How to write a business plan for an arcade game room?

Writing a business plan for an arcade game room can be an intimidating task, especially for those just starting.

This in-depth guide is designed to help entrepreneurs like you understand how to create a comprehensive business plan so that you can approach the exercise with method and confidence.

We'll cover: why writing an arcade game room business plan is so important - both when starting up, and when running and growing the business - what information you need to include in your plan, how it should be structured, and what tools you can use to get the job done efficiently.

Let's get started!

Why write a business plan for an arcade game room?

Understanding the document's scope and goals will help you easily grasp its structure and content. Before diving into the specifics of the plan, let's take a moment to explore the key reasons why having an arcade game room business plan is so crucial.

To have a clear roadmap to grow the business

Small businesses rarely experience a constant and predictable environment. Economic cycles go up and down, while the business landscape is mutating constantly with new regulations, technologies, competitors, and consumer behaviours emerging when we least expect it.

In this dynamic context, it's essential to have a clear roadmap for your arcade game room. Otherwise, you are navigating in the dark which is dangerous given that - as a business owner - your capital is at risk.

That's why crafting a well-thought-out business plan is crucial to ensure the long-term success and sustainability of your venture.

To create an effective business plan, you'll need to take a step-by-step approach. First, you'll have to assess your current position (if you're already in business), and then identify where you'd like your arcade game room to be in the next three to five years.

Once you have a clear destination for your arcade game room, you'll focus on three key areas:

• Resources: you'll determine the human, equipment, and capital resources needed to reach your goals successfully.
• Speed: you'll establish the optimal pace at which your business needs to grow if it is to meet its objectives within the desired timeframe.
• Risks: you'll identify and address potential risks you might encounter along the way.

By going through this process regularly, you'll be able to make informed decisions about resource allocation, paving the way for the long-term success of your business.

To anticipate future cash flows

Regularly comparing your actual financial performance to the projections in the financial forecast of your arcade game room's business plan gives you the ability to monitor your business's financial health and make necessary adjustments as needed.

This practice allows you to detect potential financial issues, such as unexpected cash shortfalls before they escalate into major problems. Giving you time to find additional financing or put in place corrective measures.

Additionally, it helps you identify growth opportunities, like excess cash flow that could be allocated to launch new products and services or expand into new markets.

Staying on track with these regular comparisons enables you to make well-informed decisions about the amount of financing your business might require, or the excess cash flow you can expect to generate from your main business activities.

To secure financing

A detailed business plan becomes a crucial tool when seeking financing from banks or investors for your arcade game room.

Investing and lending to small businesses are very risky activities given how fragile they are. Therefore, financiers have to take extra precautions before putting their capital at risk.

At a minimum, financiers will want to ensure that you have a clear roadmap and a solid understanding of your future cash flows (like we just explained above). But they will also want to ensure that your business plan fits the risk/reward profile they seek.

This will off-course vary from bank to bank and investor to investor, but as a rule of thumb. Banks will want to see a conservative financial management style (low risk), and they will use the information in your business plan to assess your borrowing capacity — the level of debt they think your business can comfortably handle — and your ability to repay the loan. This evaluation will determine whether they'll provide credit to your arcade game room and the terms of the agreement.

Whereas investors will carefully analyze your business plan to gauge the potential return on their investment. Their focus lies on evidence indicating your arcade game room's potential for high growth, profitability, and consistent cash flow generation over time.

Now that you recognize the importance of creating a business plan for your arcade game room, let's explore what information is required to create a compelling plan.

Information needed to create a business plan for an arcade game room

Drafting an arcade game room business plan requires research so that you can project sales, investments and cost accurately in your financial forecast, and convince the reader that there is a viable commercial opportunity to be seized.

Below, we'll focus on three critical pieces of information you should gather before starting to write your plan.

Carrying out market research for an arcade game room

Before you begin writing your business plan for an arcade game room, conducting market research is a critical step in ensuring precise and realistic financial projections.

