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The lack of proper spaces for washing machines and the dryers in newly built housing centers as well as the average person’s increasingly busy life created an opening in the market that entrepreneurs are looking to take advantage of. This has left many people wondering what they need to do to start a laundry business in Mexico.
According to the National Institute of Statistics and Geography (INEGI), there are 30,805 companies in Mexico that offer dry cleaning and laundry services with Mexico City having the largest number of establishments. It’s not surprising considering that it’s also a low investment business that can generate $10,000 to $25,000 per month.
If you’re looking to open this type of business, you need to know the pros and cons of the industry and how to start it to make a profitable laundry service.
Advantages and Disadvantages of Setting up a Laundry Service
If you still have doubts and you’re not sure if this type of business is for you, take a look at an analysis of the pros and cons of setting up a laundry service in Mexico. As the entrepreneur and investor Warren Buffet says:
Risk comes from not knowing what you’re doing.
- Ease of management: One of the greatest advantages of a laundromat business model is that it’s not necessary to be present in the establishment to start it. The washing machines and dryers work alone and the customers themselves can use them with a few simple steps and pay through an installed slot machine. This automation makes it possible to manage a self-service laundrette by telematic control instead of being there all of the time. In addition, installing cameras in the room can allow you to see what happens at all times from a mobile device.
- Affordable minimum investment: It’s a low investment business ideal for entrepreneurs who don’t have a large startup capital. Unlike other business models, it’s possible to eliminate expenses such as hiring personnel.
- Minimum risk: Washing clothes is a basic need that is not subject to rising or falling depending on the evolution of the market. In addition, there is a tendency to delegate domestic tasks like laundry to outside services due to a lack of time. Couple that with the decrease of space in housing for larger household appliances and it’s safe to say that laundry services have a steady place in the business world. This means that the risk of opening this type of business is small and there is a higher probability of success.
- Possibility of generating extra income with complementary services: If you want to set up a self-service laundrette, there is also the possibility of installing vending machines to offer coffee or snacks to people waiting for their laundry to finish. This is an easy way to earn extra income. If self-service is not enough, it’s also possible to add value by offering ironing services, tailoring, or even full-service laundry services with home deliveries.
- Possibility of increasing profits through a 24-hour service: Taking into account that staff is not essential for a laundry service to work, you can offer longer operating hours or a self-service 24 hours laundromat to accommodate customers who can’t go do laundry during normal business hours.
- Franchise opportunities: Having the support of a franchise can help you find better locations and access better machinery and premium detergents. You can also get advice to help your business succeed. Although the necessary investment for a franchise is higher it can be the better option. For example, if you don’t know where to start, you don’t know much about the industry, you don’t have time or you want to reduce your risk and make your business profitable quickly, opening a franchise could be the best option.
- Need to invest in training or expert staff: If you don’t know the industry, you may have to find a consultant or hire experienced staff to establish the business. This can increase your initial investment considerably.
- Very competitive sector: The fact that it’s a booming industry and highly demanded business model makes it more competitive. Mexico already has over 30,000 laundry establishments and dry cleaning services so finding a way to differentiate yourself and developing a good marketing plan is more necessary than ever.
Is it profitable to open a laundry service?
One of the first questions (and, sometimes, one of the most difficult to answer) people ask when starting a business is whether or not it will be profitable in the short and long term. According to several sources, laundromats and similar laundry services are considered one of the most profitable business models in Mexico.
According to data from the magazine Entrepreneur, laundry-based businesses can reach operating margins of 50 percent and average profits of up to 30 percent. This, added to the fact that the investment necessary to set up the business is low, makes it possible to get a return on your investment in a short time.
For example, suppose you’re setting up a small self-service laundrette with four washers and two dryers. The investment in the machinery would be about $49,500 without the slot machines. If you want to automate the machines with coin slots, the investment would go up to about $70,000.
To this cost, you would have to add the rent of an establishment that could cost between $3,000 and $5,000 per month, plus utilities like gas, electricity and water. You’ll then have to invest in detergents, fabric softeners, furniture and Internet service among others. Even with all of these expenses, according to the experience of the director of Maytag Mexico, Carlos Martínez, it’s possible to recover the investment in less than a year.
Therefore, yes, a laundry service is a profitable business provided you open it in the right place, offer a quality service and use effective marketing strategies to beat your competitors.
How to Open a Laundry Service Step by Step
Like any business, you first have to develop a business plan and study the market to decide who your target audience will be and what services you’ll offer (a self-service laundromat, home delivery, ironing service, by request etc.).
You’ll also have to decide where you’re going to open it considering which location would be the most advantageous and if you’re going to open a franchise or create your own business. Finally, you’ll need to decide what machinery you’re going to choose and how you’ll promote the business.
From there, you can follow a series of steps to properly start your laundry business.
