The demand for clean clothes is an evergreen one. And when consumers have items that need special care, they turn to their local dry-cleaning business.
Starting a dry-cleaning business can require a fair amount of capital. However, once the initial investment is made the ongoing expenses can be low.
If you’re interested in starting and running a successful dry-cleaning business, here are some things to consider.
Determine your niche
Conduct market research to determine the need for a commercial dry-cleaning business. If you plan to purchase an existing business, review its records to assess profitability. If you’re opening a new business, check out the competition and make sure there is sufficient demand in the area to sustain your business.
Write your dry-cleaning business plan
To ensure your dry-cleaning business is a success, you need a business plan. A well-thought-out plan can guide your strategy, identify risks, and help you secure funding to expand and grow your enterprise.
Here’s a suggested outline for your dry-cleaning business plan:
- Executive summary: A brief overview of your business and why it will be successful
- Company description: Include detailed information about your business and explain your competitive advantages. Many successful dry-cleaning businesses provide a variety of services to attract and retain new customers. In addition to dry cleaning services, you may want to consider offering tailoring and repairs, pick-up and delivery services, eco-friendly cleaning, or large and special item cleaning.
- Organization and management: Explain how your company will be structured and who will run it. For example, will it be a partnership, LLC, or S corporation? Who will be responsible for day-to-day management?
- Market analysis: What is the industry outlook? Who are your target customers? What competition are you up against?
- Financing plan: Describe your funding requirements. Include detailed financial statements and a financial statement analysis.
- Marketing strategy: Outline strategies to promote your business and to keep customers coming back.
Pick your business structure
Your choice of business structure — whether it’s a limited liability company (LLC), corporation, or partnership — will impact your daily operations, taxes, and the amount of risk you’re willing to take with your personal assets. Choose a structure that balances legal protections and benefits.
The four most common are:
- Sole proprietorship: This means that the business is owned and run by one person with no legal distinction between the owner and the business.
- General partnership: A general partnership is the simplest variety of partnerships and is created automatically when two or more persons engage in a business enterprise for profit. No state filing is required.
- Limited Liability Company (LLC): This is one of the most popular forms of business entity for small businesses. An LLC offers limited liability protection (shielding your personal assets by protecting them from debts and liabilities associated with the company) and pass-through taxation.
- Corporation: A corporation is a separate legal entity owned by its shareholders, thereby protecting owners from personal liability for corporate debts and obligations.
For more information on business entity structures, read Comparing company types.
Choose a business name
Naming your dry-cleaning business may not be as simple as it seems. When selecting a name, try to make the name short, easy to remember, descriptive of the business, and attention grabbing. Depending on the business form you choose, you may have to register and/or receive approval from the local or state government where your business is formed. For more information on naming rules for different entity types, read Naming your startup business.
Register your business
You may need to register your new dry-cleaning business with your state and/or local government.
To do this, LLCs, corporations, and general partnerships must register (online or through the mail) with the Secretary of State or business agency where they conduct business.
Importantly, if you choose to operate your business under a name other than your personal name (even if you are a sole proprietor), you will need to register that business name with state and/or local governments a process known as filing a “doing business as” (DBA) name.
File a beneficial ownership information report
A beneficial ownership information report is a new federal requirement that applies to millions of small businesses in the U.S. If the formation of your dry cleaning business required filing documents with the state (such as with an LLC or corporation), you may need to submit information on the company and on the individuals who own or control the company (known as beneficial owners) to FinCEN (Financial Crimes Enforcement Network), a bureau of the United States Department of the Treasury. This filing obligation was established by the Corporate Transparency Act, which is intended to combat money laundering, tax fraud, and other illicit activities.
If previously reported information on either the reporting company or the beneficial owners changes, an updated report must be made no later than 30 days after the date of the change.
To help determine your business’s Beneficial Ownership Information filing status, take our quiz.
For more information, visit: Beneficial Ownership Information Report
Get federal and state tax IDs
Before you can pay business taxes, you may need to register your business with the IRS and obtain an employee identification number (EIN). An EIN is the equivalent of a social security number for your business and is required on your state and federal tax filings. (Note: If you’re a sole proprietor without employees, then you don’t need an EIN. Instead, you will file your taxes using your social security number.)
An EIN is also needed to open a business bank account and ensure the separation of your business and personal finances.
You may also require a state tax ID. Typically, you’ll need to get an EIN before you apply for your state tax ID. Check with your state or a business lawyer, as the process will vary by state.
Open a business bank account and credit card
A business bank account and credit card can keep your personal and business transactions separate and afford certain legal protections. For example, if you operate your dry-cleaning business as an LLC or corporation, maintaining a business bank account can help you maintain liability protection and the security of your personal assets in the event your business is sued or found liable.