Market research grants you valuable insights into your target customer base, competitors, pricing strategies, and other crucial factors that can impact the success of your business.

In the course of this research, you may stumble upon trends that could impact your arcade game room.

You might find that your target audience could be interested in competitive gaming experiences, such as tournaments or leaderboards. Additionally, you may discover that there could be a potential for virtual reality gaming to be popular in your arcade game room.

Such market trends play a pivotal role in revenue forecasting, as they provide essential data regarding potential customers' spending habits and preferences.

By integrating these findings into your financial projections, you can provide investors with more accurate information, enabling them to make well-informed decisions about investing in your arcade game room.

Developing the marketing plan for an arcade game room

Before delving into your arcade game room business plan, it's imperative to budget for sales and marketing expenses.

To achieve this, a comprehensive sales and marketing plan is essential. This plan should provide an accurate projection of the necessary actions to acquire and retain customers.

Additionally, it will outline the required workforce to carry out these initiatives and the corresponding budget for promotions, advertising, and other marketing endeavours.

By budgeting accordingly, you can ensure that the right resources are allocated to these vital activities, aligning them with the sales and growth objectives outlined in your business plan.

The staffing and capital expenditure requirements of an arcade game room

Whether you are starting or expanding an arcade game room, it is important to have a clear plan for recruitment and capital expenditures (investment in equipment and real estate) in order to ensure the success of the business.

Both the recruitment and investment plans need to be coherent with the timing and level of growth planned in your forecast, and require appropriate funding.

A possible staffing cost that an arcade game room might incur could be hiring employees to run the arcade. This could include a manager to oversee the day to day operations, as well as game attendants to help guests with any questions they might have. Equipment costs could include the cost of the actual arcade games, as well as other necessary items such as chairs, tables and lighting. The cost of maintaining and repairing the arcade machines would also need to be covered. Additionally, the arcade might need to purchase additional supplies such as tokens or tickets.

In order to create a realistic financial forecast, you will also need to consider the other operating expenses associated with running the business on a day-to-day basis (insurance, bookkeeping, etc.). 

Once you have all the necessary information to create a business plan for your arcade game room, it is time to start creating your financial forecast.

What goes into your arcade game room's financial forecast?

The financial forecast of your arcade game room's business plan will enable you to assess the growth, profitability, funding requirements, and cash generation potential of your business in the coming years.

The four key outputs of a financial forecast for a arcade game room are:

• The profit and loss (P&L) statement,
• The projected balance sheet,
• The cash flow forecast,
• And the sources and uses table.

Let's look at each of these in a bit more detail.

The projected P&L statement

Your arcade game room forecasted P&L statement enables the reader of your business plan to get an idea of how much revenue and profits your business is expected to make in the near future.

Ideally, your reader will want to see:

• Growth above the inflation level
• Expanding profit margins
• Positive net profit throughout the plan

Expectations for an established arcade game room will of course be different than for a startup. Existing businesses which have reached their cruising altitude might have slower growth and higher margins than ventures just being started.

The projected balance sheet of your arcade game room

Your arcade game room's forecasted balance sheet enables the reader of your plan to assess your financial structure, working capital, and investment policy.

It is composed of three types of elements: assets, liabilities and equity:

• Assets: represent what the business owns and uses to produce cash flows. It includes resources such as cash, equipment, and accounts receivable (money owed by clients).
• Liabilities: represent funds advanced to the business by lenders and other creditors. It includes items such as accounts payable (money owed to suppliers), taxes due and loans.
• Equity: is the combination of what has been invested by the business owners and the cumulative profits and losses generated by the business to date (which are called retained earnings). Equity is a proxy for the value of the owner's stake in the business.

Your arcade game room's balance sheet will usually be analyzed in conjunction with the other financial statements included in your forecast.

Two key points of focus will be:

• Your arcade game room's liquidity: does your business have sufficient cash and short-term assets to pay what it owes over the next 12 months?
• And its solvency: does your business have the capacity to repay its debt over the medium-term?

The cash flow forecast

A projected cash flow statement for an arcade game room is used to show how much cash the business is generating or consuming.

