You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple step guide to starting your cloth diaper service. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a cloth diaper service?
The startup costs involved in opening a cloth diaper service are fairly low. A service generally needs:
- One-size diapers: $220 for 12 pack
- Large diaper bags: $30 each
- Transportation; It’s very efficient to use your personal vehicle.
- Rubber gloves: ~$10
- Washing machine; Using your personal washer is ideal.
- Detergent: ~$14 per 68 loads
- Cloth diaper pail: ~$50 for 7 gallon, 1-2 day pail
How many cloth diapers business owners need to purchase initially depends on what brand of cloth diapers they get. Some brands offer just one size, while others have two or three different sizes.
Business owners who want to keep their startup costs as low as possible can begin by purchasing just 3 weeks worth of cloth diapers. This should be sufficient for one client, as it allows:
- 1 week’s worth of diapers to be with the client
- 1 week’s worth of diapers to be in the laundry
- 1 week’s worth of diapers as a backup emergency supply
For Nature’s Premiere, a full week’s supply is 80 diapers, so 3 weeks would be 240 diapers. (If using a brand that has multiple sizes, a service should purchase 3 week’s worth of diapers in each size available.)
While this only provides enough diapers for a single client, more diapers can be purchased as additional clients sign up. The 1-week emergency supply should suffice for a week while new diapers are ordered. This lets business owners use the first payment that new client’s make to pay for any additional diapers that are required.
Business owners can further reduce their upfront expenses by using their own car and washing machine. A special car isn’t needed, as most vehicles are big enough for diapers. A special washing machine also isn’t required, although it’s important to have hot water.
Read our cloth diaper service purchasing guide to learn about the materials and equipment you'll need to start a cloth diaper service, how much to budget, and where to make purchases.
What are the ongoing expenses for a cloth diaper service?
The ongoing expenses for a cloth diaper service businesses are fairly low. They primarily include:
- fuel and maintenance for a vehicle
- hot water
Who is the target market?
A cloth diaper service’s ideal clients are busy parents with a decent amount of discretionary income. If you are able to find a nursery business that uses cloth diapers, that could be an easy way to increase business.
How does a cloth diaper service make money?
A cloth diaper service makes money by charging for the rental and laundering of cloth diapers. Most services charge a flat weekly or monthly fee.
How much can you charge customers?
Many cloth diaper services charge between about $25 and $50 per week. Nature’s Premier, for instance, offers a diaper service for $35 per week and an all-in-one diaper service for $50 per week.
How much profit can a cloth diaper service make?
How much a cloth diaper service can make depends entirely on how many clients it has. Nelson reports that services can have annual revenues around $25,000 with 20 clients.
How can you make your business more profitable?
Many cloth diaper service businesses increase their revenue slightly by offering cloth wipes and selling cloth diapers. Cloth wipes are typically an add-on service that’s between $5 and $8 per week. Cloth diapers may be sold new or used, with new ones commanding much higher prices.
What will you name your business?
Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your cloth diaper service is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, but if you still want to weigh all your options check our our article, What Structure Should I Choose for My Business?
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate cloth diaper business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
Many states have laws regulating industrial laundering. It is important to abide by your state’s laws regarding licensing and health/safety regulations that are specific to industrial laundering services.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
In business where services are provided on an extended basis, a services contract is often put in place outlining terms and conditions of service.
Cloth diaper services should require clients to sign a services agreement before starting a new project. This agreement should clarify client expectations and minimize risk of legal disputes by setting out payment terms and conditions, and service level expectations. An example of a service contract can be found here.
Some cloth diaper services try to achieve higher customer satisfaction by not requiring customers to sign long term contracts. Most cloth diaper services operate week to week and can be cancelled by the client at any time.
Recommended: Rocket Lawyer makes it easy to create a professional service agreement for your cloth diaper business when you sign up for their premium membership. For $39.95 per month, members receive access to hundreds of legal agreements and on call attorneys to get complimentary legal advice.
Labor safety requirements
It is important to comply with all Occupational Safety and Health Administration requirements.
Relevant requirements include:
- Employee injury report
- Safety signage
Certificate of Occupancy
Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a cloth diaper business
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build a location:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for your business’ location to ensure your cloth diaper business will be in compliance and able to obtain a CO.
STEP 7: Get Business Insurance
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market a cloth diaper service
A cloth diaper service may be marketed by partnering with doulas and midwives, through social media and via flyers posted on local bulletin boards. Many clients will also find you via online search, which demonstrates the importance of having a website.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
A cloth diaper service can set itself apart from similar businesses in the area by providing high-quality diapers that are easy to use. Parents are paying for convenience, and they’ll want a cloth diaper that’s quick and easy to change.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Cloth Diaper Service In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Anyone who is personable and also self-motivated may enjoy running a cloth diaper service. Business owners interact with clients on a periodic basis, as new people sign up and others need to change their plans. Much of the day-to-day work, however, is independent and involves little person-to-person interaction. While diaper exchanges are typically scheduled for a particular day, they can be done any time of that day—including in the evening or at night if necessary.
What happens during a typical day at a cloth diaper service?
Cloth diaper service owners spend much of their time exchanging and cleaning diapers. On any given day, they may:
- drive to client’s homes, where they pick up dirty diapers and drop off clean ones
- count how many dirty diapers a client used, so they know how many to drop off the next week
- wash diapers, which sometimes requires multiple cycles
- dry diapers, which may require letting them air-dry
- sort diapers for the next week’s deliveries
When not doing these things, business owners are frequently marketing their business and managing bills.
What are some skills and experiences that will help you build a successful cloth diaper service?
Business owners should be familiar with both how to use cloth diapers and how to properly launder them. Although they’ll only be laundering the diapers, clients may have questions about using them—and they’ll expect business owners to know how to use the products they provide.
Many cloth diaper companies (which sell cloth diapers) and cloth diaper services offer classes on properly using and washing cloth diapers. For example, Jillian's Drawers offers a free cloth diapering class, and Diaper Lab in Boston has a course for $20.00.
What is the growth potential for a cloth diaper service?
Cloth diaper services serve a single geographic area, such as a city or small regional area. Since you will probably be doing daily drop-offs and pick-ups, you will most likely be relatively limited in how far you can go. However, once you have enough income to hire additional drivers and maybe even additional branches, there is no limit to the area you can reach.
TRUiC's YouTube Channel
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One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
What are some insider tips for jump starting a cloth diaper service?
When washing cloth diapers, it’s extremely important to disinfect them. A good wash routine, Angie Nelson says, will use water that’s at least 160 degrees Fahrenheit. It also may involve multiple washings—some services use up to 13 changes of water when washing diapers.
How and when to build a team
Cloth diaper services can be run as one-person operations. If revenue grows enough, one or more employees may be hired to help with pickups, dropoffs and laundering. It is important to find employees with good social skills (if they will be delivering the diapers).
Read our cloth diaper service hiring guide to learn about the different roles a cloth diaper service typically fills, how much to budget for employee salaries, and how to build your team exactly how you want it.