Two years of unemployment in Michigan is enough for me. Looking for jobs that pay more than or even comparable to the unemployment check (soon to end) hasn’t worked, although I keep trying. I recently found a contracting gig that has me taking tech support calls out of the house, but even that isn’t that great and they haven’t been reliable and I don’t know when I’ll get paid or how regular it will be (you get paid by the call not the hour), and something’s gotta give.
I’ve been thinking for some time now I need to start my own business, and even talking about it. What kind of business? I’m thinking something I know, something I’m passionate about, something I know I can do, something I’d be good at. I want to open a LAN Gaming Center.
When you’re broke and unemployed is that the best time to start a business? Well if it isn’t, what is the best time? More than one successful business has started on a shoestring just that way; ask Warren Buffet.
So what do you need to start a LAN Gaming Center? Some machines. Some games. An internet connection. A building. A license. Some insurance. Budget for maintenance and things like credit card processing. And some ground-level marketing to where we know the customers are (mostly kids and college aged folks, to start).
Pretty cheap all the way around if you’re starting on a shoestring.
Got a partner already, another IT guy with extensive gaming and technical knowledge. We know we can do all the work ourselves.
Anyone out there think they may want to invest in a small startup enterprise like this? Or know someone who does? Or some other resources that might be useful?
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An old roommate and friend of mine owned one of those 2nd/3rd run movie theaters. It had two screens, and he had video projectors hooked up to computers. We’d play Duke Nuke’em 3D and Doom in network mode, so you had 18 foot tall monsters coming at you.
So my suggestion is, set things up so that someone running the place can select someone’s game and project it up on the wall for spectators to watch if they want.
Also, however you do it, set things up so that teams can come in, sit all around the same table, and go up against other teams.
Seriously? I think you’d have to come up with a better business model proposal than that. How are you going to generate your income? All sources.
Oh, LAN Gaming Centers are already a proven business model, Mike. If you aren’t familiar with it, here’s how it works:
You take a collection of game consoles and/or PCs, and network them together on a LAN with internet access. You get a collection of games, mostly the type (such as Modern Warfare, Halo, Bioshock 2, Left 4 Dead, World of Warcraft, etc.) that are designed for network multiplay. And you charge by the hour (or 1/2 hour, or by block of time) for people who want to play.
Your income is derived entirely from customers who come in to play.
Why would people do that when they can play at home? We can get into it in some depth, but the fact of the matter is that people already do. Your customers are:
1) Kids, basically around age 8 all the way through High School
2) College students
3) Families and single adults who enjoy playing.
The median age of a video game hobbyist today is about 35–yes, I said 35. It is a serious hobby. In fact, video gaming is one of the largest and fastest growing market segments in America.
Think of this as the video arcade of the 21st century; you don’t pump quarters into a machine, you pay by the hour. And the games aren’t usually solo, but rather, played with friends and other customers.
This is already a proven business model. Type “LAN Gaming Center” into Google and you’ll see a number of businesses already flourishing, along with a Wikipedia entry explaining the basic concept.
Obviously, an easy initial market is kids when they get out of school who are looking for something to do. Although these things also flourish like crazy in college towns. They are also increasingly cropping up in major shopping malls, including upscale ones, which market to adults. I’ve been to more than a half-dozen in Michigan and they range from holes in the wall run entirely by geeks with no obvious business ability, to corporate enterprises that are marketing primarily to single adults and families with children. They typically charge anywhere from $2.00/hour to $6.00 per hour to play, with of course packages available (3 hour blocks, 6 hour blocks, all day blocks, weekend passes, etc.), memberships in exchange for merchandise and discounts and preferential seating, etc.
Warren Buffet started out in business by buying a pinball machine and sticking it in a friend’s store, and invested those profits in another pinball machine, and another, and so on.
The most critical thing about a business of this type, as a shoestring startup, is going to be location. Rent must be cheap, but a customer base (people who play video games) must be there. We’re scouting locations now.
I don’t understand why people would go to a LAN gaming center instead of just playing other people over their high speed internet connection. vOv
Dean, some comments, for whatever they might be worth…
I’ve been to a couple of LAN cafes. We actually have one in the tiny little mountain town of Conifer. Or had one. These things are like any other gaming store, they pop up like popcorn and vanish just as fast.
I was doing a search on Google for “Game Stores, Denver” the other day. The vast majority of the responses were video game stores that sold new and used games, and rented game consoles. There were maybe half a dozen LAN cafe gaming centers, and virtually all of them were closed. In fact traditional board and role playing game stores seemed to be more stable than the LAN cafe businesses, and several of those were closed too.
The better of the two LAN cafes I went to (it was for a birthday party for the son of a co-worker of my wife) was pretty nice actually. It had several projector screens and had a playing area and a viewing area for each screen. They had all the popular game systems and games.
