Below are internet cafe business plan tips for entrepreneurs who are considering putting up an internet cafe. As the project manager of the internet cafe association I belonged to in the past, I have interacted with co-icafe owners and gained a wider insight in this business. These are hard learned lessons that are actually the result of my personal experience and observations of the common mistakes and best practices in the industry. This is not a comprehensive list, but I hope you find them useful in creating your own internet cafe business plan.
- Before investing, you need to have a good financial forecast of your business. CLICK HERE for a FREE DOWNLOAD of our Internet Cafe Financial Calculator. Below is the video tutorial. Remember, your business assumptions like average computer uptime should be based on market and competitor analysis and not just from wishful thinking.
- I don’t usually advise getting loan from banks, but if you really want to you should ensure that your monthly amortization is equal or less than your current monthly “personal” savings. Do not rely on your life savings! If you have enough monthly savings coming in, no matter how bad your business is doing on the first month (because of incorrect financial assumptions)… you still have a safety net from legal obligations from banks.
- Do not ask a loan from relatives or friends, unless you really really have to. Some people prefer/advise asking a loan from relatives/friends because of smaller interest fee or none at all. But the repercussion is damaged relationship if you are unable to pay. Again, make sure that you have enough monthly “personal” savings to cover the monthly amortization. Don’t just rely on your earnings from the business, which is up to this point is still hypothetical.
- Join sponsored business programs that grant funds to small business entrepreneurs. Example is http://www.bidnetwork.org/ wherein I participated this year as one of the evaluators of business plans submitted in the Philippines. They provide fundings to businesses all over the world, check http://www.bidnetwork.org/en/countries for the list of countries. If your business idea and plan passes set criteria and meets the cut-off then you will be granted a certain amount of your needed funding by investors participating in the competition. In order to win the competition your internet cafe or cybercafe business plan should not just be a “typical” internet cafe.
- Use only 80% of your savings (at most) if you are 30 years old and below
- Use only 50% of your savings (at most) if you are 31 to 40 years old
- Use only 30% of your savings (at most) if you are 41 to 50 years old and below
- It is not enough that you write an internet cafe business plan. You should get excited in doing this! The thought of putting up an internet café should bring you joy. And with this feeling, you shouldn’t be able to stop thinking about it and talking about it with your family. This will make things easier and fun. How can you be excited? You should first know what is your main goal? Is it just to earn profit? Is information technology your passion? Do you love interacting with young people? Whatever your reason is, it should excite you in order for you to succeed. Find your burning reason!
- Be pessimistic in your financial forecast. While having the feeling of excitement, you shouldn’t loose your “business sense”. A good level of pessimism is good. If you have downloaded our internet café financial calculator, you should base your decision on the pessimistic output value it provides. Only use “just right” value if you have only one competitor and “optimistic” if you have total monopoly in your area.
- Make a realistic assumption of your average computer uptime. Don’t just assume that your business and all of your computers will run 8 hours a day without idle time within the day, week, month, year. Consider factors affecting it such as school vacations, holidays, ISP problems, Acts of Nature, city ordinance etc.
- Create a brand. You should have a unique value proposition that you will offer to your customers. Your unique value proposition should distinguish you from the rest of your competitors. Example “The All Girls iCafe” (for girls only). “The Quite iCafe” (no noisy customers). “The CounterStrike iCafe” (regular C.S. competition are held or it is the hangout of hardcore gamers of C.S.). This is what your icafe will be known for in the community. Your UVP should be strong and you should protect it from imitators.
- Your target customers should be 18 years old and above (not minors). City ordinance that regulates the internet café business are being passed to protect minors. You should target instead college students and working people. Meaning your business plan, marketing, pricing, services etc. should be made with them in mind.
- One of the major factor that you should consider in your internet cafe business plan is LOCATION. I can’t stress this enough. LOCATION LOCATION LOCATION!
- Ask help from friends when looking for a location for your new business. Ask recommendations from friends on social sites like Facebook and Twitter. Just tell them what you are looking for in a location (e.g. the location should have no nearby internet café, flood free, near college, near McDonald etc.)
- Locate colleges and universities through Wikipedia or google map. Then check which college has no nearby internet café, you can use google map or other tools like an internet café locator.
- Search a location with no competitors but with good market
- Avoid cities with ordinances preventing students to enter and use the services of internet café “regardless” if they will play games or not. Check the list of cities and their corresponding ordinances.
- Select cities with price regulation (minimum flat rate) imposed by local government, this will protect you from possible price war in the future.
- If your house is near your target customers then good for you. You don’t have to worry rent thereby significantly reducing your potential monthly expense. Just check zoning and if you will be able to get necessary business permits. Some local government are not that strict, especially in the Philippines if there is a sari-sari store (very small convenience store) near your residence chances are zoning is not an issue.
- Avoid locations that are only being flocked by your target customers on certain days, but leaving you dry on other days. Example, if you are located near a high school and are far from residential and commercial establishments. Naturally, you are full during class days (i.e. Monday to Friday) and your internet cafe will feel like it was deserted during weekends, holidays and long long school breaks!
- Build your own computer rather than buying computer packages. Try first building one, check our guide in building one. You’ll never know how easy it is. Not only can you save considerable amount of money but you can avail of extended warranties of computer parts from the manufacturers.
