How to Start a Trucking Business and Earn $100K/Month (2024)
May 2, 2023
May 2, 2023
Want to get into one of the fastest-growing industries in the country? The trucking business isn’t known for its high profits, but that changes when you start hauling 80,000 pounds per truck. That’s right! We’ll learn how to start a trucking business with expert advice from a trucking company.
Mikael Sant, the founder of Sant Lines, is ahead of the game. He started Sant Lines in May of 2021 at the age of 19. The trucking company made over $159,000 in revenue in the first six months. That’s more than many owner-operators make in a year. He has grown to four trucks, expects to have 100 in seven years, and is working to be a dominant force in the industry.
We’ve outlined the process to start a trucking company in just 7 steps. Click any of the links below to jump ahead.
Before you even consider operating a trucking company, you should:
Mikael is a serial entrepreneur. He owns:
Check out our interview with him below:
You can write your own success story in trucking by following Mikael’s advice with these seven steps.
Most of us are familiar with trucking on some level, whether it’s seeing big rigs on the road or utilizing local moving companies. Behind the products we receive from those giant trucks, plenty of government regulations ensure every trucking company delivers products safely.
If you haven’t worked in a trucking company, it’s important to get some industry experience and specific licenses. You might want to work with a moving company to learn about the industry.
Very simply, truckers make money based on miles and weight as they transport products. A trucking company operates under one of four main NAICS codes:
Trucking businesses charge different amounts based on what they are hauling and where they are hauling it. I combined the IBIS World statistics for the four sectors and found that the industry makes $557.2 billion in annual revenue and $33.2 billion in profit. Check out the rest of my findings below:
NAICS Code |
48411 |
48412 |
48422 |
49222 |
Combined |
Type of Trucking |
Local Freight |
Long Distance Freight |
Local Specialized Freight |
Couriers and Delivery |
4 Major NAICS Codes |
Revenue (billions) |
$86.60 |
$262.90 |
$56.10 |
$151.60 |
$557.20 |
Expected CAGR (compound annual growth rate) |
0.80% |
1.20% |
1.90% |
3.60% |
1.90% |
Profit (billions) |
$5.70 |
$13.70 |
$3.60 |
$10.20 |
$33.20 |
Profit Margin |
6.60% |
5.20% |
6.40% |
6.70% |
5.96% |
Number of Businesses |
307,000 |
570,000 |
65,000 |
416,000 |
1,358,000 |
Expected Businesses CAGR |
4.30% |
4.20% |
1.80% |
7.90% |
5.30% |
Number of Employees |
562,000 |
1,000,000 |
290,000 |
1,000,000 |
2,852,000 |
Expected Employment CAGR |
5.20% |
2.30% |
2.10% |
4.70% |
3.70% |
Wages (billions) |
$23.30 |
$69.20 |
$15.40 |
$43.90 |
$151.80 |
Expected Wage CAGR |
3.90% |
2.10% |
2.10% |
4.50% |
3.10% |
Wages/Revenue |
26.91% |
26.32% |
27.45% |
28.96% |
27.24% |
Purchases/Revenue |
31.40% |
31.50% |
30.60% |
7.80% |
24.95% |
Marketing/Revenue |
0.20% |
0.20% |
0.20% |
0.30% |
0.23% |
Depreciation/Revenue |
5% |
6.70% |
6.20% |
1.60% |
5.00% |
Rent/Revenue |
4.30% |
4.40% |
4.20% |
3.70% |
4.17% |
Other Costs/Revenue |
25.20% |
25.30% |
24.50% |
56% |
33.56% |
The average trucking company has over $410K in revenue. Specialized freight makes the most at over $860K, while the others earn far less. If you plan to start a trucking company, it’s reasonable to assume you will make no more than the following amounts during each of the first few years.
Learn more on our podcast where we discuss trucking with Mikael.
In the podcast, Mikael explains how he built his company from the ground up, including startup costs, and how he’s adapted to new systems as his company has grown. Plus, he talks about some surprising obstacles he’s had to overcome to keep the company running.
Yes, owning a trucking company can be highly profitable. The average trucker makes around $54K per year in wages and another $6,000 in profits, assuming they meet industry averages.
Mikael currently makes over $135K per year. He only drives in case of emergencies and pays his drivers to do most of the driving. So it can be highly profitable to start a trucking company without driving consistently.
More and more truckers choose to go out on their own once they have gotten some experience. In fact, owner-operators have the highest rate of solo entrepreneurs in the United States.
That’s because they can make a great living. Assuming the 4.2% rent is helping pay off their homes, that means the average business owner is paying off around $17,000 of their mortgage as a business expense.
When you start a trucking company, it is important to understand you are entering one of the most regulated industries in the United States. If you provide long haul services, you’ll need to register with multiple agencies including:
Mikael told us:
He also told us:
All of these costs add up, of course. Let’s have a look at the hard numbers so there are no surprises when you start to pay your startup expenses.
You’ll want at least $50K-$60K to start a trucking company. Mikael explained the startup costs for a trucking company, which include the following:
The good news is:
Yes, many major transportation businesses offer company drivers the ability to transition to owner-operators after working with them for a certain amount of time. They do this by setting up brokerages, leasing companies, and load boards.
The leasing company leases the owner-operator a truck in exchange for the truck company owner committing to a multi-year contract with them. At the end of the contract, you have your own trucking company and truck owned outright.
We’ll discuss the leases more in later sections, but first let’s check out more resources to learn how to start a trucking company.
There are industry organizations that you’ll want to follow to stay up to date on the trucking industry. These are some of the biggest in the U.S.
As the saying goes, if you fail to plan, you plan to fail. You need a solid business plan. Trucking company business operations comply with numerous regulatory agencies. Your truck company business plan should address all aspects of the business that are essential to your success.
The business plan dictates the plan of action. Once you have some knowledge and experience in the trucking industry, writing your new trucking company’s business plan is the next logical step.
Your business plan is your venture’s founding document, and it will be the reference point for all business decisions moving forward. You want to put time and effort into composing the business plan because a well-written one will help improve the probability of business success.
Luckily, there are great resources for entrepreneurs who are writing their own business plans. Check out our business plan template and watch our interview with Mike Andes below.
The Small Business Association (SBA) is part of the federal government and provides a step-by-step guide to writing your business plan.
Truckstop.com also has a guide to writing a business plan for trucking companies.
Keep reading to learn how to identify the target market for your own trucking company.
Your target market will mostly be businesses when you open your new trucking company. Depending on the type of truck, you might want to build relationships with different kinds of businesses. Some businesses that consistently need truckers include:
You’ll want to build relationships with load boards and brokers like datboard and truckstop.com, but Mikael also wins a lot of business with word of mouth recommendations. You’ll probably also want to consider seasonal fluctuations. Mikael told us:
It can be hard to describe your market accurately, but it’s a critical assessment to make. Market research firms gather data that are good for validating your original research. It’s worth considering hiring one if you aren’t confident in your research methods.
You can find a guide to market research for new businesses at Entrepreneur, and Joe Gardiner, CEO of VentureDevs, has a complete guide to market research at Forbes.
Because of the investment, you’ll probably start a trucking business as a Limited Liability Company (LLC). A trucking LLC filing as an S-Corporation is the prevailing business structure when someone starts a trucking company.
Limited Liability Companies can opt for the business entity to be treated as an S-Corp for tax purposes. You just have to file an 1120-S with the Internal Revenue Service.