We spent probably three hours there on a Saturday afternoon. They may have had four other paying customers outside of the party attendees.
Last time I drove by, it was empty.
The business model strikes me as extremely expensive and focused too much on one niche. You’d be better off diversifying your client base. Ffor example, you could make it a “business e-cafe” during school/work hours, where people (like me) who dont want to go into teh office can come by and telecommute, providing them with either wireless or wired connections for their own PCs, or simple internet terminals with OpenOffice installed.
Offer free coffee, or contract with a local cafe to supply lattes for split profits in house. Keep teh environment quiet and pleasant and professional, enforce a minimum dress code and no smoking. Youll attract a lot of entrepeneurs and other office bees who just dont want to drive into the office that day. I cant tell you how many times Ive wished i had a facility like that around.
Then, on weekends, you can to cater to the gaming crowd (be careful – some software is a per-machine license rather than a per-user one. Can get expensive fast, esp since you need to stay on top of the latest games to stay relevant.)
No one is going to permit their kids to go to a gaming center on weekdays, especially in this economy – the arcade is much cheaper an alternative and they are on the skids. You cant rely on that segment alone.
IT issues are going to be a MASSIVE headache. Youll probably be ghosting every harddrive once a week. Also, the uront hardware cost will be huge – and you have to have a systematic upgrade cycle (so choose your hardwraee *very* carefully to facilitate that) .
A third segment you can appeal to is e-shopping. Register a dedicated amazon affiliate account and advertise the shop as a virtual strefront – with free shipping. Pay for Amazon Prime yoruself and then let people place orders via you by coming in, browsing Amazon, ordering their merchandise. You can also do ebay sales for people wanting to dump their junk but not wanting to go thru the hassle of actually doing teh legwork on ebay themselves.
I am good friends with a guy who ran a gaming store that also had a LAN section.
First, be careful with the licenses on the games. Make sure that they don’t have something hinky in them that won’t let you do this sort of play with it.
Second, you are likely to make more money on merch and concessions than the actual play time. Plan on stocking lots of soda and snacks. Depending on the code, you may be able to sell pre-packaged with not much trouble, but being the People’s Republic of Michigan you may have problems with even that. Don’t miss making a significant part of the income on that (and other geeky purchases like game-themed hoodies, keychains and collectable card games.)
Oh, and plan on part of your routine being to shove a new ghost-image of your “standard config” for the machines down every morning.
And talk to someone about what you need to worry about when it comes to bouncing minors out of the place.
JohnW: I don’t understand why people would go to a LAN gaming center instead of just playing other people over their high speed internet connection.
Well, I can give you several reasons, but the most important answer for you is that it doesn’t matter if you understand why they would or not, because the empirical fact is that they do, in fact, do so.
There are several reasons. It’s fun to get together with friends in person. It’s good to get out of the house. It’s good not to have to fight with whoever else you live with to get to the TV or the game console. It’s great to go out and check out a new game and play it for an hour or two for a few bucks rather than buy a copy. It’s fun to attend tournaments and competitions. It’s a great place to take your girlfriend if she likes video games (and a lot of girls do these days). It’s a great place to take your kids, or drop them off while you go shopping. It’s somewhere someone low on money who can’t afford to buy a system can still go play sometimes.
As I say, though, you don’t particularly have to understand it. People do, in fact, do this very thing. It is a growing business segment.
Cosmic: I was doing a search on Google for “Game Stores, Denver” the other day.
Yeah. Try “LAN Gaming Denver.” First thing that pops up:
http://www.gameondenver.com/
…with quite a few other links, including other sites and of course hobbyist groups. Not surprising; as I noted, video game hobbyists are one of the largest and fastest-growing media markets in the United States.
I’m not particularly interested in the fact that you are aware of businesses like these that have failed; know any restaurants that failed? Any businesses of any other kind that failed? Yeesh. No offense, but that’s a meaningless anecdote.
Aziz: Oh, all that’s there. Many LAN gaming centers are set up exactly as you specify. Others are more niche oriented; some are set up like your old style video arcade (these places are basically Arcade 2.0) near a school or several schools, attracting mostly kids after school on weekends; they do things like open at 3:00pm and close around curfew, later on weekends to cater to older gamers. They also typically do what are called “lock ins” where parents actually drop their older kids off at around 9pm on a Friday or Saturday night, the place is locked up, and the kids literally stay there all night playing whatever they want. (Don’t look at me like I’m crazy, I’ve seen it multiple places.)
If you can afford rent in an area with a high adult population of gamers, then you can indeed do exactly what you want: target e-shoppers, people who want to browse the web and do email and job search and shopping and grab a coffee and maybe play a video game. Those exist too. I’ve been to them.
