Email Bag #1 – Answering Start-up Questions

mailboxWhen I answer emails for those thinking about starting a Video Game LAN Center this is a way I can archive them and try to help answer questions for others without saying the same things each time.  Here is a list of questions asked from me this week with my answers.

What financial problems did you meet while starting out the business that you didn’t plan on accounting for?
What problems do all businesses face when starting up?  We were under-capitalized, naive, young, unprepared and we didn’t have control over what the economy was going to do in 2007-2008.  The biggest thing that we still face is the ability to sock away funds for the next upgrade, which in this business happens very regularly.  The one thing we did right (by accident) when we started was leasing our computers.  That isn’t easy to do today, but by leasing them we paid for them very quickly, sold them while they were still valuable, and then started a new lease.  This kept our technology up-to-date AND gave us all kinds of fun and excitement at the store.  We don’t do that now, but perhaps we should go back and look at it again.

What size of venue would be ideal for an average center? (Looking at 30 PC’s, consoles, tournament area, lounge, snack bar, etc).
Well, I still stand by my strong opinion that building a LAN Center with just what you can afford to start is a bad idea.  If you start too small then you are destined to fail.  I love to compare us to movie theaters.  Why do they build 8, 10, 12 and 20 screen theater complexes?  You show up on a random Tuesday and you can have a theater all to yourself.  However on opening weekend for major releases those 200+ rooms are sold out.  You make all of your money during your busiest times.

Do you see that running a gaming center profitable?
No.  Honestly still after 10 years we are not “profitable”.  Do I get paid to do this? Yes.  Do we pay the bills for running it? Yes.  But is it profitable as a business with standard accounting principles?  Heck no, not even close.  In our case we have had some investors through the years that have come in and tried some things that have opened doors that they are not benefiting from today.  This industry is still infant, but the winds are changing…..

When you started out, did you start too big or too small?
By complete accident we started about just right.  We had 14 computers and 18 Xbox stations in our first store.  Within 3 months we added 8 more computers.  18 months after we opened using about 2000 sq. ft. we renovated a building and moved into 4000 sq. ft.  Everything was stressful and hard our first 2 years but it all worked out for a purpose in the end.

What did finding the right location do for you? What made it the right location?
This is actually something that is very black and white for me.  We started in a warehouse about 200 yards off the busiest road in our little city.  That store did about $7k per month in sales the first year.  When we moved, we moved from 2115 S. 3rd to 2303 S. 3rd which is actually less than a block.  However the new building was very close to the same road (55,000 cars per day).  Our sales the FIRST month we moved went up $5k/month.  Our increased rent was only $2k/month.  You get what you pay for.  Real estate is generally priced for the exposure and traffic you will receive.

How long did it take for your business to get out of the negative and start profiting?
We are just turning 10 years old.  Hopefully I will be able to say that in our 11th year we started showing a profit. 🙂

 

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