A successful trucking company will find this business entity and tax structure beneficial because they will be able to:
Running your business in this method provides a good balance of liability protection and business structure if you choose to grow beyond a solo entrepreneur. Almost every successful trucking business will use either this structure or a C-Corporation.
You might want to hire a law firm to form your corporation because it’s easier to head off any problems as the business is formed rather than to go back and change your founding documents or business protocols once issues arise.
Check out our business hub for more in-depth information on business licenses and entities. Alternatively, review the Small Business Administration startup guide for more information.
Your trucking name can reflect your geographic origins, or it can be more abstract, or even the name of the founder. Sant Lines uses Mikael’s last name.
Choosing your trucking name is an important consideration that can affect both the present and future of your business.
For example, naming your company the Trucking Business of North Carolina may attract customers in your home state that want to do business with local trucking companies, but it might hinder your expansion outside of your state.
For some help with choosing a name for your business, check out our guide and business name generator. Alternatively, Forbes has a guide, as does The Balance.
Once you’ve determined your trucking name, run searches at your Secretary of State’s website and get a domain name from sites like GoDaddy or NameCheap.
Your plan should outline the source(s) of your capital plus how and when investors will be paid back. Outline your operational costs carefully. For a trucking company, there are three main sources of operations costs:
The primary costs associated with trucking are purchases including gas, maintenance, and repairs. These will be nearly ⅓ of your business expenses, so make sure to calculate them effectively. That means if you are doing long haul trucking, you should assume $153,667 of purchases per truck each year.
Your wages and any employee wages will be up to 29% of the revenue. That means you should assume you’ll be paying up to $133,690 if you are making the average amount for a long haul trucker. On average wages are around $55,000 per year across the industry.
The third largest expense relates to other costs like technology, miscellaneous business expenses, and taxes. These account for approximately 25% of revenue. I have created an automated 10 year calculator that estimates the revenue, expenses, and profits when considering the compound annual growth rate (CAGR) and how many trucks you want to add each year. Feel free to download it and try it out.
An owner-operator will normally pay themselves a salary plus profits paid out as either a dividend or return of capital. If you run as a sole operator, you need to make sure you set your pay correctly. There are a few ways you might fall under on the Bureau of Labor Statistics site:
In addition, an average trucking company would offer around $20,000–30,000 in profits which can be treated as dividends. If you pay yourself less than the $106K salary, which I suspect most would for the first few years, do not give yourself more than a $30K dividend check unless you want to risk an audit.
(I’m not a tax attorney, but I know enough that you don’t want to deal with IRS audits. If you make enough to pay yourself $200K, it is the safest bet.)
Consult a corporate attorney to get legal advice.
Once you’ve put together a plan, it’s time to start considering how to secure startup funding. As Mikael stated, you’ll need around $50K to $60K just to make it through the first couple of months. If you factor in the first year, you’ll need almost $300K, and to make it through the first five years you can expect to need over $2 million. These numbers do not include wages or depreciation (because depreciation is not a hard cost).
Most business owners start their trucking company with personal savings or by borrowing from friends and family, but you can also qualify for equipment financing and other loans that use the truck to back the loan. We suggest reaching out to National Business Capital first because they offer flexible financing options and work with you to find the best loan for your business from over 75 lenders.
If your business will serve a particular community or industry, you might be able to use crowdfunding to get the startup costs. Of course, you’ll normally have to offer them something like discounted pricing or a free local delivery depending on how much they contribute.
Kickstarter is a popular site for business funding. If you’d like to learn more about the Kickstarter process, check out our interview with Pooch Selfie’s founder.
While talking with one of my relatives about how to get into the trucking industry, he advised going through one of the major fleets to get financing. The way they work is they basically finance the truck in exchange for a contract of five years. After those five years, you own the truck.
He warned that you need to be cautious with these, however. Some of the fleets are a bit shady. If you are making less than $400 per day, they aren’t doing right by you. In addition, after five years you should absolutely own the vehicle. Make sure to read the contract carefully.
I asked about the best ones. He specifically mentioned:
A trucking business isn’t hard to start, but you will have some unique requirements that most business owners do not.
First, you’ll need to get your commercial driver’s license (CDL). You’ll also need to perform the following tasks when you start a trucking company:
To drive a semi-truck, you’ll need a commercial driver’s license. Each state has different requirements, but most consist of the following:
Mikael told us:
He suggested JJ Keller for the school.
Next, you’ll want to apply for insurance because many of the following steps require it.
Mikael spent a good bit of time talking about the important aspects of a truck. He normally looks for vehicles with these features:
He told us:
He also suggested bringing someone with you that can check the engine and transmission. They will be able to provide reasonable estimates for the cost of repairs and help you negotiate the price.
Trucks in the United States are rated by the gross vehicle weight rating (GVWR). The GVWR is a rating that manufacturers use to specify the maximum weight that a vehicle can operate safely. This weight includes the truck, trailer, gas, occupants, and freight. There are eight basic levels including:
The federal government requires heavy-duty trucks to have a commercial driver’s license, but each state has its own policies. California requires any vehicle over 6,000 pounds and 3 axles to have a CDL.
Tow trucks and other vehicles may also require CDLs. To learn more about tow truck driving, check out our interview with K.O. Towing below:
There are a ton of different trailers you can use for trucking. It just depends on what you need to carry. Some of the most common are:
Watch the video below to learn more about these trailers:
They don’t mention tankers in the video. You can transport hazardous waste or oil products, but those will require specialized licensing and knowledge. You are better off getting some miles on the road before you start hauling these products.
When first starting, you’ll probably only be able to choose one type of trailer. I’d probably go with a reefer or drop deck as they will offer you the most versatility. That sounds consistent with what Mikael told us:
You’ll need to pay your heavy use taxes to the IRS before you can start driving. You’ll use Form 2290 and either apply for an exemption or pay up to $504.17 (subject to increase). You won’t be able to get your authority or IRP License without proof.
You’ll need active insurance coverage including public liability insurance. The requirements vary based on state and federal laws, but you will need at least $750,000 of Bodily Injury (BI) and Property Damage (PD) liability insurance coverage. If you will be transporting hazardous materials, the requirement is $5 million.
The ATA has an agreement with Sentry as a preferred insurance provider. Most major insurers also have a commercial truck insurance product, or you can also find specialized truck insurance from companies like Owner Operator Direct.
To run an interstate (operating across state lines) business in the U.S. transportation industry, you will need to get licensed as an operating authority with the Federal Motor Carrier Safety Administration (FMCSA). To apply, you’ll need to:
When you perform these steps you will have a temporary operating authority for your self-owned trucking company. The DOT has to perform an audit before you have a permanent operating authority. These are not actually permanent, however, as they will take it away if you do not operate under the laws.
You’ll want to join the International Fuel Tax Association. It was created under the International Fuel Tax Agreement to simplify the payment of fuel taxes in the continental United States, Alaska, and Canadian provinces.
Truckers are required to pay fuel tax based on the percentage of miles they drive in each state. To simplify the administrative costs, each jurisdiction handles its own member applications, tax returns, and audits. Read up on how it works on the IFTACH website.
You’ll need to apply at your local office and pay a fee which will provide you with two decals to prove your membership.
These taxes fund highway programs that you and other trucking companies rely on to transport products, livestock, and agricultural goods.
You can get more details on the IFTA website.
