Money Management
November 11, 2024
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The service industry in Kenya has been growing - particularly fuelled by the growing middle class who have some disposable income.
One of the services that have become increasingly popular is laundry - seen particularly in the rise of laundromats and the popularity of mama fuas in middle-class estates.
The laundry business is fairly profitable and straightforward - which makes it an ideal venture in 2023. This article discusses three business models of this business.
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Before venturing into any business, it is advisable to have a solid business plan that lays out the market gap and your strategy for following it. You also include details of your business, the name, the mode of registration, the type of services you will offer, and the projected growth over a period of 3 to 5 years.
The financial projections are also an important part of the business plan. This indicates the amount of capital you will require to start your business, and the recurrent expenses, such as the cost of detergents, labour, machine maintenance, and utility bills.
The projected costs then inform your pricing model, which indicates how much you will be charging for your services in a way that you have a profit margin that returns your initial capital as fast as possible.
The costing model should also make your business competitive since it is likely that there will be more laundry businesses in your area. A high-price model may lock you out of the business as clients turn to the competition who may have friendlier prices.
It is also critical to analyse the market and identify if there are other businesses related to what you intend to do. Consider how your product differs from the existing products or services and potential strategies for differentiation.
For example, if a laundromat already exists in the area you intend to start, find out their weakness. Do their customers complain about the time taken to complete the service? Can you develop a business solution that allows you to offer the same service at the same cost - but at faster speeds? If so, your marketing plan should emphasize speed as one of the competitive edges of your business.
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Mama fua are individuals, mostly women, who are hired temporarily - usually paid per day - to offer in-home cleaning services. Despite their popularity, the industry operates informally and has great room for better profits if formalized.
In this model, you could organise the resources - hire individuals to work as Mama fua - train them with people skills, etiquette, and other add-ons that will make their services memorable. You then brand them, say with uniforms, and market your business aggressively - on posters in the estates, on a website or app where people can not only - see your catalogue, but also make online bookings and rate your staff.
You can then charge a premium for the services - which are needed in domestic homes as well as in businesses and offices.
This model may require significant capital, given the cost of employing the cleaning staff and having them trained. You will also need to pay them the minimum wage, including statutory deductions, pay-as-you-earn (PAYE) taxes, NHIF and NSSF deductions.
Building a website or app where clients can book and request these services and a marketing campaign that attracts a sizeable clientele that presents business sense.
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The second business model is to have a home laundromat where clients can call and have their clothes picked up and delivered after cleaning. This model would require you to set up a laundry business that operates from your home - cutting on costs such as permits and rent.
The important thing is to have an aggressive marketing campaign, especially online (a website and social media presence) and physical market storms in geo-targeted estates - to ensure the business is widely known.
In this model, you have to purchase the necessary equipment, which includes:
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The third business model for a laundry business is a physical laundromat where people can bring their clothes, have them cleaned and pick them up later.
The first important strategy to ensure your business becomes profitable is to pick a strategic location. A street where there is great foot traffic is ideal, especially if it's an estate that matches your target market.
It is also important to consider the rental business so that you do not end up spending all your revenues on rent and draining your profits in the process.
An innovative strategy would be to have a small office in a prime location - and then have a bigger work area in some other location where the rent is not as high. This will allow you to kill two birds with one stone - benefit on extra traffic due to a good location - while cutting down on rental costs for the work area.
The second important consideration is the branding - you need to have a noticeable front office - which may require that you spend on the branding and interior decoration to give it a great aesthetic look. You also need space where clients’ clothes will be preserved - say, a nice closet that does not make your business space too cluttered.
Other requirements to budget for in a physical laundromat business include:
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The third business model is particularly strategic because it can be combined with the other two and even scaled up into a franchisee. The most important aspect of the business is marketing and meeting customer demands which provide a fertile ground for growth.
Franchising is based on a marketing concept that an organization can adopt as a strategy for business expansion. Under this model, your brand, let’s call it Sparkle Cleaners, sells its trademark rights to other individuals who can open different shops - after paying you a fee.
They also agree to abide by your business standards - which you will regularly monitor. This becomes useful in protecting the brand because a negative experience by clients - even those managed by franchisees- will negatively impact the overall business.
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