Opening a laundromat can be a lucrative business with steady cash flow and low overhead. However, just like any other business, it requires careful planning and financial management to ensure its long-term success. A solid financial model is essential for understanding the financial health of your laundromat and guiding your decisions regarding operations, pricing, and expansion.
A financial model helps you project your revenue, estimate expenses, and calculate profits, giving you a clear roadmap of your business’s potential. Whether you are starting a laundromat from scratch or purchasing an existing one, developing a financial model is an important first step in building a successful business.
In this step-by-step guide, we’ll walk you through the process of creating a laundromat financial model. By the end of this article, you’ll have a better understanding of the components you need to include and how to use this model to make data-driven decisions for your business.
We have also built a ready-to-go Laundromat Financial Model Template for Founders looking for an easy-to-use Financial model which will allow them to model out their financials and provide an Income Statement, Balance Sheet and Cash Flow Statement for their business.
What is a Financial Model?
A financial model is a detailed framework used to represent the financial performance of a business over time. For a laundromat, this would include all revenue streams, expected costs, and profitability calculations. A well-built financial model helps you project key metrics like revenue, expenses, profit margins, and cash flow.
It can be a simple spreadsheet or a more complex model, depending on your business needs. A good financial model serves several purposes:
- It helps you forecast future financial performance.
- It allows you to evaluate different pricing, marketing, and operational strategies.
- It is crucial for securing funding from investors or lenders.
- It enables you to track performance against your goals.
Step 1: Understand the Laundromat Business Model
Before diving into the numbers, it’s important to understand the key elements of a laundromat business. A laundromat typically generates revenue through several key activities:
- Self-service washing and drying machines.
- Wash-and-fold services (if applicable).
- Vending machines for detergents, fabric softeners, and other laundry-related products.
- Dry cleaning services (if applicable).
These revenue streams are relatively stable and predictable, as people need to do laundry regularly. However, success depends on factors like location, equipment quality, pricing, and customer experience.
You will also need to take into account the competition in your area, as well as customer preferences for self-service, delivery, or additional services.
Step 2: Estimate Revenue Streams
Your laundromat’s revenue will primarily come from the following sources: washing machines, dryers, wash-and-fold services, and potentially dry cleaning and vending machines. To build your financial model, you need to estimate the revenue from each stream.
Self-Service Washing and Drying Machines
The largest revenue stream for most laundromats is typically the self-service machines. The number of washers and dryers you have, the price you charge per load, and the average number of customers you serve will determine your income.
To estimate your revenue from these machines, calculate:
- The number of washing machines and dryers: A typical laundromat will have anywhere from 15 to 30 machines, depending on the size of the location.
- The price per load: Depending on the location, you might charge between $2.00 and $5.00 per wash and between $1.50 and $4.00 per dryer load.
- The number of customers per day: This can be estimated based on foot traffic and the average number of washes per customer. A busy laundromat might serve 50 to 100 customers per day.
Example: Let’s say your laundromat has 20 washers and 20 dryers, charging $3.00 per wash and $2.50 per dryer load. On average, each customer uses one wash and one dryer load. If you have 60 customers per day:
- Washing revenue: 20 machines × $3.00 × 60 customers = $3,600 per day
- Drying revenue: 20 machines × $2.50 × 60 customers = $3,000 per day
- Total revenue per day from washing and drying = $6,600
If your laundromat operates 30 days a month, your monthly revenue from washing and drying would be:
Wash-and-Fold Service
If you offer wash-and-fold services, you will generate additional revenue. Pricing for this service typically ranges from $1.50 to $3.00 per pound of laundry, depending on the region and service quality.
Estimate your monthly revenue from wash-and-fold services based on the following factors:
- Price per pound: Decide the rate you will charge for this service.
- Average weight per load: An average laundry load weighs between 10 and 15 pounds.
- Number of customers: Estimate how many customers will use this service each day. A laundromat might have around 10-20 wash-and-fold customers per day, depending on the size of the location.
Example: If you charge $2.50 per pound and each customer has an average of 10 pounds of laundry, serving 15 customers per day:
- Daily wash-and-fold revenue: 15 customers × 10 lbs/customer × $2.50 = $375 per day
- Monthly wash-and-fold revenue: $375/day × 30 days = $11,250 per month
Vending Machines
Many laundromats supplement their revenue with vending machines that sell laundry detergent, fabric softeners, snacks, and drinks. You will need to estimate how much your vending machines will earn per day. This depends on the location, machine selection, and customer needs.