You’ll need to file a tax return every year for your gas tax. Fortunately, you just file with your state and they’ll distribute it accordingly. You’ll need to track your miles and time in each state to pay the appropriate taxes whether you bought gas in that state or not. You can use a log book or an electronic log (elog). I talked to a relative that is a truck driver and he warned:
You’ll need an International Registration Plan (IRP) before you start a trucking company. An IRP is a plate that allows you to get plates that work in all states. You’ll want to go to the appropriate licensing office in your state to get these. You can find each state in the FMCSA list of providers.
Some states also require additional permits to operate within them. Mikael told us:
When you start a trucking company, the DOT will conduct an audit during the first year to verify that:
You can learn more at FMCSA. If you do not pass this audit, your business will not get permanent authority to operate.
Keep reading for tips on how a successful trucking company gets customers.
With all the regulatory compliance that starting a trucking involves, it’s easy to lose sight of the end goal of any business: attracting and retaining new customers.
Getting customers for your new trucking business isn’t that hard these days. There is a huge shortage of drivers, and you just have to get your name out there.
Mikael had a ton to say about finding customers. He told us:
One of the best ways to attract new customers is by creating a memorable brand image through an effective branding campaign.
Branding is the process through which a company’s mission, values, and image enters the public consciousness.
Successful branding begins with a good logo that represents the company effectively and in a simple, easily memorable manner.
Getting the logo right is an important step toward corporate success, and if you are not a natural artist or computer graphics expert, plenty of firms offer logo design for reasonable rates. It’s a worthy investment of resources toward a bright future for your new trucking business.
Successful advertising happens in both traditional and social media. Mikael told us:
He went on to explain that he does short videos to help people understand the industry better. He even hires new drivers through the videos. He had four interviews from a single TikTok video.
Branding and advertising can all be for naught if your company’s competitive advantage is not clearly defined. A competitive advantage is a unique service, perk, or reward that differentiates your business from others.
The trucking business is a very competitive industry with some large players that have thousands of trucks in their fleet and nearly half a million competitors. Some ways to differentiate your trucking company might be:
Mikael reminded us that traditional marketing strategies like business cards and networking are really beneficial in the trucking industry. He told us that the trucking industry is in demand by most companies.
Always be prepared; you never know where you’ll find customers.
There are a couple of excellent articles that focus specifically on getting customers. Forbes offers ten ways to get customers to your new small business, and Inc. offers the same, with a focus on also increasing your sales.
Mikael runs multiple businesses so he had a lot to say about how to manage a trucking business (or any business for that matter). Some of the advice he gave us included:
He told us:
He went on to explain how they try to grow. He explained:
Trucking companies have a lot of administrative work they have to do. If you’re a solo entrepreneur, you’ll be doing it yourself, or you can hire people to help you. A lot of truckers hire their wives to do the dispatch. This can be a good or bad thing. Make sure she understands what she’s doing.
The main administrative work is typically done by dispatchers. A dispatcher will normally make between $30,000 and $75,000 per year and have job responsibilities including:
You can outsource your dispatch to a company like Cameron.
You’ll probably need some software to manage this so let’s look at some of the software Mikael suggests.
Mikael suggested the following software:
We’ll answer some of the most frequently asked questions on how to start a trucking company in this section so you are better prepared for your own trucking business.
You can either start your own trucking company as an owner-operator or pay someone else to drive the truck. You’ll want to:
An owner-operator will be required to perform all parts of a successful business. You’ll need to:
We created an owner-operator startup checklist for those who want more information on how to start a owner-operator trucking business. Download it below.
Starting a box truck business is a little bit easier than other trucking companies. You’ll want to:
Be sure to glance back at the steps included in this article if you have questions about these tasks.
Most box trucking companies are not required to have the following:
A truck broker or freight broker is a company that has relationships with suppliers and transportation companies. They manage a load board and help both parties meet their unique business needs. They may be large businesses that also participate in hauling loads, or they may be strictly middlemen.
To start this type of company, you will need to follow the 7 steps outlined above, including:
Read the whole blog for more information on how to start trucking business brokerages.
There are a few ways to start a trucking business without driving. Some of the trucking businesses that don’t require you to drive include:
Checking out what other companies are doing can be really beneficial. Part Catalog has a great list of trucking influencers. We included two with the highest engagement and Mikael Sant’s links.
Starting a trucking company requires complying with a lot of regulations, a lot of administrative functions, and a lot of patience and determination to build a company that makes more than $75K per month. It’s achievable, though.
Just make sure it works with your life. While long-haul trucking is more profitable, you might want to start locally if you have a family you want to see every night.
Given the amount of regulation, starting a truck company might not be the first business you start unless you’re already driving and want to go independent. You can definitely build a successful career in trucking, but it’s a long haul.
For those who successfully scale the formidable barriers to entry, the financial rewards can be great. But the majority of trucking owners love the freedom of the open road and are typically mom-and-pop shops.
Do you have experience running a trucking business? What do you love about it? What would you change? With what other businesses do you get to explore the world as you work?
Brandon Boushy
Did you know that one of the easiest paths to financial freedom is learning how to start a business?
In fact, self-employed families have nearly four times the net worth of those who work for someone else. That’s why we look for ways to make it easier for you to become a small business owner.
We talked to two of the most successful small business owners we could find, Mike Andes and Paul Akers, to help you learn how to start a business. Hours of interviews were conducted to get this information about starting a successful business. We’re going to share it all with you!
Mike Andes turned a childhood lawn care business into one of Entrepreneur’s top 500 franchises. Augusta Lawn Care Services has more than 40 franchisees across the U.S. In addition, Mike has gone on to get an MBA, write multiple books, and teach others how to create a successful business.
Paul Akers turned an idea for easy screw covers for cabinets into a successful business that launches 30 new products a year. Fast Cap has been introducing new products to increase the efficiency of cabinetry for nearly 25 years and has developed a reputation as an expert in lean manufacturing.
[su_note note_color="#dbeafc"]
Click on any of the links below to find out what you want to know about how to start a small business.
The Small Business Administration (SBA) breaks down the process of starting a business into 11 steps, which include:
These steps are more easily broken into four distinct phases you’ll progress through as you discover how to start a small business. The business startup cycle consists of:
We’ll cover all of these steps to show you how to start a business.
When thinking about how to start a business, it’s important to remember that every business is a solution to a problem. If you have the problem, someone else probably does, too.
If you are doing something and think, There’s a better way—follow that! Research it. Find a way to make it better. There’s a business idea.
Mike told us:
[su_quote]Look for ways to improve in your everyday life. There are problems to be solved every day. If it saves you time, it will save others time. The more time people save, the more they’ll pay for something.[/su_quote]
Here are some questions that people have that may give you some ideas on how to start a business.
Starting a company doesn’t have to cost a lot of money—or any for that matter. We asked Mike this question, and here’s what he told us:
[su_quote]In the landscaping industry, you can’t start a lawn mowing business without money ’cause you need a lawnmower, but you can sell your time and start a weed-pulling business.[/su_quote]
So if you don’t have a lot of money, look at what you have available and ask yourself, How do I start a business with what I have?
The easiest business to start will typically be a cleaning business, pet sitting business, rideshare business, or freelancing business.
We’ve interviewed many business owners and done even more research about small businesses and what it takes to succeed. Check out some of our small business ideas blogs:
Read on for the next step in starting your small business.
Next, you’ll conduct market research before starting a business. Market research is simply identifying the amount of demand for the products or services the business will offer.