As for the technical issues: dude, we know the tech. You can either start with PCs, or start with consoles. Consoles are way easier because they’re plug and play. A dozen Xbox 360s, some ethernet wires, and an internet connection, and you’re done. If you’re using PCs, you get a lot more headaches, but you also cater to a different variety of customer. You can do both, although if you’re starting on a shoestring you pick one or the other; personally I’d start with consoles only, but we’re still discussing it.
Make sure you’re logistically and legally set up to sell coffee, soft drinks, and snacks, and make sure you do frequent Costco runs to make sure you’ve got decent supplies of them. Also, you may want to see if there’s game-themed swag, magazines, etc you can sell.
Tournaments with prizes are good too, as are things like halls of fame and high-score lists.
Oh there’s a ton of game-based swag. My favorite is the “energy potions,” which are energy shots (like the 5-hour energy shot you see all the time in stores now), but put in a little bottle that looks like a magic potion. But yeah, t-shirts, wallets, magazines, a few comic books (not too many), and ideally, you also sell things like coffeee and fountain drinks. Which are high margin I might add…
And snack/drink cards. Like buy a card that’s the price of nine drinks, but is good for 10. Then either they have a reason to come back again, or they paid for three or four drinks that they didn’t actually consume.
Another suggestion… For a place like this, you will go by simple “restaurant math”: cashflow per square foot. You want both high unit margins and to keep your “stations” active, either by having lots of people coming & going, or by having people come and stay for a long time.
Not sure whether you may want to consider a “membership” model, where you charge a fixed price per month, or a unit of use model, where you charge per use, or a mix, which is complicated but can be made to work.
In your lease, make sure you are allowed to sell food and that nobody else in your strip-mall has an exclusive right to sell food, coffee, etc. (In my area, exclusivity clauses in commercial leases are rare, but far from unknown.)
Also, cooked food and food-related equipment is subject to lots of massively expensive restrictions; other than possibly having a microwave or toaster oven (check local regs), you probably don’t want to attempt to serve prepared hot food.
membership model is definitely teh way to go if you do the remote-office thing. Tell yoru clients, for $20/month you hav efree wireless access and unlimited cubicle time. walkins have to pay by the hour and connection.
Dean, if you have a good location and business plan, I will invest a minimum of $2500. I’d prefer to structure it as a convertible bond. You have my email on file, contact me if/when the time is right.
I wish you ‘a good business analysis plus some determination’.
Find an area with a good number of asians in it.
Dean, you are welcome to pursue your own desires on this, and I wish you nothing but luck. My brother ran a game store for years. At one point he added a LAN cafe area, although this was some time ago and it mostly included Doom and Duke Nukem as options. But those were insanely popular at the time. His business was primarily a sports and game store with tables set up for playing tabletop games, and the LAN area.
His experience was that the lowest margin of income from all of his different income sources was the LAN area. So he discontinued it.
With the wealth of marketable skills you have Dean, I can’t help but think that pursuing a LAN cafe as your business model is not really pursuing your highest financial potential. I’d think you would want to pursue something more along the lines of a consulting technical firm.
btw Dean – do you have programming skills? if you can do Objective-C, then you may want to try your hand at writing apps for the iphone/android.
FWIW, here are the issues my brother encountered when trying to make a LAN cafe successful back when high speed internet access was a fairly rare thing for a home to have.
1. The cost of keeping up with the latest technology is easy to under-estimate. This isn’t just about keeping up with the latest games, although that in itself is a very expensive thing. It includes having the CPUs and graphic cards that can handle the latest releases. That means your business model has to include upgrades to hardware on a regular basis. Once per year may not be fast enough. Licensing is a complex thing to keep track of too.
2. Food is a bigger problem than you might think. If you are able to sell food, you still have to prepare it. Putting even a toaster oven in your business can jack up your insurance rates. Microwave ovens may or may not be allowed by your lease. Any food you serve opens the door for potential lawsuits. You’ll need refrigeration to store the food. If you decide not to provide food, people will want to bring food in from outside. That creates its own problems. Most businesses like this get into the business thinking all they need to provide is snacks and soda. But it turns out that if another competitor offers sandwiches and salads, that is a significant advantage. Hot food is even better. I currently play D&D at a game store that provides snacks, salads, sandwiches, coffee, tea, soda and microwavable refrigerated items. Since they opened they have put at least one other game store out of business based on their food selection alone. But I know the business owner and he says that the food is killing them. He’s not sure how much longer he can stay in business.
3. Restrooms are as big an issue as food. If you expect to host decent numbers of patrons, you will have to have multiple restrooms and they’ll have to be kept clean. This was a major problem for my brother because he ran the shop mostly by himself, which meant leaving the cash register when it was necessary to clean the restroom. And it was necessary.