Typically, a vending machine can generate anywhere from $5 to $20 per day, depending on the products sold.
Dry Cleaning Services
If you offer dry cleaning services, this can be an additional revenue stream. Dry cleaning can generate more revenue per item than self-service machines or wash-and-fold services. However, it may also require additional staff or equipment.
Estimate the number of dry cleaning customers you expect to serve and the price per item to forecast this revenue.
Example Total Revenue Breakdown:
| Revenue Source | Amount per Unit | Number of Units | Daily Revenue | Monthly Revenue |
|---|---|---|---|---|
| Washing Machines | $3.00/load | 60 customers | $3,600 | $108,000 |
| Drying Machines | $2.50/load | 60 customers | $3,000 | $90,000 |
| Wash-and-Fold Services | $2.50/lb | 15 customers | $375 | $11,250 |
| Vending Machines | $5-$20/day | 3 machines | $45-$60 | $1,350-$1,800 |
| Total Revenue | $7,020-$7,035 | $210,600-$211,050 |
Step 3: Estimate Your Operating Expenses
In addition to estimating revenue, it’s crucial to account for your operating expenses. These can be divided into fixed and variable costs.
Fixed Costs
- Rent: The cost of leasing your location, which will depend on the size of the space and its location.
- Salaries: Wages for any employees (e.g., attendants, managers, or cleaning staff).
- Insurance: Property, liability, and worker’s compensation insurance.
- Loan Payments: If you took out a loan to purchase equipment or the property, include monthly loan payments.
- Software/Subscriptions: Costs for any point-of-sale systems or scheduling software.
Variable Costs
- Utilities: Water, electricity, and gas bills, which will increase depending on how much your machines are in use.
- Supplies: Detergents, fabric softeners, cleaning materials, etc.
- Maintenance: Regular maintenance for your machines to keep them in good working order.
Example Expenses Breakdown:
| Expense Category | Monthly Cost |
|---|---|
| Rent | $3,000 |
| Salaries | $5,000 |
| Insurance | $500 |
| Loan Payments | $1,000 |
| Utilities | $2,000 |
| Supplies | $1,200 |
| Maintenance | $500 |
| Total Expenses | $13,200 |
Step 4: Calculate Profit and Loss (P&L)
Once you have your revenue and expenses, you can calculate your profit.
Profit Calculation:
- Total Revenue: $210,600 – $211,050 per year
- Total Expenses: $13,200 per month ($158,400 per year)
Subtract your expenses from your revenue to determine your net profit.
For example:
- Annual Revenue: $210,600
- Annual Expenses: $158,400
- Net Profit: $210,600 – $158,400 = $52,200
This gives you an estimate of how much profit your laundromat could generate annually.
Step 5: Create Financial Projections for Growth
Now that you have your baseline financial model, you can create projections for future growth. Factors to consider include:
- Increasing foot traffic: How can you attract more customers to your laundromat?
- Expanding services: Can you add more machines, offer delivery services, or expand into new markets?
- Reducing costs: Are there any opportunities to reduce utility costs, negotiate better rent, or find more efficient equipment?
Final Thoughts!
Building a laundromat financial model is a crucial step toward ensuring the long-term success of your business. By forecasting your revenue, estimating expenses, and calculating your profits, you can make more informed decisions about pricing, marketing, and expansion.
Remember, your financial model should be flexible and updated regularly as conditions change. Whether you’re starting from scratch or purchasing an existing laundromat, a well-thought-out financial model will help you run a profitable business and navigate any challenges that may arise.
Frequently Asked Questions
What is a laundromat financial model?
A laundromat financial model is a tool that projects revenue, expenses, and profits, guiding decisions regarding operations and investment strategies.
How can a financial modeling tool help my laundromat?
A financial modeling tool helps by providing financial forecasts, analyzing profitability, and aiding in investment strategies suitable for laundromats.
Why is laundromat scalability important?
Scalability ensures that a laundromat can grow and add more services or locations without proportionally increasing its operating costs.
Get started with your laundromat financial forecasting today to ensure sustainability and profitability in the competitive laundromat industry.