The cash flow forecast is usually organized by nature to show three key metrics:

• The operating cash flow: do the core business activities generate or consume cash?
• The investing cash flow: how much is the business investing in long-term assets (this is usually compared to the level of fixed assets on the balance sheet to assess whether the business is regularly maintaining and renewing its equipment)?
• The financing cash flow: is the business raising new financing or repaying financiers (debt repayment, dividends)?

As we discussed earlier, cash is king and keeping an eye on future cash flows an imperative for running a successful business. Therefore, you can expect the reader of your arcade game room business plan to pay close attention to your cash flow forecast.

Also, note that it is customary to provide both yearly and monthly cash flow forecasts in a business plan - so that the reader can analyze seasonal variation and ensure the arcade game room is appropriately funded.

The initial financing plan

The initial financing plan - also called a sources and uses table - is an important tool when starting an arcade game room.

It shows where the money needed to set up the business will come from (sources) and how it will be allocated (uses).

Having this table helps understand what costs are involved in setting up the arcade game room, how the risks are distributed between the shareholders and the lenders, and what will be the starting cash position (which needs to be sufficient to sustain operations until the business breaks even).

Now that the financial forecast of an arcade game room business plan is understood, let's focus on what goes into the written part of the plan.

The written part of an arcade game room business plan

The written part of an arcade game room business plan is composed of 7 main sections:

1. The executive summary
2. The presentation of the company
3. The products and services
4. The market analysis
5. The strategy
6. The operations
7. The financial plan

Throughout these sections, you will seek to provide the reader with the details and context needed for them to form a view on whether or not your business plan is achievable and your forecast a realistic possibility.

Let's go through the content of each section in more detail!

1. The executive summary

The first section of your arcade game room's business plan is the executive summary which provides, as its name suggests, an enticing summary of your plan which should hook the reader and make them want to know more about your business.

When writing the executive summary, it is important to provide an overview of the business, the market, the key financials, and what you are asking from the reader.

Start with a brief introduction of the business, its name, concept, location, how long it has been in operation, and what makes it unique. Mention any services or products you plan to offer and who you sell to.

Then you should follow with an overview of the addressable market for your arcade game room, current trends, and potential growth opportunities.

You should then include a summary of your key financial figures such as projected revenues, profits, and cash flows.

Finally, you should detail any funding requirements in the ask section.

2. The presentation of the company

The second section in your arcade game room's business plan should focus on the structure and ownership, location, and management team of the company.

The structure and ownership part provides an overview of the legal structure of the business, who the owners are and how much each has invested and owns. If you are seeking financing it is important that the reader gets a clear picture of which legal entity is receiving the funds, and who controls the business.

The location part should give an overview of the premises from which the company is operating, and why that location is of particular interest (catchment area, accessibility, amenities nearby, etc.).

When describing the location of your arcade game room, you might emphasize its proximity to potential customers. Highlight that it could be located in a densely populated area, with plenty of foot traffic, ideal for drawing in customers. You could also point out its potential to be situated in a busy commercial or entertainment district, with access to a wide variety of other activities. Additionally, you could stress its accessibility, as it could be located near public transportation or parking. Finally, its proximity to other businesses could provide the opportunity for collaborations and partnerships, which may be beneficial for your business.

Finally, you should introduce the management team. Explain each member's role, background, and experience.

It is also important to emphasize any past successes that the members of the management team have achieved, and how long they've been working together, as this will help potential lenders or investors understand why they should trust in their leadership.

3. The products and services section

The products and services section of your business plan should include a detailed description of the offerings that your company provides to its customers. 

For example, your arcade game room could offer classic arcade games, virtual reality games, and a variety of console games to its customers. Classic arcade games provide customers with a nostalgic experience, virtual reality games offer an immersive experience, and console games let customers enjoy their favorite titles on the big screen. Customers can also enjoy food and beverage services, as well as a comfortable and inviting atmosphere.

