laundromat Purchase
Like most deals, you can use cash, loans, seller financing, or a mix to secure your suds business.
Take a look at one of Codie’s early deals buying a laundromat with very little money down.
Using a loan for $100k, she put down $25k in personal cash.
After looking at the financials over the previous few years, she determined that the operation brought in about $5500 a month.
The loan payments spread the $100k over three years, with $67k in profit yearly.
That’s breakeven in just 3 months for the initial cash down with a total Cash on Cash return of 258%.
Seller financing can benefit both you and the owner.
This is the first and best route to explore. The owner continues to get a check from you for several years, and you get a longer period to pay them back as you get your feet under you in the biz.
You can always find another way to make a deal.
Imagine you don’t have a personal loan. You could take out an equipment loan on the machines to make it work.
If you have the cash to go all in, use that to your advantage in negotiations.
You take a big risk tying up all that cash in one deal. But you may get a better price on the purchase since the seller walks away with all the cash in one payment.
You can also turn to general SBA loans to build or buy your own laundromat, too. Side note: SBA must show up in the first lien position on the loan to get their money before anyone else. This means they are the primary lender in case you default.
4. Negotiating and Closing the Deal
Just like any other deal, negotiate!
Know the owner’s motivation to leave. This gives you what you need to know about negotiation.
Remember that an owner may not fully understand seller financing, but you can pitch this as a valuable option to get them out of the business fast while still giving them cash flow over a period of a few years.
At the same time, that may give you confidence that the business has strong legs to build on when you take over.
Be prepared to educate about seller financing and come to the negotiating table with terms that tap into what’s most important for you and the seller.
Running a Successful Laundromat
A laundromat has low overhead and is easy to run. But that doesn’t mean there’s no work.
Plenty of things help the operation make more money and run efficiently.
To keep things running, invest some time and energy into optimizing the business itself. Optimizing your operations is vital for improving revenue and profit, and often requires way less work than things like buying and installing brand-new machines.
Optimizing Your Operations
It doesn’t take a rocket scientist to build a laundromat that rakes in cash every day. But it does take some know-how around 2 key things:
- Hiring an operator
- Modernizing the operation
Unless you want to hang around arguing with people who say the change machine screwed them, get someone else hired right away to manage things in the physical facility.
This frees up your focus to work on things like growing the business for better cash flow.
It also frees you up to think about how you can modernize the business and offer new value-add service for your customers, like:
- Vending machines (toys, soap, etc)
- Wash-and-fold onsite (buy commercial laundry equipment for bulk work)
- Laundry home pickup and delivery
Even adding WiFi and giving people somewhere to work while they wash could draw in more customers.
If the idea of laundry home pickup and delivery speaks to you, check out how Mark turned that service into a cool $3 mil in revenue with projections to grow at warp speed.
With an operator, consider an equity split to incentivize them. When they feel invested in the laundromat’s success, they’ll more likely keep an eye on problems or even suggest new ways to boost profit.
Managing the Risks and Challenges
Just like any business, you face risks and challenges running a laundromat. Compared to the complexity of other businesses like a restaurant, you can tackle these much more easily.
Some of the heavy hitters to plan for:
- Operational issues like maintaining, repairing, or replacing the machines.
- Managing increasing costs like rent and utilities.
- Dealing with competition (low barrier to entry = easier for others to open nearby).
- Security problems like loitering, theft, or vandalism.
If you can, shadow the current owner of a nearby operation.
If you buy an active laundromat, plan in a transition period to learn the ropes from the owner. You should begin brainstorming ways to protect against these risks early or how you can build on what the prior owner did.
Bring Home the Bacon with Bubbles: Buy Your Own Laundromat
Who knew that everyone’s most hated chore could be your key to cash? Buying an existing laundromat unlocks opportunities for ongoing money in a recession-proof business.
If you can find the right location, invest in some minor upgrades for curb appeal and customer experience, and hire the right operator, you’ll put in way less work than most owner-operators in other industries do!
Spend the time researching your choice, running the numbers, and negotiating a deal that works for your financial situation.