Step 1 – Affiliate with Canalava
If you don’t know the industry, it’s best to seek advice and training to decrease your chances of failure and increase the chances of success. In Mexico, the Canalava (a national chamber of the laundry industry) can help you navigate the ins and outs of the industry facilitating the opening and management of your laundry.
By joining the Canalava you get the following benefits:
- Business training: Courses, seminars and workshops on everything involved in setting up a laundry service.
- Advice and management: Accounting packages, advice on the regulations applicable to the laundry sector and management of procedures such as land use, opening notice, adhesion contract and verification of scales, among many others.
- Liaison with federal dependencies: Possible support of different federal and state agencies.
- Access to information of the industry: Newsletters, digital magazines and business opportunities regarding the laundry industry.
Step 2 – Study and Define your Ideal Client
The first step and one of the most important parts of the creation of any business is defining your target market. To achieve success, your laundry service should be built around the type of client or the broad community you want to reach. Most of the decisions about your services will have to do with whether or not they meet the needs of your ideal clients.
For example, if you want to attract entrepreneurs or workers of medium-high purchasing power who don’t have time to do laundry, a by-order or home delivery laundry service could work well. On the other hand, if your business is aimed at students or singles who rent rooms and don’t have a washing machine, the best option would be to set up a self-service laundromat.
Another idea is to cater to other businesses such as restaurants or spas that need to wash large quantities of tablecloths or towels. There, you would need to have large capacity industrial washers and dryers. It could also be beneficial to offer an ironing service since these businesses probably don’t have the time or the irons to do it themselves.
Defining your ideal client will not only help you build your laundry business, but it will also allow you to design an effective marketing strategy. To do this, you must study your target audience and know it like the palm of your hand. In marketing terms, this is known as defining your “buyer persona.”
According to Tony Zambito, founder and principal authority on information about buyers and creator of the term “buyer persona”, this is an archetypal model that is the result of a research process that defines who the buyers are, what they are trying to achieve, how they think, where they buy products or services, how they buy them, their motivations and when they decide to make purchases.
It’s about putting yourself in the shoes of your ideal client and thinking about what their concerns, needs and actions are. You can also conduct surveys or interviews with your ideal clients to obtain more information about them.
Step 3 – Choose an Establishment Intelligently
The choice of premises can be a factor that ultimately decides the fate of your laundry business. Verónica Ybarzabal Téllez, president of the Canalava, said, “a laundry business serves a sector of the area and localization is the determining factor for its success.”
A laundromat located far from where the majority of your potential customers reside, or one in an area where other laundromats that offer the same services already exist, will hardly be profitable. Therefore, when defining your ideal clients, it’s important to find out where they live.
Generally, it’s best to place a laundromat on a busy street in an urban neighborhood along a main commuting route, near subdivisions or apartment buildings, in shopping centers, within coastal towns or in the center of a city.
According to an analysis by the magazine Entrepreneur, most people who use laundry services are middle class and often live in popular neighborhoods with a high population density. Customers who live in these areas often prefer self-service laundromats over delivery or drop-off services.
If you want to get to managers of restaurants, hotels, spas or hospitals you should look for a place that is near these establishments. Keep in mind that this type of customer usually spends about $4,000 on laundry services and are typically eager to deal with laundry businesses so they aren’t as unobtainable as you might think.
In addition to the proximity to your potential customers, you must take into account the size of the space, the rental or purchase price, any renovations needed and the cost of monthly utilities.
Finally, it’s important that the architecture of the premises aligns with your objectives. Here, pay attention to the following:
- If the planned machinery can be easily set up in the space.
- If the electrical and water installation would need to be adjusted to set up the machinery or if rewiring and moving pipes would be necessary.
- If you need a renovation project to change the premises to fit your objectives and what the cost would be.
Step 4 – Choose the Right Equipment
The equipment takes up a substantial part of your initial investment and, like the location, the quality of laundry services you offer can be another factor that determines the success of your laundromat. Besides taking the price into account, take your potential customers’ needs and the efficiency of the machines into account.
In general, having at least one large industrial washing machine is essential, since many of your customers might go to your laundromat just because they don’t have access to large capacity washing machines. In addition, they would be necessary to attract small businesses, too.
You should also have at least one washing machine dedicated to delicate clothing to offer better service and satisfy those customers who want to wash delicate fabrics such as silk or wool. If your target audience wears these types of garments, be sure to include this specialized washing machine. Of course, you’ll also need dryers and accessories like detergent dispensers.
According to Carlos Martinez, commercial director of the laundry equipment distributor Maytag Mexico, a laundromat can be started with six semi-industrial machines and a large-capacity one.
If you want your laundry service to be self-service and you want to skip the staff, you should invest in machines that include a slot machine or a central payment system so they can choose their washing and drying cycles and pay in cash, with a credit card or even with a loyalty card.