4. Loitering. Parents these days seem to love to have unpaid baby-sitters. For some reason many parents seem to think a business like this is a great place to drop off their kids while they go do their own thing. This creates problems for the business when those kids are bored and have no money to actually pay for anything.
In a nutshell, in his case trying to run a LAN was a low-margin, high-maintenance exercise that was sucking his time and resources from actual profitable products.
For comparison, he also ran Magic:The Gathering tournaments and had Magic:The Gathering tables set up for people to play. A person playing Magic:The Gathering needed only a chair and a place at a table. They regularly purchased new Magic card packages to continue playing. This was a low-maintenance, high return part of his business, and when he finally sat down and calculated the actual income vs. floor space for both, he realized that every LAN setup he had was costing him money.
Now, his whole business model wasn’t based on LAN gaming. And there are definitely some LAN cafes that make a profit. I’m just trying to give you an idea of what you’ll have to deal with based on the experiences my brother had.
PC-based gaming definitely raises a whole host of headaches, which is why you think hard about doing it at all; the technical costs are insane. A batch of Xbox 360 units, by comparison, requires extremely little maintenance or upgrades and are easy to deal with; they basically work or they don’t, with only a few technical issues. This is why most gaming centers work preferentially on console systems and although some do include PCs many do not and most seem to rely primarily on the consoles (with only one exception I’ve seen, and they knew what they were doing but they had all sorts of headaches).
As for whether there are better business models for me to pursue: I suck at consulting. And I’m in a market where PC and networking techs are a dime a dozen. Every tech I know in this area is either out of work or has changed careers or has left Michigan. My one friend who recently finally found (temporary contracting) job got dropped after a few weeks; they treated their contractors so bad they expected their networking and server support techs to sweep and mop floors and just dropped people right and left.
Anyone in tech in this area who is not a programmer (and I am not a programmer) who has experience and certifications and even a degree has about as much marketable skill as a High School graduate. I’m only exaggerating a little. Taking jobs that pay less than an unemployment check are insane to take but I may be taking them soon.
Career changing is a major, major option anymore in tech. I think I have to do it. This is insane. Tech isn’t the place to work in this market.
I know a guy who runs a retro gaming store that also has consoles that are locally connected for gaming that people can rent time on. It’s cool because a bunch of friends can go and pay 5-10 bucks for an hour or two of “no advantages” gaming. Basically if you make it a game store that should go well but it can’t be a normal game store (ergo why his has a retro gaming specialty) because GameStop will squeeze you out. So you sell some sort of specialty item; anime is good too. Also, getting certified in repair will also be a great help.
Word of advice, offer cheap microwave popcorn (25 cents to 50 cents a bag) and make sure you have a pop machine. It’s a real cash cow believe it or not and sometimes actually helps with slow days. Also at least if people are loitering they’ll spend money on something.
Conservative Scientist: We’re still working on it, the request was very initial, but I WILL Be getting back to you. Thank you!
I should add it’s not a bad business model considering that Games outsold DVDs last year and the game market is still expected to grow while sales for home movies are expected to decline.
I agree that the game market is expanding and has already overtaken the movie market in terms of gross sales. It shows no signs of slowing down. Success or failure in a venture like this is probably more about the tactical day-to-day things you do and how much effort you put into it, so good luck Dean. I certainly don’t want to be discouraging anyone from starting a small business. Go for it.
Loitering definitely is a problem, so you’ll want to make sure that people can’t come in and just “hang out” without doing anything. A monthly membership or something will reduce this.
There was a startup game/food place near my house that crashed and burned for exactly this reason: too many unpleasant kids drove off the paying customers. Of course, putting this place in the most expensive building in the city with a $23,000/month rent didn’t help either! Even if the concept “worked”, that’s a whole lot of burgers & cokes just to pay that monthly nut…
As a general rule, with any business with restaurant or other personal-service economics, you want the rent to be 15% of the gross or less.
(My wife is a biz broker and has helped people buy and sell a couple hundred businesses and we talk a whole lot about business success and failure at the dinner table. Her work is far more “talkable” than my database engine geekery :)
> A monthly membership or something will reduce this.
Or simply a fee to get into the food /gaming area.
Yours,
Tom
There are many sites that offer information about businesses for sale. Even if you don’t plan to buy an existing business, google-ing something like “LAN games for sale” will show data like the average value of this sort of business (in your area), typical revenue, foreclosures/out of business sales, etc.
From what I’ve seen, game centers that also offer internet access, combined with some comforts of home, like microwaved popcorn (or maybe locally catered snack food), in heavily trafficked mall areas are more successful.
oops – that should be “lan games business for sale”
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