When drafting this section, you should be precise about the categories of products or services you sell, the types of customers you are targeting and how customers can buy them.

4. The market analysis

When you present your market analysis in your arcade game room business plan, it's crucial to include detailed information about customers' demographics and segmentation, target market, competition, barriers to entry, and any relevant regulations.

The main objective of this section is to help the reader understand the size and attractiveness of the market while demonstrating your solid understanding of the industry.

Begin with the demographics and segmentation subsection, providing an overview of the addressable market for your arcade game room, the key trends in the marketplace, and introducing different customer segments along with their preferences in terms of purchasing habits and budgets.

Next, focus on your target market, zooming in on the specific customer segments your arcade game room aims to serve and explaining how your products and services fulfil their distinct needs.

For example, your target market might include people aged 13-18. This group of customers is likely to enjoy classic arcade games and have free time to visit the arcade. Additionally, this age group is likely to have their own income to spend on arcade games and snacks.

Then proceed to the competition subsection, where you introduce your main competitors and highlight what sets you apart from them.

Finally, conclude your market analysis with an overview of the key regulations applicable to your arcade game room.

5. The strategy section

When you write the strategy section of your arcade game room business plan, remember to cover key elements such as your competitive edge, pricing strategy, sales & marketing plan, milestones, and risks and mitigants.

In the competitive edge subsection, elaborate on what makes your company stand out from competitors. This becomes especially important if you're a startup, aiming to carve a place for yourself amidst established players in the marketplace.

The pricing strategy subsection should demonstrate how you plan to maintain profitability while offering competitive prices to attract customers.

Outline your sales & marketing plan, detailing how you'll reach out to new customers and retain existing ones through loyalty programs or special offers.

For the milestones subsection, outline your company's achievements to date and your main objectives for the future, complete with specific dates to set clear expectations for progress.

Lastly, the risks and mitigants subsection should address the main risks that could affect your plan's execution. Explain the measures you've put in place to minimize these risks, assuring potential investors or lenders.

Your arcade game room could face several risks. For example, there may be a risk of theft. People may enter the game room and take items such as game consoles or tokens without permission. Additionally, there might be a risk of damage to the games or consoles. People may play the games too aggressively or drop them, leading to costly repairs or replacements.

6. The operations section

In your business plan, it's also essential to provide a detailed overview of the operations of your arcade game room.

Start by covering your team, highlighting key roles and your recruitment plan to support the expected growth. Outline the qualifications and experience required for each role and your intended recruitment methods, whether through job boards, referrals, or headhunters.

Next, clearly state your arcade game room's operating hours, allowing the reader to assess staffing levels adequately. Additionally, mention any plans for varying opening times during peak seasons and how you'll handle customer queries outside normal operating hours.

Then, shift your focus to the key assets and intellectual property (IP) necessary for your business. If you rely on licenses, trademarks, physical structures like equipment or property, or lease agreements, make sure to include them in this section.

You could have a variety of arcade games as key assets in an arcade game room. This could include classic games such as Pac-Man, Space Invaders and Galaga. Additionally, you might have more modern games such as Dance Dance Revolution or Mario Kart. As for Intellectual Property, the arcade game room could have exclusive rights to certain games, such as a rare vintage game or a game that the room has developed in-house. The room could also have a unique brand logo or an original theme that they have created themselves.

Lastly, include a list of suppliers you plan to work with, detailing their services and main commercial terms, such as price, payment terms, and contract duration. Investors are interested in understanding why you've chosen specific suppliers, which may be due to higher-quality products or established relationships from previous ventures.

7. The presentation of the financial plan

The financial plan section is where we will include the financial forecast we discussed earlier in this guide.

Now that you have a clear idea of what goes into an arcade game room business plan, let's look at some of the tools you can use to create yours efficiently.

What tool should I use to write my arcade game room's business plan?

In this section, we will be reviewing the two main options for writing an arcade game room business plan efficiently:

• Using specialized software,
• Outsourcing the drafting to the business plan writer.

