The Ultimate Guide to Laundromat Investing: The Business Plan

Designing a Successful Laundromat Business Plan

In this post, we will dive into the development of a successful and useful business plan for a proposed laundromat business. We hope to give you a basic understanding of the main purposes for having a business plan and the essential elements included in a thorough, properly researched and well-formulated business plan.

Your business plan will serve as a road map. It should help you to set reasonable expectations for the laundromat. It will give you the opportunity to educate yourself throughout the process and allow you to dig deep into the operational requirements of the business, generate revenue and expense projections, and create a profitability timeline. In doing so, it will compel you to understand the full range of responsibilities that come with owning and operating a laundry. When you are finished, your plan gives you the chance to sit back and assess whether the venture is worth your time and investment.

In addition to helping visualize the success of the business, a business plan serves as a compulsory exercise that is necessary in order to secure financing. Lenders will require a business plan to assess the qualifications of the prospective borrower AND the soundness of the proposed business. For new laundromat investors, a more detailed business plan is required, while acquiring an existing laundromat does not necessitate a plan that is as thorough, given the history of the existing business. Although, being as detailed as possible is always better.

Preliminary Research

To begin, you will want to ask the question, “Will this be worth my time and energy?”

To a greater extent, you are really asking, “Will this work?!”

To answer these questions, a feasibility study is essential. Your preliminary research should include a demographics report that shows nearby household income, education, occupations, home values, dollars spent on laundry per week, and rental units surrounding the location, among others. Arrow Machinery can help with this step, as we have access to resources giving us up-to-date information on the specific demographics associated with successful laundromats.

If you are purchasing an existing laundromat, you will want to perform thorough due diligence on the store valuation, review the lease agreement, inspect the equipment, and verify income and expense claims by the current owners. Many times, existing stores need refitting or retooling to better serve the customer base, so making sure you know your total equipment investment is extremely important. In addition to new equipment, existing laundromats may also require leasehold improvements to ensure the store is appealing to current and potential customers.

(Need help with your feasibility study? Arrow Machinery can do it for you!)

Once the feasibility study satisfactorily shows the business can be successful, it is time to begin the task of collecting and assembling information for the actual business plan.

Business Plan Components

A business plan is simply a formal was to organize and present information and data related to a proposed commercial enterprise. I can be simple or it can be complicated, depending on the situation. There are a few common elements, regardless of how detailed the plan should be:

• Executive Summary

• Products and Services

• Marketing Plan

• Management and Operations

• Financial Plan

Not all lenders require the same information. If seeking funding from a specific lender, ask about the particular kinds of facts and figures they want in the plan for them to consider the loan. If you are seeking an SBA (Small Business Administration) loan from your bank, go to SBA.gov and research what information your business plan should contain and how that material should be presented.

Executive Summary

Although the Executive Summary appears first in your business plan, it is actually the last section you will write. It boils down the information presented in the rest of the plan in a succinct fashion. Essentially, you will summarize why you want to start the business, why it will be successful, and why you should be leant the money you are requesting. You should present this section in a tight, business-like manner, using short, concise paragraphs that present the information in the same order as it appears in the plan.

Include your reasons for getting into the business, a description of the store, an explanation of the opportunities the business is seeking to exploit in your target market, and demonstrate how it will accomplish its mission. An easy recommendation we have is to dedicate one paragraph to each section of the full plan. In all, your Executive Summary should be one to two pages, so don’t go overboard. Be succinct and to the point.

Products and Services

This section will be all about what you are selling. List all of your laundry’s offerings, which may include wash-dry-fold, over-the-counter and/or vending machine sales, pickup and delivery and anything else you may offer as a profit center, like merchandise or even ice cream. Be sure to really think about everything you want to offer your customers, because this will help you in your decision on what your facility will need in terms of operational processes and support. A well-chosen slate of products and services can provide marketing leverage if those offerings set the laundry apart from your competitors.

Marketing Plan

Also of particular interest to lenders and investors, the Marketing Plan contains important details on who your customer base is, how the business plans to retain existing customers (for existing laundromats), how the business plans to attract new customers, and how you will go about this. In this section, you should lay out individual strategies for marketing the business through social media, your website, print media and other advertising vehicles – and an overall strategy for executing the marketing effort, tracking success and calculating your return on investment. Surprisingly, many laundromats do little to no marketing, so spend a good amount of time on this. You can form a significant advantage over your competitors.

