Have you ever paid for dry cleaning and thought about how profitable it might be? Well, someone is making a good living from that dry cleaning business. Why not you? It could be a profitable opportunity for you to be your own boss.
A dry cleaning business offers dry cleaning of clothing and other garments, as well as other laundry services. Some offer pick-up and delivery service as well.
According to IBIS World, the market size of the dry cleaning industry is $8 billion. Globally, according to Business World, the market size as of 2018 was $118.9 billion and was expected to grow 10.9% per year through 2022. 70% of the market is households, and the rest of the market consists of hospitals, restaurants, hotels, and other organizations.
The industry is being driven by the desire of consumers for convenience, particularly with pickup and delivery services. However, the industry overall is expected to show some decline in growth due to the adoption of business casual attire. Economic downturns also affect the industry.
Your target market will be those seeking the convenience of laundering and dry cleaning services.
Skills, Experience, and Education Useful in Running a Dry Cleaning Business
There are several specific skills that you will need to open a dry cleaning business.
- Experience. Experience working in a dry cleaning or laundry business is valuable, particularly in management.
- Business knowledge and experience. You will need to have at least some basic knowledge of marketing, finance/accounting, and human resources.
- People skills. You’ll need to be able to build rapport with your customers so that you retain them as customers and keep them coming back.
Checklist for Starting a Dry Cleaning Business
If you’re thinking about starting your own dry cleaning business, there are a few things you should keep in mind before launching your business. Here is a checklist of the essentials to get started.
Step 1: Write your Business Plan
After coming up with the idea, the next step in starting your dry cleaning business should be to write a business plan. The business plan will make you focus on some important aspects of the business, such as who your customers are, how you plan to reach them, projecting sales and expenses, your value proposition to use for marketing, and more. You’ll also need to do some research to calculate exactly what your startup expenses will be and what your ongoing expenses will be.
Not only will a bank require you to have a business plan if you need financing, but multiple studies have shown that having a good business plan increases the odds of starting a successful business. Writing the plan helps you to think through all the aspects of the business and then serves as a guide as you begin.
Related: How to write a business plan
Step 2: Name the Business
Finding the perfect dry cleaning business name can be challenging. Not only does the name have to reflect what you do and be appealing to customers, but it also has to be available to use. You can check your state’s website to see if the name is available and register your name. Your name should make you stand out, reflect your brand, and tell potential customers exactly what you do.
Step 3: Form a Business Entity
A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for a dry cleaning business, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay. The corporation can be a good choice because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: 3 steps to forming your LLC
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 4: Select your Location
You need a location that is extremely convenient for customers, preferably close to or along a route that many business travelers will take.
In addition to accounting for lease or rent costs, the cost for utilities will need to be figured in as well. Also, be sure there is a sufficient water supply coming into the building as insufficient water will make it difficult to operate this business properly.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
From OSHA guidelines to state and local requirements for operating a dry cleaner, there is a lot to research before starting your business.
In addition to dry-cleaner specific requirements, there are also general business requirements such as local business licenses, sales tax permits, Employer Identification Number, and more.
Step 6: Find Financing
Coming up with a good business idea and having the skills to run it are one thing but getting the funding to start a dry cleaning service is another. In order to get a small business loan, the borrower(s) will need to have good credit and be able to invest 15-25% of their money towards the total start-up costs.
Step 7: Open a Business Bank Account
Keeping your business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 8: Get your Marketing Plan in Place
A dry cleaning business will need to set aside a budget to cover marketing costs on a continuous basis. Common marketing techniques for a dry cleaning business include social media marketing and online advertising. Developing a website can be a significant expense, but it can also give your dry cleaning business greater visibility online.
Step 9: Get Business Insurance
A dry cleaning business needs several types of insurance to fully protect the business. A few of the more common types of insurance include:
– General liability insurance can help protect you from third-party claims of bodily injury and property damage.
– Professional liability insurance protects you from claims of professional errors or negligence that result in a financial loss.
– Worker’s compensation insurance covers expenses like medical bills and legal fees that a business might face if an employee were ever hurt while working.
The cost of insurance will vary based on a number of factors. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. When comparing the quotes, consider not only the premiums but also how the plan exclusions, coverage limitations, and deductibles compare.
Step 10: Hire Employees
To efficiently run a dry cleaning operation, employees will be needed. Labor is typically the largest operating cost for a dry cleaner, so good training and management skills are a must.
In addition to salary costs, your budget will also need to include other employee-related expenses. Workman’s comp insurance, unemployment insurance, and paid time off are common expenses that a business will need to cover when hiring staff.
Related: Hiring your first employee
Step 11: Set up an Accounting System
Setting up an accounting system for your dry cleaning business is critical to the long-term success of your business.
Staying on top of taxes not only keeps the business out of trouble with the government but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.
The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:
- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.
Find bookkeepers in your local area or use a service like 800Accountant.
How much does it cost to start a dry cleaning business?
Here are a few of the most common startup costs you will face when you open a dry cleaning business.
– First month security deposit for rent $1,500 – $5,000
– Dry cleaning equipment such as washing machine, dryers, garment conveyor, presses, etc. $100,000-$200,000
– Supplies such as hangers, cleaning chemicals, etc. $2,000
– Initial marketing $500 – $5,000
How profitable is a dry cleaning business?
The profit for a dry cleaning business can easily be $200 or more per day, which is an annual revenue of $73,000 per year.
Other profit centers include alterations, severe stain removal, replacing buttons or zippers, and cleaning rugs and curtains. Some dry cleaners will also offer a laundry service as well.
Summer is often the slowest time of year for dry cleaners are customers are more wearing casual clothing more often or taking vacations.
Are there grants to start a dry cleaning business?
It’s extremely rare to find a grant to start a dry cleaning business. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov and you can check on your state’s economic development office to see if they have any grants available.
What is the NAICS code for a dry cleaning business?
The NAICS code for a dry cleaning business is 812320, which is categorized under Drycleaning and Laundry Services.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.