A bank account and credit card also help build business credit — something that suppliers and vendors will verify before transacting business with you. For this reason, consider opening your business accounts as soon as you start incurring business expenses or accepting money.
Find a location for your dry-cleaning business
Dry-cleaning businesses should be convenient. Customers will want to drop off their items on the way to the grocery store, school, or work. Do some basic market research to help determine the right location. How many competitors are in the area? Is the location a high-traffic one and will your business be noticed? Is the space accessible by car and foot? Are there services that you can provide that are currently not being offered?
If you intend to open a larger commercial dry-cleaning business, consider locations near major services such as hotels, hospitals, or downtown areas.
Determine license and permit requirements for your dry-cleaning business
Most states require that dry-cleaning businesses have specific licenses and permits to operate. For instance, depending on the materials used in the cleaning process, you may need to register with your state’s Department of Environmental Protection. In addition, city and county business licenses may be required.
For example, in New York, a dry-cleaning business must obtain a laundry/dry-cleaning license. Authorities will ask to see proof of ownership or a lease for the facility, insurance, and other business information. The state also requires businesses to declare the chemicals used in the dry-cleaning process.
In Massachusetts, a dry cleaner certification form is needed, and you must register your business with the state’s Department of Environmental Protection.
Your state or local government may also require you to obtain the following:
- Basic business operation license: A license from the city in which your business will operate, or from the local county (if the business will be operated outside of the city's legal boundaries).
- Zoning and land use permits: Local government zoning laws may prohibit certain business activity in designated areas.
- Building permit: If you plan on remodeling or building a commercial space, you'll need to get a building permit.
- Certificate of Occupancy: This outlines what the building structure is used for and ensures it is compliant with building codes.
Get insurance for your dry-cleaning business
An insurance policy can protect your business financially should an accident or injury occur on your premises. For example, general liability insurance can protect against accidents and lawsuits.
You may also need to obtain vehicle insurance (for pick-up and delivery services) and workers’ compensation and employment insurance.
Finance your dry-cleaning business
Starting a dry-cleaning business involves a degree of upfront investment and may require you to obtain financing. A business bank loan or SBA-backed loan are common sources of small business financing. These funds can be used to procure equipment and other capital expenses.
Use your business plan to help increase your chances of securing funding. Include your budget, projected profit and losses, and financial projections. With these tools, you’ll have a good sense of how much funding you need and your plan to repay the loan.
Market your dry-cleaning business
Consider how you will get the word out about your dry-cleaning business and build a loyal customer base. Here are some tips:
- Launch a website. Create a website that is optimized for search engines, this will ensure your business ranks high when someone searches for a local dry-cleaning business. Use key search words and phrases in your body copy, headers, and metadata. Ensure your website is designed with desktop and mobile users in mind and make it easy for anyone to book your services. See Top 3 tips for building a company website for more information.
- Create social media and other online profiles. Set up business pages and accounts on Facebook, Yelp, Instagram, Google my Business, and Twitter. Ask customers to leave reviews, post regular updates, and special offers.
- Foster customer loyalty. Use email newsletters and offers to keep in touch with customers. Include incentives for repeat customers or create a reward program. Use customer relationship management (CRM) tools that let you build a customer database, connect with customers, and track incentives.
- Partner with other businesses. Cross-promote your business by reaching out to other local businesses and joining them in offering new customer specials.
Frequently asked questions to starting a dry-cleaning business
What are the startup costs for a dry-cleaning business?
The startup costs for a dry-cleaning business can vary significantly based on your business model and location. Whether you take over an existing store, open your own, or purchase or lease equipment, there are many factors that determine startup costs which can vary from $30,000 to over $1 million.
Are dry-cleaning businesses profitable?
While the dry-cleaning business is predicted to grow, market factors such as changes in garments, increased regulation, and the shift to work from home could impact profits.
How much should you charge dry-cleaning customers?
Prices will vary by garment and service (such as heavily soiled garments). But, consider other variables such as your competition, your location, and demographics, and if you intend to aggressively grab market share.
If you choose to offer services such as repairs, adjustments, or high-touch finishing for garments such as wedding dresses, evening gowns, and tuxedos, consider charging more for these premium items and services.
At the end of the day, make sure that your prices cover your costs and leave sufficient room for profit.
Start a dry-cleaning business
With the right planning, you can build a successful dry-cleaning business. There are several options to choose from, and the potential for growth is evident.
Ready to form a corporation or LLC? Learn about BizFilings incorporation and LLC formation services.