Speaking of your competitors, this is a good place to research and analyze them. Sometimes called a SWOT Analysis, you will want to put together a “map” of the landscape existing at the time you plan to open your laundry. You will honestly examine your strengths and weaknesses as a laundromat owner, your competition’s strengths and weaknesses, the opportunities available to you in the market and the threats that may exist that could play a role in making things difficult to achieve your goals.

Management and Operations

In this section, you will lay out your company’s organizational chart and provide a brief rundown on the work experience of all owners, especially any direct experience with laundromats, financial experience, and managerial experience. You will include how you plan to execute some of the essential functions of the business-like marketing, accounting and payroll. For example, will you handle all of your accounting in-house, or will you outsource it to a third party? Give your reasoning, and be very clear about why you are shaping your company the way you are proposing.

Under your Operations Plan, be sure to present a clear management structure with defined titles and responsibilities. Who will perform administrative tasks? Maintenance and repairs? Refill vending machines? Be transparent about who will do what in your day-to-day operations. At the end, this section can serve as a blueprint for you to write an operations manual that includes policies, processes and procedures governing things such as quality control, terms of employment and other legal matters.

Financial Plan

The contents of the financial plan are determined by whether the overall business plan is intended to address the acquisition of an existing laundry of the construction of a new one. Regardless of whether it is created for an acquisition or a start-up, the financial section should include:

• 12-month financial projection, plus five years of annual projections

• Income and expenditures spreadsheet, including debt service

• Cash flow projections

• A break-even analysis

In the case of an acquisition, the financial section also should include:

• Current balance sheet of the existing business

• Past 2 years of financial statements, at a minimum

• Last 3 years of business tax returns

• Last 3 years of utility bills

• Copy of the lease to be transferred (If applicable)

• Breakdown of any expenditures related to leasehold improvements or equipment acquisition or replacement.

If the business plan is for a new laundry, the section also should cover:

• Start-up costs, i.e. real estate, construction, financing, equipment costs and other expenses

• Capitalization

Projections should be developed based on your proposed mix of product and service offerings and the hours the business will be open. If the plan is to be used as part of a loan application, it also should include a personal financial statement and the last 2 or 3 years of your personal tax returns.

Helpful Hints

So, you’ve started your preliminary research for your business plan and collected a mountain of information. It is now time to organize and present your information in a logical and compelling way. We have some suggestions that may help simplify the process from here.

1) Be smart with the template you use. There are many downloadable business plan templates out there – most of which share many common elements – available from business schools, trade organizations, business advisors, financial institutions, distributors and business brokers, as well as agencies like the SBA. It will serve you better to dedicate some amount of time to exploring these templates to determine which fits your business plan and overall style the best. The template should be professional no matter which one you choose, so be mindful of how the template will serve to present your plan.

2) Remember your audience. As you assemble your plan, it is wise to keep in mind that the most important reader of the plan is going to be a lender or investor. So, whenever possible, the content of the plan should be presented in a manner that helps in some way to answer on of the 2 basic questions: Why you want to enter the laundromat business, and how you are going to repay the loan or investment. From writing about your background and management skills to ensuring all financial data is comprehensive and accurate, your plan is supposed to convince someone else to give you money. Make your case a compelling one.

3) Play devil’s advocate. Do yourself a favor and put yourself in the shoes of a lender or investor. Read through your plan as you go and examine it with a critical eye. Try to shoot holes in your own logic and research. As you go, anticipate questions from lenders or investors, and do your best to mitigate any glaring weaknesses by making a plan to address them. It is okay to have weaknesses in your business plan as long as you can articulate how your will deal with them.

As you go through your business plan journey, seek out help from resources willing to help you, because writing a business plan for a laundromat is not a short task. It can be a daunting assignment! Arrow Machinery has the tools available to give you accurate demographics reports and financial projections, which are typically the hardest areas to get accurate information on. We are here and available to you to help you achieve your goal of opening a laundromat.