Mike spends quite a bit of time discussing the benefits and how to conduct thorough market research. He demonstrates how easy it is to conduct research by surveying his employees. Watch how simple it can be.
He discusses aspects such as demographics, target market, focus groups, online surveys, and target markets. Let’s look at each of these terms to better understand how to start a business.
Demographics are characteristics of the people who buy a product or service. You’ll want to consider:
Later, We’ll provide a link to a breakdown of all the ways you can improve your targeting on Facebook. It will be a great guide for how well you should specify your demographics. But first, find out how to identify your potential customers.
If you have a new business idea, it might not be obvious who your potential customers are. You might need to use marketing tools, like surveys and focus groups, to establish what demographics are drawn to your small business idea.
Once upon a time, this research was really costly because you had to conduct focus groups, do in-person surveys, or do phone surveys. Each option is fairly costly.
Drive Research estimates that focus groups cost $4,000-$12,000 for two focus groups—and you normally need multiple groups for good data. That’s almost $500 per person based on their information.
The publication Entrepreneur gives a good breakdown of survey costs. Most methods will cost at least a couple of grand given the time it takes to create surveys and contact people, plus compensating participants for their time.
Meanwhile, Facebook Ad Center can normally get the results you want for less than $1 per action. Even if you pay each respondent $5 for their time, that’s still 2,000 responses for the same price as a focus group that might have just 25 people.
Pro Tip: PowerAdSpy has a great blog on how to use Facebook ads for market research campaigns.
A successful business needs to know who its ideal client is. Since you’ve just come up with your business idea, you’ll need to figure out who buys the product or services you are selling.
Facebook has got this down to a science, but their ads can be complex to use if you don’t know what you’re doing.
Pro Tip: WordStream has a great infographic on all of Facebook’s targeting options. If you want to get your target market as precise as possible, spend some time learning about each of the options.
Mike told us:
[su_quote]If you are offering lawn care services, people who own a home are going to be your potential customers. Renters won’t.[/su_quote]
We dig even deeper in our market research blog. Bookmark it and keep reading for tips on how to write a business plan.
Mike explains in detail how to write a solid business plan you’ll actually use. Download our free business plan template and work through it while watching the video below.
[su_youtube url="https://www.youtube.com/watch?v=Seac5PbUZXk"]You’ll want to include the following and go into as much detail as possible:
Check out our blog about writing a solid business plan to go through all the steps.
The biggest thing to remember about writing a business plan is it should be easy to understand, well-documented, and as short as possible.
Mike told us:
[su_quote]Venture capitalists and big banks will want every piece of information possible, but most people can’t write a business plan that meets their expectations. A new business will most likely have to use alternative methods of funding, so make sure the business plan works for guiding your decision-making.[/su_quote]
Your startup costs are the amount of money you’ll need to get the business up and running. In an ideal world, you’d have enough to cover the upfront costs and the ongoing expenses until you make enough to cover your entire cost of doing business and your cost of living, but we don’t live in an ideal world.
Just do the best you can.
We wanted to know how much it costs to start a business, so we did a ton of research. We established that most people can start a business for under $50K, but you could need up to $2 million, depending on your circumstances. Find out more about real business startup costs.
You’ll want to start building business credit ASAP. Most small business loans will require either a 650+ personal credit score or an 80 business credit score from D&B. The following credit providers are normally very friendly to small business owners.
Next, you’ll want to secure funding for your small business.
You should already have an idea of your business costs, but where will you get the funding for starting a business?
Most small business owners get the funds for starting a business from the following sources:
As noted in previous sections, Mike said the following types of funding have high hurdles:
Let’s explore funding options to find ones that make sense for your new business idea.
Both Mike and Paul Akers think bootstrapping is the best way to start a new business. All you have to do is spend less and make sacrifices for what you really want.
Mike told us:
[su_quote]Self-financing is the easiest way to start a business as you don’t have the additional cost of debt and other people’s expectations pushing you to move faster.[/su_quote]
Paul told us:
[su_quote]There are four ways to spend money:
Hear more from Paul below:
Some people are able to get money to start a business from friends and family.
If you are, that’s awesome!
Just make sure that you have an agreement in writing because nothing can strain a relationship like a lender expecting to get it back and the borrower thinking the startup capital is a gift.
Also, don’t use your parents’ house (or anyone else’s!) for a secured small business loan when starting a business.
Neither Mike nor Paul particularly loves getting loans when considering how to start a business. Paul told us:
[su_quote]When you’re spending other people’s money, you don’t know what it took to earn it. That means you spend it more recklessly.[/su_quote]
That said, if you have a bank account with a local bank or credit union, they are more likely to lend to small business owners in their local community than larger banks.
Just research “credit unions near me” to find local banks and credit unions.
Be aware that they may expect you to have the business formation already completed. They also may want you to have a business bank account to prevent you from mixing your personal assets and your business assets.
When just starting a business, they may expect you to take on some personal liability, even if you are a limited liability company (LLC), before you have built business credit.
If that is the case, make sure it’s not an amount that would cause you immense problems should you decide to close the business in the future.
Alternatively, you can try applying with our loan partners to get a business loan.
Follow the links above and make sure to have the following ready:
Many people use credit cards to start small businesses, but you need to make sure that the return on investment will be worth it.
Paul told us:
[su_quote]If your interest is 15%, you have to make a return of greater than 15% to justify it. Otherwise, you’re losing money.[/su_quote]
Despite Paul’s concern, consider applying for a business credit card so that you can start building your business credit.
Pro Tip: Having a business bank account and business credit card at the same bank as your personal accounts can help to strengthen the relationship as your business grows.
You could also get a credit card from a company you are interested in doing business with. If you are looking for cards that are likely to approve you, use Credit Karma, which also suggests loans for your small business.
For the best rates and perks, check out Nerd Wallet’s credit card recommendations.
Next, let’s look at some of the other options for getting funding when starting a business.
Funding from a venture capitalist is typically something that only the most unique of small businesses are offered in their business formation process.
Working with a venture capitalist is similar to getting a business partner, but on a much larger scale. They look for businesses that will change the world and will turn thousands into billions of dollars.
Neither Mike nor Paul encourage this option when considering how to start your own business.
Both prefer full control because it allows them to make decisions based on their goals. As soon as you sell equity, other people have expectations that might be different than yours.
Mike told us:
[su_quote]If you sell equity, make sure you own at least 51% of the shares. Any less, and you don’t control the company.[/su_quote]
Here’s the input Paul gave us:
[su_quote]I own 100% of my company because I don’t want anyone else telling me how to run it.[/su_quote]
Watch our interview with Keith before approaching a venture capitalist.
[su_youtube url="https://www.youtube.com/watch?v=T-0qmNTaU90"]Be careful, though, because too many startups fail to understand the terms that this capital comes with.
Make sure to review your contract with a contract lawyer you trust. If you don’t know one, ask your friends or other business owners for a reference.
Banks like Bank of America, Wells Fargo, and CitiBank are some of the larger banks that you can get loans or lines of credit from.
They offer a variety of business products to help business owners, but many of them require $50K a year in revenue and a minimum of two years in business. That’s not exactly helpful for those wondering how to start a business from scratch.
Let’s look at other options.
Small Business Administration loans are a great way to start a business if you can get one. They offer three main products:
You can learn more about each on the SBA website. The 7(a) is the most commonly distributed loan.
The following charts are organized to make it easier to find the bank that best suits your needs. All statistics are modified from the 100 most active SBA 7(a) lenders for the fiscal year 2021 up to June 30, 2021.
