Out of pocket start up costs

[Victor]

Hi,

I am interested in opening a laundromat in the San Francisco Bay Area. I see that the sale prices of laundromats usually run in the hundreds of thousands of dollars.

I want to know how feasible it is to start a laundromat on a shoestring budget. I probably won't be able to put up more than 10K out of my own pocket. Can I make the rest up through financing, loan, government grant, other opportunities? Or is this a business you need to have significant $$$ to start?

Is there any hope for someone in my position to get in this industry?

Any input would be greatly appreciated.

thanks,
Victor

[Duane]

Victor,

I sent you an e-mail.....

Duane.


For other newbies interested, here is part of the e-mail I sent to Victor:

"To build a new mat usually runs about $100 to $150 (depending on size and equipment mix) per square foot. So even a small mat of 1000 square foot would range between $100,000 to $150,000 just to build. You will also need cash to support the store during startup and it could take 6 months to a year to reach break even point. This alone would be tens of thousands of dollars.

Most banks would like to see around 25% of your own money down on a business loan. For a small mat you are still looking at over $35k down payment and you will still need to support the business until it starts to pay for itself. The smaller down payment means that you will have a larger loan to pay back and that means working several years making little to no money while paying off the loan.

There are also other issues of building a new mat and being able to generate enough of a customer base to support the store.

............................."

[Howard]

The number one reason for busines failures in this county is undercapitalization. Can you do it for $10,000 - sure, will you likely fair - yes. Sure there is a slim chance of sucess, and I'm sure some #$%#$% will chime in how he did it - but the odds are against you.

[petefritz]

I do not see how it is possible to buy an existing mat, let alone build a new one. The architect work can cost almost 10k just for design and blueprint. I suggest you try a route setup, where you place a few washers and dryers in an apartment building and split the profits. Maybe start a w/d/f service, you go anf pick up, and delver, do the laundry at a mat nearby. The 10k might afford you a decent used van to use in this new business.

[millenniumplus]

You might proceed with the assumption you can get 100% financing for the building and equipment. It's
certainly not impossible. Where you would next need to focus yourself is the hidden costs - the devil is
in those details!!! . In our area the electric, gas, and water company wanted 2 months payment in advance
for new business. Insurance is another cost. The cost for employees (if applicable) needs to be factored in.
Cash register(s), security equipment, telephone(s), trash removal should be on your list to name a few. Not
having any expertise in the area of gov/state/city grants - maybe there would be room for them to pay these
items. I believe there is always hope but a lot more homework is ahead of you. Good luck in trying to pool
all of this together to start up a laundromat with $10k. No doubt if one is to succeed with around $10k out
of pocket, a big requirement is that you be highly motivated, creative and result oriented! Keep us posted...

[Jack]

Victor,

I'm new to this industry as well and made a very smart move recently. I contacted my local Small Business Development Center (state run, by the way) and they are doing everything they can to get my financing all lined up. I figure they have their finger on the pulse of any gov't loans, community development block grants, etc. and they work with local banks everyday to secure loans for small business.

I'm not sure if CA has a Small Bus. Dev. Center, but it's worth checking into. BTW, I do not recommend working with SCORE. My counselor there tried to talk me out of owning a laundromat. He was not at all supportive or encouraging.

Good luck,
Jack

[Victor]

wow, thanks everyone for their cogent responses. It's really great to share in this deep pool of knowledge.

I will definitely look into these suggestions, such as the Small Biz Development Center. I know that you need a certain level of capitalization for this biz, the challenge now is to be creative and find those sources of financing!

I will definitely keep everyone posted as I delve into this. Hopefully, I can help others who are wrestling with this issue.

thanks,
Victor