Using an online business plan software for your arcade game room's business plan

Using online business planning software is the most efficient and modern way to create an arcade game room business plan.

There are several advantages to using specialized software:

• You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
• You are guided through the writing process by detailed instructions and examples for each part of the plan
• You can access a library of dozens of complete business plan samples and templates for inspiration
• You get a professional business plan, formatted and ready to be sent to your bank or investors
• You can easily track your actual financial performance against your financial forecast
• You can create scenarios to stress test your forecast's main assumptions
• You can easily update your forecast as time goes by to maintain visibility on future cash flows
• You have a friendly support team on standby to assist you when you are stuck

If you're interested in using this type of solution, you can try The Business Plan Shop for free by signing up here.

Hiring a business plan writer to write your arcade game room's business plan

Outsourcing your arcade game room business plan to a business plan writer can also be a viable option.

Business plan writers are experienced in writing business plans and adept at creating financial forecasts without errors. Furthermore, hiring a consultant can save you time and allow you to focus on the day-to-day operations of your business.

However, hiring business plan writers is expensive as you are paying for the software used by the consultant, plus their time, and their profit margin of course.

From experience, you need to budget at least £1.5k ($2.0k) excluding tax for a complete business plan, more if you need to make changes after the initial version (which happens frequently after the initial meetings with lenders or investors).

You also need to be careful when seeking investment. Investors want their money to be used to grow the business, not spent on consulting fees. Therefore, the amount you spend on business plan writing services (and other consulting services such as legal services) needs to be negligible relative to the amount raised.

The other drawback is that you usually don't own the business plan itself: you just get the output, while the actual document is saved in the consultant's business plan software - which makes it difficult to maintain the document up to date without hiring the consultant on a retainer.

For these reasons, outsourcing the arcade game room business plan to a business plan writer should be considered carefully, weighing both the advantages and disadvantages of hiring outside help.

Ultimately, it may be the right decision for some businesses, while others may find it beneficial to write their business plan using online software.

Why not create your arcade game room's business plan using Word or Excel?

Using Microsoft Excel and Word (or their Google, Apple, or open-source equivalents) to write an arcade game room business plan is a terrible idea.

Why?

For starters, creating an accurate and error-free financial forecast on Excel (or any spreadsheet) is very technical and requires both a strong grasp of accounting principles and solid skills in financial modelling.

As a result, it is unlikely anyone will trust your numbers unless - like us at The Business Plan Shop - you hold a degree in finance and accounting and have significant financial modelling experience in your past.

The second reason is that it is inefficient. Building forecasts on spreadsheets was the only option in the 1990s and early 2000s, nowadays technology has advanced and software can do it much faster and much more accurately.

And with the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.

Also, using software makes it easy to compare actuals vs. forecasts and maintain our forecasts up to date to maintain visibility on future cash flows - as we discussed earlier in this guide - whereas this is a pain to do with a spreadsheet.

That's for the forecast, but what about the written part of my arcade game room business plan?

This part is less error-prone, but here also software brings tremendous gains in productivity:

• Word processors don't include instructions and examples for each part of your business plan
• Word processors don't update your numbers automatically when they change in your forecast
• Word processors don't handle the formatting for you
• ...

Overall, while Word or Excel may be viable options for creating an arcade game room business plan for some entrepreneurs, it is by far not the best or most efficient solution.

Takeaways

1. Having an up-to-date business plan is key to maintaining visibility on your future cash flows.
2. A business plan has 2 parts: a financial forecast highlighting the expected growth, profitability and cash generation of the business; and a written part which provides the context needed to interpret and assess the quality of the forecast.
3. Using business plan software is the modern way of writing and maintaining business plans.

We hope that this guide helped you to better understand how to write the business plan for an arcade game room. If you still have questions, do not hesitate to contact us.

Also on The Business Plan Shop

• How to write a 5 years business plan
• How to conclude a business plan?
• Tips to write an effective business plan
• Why do you need a business plan?
• Business plan myths

Know someone who owns or wants to start an arcade game room? Share this article with them!