The chart below ranks the top 10 lenders by the number of loans originated.
If you are interested in them by total approval amount, the list changes some. Five of them are the same and five are new entries.
I’ve also created tables showing the five highest and five lowest average approval values. It should be noted that the banks with the lowest average approvals also happen to be the ones that originate the most total loans.
I have personally done business with four of the 10 banks that originate the most loans. Of them, I personally preferred the service from Huntington National Bank.
There are grants available to some industries, regions, or groups of people. Most people won’t qualify, but check the SBA for grants.
Partnerships are similar to a sole proprietor but for more than two people. They are most common in law firms. If one partner provides the work and the other the funding, it can be a nice arrangement for each.
Crowdfunding is raising money from a lot of smaller investments to start a company. The owner of Pooch Selfie talked to us about crowdfunding and going on Shark Tank. Check out his interview below.
[su_youtube url="https://www.youtube.com/watch?v=j7UzP5dVOqA"]Find out about 17 ways to fund a business or keep reading to learn about buying an existing business.
There are numerous reasons why you might want to buy an existing business or franchise. We’ll cover the:
Buying a business means you have full control of the business, how it operates, and what you do with the assets. Meanwhile, buying a franchise grants you the rights to operate using the company name, systems, and procedures.
A franchise has more disclosures and requirements governing the business structure than an existing business, so you will normally be able to get more information than when buying a small business unless the business owner has kept detailed records.
Buying an existing business or franchise can be a great way to get into business for yourself without having to start from scratch. There are many advantages to buying an existing business, including:
There are also some potential disadvantages of buying an existing business, including:
Overall, buying an existing business or franchise can be a great way to get into business for yourself. However, it is important to do your research carefully and to ask questions before making a purchase.
Here are some tips for buying an existing business or franchise:
If you are considering buying an existing business or franchise, be sure to do your research and get professional help. With careful planning and execution, buying a business can be a great way to achieve your financial goals.
Learn more about buying franchises. Next, let’s look at how to turn your business idea into a real small business.
You’re done planning and now you need to form the business. Launching a business requires
Let’s look at how to choose a business location.
Your business location impacts how well your business does. The choices you make about opening a brick-and-mortar business or launching an online store impact your legal requirements, revenue, and taxes.
For an office, it’s good to have at least 300 square feet that you can work in, and it should be quiet. Whether it’s at home or somewhere else doesn’t matter. If you need help finding a business location, contact your local realtor.
Realtors will be able to help you find a place that works and, if needed, puts you near the customers your business serves.
If you expect customers to come to the location, try to get a space with high foot traffic. That increases people’s awareness of your company.
In addition, you may need space to store parts or inventory. Make sure to consider how many products you’ll be storing and how much space you’ll need.
Most products will need at least three square feet of space, but if you are using shelves, you can normally get two to four products in the same space. You’ll also want at least three feet between storage displays. Four to five feet gives both you and your customers more room to navigate.
Search for commercial interior designers to find someone to advise you before making a decision on a space.
Check out our information on finding a business location and home-based businesses for more useful considerations.
The legal structure you choose for your business will impact your business registration requirements, how much you pay in taxes, and your personal liability.
A sole proprietorship is the easiest way to meet small business legal requirements, but the structure doesn’t protect the owner’s personal assets from legal issues.
That means if something goes wrong, you could lose both your company and your home.
This structure should only be used if you can’t afford an LLC because most businesses have liabilities that could be costly if you operate as a sole proprietor.
To start a sole proprietorship, fill out a special tax form called a Schedule C.
Pro Tip: Sole proprietors can also join the American Independent Business Alliance.
An LLC is the most common business structure used in the United States because the company protects the owner’s personal assets. An LLC protects many business owners’ assets because it is a separate entity.
It’s similar to partnerships and corporations but can be a single-member LLC in most states. An LLC requires a document called an operating agreement.
Each state has different requirements. Here’s a link to find your state’s requirements. People may register in specific states due to the cost of doing business.
Delaware and Nevada are common states to file an LLC because of their business-friendly laws. Here’s a blog on the top 10 states to get an LLC.
This will typically be the best business structure for most small business ideas. Learn more about registering a business.
Partnerships and corporations are typically for massive organizations or legal firms.
Unless there is a specific reason you need a partnership, it is better to do a multi-person LLC. Investopedia has good information about partnerships and corporations.
Mike specified that the difference between an S-Corp and a C-Corp is the number of shareholders it can have, among other things.
[su_quote]If you want to have a bunch of stockholders, you’ll need to be a C-Corp.[/su_quote]
There are a ton of other business structures, too. Find the one that works for you!
Mike emphasizes the importance of a name. He personally suggested using a name generator to get ideas for your business.
Pro Tip: We created our own name generator. Find your business name today!
Mike points out how you can add different words for the generator to come up with a name, like the city you live in and the type of company you’re starting, to get some good ideas.
I suggest making sure it doesn’t get shortened to curse words, slang that you wouldn’t want associated with a business, or negative statements.
For instance, Bold & Daring could be shortened to BAD, and you might not want that.
Read our blog about naming a business for more information.
Once you’ve picked the perfect business name, it’s time to register your business name with the government to protect your brand. You may need to register with state, local, and federal governments. Learn more about registering your business.
You’ll use your employer identification number (EIN) to open a bank account and pay taxes. You get the Federal EIN (or FEIN) from the Internal Revenue Service. It’s like a social security number for your business.
Some states require an EIN from the state in addition to the Federal EIN.
Legal compliance is important to keep your business running smoothly.
Each location has different licenses, permits, and tax forms required. Use the SBA License and Permits page to identify what requirements your business needs to meet.
Pro Tip: Check out our walkthrough of the business licensing process.
You’ll want a business bank account to separate your personal and business finances. A small business checking account will make legal, payroll, and taxes easier than commingling the business earnings with your personal funds.
In addition to a business bank account, you’ll want to get business insurance.
The U.S. Chamber of Commerce has a ton of information on unemployment insurance (UI) and also offers links to each state agency that handles state unemployment.
When you have employees, you’ll have to pay $420 per employee on a federal level plus any state UI.
Workers compensation is basically insurance against injury or disability. Each state has different requirements. Check your state requirements.
Contact your current insurance agent and ask them if they can provide these. Most will be able to provide a quote or refer you to someone who can. I personally prefer Simply Business.
Basically, you want $1 to $2 million in general liability coverage unless you have reason to need more. Protecting personal assets or higher local requirements are the most common reasons to buy more.
If you own valuable machinery, work in fields that could cause personal liability (for instance, gas furnace installers can be held personally liable for explosions), or collect sensitive information, you may want other types of insurance to protect your business success, too.
Check out our walkthrough on how to get business insurance and keep reading for tips on how to run a business.
You’re a small business owner now. You chose a business model and got your LLC and business license. Now you have a business to run. Get ready to:
Managing your business finances is all about knowing how much money you have coming in and going out. That means you’ll want to keep your personal finances separate from your business expenses.
Most new business owners use QuickBooks accounting software because it has all the tools you need to manage your finances as a small business owner. Plus it integrates with most other software.
Hiring employees includes posting jobs, conducting interviews, compensation, paying taxes, following labor laws, scheduling, and payroll.
Hiring people requires posting “Now Hiring” signs and posting on prominent job boards. Some places you can start posting job requirements are:
Preparing a list of questions for interviews will make hiring the right people easier. Indeed offers a variety of resources to help you make better hiring decisions. Read their How to Hire Your First Employee guide.