Finally, keep in mind that there are many industrial and semi-industrial machines that also include a magnetic card capable of recording high-value data like frequencies of use or washing cycles that your customers usually use.
Those statistics can help you improve the management of your laundromat and implement more effective marketing strategies. For example, you could do promotions with discounts on specific types of washes that your customers use more to attract new customers or retain the ones you already have.
Step 5 – Create a Marketing Plan
Opening a laundry business and standing idly by waiting for customers to appear hardly ever works. Many small businesses fail because they don’t have a marketing plan usually because they see marketing or advertising as a cost that can be cut.
In the book Return on Marketing Investment by Guy R. Powell, CEO and founding partner of ProRelevant Marketing Solutions, he states:
Everything we spend on marketing should be seen
as an investment.
Even if there is a cost in the beginning, what really matters is the return you get from our actions.
To create your marketing plan you should think about what channels (online and offline) will let you reach your potential customers in the most effective way. Are your clients students? Then they are likely to be active on social networks or they at least use Google to find the nearest laundromat. Are your clients middle-aged instead? Maybe they usually read the newspaper, subscribe to a local magazine or listen to the radio.
Depending on your target audience, choose the media outlet(s) that they’re more likely to use so the chance of them seeing your advertisements is higher. That being said, there are some digital marketing channels and strategies that, as a rule, are usually effective for every type of laundry customer. Here are some of those channels.
Use Google to Gain Visibility
The company behind the most used search engine in the world is also responsible for the popular and useful advertising platform called Google Ads. This allows you to add your website to the top positions of Google.
According to data from Google Trends, people are increasingly searching for “laundry nearby” so advertising on Google, without a doubt, can help you gain visibility of people who are looking for your services.
In addition, digital advertising is one of the most affordable and effective ways to advertise a local business. A study by the Mexican association of Internet shows that 80 percent of users search for information on the Internet and one in three users interacts with digital advertising.
Using Email Marketing for Customer Loyalty
According to Hubspot data, 99 percent of consumers check their email every day and 80 percent of professionals believe that email marketing increases customer retention. It’s a very effective channel due to the fact that it allows direct communication with the client.
This is about getting your customers to subscribe to your email list so you can send them offers, promotions and other communications so they’ll remain interested in your laundry business.
For this, you can add a simple form on your website so that your customers can provide their name and email address. You should also hang a sign in your laundromat to inform them that they can subscribe to your newsletter to receive promotions and discounts.
Once you have collected some email addresses you will have to plan out the content of the emails to send them while also deciding how often you will do it.
You can send your clients individual discounts for their birthday, offer them a discount to wash their blankets when the winter ends or create a promotion in September to wash double the amount of clothes for the price of one to make their return to work after summer vacations more bearable. You can be as creative as you like here!
Gather Positive Reviews with a Google My Business Account
With a Google My Business account, your laundry service will appear on Google Maps whenever someone searches for nearby laundromats. To make your laundry service appear among the first results of Google Maps, you must accumulate positive reviews on Google.
To get them, you can ask your satisfied customers to write reviews or offer an incentive for them to do so. If you have an email list, you can send an email to your subscribers to ask them to write a review in exchange for receiving, for example, a 30 percent discount on their next wash.
Step 6 – Calculate your Necessary Investment
Once you create your business plan, it’s time to calculate all the expenses that your laundry service will have. To do this, you can group the different types of expenses into categories so you don’t forget anything. For example, to set up a laundromat, calculate it in the following way:
- Project: Cost of the electrical, construction or similar projects
- Rents: Whether for the location, the equipment or for the furniture
- Licenses: Land use permit(s), notice of opening declarations, external announcement and registration to the Federal Taxpayers Registry, etc.
- Insurance: For the business, equipment, etc.
- Reforms: Any necessary renovations that your space may need to function properly as a laundromat
- Installation: Wiring and lighting installation, plumbing, ventilation, air conditioning, gas, fire protection, security cameras, Internet, etc.
- Equipment: Washers, dryers, irons, payment centers, detergent dispensers, coin exchange machine, vending machines, television, etc.
- Products for washing: Soaps, detergents and softeners
- Furniture and utilities: Tables, clothes racks, shelves, chairs, sofas, magazine racks, cubes, etc.
- Decorations: Cost of painting the premises, posters, etc.
- Services: Cleaning service, repair services, etc.
In addition to the money necessary to cover those expenses, it’s important to have a sum of money to cover possible incidental problems. Remember that when you open a business, during the first months (or years), income is used to recover the investment, therefore, you have to be prepared to face the possible initial losses.
The only thing that’s left to do is to set up the company and get all your licenses and papers in order to start serving your community. Remember that the Canalava makes it easy for you to build your laundry service by helping you identify and manage all the necessary permits and go through the proper procedures.
Now that you know how to do it and where to find support, you can confidently join the growing community of entrepreneurs opening laundry businesses in Mexico.