- Check http://www.doingbusiness.org/reports/subnational-reports and download the latest guide on business registration for your country. Depending on your country and city, the number of days and processes it requires to complete all necessary business permits greatly varies from country to country. In the Philippines it is an average of 30 days (without red tape of course)
- Register a cool name with only two or three syllables. It should be memorable. Like a song it should have “recall”.
- I recommend registering your business as a sole proprietor. If you are in the Philippines this is done only up to the Department of Trade and Industry (D.T.I.), you don’t need to register at the Security and Exchange Commission (S.E.C.). Avoid registering it as a corporation because of all the necessary requirements during application, operation and closure.
- Don’t forget to apply social security for your employees. Check www.sss.gov.ph for Philippines for example. If you the owner are the only one working in your business and you are not paying anyone a salary, then you don’t need to pay for an employee’s social security because you have none! Why am I saying the obvious? Because if you for example have a relative that is just helping you out in the business (maybe your cousin who likes free use of the internet) and don’t receive a salary, then you don’t need to pay for his social security because he is not an employee. But of course even if you don’t have any employee, you need to pay for your own social security contribution! Especially if you just recently became self employed from being an employee, you don’t want your monthly contribution to stop. Or else, you won’t be able to avail of your benefits when the time comes.
- When registering a fire permit, you don’t need to buy a fire extinguisher from your local fire department! In the Philippines, they usually over price them. Don’t get bullied by their tactics. Good thing my Aunt is a friend of their chief and stopped bugging me on buying their overpriced fire extinguishers. You only need to know the size and number of fire extinguishers required for your internet café size then buy from a local store or buy online! Just ensure that what you are buying are of quality. Then apply for a fire permit.
- Don’t forget to pay yourself if you are working as the manager or technician etc. for your internet café. You should have a salary. This is different from profit sharing as an owner.
- Learn how to optimize your business. Example, increase internet speed by simply tweaking your computer system or by using certain softwares. Learn what are the best free softwares like antivirus etc. By knowing these computer tips and tricks you will be able to save money instead of buying additional hardware/software/services. I recommend that you check Computer Secrets UNLEASHED. An internet cafe needs fast and reliable computers but even if you bought such computers, if you do not know how to maintain them, eventually they will sloooooooooooooow down especially if you are operating 12 hours a day! And worst case, they will not last long if you don’t know how to take care of them!
- Your goal should be that you spend less time in doing employee tasks (e.g. repair, maintenance, book-keeping etc.) and focus more on managing (e.g. planning marketing strategy, analyzing your daily sales and making adjustments, identifying risks and creating contingencies and mitigations). I’m not saying that you don’t do the “hands-on” stuff, but you need to prioritize your tasks. If you can outsource book keeping the better.
- Don’t use business cash on personal expense. Wait until it’s time for you to take your salary (if you are “working” as a manager) or your share (as an owner) at the end of each month.
- Monthly depreciation expense should not be treated as part of your net monthly income. It should be put back to your personal savings if your startup capital came from it or pay your loan if you took a loan for your startup capital.
- Keep a close eye on your monthly ACU (average computer uptime). If it is below your assumed ACU when you are doing your financial forecast then you have to improve your marketing and services.
- Organize a game tournament on idle/slow/off-peak days or hours.
- Organize an educational competition related to the use of information technology. Example: Article composition through web on a particular topic given by school representatives. Topic maybe relevant to the local community. Participants will research through the world wide web while observing copyrights law. Solicit sponsors especially from politicians. Ask school representatives (target principals, school heads, parent teacher association president and the like) to participate in the competition as judges. Repay them with free internet hours on off-peak days/hours or just simply thank them through your website or FB fan page. This will not only boost your popularity and sales but also improve the image of the internet café business in your area. Hopefully deterring strict ordinances that will negatively impact the business.
- Give student discounts on “group research/study” during off-peak hours. Better yet, create coupons for this and provide them to school teachers/heads/principals for them to “award” their selected students (probably those who are financially challenged but are academically good).
- Create a Facebook fan page, encourage your customers to “like” it by conducting regular contests. Example: Submit most wacky group pictures (for students). Prize would be simple gift items like custom t-shirts with cool prints with your internet café name on it.
- Provide a membership promo (not lower rates but add-ons like free snack on the 10th hour), a membership referral promo (example: free two hours during off-peak hours/days for every 2 referrals who will avail 1 hour internet access each)
- Have a big LCD TV screen on your front display pane, showing videos of your latest games, services, customer group pictures etc. This will attract passersby!
- [important]13. Learn how to make MORE MONEY with your internet cafe. There are several add-on businesses that you can put together with your internet cafe. But I will share with you The Best Way To Make Extra Money That Most Internet Cafe Owners Don’t Know About (click this link). Note: even if you don’t have an internet cafe, you can still do this if you have a computer and an internet connection.[/important]
- Deter internet café with no business permits (colloquial term: colorums) from operating. Send a formal complaint to your local government. Submit a petition with all registered internet café owners signing in that petition.
- Send scout to these colorums and check if they have license softwares. If they don’t have, report them to BSA as a group.
- As a group, give something in return to the community. Example, conduct a monthly free computer training to schools on their computer subjects. Sponsor a public high school for their internet connection etc. Work with public officials on every project your association has. This will establish good relationships with school and public officials, thereby making business negotiations or demands easy (example, asking to regulate the number of internet cafe in an area or lessening regulations that negatively impact the business etc.)