Employees are typically a company’s biggest expense. There are three common pay structures in business. Each fits different scenarios. Let’s take a closer look.
This is a flat weekly or monthly rate based on a person working a specific number of hours. It’s typically reserved for owners, managers, and some admin roles. You might want to assign this to yourself for budgeting purposes.
This pay structure simply tracks the hours an employee works and pays them a set hourly rate. This pay structure is solely based on time, not performance.
Commission-based pay is typically used in sales to give employees a percentage of revenue. It is a strictly performance-based compensation model.
Hybrid models combine two pay structures: for instance, hourly plus commission to compensate for time and performance. The hourly rate will typically be lower than an hourly rate without commission, but the commission should make it so good performing employees make more than they would without commission. These structures also help reduce the variability of pay from week to week.
Paying employees an hourly wage works for most positions, but depending on your business structure, a commission or hybrid payment model might make sense.
Pro Tip: Entrepreneur’s article on how to create a pay structure that promotes team and company growth offers some insights into thinking about pay structure.
Federal and state tax filing requirements apply to new employers. You must keep records of employment taxes for at least four years, including special forms and accounting for state taxes.
Don’t worry! We’ve got you covered! Check out the IRS guide for employers here.
All employers must display Workplace Posters, which you can download from the Department of Labor website.
Other requirements may include:
Scheduling employees can become complicated depending on your company’s hours of operation. Labor laws in the U.S. define work that occurs after an employee has clocked 40 hours in a week as overtime, meaning you’ll have to pay 1.5 times their hourly wage if they work over 40 hours.
If your business is open for nine hours a day (with an hour lunch), five days a week , you can hire exactly enough people to meet the company’s needs. Once it exceeds that, you’ll need more employees and have to schedule based on their needs as well.
Pro Tip: 7Shifts has a great blog on scheduling and also offers scheduling software. Check them out.
Paying your employees will normally occur on a weekly, every two weeks, bi-monthly, or monthly period. Most employees like being paid weekly because cash flow management is easier, but it costs less to pay less frequently.
You can pay by check or direct deposit, and you can hire payroll companies to manage payroll for you. ADP is the most well-known payroll company, but Inc. provides a list of payroll companies to check out.
If you handle it yourself, your accounting software can integrate with your bank and your timesheets to make the management of payroll easier.
Personally, I don’t love this section because government spending is wasteful, but as a business owner, you are required to pay taxes. You may have to pay:
Pro Tip: Look for a great accountant who can help you find ways to make your taxable income as close to zero as possible. It’s better to reinvest in the business than send the government money.
Every business idea and business model will have different government regulations you have to follow. Those who don’t may find themselves dealing with lawsuits, fines, and in some cases, criminal charges.
You’ll need the tools to do the job. Most businesses will need:
We’ve written blogs for many business ideas. In each we include suggestions for the assets and tools you need for that specific small business idea. Just use the search function near the top of this blog to find blogs that discuss your business idea.
You’ll need a budget for business marketing that leverages:
You’ll also need to consider things like how to accept credit card payments and how to communicate with your target audience. Each of these will change depending on whether you run an eCommerce store, a brick-and-mortar business, or a home service company.
There are some useful marketing tools that small business owners use to market their companies:
As your online business grows, you will become a target for hackers trying to gain access to information like your business credit card, customer cards, and intellectual property. You’ll want to start paying for better cyber security and insurance to protect against losses.
One of the easiest ways to do this is hosting your web assets on Google, Amazon, or Azure servers because they have a dedicated team of cybersecurity professionals working around the clock to protect against attacks.
You can also get business insurance to protect against the cost of attacks.
As your business grows, there are going to be times when things occur that could severely harm your business. Natural disaster, death of a valuable employee, lawsuits, and suffering a personal injury are all things that take your attention away from the business.
When these occur, you need a plan in place to handle them. This plan might include having a public relations person on retainer, buying business interruption insurance to protect against lost business income, or training a manager to take over in case of emergency.
Check out the SBA’s emergency planning content for more information.
Business recovery from disasters is all about implementing your emergency preparedness plan.
In some cases, like a hurricane or wildfires, you may have some warning to help prepare the business to help itself and others. You can also work with fundraisers to help raise money to help the community. Doing so will create goodwill, which is one of a company’s most valuable assets.
Recovering from a disaster can be a long and difficult process, but it is possible. By following these tips, you can give your business the best chance of success.
Every business owner reaches a point where business exit planning needs to occur. Often it is because the business grows too slowly and they have to abandon it, but many people also reach retirement or succeed enough that a competitor makes an offer to buy their business.
Keeping detailed records, maintaining a CRM for your business website, and documenting procedures are all good steps to take to make sure you can exit the small business idea and it can carry on without you.
It’s also good to keep employees, your target audience, and investors in the loop when you are implementing an exit plan. They’ll all want reassurance that your small business idea will not leave them in a problematic scenario.
When you hire employees, there are incentives for hiring certain individuals. These incentives can include tax credits (meaning the right hires could take your taxable consequences below zero).
You have to screen to get potential employees qualified before hiring them, but some of the groups that are incentivized include:
Check out the Work Opportunity Tax Credit to see if it is something you want to implement. Hiring qualifying individuals can save you up to $9,600 per employee during their first year as long as they work more than 400 hours a year.
This is a great way to reduce the cost of doing business and improve your chances of success. Once you have implemented everything you need, it’s time to look at the different ways to help your business model grow.
Once you’ve done everything to become a successful business owner, you’ll reach a point where you want to meet new goals. There are a ton of ways you can expand a business to challenge yourself more. Some common ways to grow a business include:
Let’s start by looking at how to get more funding.
Business financing is normally much easier once you reach three years in business and over $100K in annual revenue. More lenders are willing to offer business loans after this point.
You’ll normally need:
We got the chance to pick the brain of Joseph Camberato, who started National Business Capital and has helped businesses secure over $2 billion in financing. Check out our interview with him below.
Once your revenue peaks at a single location, you may want to convert your good small business idea into a chain or franchise. When should you choose each, though?
Turning your single location into a chain can work if you live in a large city and can operate many locations. Running corporate locations in other cities can be a real challenge if you don’t have people you trust in those locations. That’s why many business owners choose a different route.
Franchising means allowing other business owners to use your business name, intellectual property, and processes to skip many of the trials new business owners face. You’ll need processes for each of these areas of business:
You provide the systems to be successful for an initial fee and recurring commission while the franchisee runs the franchise and manages employees and customers. The franchisor normally gets less than 10% of revenue and the franchisee keeps the profits.
Make sure both corporate offices and franchises comply with all laws, rules, and regulations.
Pro Tip: Does franchising sound like a fit? Find out how to franchise a business.
Mergers and acquisitions (M&A) are common with large corporations, but you can grow your business by buying or merging with a smaller business, too. The process is similar to starting a new business but has some unique benefits and challenges.
Mergers have some benefits that save money and increase profit margins. Some of the unique benefits of a merger or acquisition include:
Meanwhile, there are also challenges when two companies become one.
If a merger or acquisition is not handled well, you may face some challenges over opening new locations like:
Every business should move with caution when bringing two companies together. If the costs of lost customers and talent exceed the benefits from cost savings, you may end up writing off the purchase.
Federal contracting is big business. The federal government provides assistance to encourage small businesses to bid on contracting opportunities. Find out how to become a federal contractor from the SBA.
