How to Stay Profitable with Rising Laundromat Utility Costs - Jordan Berry's 2 Cents

The more money you are spending on utility costs, the better. It means that your machines are being used—but only if they’re priced correctly. According to a survey conducted by the CLA, nearly 70% of laundromat owners felt the biggest problem they face in the industry is high utility costs.

In this blog, I discuss how to adjust your pricing structure to include your laundromat’s utility costs and what to consider like how to raise prices at your laundromat, stay competitive, and maintain customer loyalty.

Adjusting pricing structure to include laundromat utility costs

When it comes to adjusting your pricing structure to include your utility costs, it’s less about how much you’re charging and more about the ratio of utility costs to gross income. If you’re paying $10,000 a month for electricity, gas, and water and it’s equating to 15% of your income, then your pricing structure is right where it should be.

To price your machines correctly and adjust your pricing to accommodate the rise in utility costs, take a look at the percentage of your utility costs when compared to your gross income. If you have newer machines, your monthly utility costs should equal 15% of your monthly gross income. For older machines, that number should be closer to 20%.

But how do you know when it’s time to adjust your prices? When you notice that your utility costs are starting to creep over 15% for newer and 20% for older machines, then it’s time to address pricing and try to get your ratios back in line.

How to raise prices at your laundromat

Use industry experts to explore the different ways laundromats raise prices across the U.S. Some owners raise everything all at once, while others gradually raise a few things over a period of time.

For example, you can start by raising prices for certain-sized machines or raise dryer prices now and washers later. You can raise 20-lb washers this month and your 30-lb washers next month. (If you’re raising prices because of utility costs, it might not make sense to raise prices per machine size. If utility costs are on the rise, all your machines are costing more to run.)

Another option is to add modifiers. If your customers want to add hot water, then it’s going to cost you more to heat the water because now your machines are using gas, so you can charge more for hot water. You can also experiment with creating pricing structures like full-cycle dry. You can charge a certain amount of minutes: $0.50 per 7 minutes or use quarters to dictate how much each interval will cost. Trying different creative pricing structures can help maximize your profit.

These are just a few of the different strategies you can employ, but in the end, you’ll have to do what works best for your business.

Staying in line with your competitors

Where pricing starts to get tricky is when you have competitors that don’t raise their prices, which is pretty common. Trying to maintain your competitive pricing while maintaining those ratios can be difficult.

There is something you have to consider: sticking with your ratios will help your business survive. In terms of long-term stability, you want to keep as close to the above ratios as possible.  Your competitors are more than likely paying the same utility costs as you, which means they won't be sustainable if they’re not raising their prices. According to the CLA Industry Survey, only 10% of respondents do not plan on raising prices in 2023, which means this may be a good time for you to do so.

Maintaining customer loyalty

Raising prices is something every small business and industry has to do as inflation and economics start to affect the cost to run your business. Look for ways to make the experience better for your customers so that they understand you have to change, but they have a better experience at your laundromat. As prices get raised, unfortunately, we too have to raise prices.

I did a survey on my YouTube channel and I asked people:

Do you think that laundromat owners should communicate with customers about why they’re raising prices?

Out of those that responded, 67% of my audience said no, you shouldn’t have to communicate with customers why you should raise your prices.

There can be some value in letting them know, especially when prices are going up rapidly. You can always ensure your customers that you’re not raising them to make more money, but to maintain profitability so they can continue to take advantage of the services you offer. 

How to save on laundromat utility costs

Even if you’re planning to raise your prices, it doesn’t hurt to find ways to save on laundromat utility costs. A major concern for the industry, there are various ways you can reduce costs. While you should be looking for ways to increase your income, you should equally consider ways to decrease different expenses.

Invest in energy-efficient machines

Energy efficiency is becoming a major consideration for many different industries. Everyone wants to save money when it comes to utilities as nearly every residential appliance product advertises its efficiency. In the long run, purchasing new machines or retooling your existing ones to be more efficient will benefit your business as utility and business costs continue to increase.

Negotiate with your utility companies

It never hurts to call your utility company. Many of them offer programs, grants, or discounts that help you save money year-over-year. You can also partner with companies like Global Energy to reduce your utility costs by relatively marginal amounts which helps boost your bottom line.

Global Energy works with your utility companies to help lower your rates. They look at your bill and evaluate what you’re paying now. They quote it out with a set of suppliers in your area, coming back with the best rate that they’re able to get for your location. Global Energy compares the rate they can offer versus what you’ve been paying over the last 12 to 24 months. 

Navigating pricing at your laundromat

If you’re looking for more information on determining pricing at your laundromat, I spoke with real laundromat owners and operators on determining the right prices based on your customers, competitors, services, and market. Watch the Cents webinar recording where I speak with Brian Smolin, owner of Laundremax, and Gilli Cherrin, Chief Product Officer at Cents.

Jordan Berry is the mind behind LaundromatResource.com, which aims to help clients learn about and break into the laundry industry. Jordan Berry’s 2 Cents is a spin cycle on our proverbial customer education machine that we like to run whenever we can. Keep an eye out for more of his featured input in the future!