Another way to grow your business is exporting goods. There are a ton of resources that are helpful for online business ideas that involve expansion to selling internationally.
Pro Tip: Research exporting products by checking out SBA resources.
There are small business grants and other business incentives for the following types of business owners:
There are plenty of resources for women about how to start a business. There are specific loans for female entrepreneurs. Plus, women can get training and funding opportunities from the SBA.
Native Americans can benefit from opportunities the federal government provides including contracting, business development, and other programs. Learn more.
Get information on what the SBA offers veterans to help support business ownership. You’ll find training, funding programs, and federal contracting opportunities.
There are lots of opportunities for the LGBTQ community on the SBA website.
Rural small businesses are the lifeblood of small towns. That’s why the SBA offers resources to support local economies and communities. Learn more about SBA resources for rural businesses.
Minority-owned businesses receive support to improve resources in underserved communities. Find out how the SBA provides support for development and growth.
We’ve shared tons of information about how to start a business, but there is so much more for you to do. Most business owners find it easiest to start an online business like an eCommerce store or social media management company because they have low barriers to entry.
Just remember, even though it seems like a lot, it only takes four steps:
What business are you going to start? Let us know in the comments below.
Did you know the average laundromat makes over $238K, and up to half of that can go to the laundromat owners?
The laundromat industry in the U.S. is worth $5BN, with over 21,000 businesses in operation that employ over 50,000 people.
Do I have your attention? If I do, get ready to learn how to start a laundromat!
We have interviewed the owners of four different laundromat businesses, including Dave Menz, the CEO of Queen City Laundry, who owns four laundromats and makes over $1.8 million annually.
Dave will share his wisdom on finding a laundromat, getting financing, how to value the business, and how to negotiate a deal. We pull in insights from other successful laundromat owners, too. Get ready to learn how to start a laundromat.
[su_note note_color="#dbeafc"]
Dave Menz got into the laundry business in 2010. He told us:
[su_quote]I grew up in poverty and people looking down at me. I fought out of poverty to middle class and then financial independence. I could do nothing if I wanted to, but I prefer to teach people to reach that same level.[/su_quote]
He bought his first laundromat and worked at it on nights and weekends. He bought two more before he made enough that he could quit his job and still live a comparable life. Dave told us:
[su_quote]I don’t love doing laundry, but I love the industry. I love the people, the impact on my community, and the opportunities it provides.
The laundromat industry is not for everyone, but for many it can be a phenomenal business. I see the antiquated nature of the industry as a positive because it makes it easy for you to stand out compared to a coin laundry business.[/su_quote]
His primary services are:
Since starting, Dave has bought four more laundromats. When he buys laundromats, he looks for locations he can fix up that offer services he can improve on to make them more appealing to local clients.
Dave maintains one company that owns the land his laundromats are on. This separate company rents the land to his laundromats, effectively making him his own landlord. This unique strategy has built him a $3.8 million net worth and makes him over $1.8 million in revenue per year. Find out how below:
He’s currently working on upgrading from coin machines to accepting cards and PhonePay in addition to the other services he offers.
Have you ever found yourself wondering how much money a laundromat makes? Or Is the average laundromat cost something I can afford?
Dave told us:
[su_quote]Laundromats are a vital community resource. That’s really why I fell in love with the business.[/su_quote]
Established organizations provide the information you need. Keep reading to find places that conduct market research and provide market analysis.
Check out the free industry overview by the Coin Laundry Association (CLA). Also, download their most recent Laundry Industry Survey and Laundry Customer Profile, which presents the results of over 400 customer surveys.
For commercial laundry, the Textile Rental Services Association (TRSA) offers benchmarking reports. Don’t overlook the National Apartment Association (NAA), which provides insight into the industry’s multi-housing segment.
When you open a laundromat, you should assume that it will make around $300K in revenue annually. You can add additional sources of revenue by adding vending machines, laundry delivery, and other services.
Dave told us:
[su_quote]Almost everything is paid upfront before services are provided. This makes running the business easier because you don’t have to chase customers for payment.
Businesses focus on [repairs] and collecting the money from a coin laundry machine. You can reimagine this to save you time, money, and help your customers better.
The laundromat business is not passive income, but semi-passive or flexible.[/su_quote]
Of course, emergencies are bound to occur if all you do is fix things when they’re broken. Take proactive steps to keep your laundromat running smoothly, and you’ll find yourself on the road to laundromat success.
One of Dave’s recommendations: Add an annual sewage drain flush to your maintenance routine to reduce breakdowns.
He does that for all his laundromats, and listen to what happened:
[su_quote]We were looking for a consolidation loan and were putting all the financials together, and I realized I am a millionaire.[/su_quote]
Inspired? Get ready to learn about laundromat profitability.
According to Cents, the average U.S. laundromat profitability is 20 to 30% on approximately $300K in revenue assuming they are not using leverage. According to Dave, top-performing laundromats can operate with 50% margins or higher. That's two to eight times higher than the average real estate investment, which is 7 to 10%.
A laundromat's ROI changes depending on:
Ancillary services like dry cleaning, pickup and delivery, sneaker cleaning, wash and fold, and other luxury services can increase your profitability.
Rosie Wash Express Laundry achieves impressive 36% margins by offering additional services and a rewards program. Want to learn more? Check out our interview with the existing laundry business owner.
Entrepreneurs normally spend between $100,000 and $1,000,000 to start a new laundromat or buy a laundry business for sale.
Dave suggests that you should normally spend between two and five times revenue, but that you should base your business valuation on what it’s worth to you.
The startup costs to open a laundromat depend on:
The best location for a laundry business will have the following characteristics:
Get ready to learn step by step how to start a laundry business.
Starting a laundromat means you’ll need to
First, you’ll need to pick a laundry business type, which means selecting your services, business structure, and business model.
Consider the different kinds of laundromat businesses:
Learn about each type of laundry service below.
When you want to start a laundry business, you’ll find most business entities offer coin-operated machines that people operate themselves. A business venture that focuses on this strategy is normally going to have the lowest profit margin of companies that clean clothes.
That said, at Ferndale Laundry, the most revenue comes from self-serve machines. Owner Justin says:
[su_quote]There’s little to no maintenance or cost to me because they’re doing all the work.[/su_quote]
Check out our interview with Justin below.
You might also check out this video about a day in the life of a laundromat business owner.
A dry cleaning business uses completely different laundry machines than standard washers and dryers. Dry cleaners normally charge by the garment. Common dry cleaning prices range from:
• Shirts: $2.99 to $8
• Pants: $6 to $11.99
• Sweaters: $7.50 to $12.99
• Dresses: $13.25 to $19.99
• Suits: $14.99 to $25.95
• Coats: $15 to $25.99
• Comforters: $18.99 to $42.99
Owning a laundromat that offers wash and fold services can be highly beneficial. It improves your customer experience because they can drop off their clothes on the way to work and pick them up on the way home.
Laundromat prices will normally be based on the pound. That means you make more money per wash and protect your machines by not overloading them, which saves your business entity from increased maintenance costs.
A commercial laundry facility provides uniforms and other items to service companies and hotels, picks up dirty uniforms and sheets, and washes them. This is highly profitable because you make money from both the rental of clothing and the cleaning.
Check out Cintas’s website for an example of commercial laundry and uniform company offerings.
Whether you choose to operate a coin laundry business or laundromat equipment rental business, you can make money by supplying quality equipment to apartment complexes. Check out information about multi-unit housing on NAA’s website.
Rosie Wash Express Laundry uses an app to manage its home delivery business, allowing customers to enter details and pay online. Delivery drivers receive GPS information to complete their routes.
Pro Tip: Get more information about owning a pickup-and-delivery business here.
In addition to deciding what kind of laundry services you’ll offer, you need to create a business entity for your laundromat. This requires selecting a business name that is available as a website domain, trademark, and social media handle.
The two most common ways to create a business entity are a limited liability company (LLC) or a corporation. There are other types of business entities you might want to consider, but most involve potential liability you don’t want to assume.
Both LLCs and corporations limit your potential losses to the initial investment as long as you don’t sign anything guaranteeing personal liability. You can also run both on your own or with business partners.
Dave uses numerous business structures to manage his business, including LLCs and land-rent agreements between his company that owns the land and his companies that own the laundromat.
Pro Tip: Learn how to register your business and how to get an employer identification number (EIN) from the IRS.
This plan should outline your strengths, competitors, goals, and workflow. A good plan can help you attract investors or earn grants.
Iron out your vision, objectives, and strategy into a laundromat business plan that will help you accomplish essentials like securing financing or partnering with other businesses. It’s totally worth your time.
Pro Tip: If you want some extra guidance on how to write a business plan that will appeal to investors, consider working with a company like Wise Business Plans, whose team of MBA-trained writers have experience writing business plans that successfully secure funding from banks and other lenders.
Dave told us that relationships with his distributors contribute to nearly 50% of his success. Some of the most common types of distributors are:
But how do you find the best distributors? Do a Google search, contact manufacturers, or network with people. After you’ve found a prospective distributor, you’ll want to talk to them on the phone then visit their location.
You'll need money to cover leasing or buying a space, hiring employees, and buying equipment. Getting into the laundromat business isn’t cheap. You’ll want to estimate how much you need to start and operate the business, which you can learn how to do through Udemy.
Once you’ve established how much money you’ll need, you have to find a way to get the money. Some common funding options include:
The Small Business Administration (SBA) offers free courses on financing options and funding programs. Consider alternative sources of funding, like crowdfunding or even a home equity loan.
Many small business owners finance their investment at least partially through a business loan. You can inquire about financing options with your business banker, or compare options from multiple lenders on National Business Capital.
You can find a range of financing options on their site, including term loans with flexible financing and business lines of credit. Many of these have no credit score requirement, either, so you can access funds for your business regardless of your personal financial situation.
Pro Tip: Want to know how to open a laundromat with no money? Check out our blog about seller financing to find out how.
Fact: 87% of laundromat customers live within one mile of their preferred location.
Taking the time to find an ideal location is the best investment of your time as a future laundromat owner.
Consider a location near any of the following:
Dave offers some suggestions on how to find a business location in your local market, including:
Self-serve laundromats are normally in small towns or outskirts of suburban areas, under 5,000 square feet, and unmanned. Large laundromats are typically over 5,000 square feet and in busy areas.
High-volume laundromats with lots of ancillary laundry locations are the biggest and largest laundry businesses and normally have four or five streams of revenue that diversify their income.
The CLA offers more information about site selection for a laundromat business.
Once you have found a strategic location, there are things to do before you open to customers. You’ll need to get business licenses, a state tax ID or sales tax permit, and relevant insurance. Some common types of insurance include general liability, commercial property, workers compensation, and crime insurance.
Regardless of the legal structure you choose, determine if your business may require any licenses, permits, or tax forms to operate legally. Use the SBA’s tool. Also, you might be required to collect sales tax. Now go out and do it!
During his first week of operations, Jeff, the owner of Rosie Wash Express Laundry, witnessed a customer fall down, crack his head on the floor, and start bleeding. Hopefully, that shows why every laundromat owner needs commercial property insurance and liability insurance.
Both will typically be included in small business general liability insurance that you can get from trusted providers like Simply Business. Even if you have an insurance provider you trust for your personal property, it’s a smart move to work with a company that specializes in small businesses for your laundromat.
Furthermore, if you plan to hire employees, you will need workers compensation insurance and unemployment insurance. Gain general knowledge about insurance for a small business here.
You can also check out CLA’s listing of insurance products that meet the specific needs of a coin-operated laundry business.
Get a business bank account and credit card, and purchase equipment. You'll also need to set up software and prepare marketing materials.
Whether you start a new laundromat or buy an existing laundromat, you’ll need a business bank account. You can get a business bank account from major banks, regional banks, or online banks.
Regional banks tend to provide better business loans, but online banks offer better interest rates on cash in your bank account. Learn more about business bank accounts.
A business credit card can help fund your laundromat startup cost. You may have to get a secured one at first.
You’ll need washers, dryers, and other equipment for your laundromat. This equipment is a major part of the cost to open a laundromat.
Expect to spend between $1K and $5K each for a commercial washer or dryer. Meanwhile, industrial washers and dryers can cost between $10K and $50K depending on the load size and power.
The machines’ capacity can range from 30 to 80 pounds. To learn more, check out this handy formula for calculating the capacity of a machine.
Dave explains that you want to find properties with value-add opportunities. Look at the space usage, the amenities you can add, the services you can add, and how the property can be upgraded to provide a different or better experience. He told us:
[su_quote]We turned a $500-per-week property into a $7,000-per-week business by making changes.[/su_quote]
As you’re shopping and pricing, consider that new equipment comes with a warranty. Read a white paper about replacing laundry equipment. Buy the right laundry equipment for your store by referring to the laundry equipment and services directories.
You might also want to include vending machines or a small convenience store in your laundromat to supplement income.
Technological innovations are fueling a revival of the laundry industry. Laundry apps are becoming increasingly popular, but what’s the bottom line?
You can attract customers with a good location, but you can optimize that even further with marketing such as a website, social media, and advertisements.
Dave explains that you’ll want to invest in
[su_quote]A market differentiator that makes your laundry business stand out against [its] competitors.[/su_quote]
He says some of the things that make a difference include:
You can use all of these to market your business and stand out in the laundromat industry. Provide a value proposition, charge more, and market the differences without putting your competitors down.
Digital marketing includes email newsletters, social media, and search engine optimization (SEO).
Google My Business helps you:
Facebook is another great site for marketing your business.
Another pro tip is to invest in an all-in-one marketing software like Semrush. The Site Audit tool demystifies search engine optimization for new business owners, while their Keyword Magic tool can save you tons of time on keyword research. Using this type of program also makes it much easier to track marketing campaigns across multiple platforms to ensure you’re getting the full value from the time and money you spend.
Print marketing includes business cards, flyers, brochures, t-shirts, and even uniforms! Try designing yours in Canva.
You might also run advertisements in local newspapers, or ValPack mailers, which reach 10K residents for $300 a month on a five-month subscription.
Consider offering extra amenities, such as Wi-Fi. CLA published a guide to help laundry owners through the basics of setting up a secure network.
Other ways to create a welcoming atmosphere include cleanliness, professionalism, a children’s area, and televisions.
We’ve discussed the coin laundry industry, startup and monthly cost to run a laundromat, and how to start a laundromat business. Along the way, we provided information on how to craft a great laundromat business plan, getting a business license, financing, choosing locations, and marketing your laundromat.
It’s up to you to decide whether you want to start a new laundromat or buy a laundromat for sale. What strategies will you use to take your laundromat business idea to the next level?
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