How to Start a Children’s Entertainment Center

Posted on March 23rd, 2012 in How To Start a Business by admin

How to Start a Children’s Entertainment Center

 

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Introduction

 

Children’s entertainment centers typically operate with a very high degree of economic stability as it is a low cost form of entertainment. As such, these businesses are able to generate a highly predictable stream of revenue that is very sought after by small business administration loan Banks has it pertains to the financing. When you are thinking about how to start a children’s entertainment center business, it is extremely important to first discuss the appropriate financing help needed to pass it pertains to starting a company. Foremost, you should think about how much money you intend to contribute in regards to activate while also thinking about how much money you’ll need as it pertains to an SBA loan in order to launch your children’s entertainment center business.

Additionally, when you are thinking of how to start an children’s entertainment center, you should think about what type of games you offer for your facility, how you intend to acquire a highly visible retailfacility, how you intend to host birthday parties and other events at your facility, and most importantly how you intend to market your company to the general public. Throughout this article, we’ll continue to focus significantly on how to tackle each one of these issues so that you weren’t able to effectively generate a profit from the onset of operations.

When you are thinking, again, of how to start a children’s entertainment center, you need to think about the breakdown of how much money will cost ultimately to launch a business. Most children’s entertainment centers thrive when they are able to secure a highly visible retail location so that they are able to generate large amount traffic among both child users as well as adult users as well. As such, when you are planning how to start your children’s entertainment center, you should seek out a number of different highly visible retail locations within your area so that you can have a significant amount of traffic coming to your location on an ongoing basis. Additionally, you should focus heavily on how you intend to effectively market your services to the general public.


 

Incorporation

You are going to need to incorporate your business. Again, only your attorney can determine the appropriate corporate structure that may be applicable to you as it relates to your children’s entertainment center business. In many instances, you will most likely register as a limited liability company, or LLC, in the state in which you intend to do business. If you own a business with a large number of people then it may be in your best interest to register the business as a limited liability company rather than a stock corporation as you will have a tremendous amount of flexibility as it relates to how the business is operated on a day to day basis. Additionally, your corporate entity will protect you from any liabilities that you may incur as a result of operating a children’s entertainment center.

 

Once you have incorporated your business, you will need to receive a Federal taxpayer ID number (commonly known as your “FEIN”) that will identity your business to the Internal Revenue Service. Typically, your accountant or your attorney will include this as part of the incorporation service. However, you can always call the IRS or go onto their website in order to immediately receive your taxpayer ID number. This should be done within days of incorporating your business so that you can begin to apply for the necessary business licenses that are required of you coupled with the fact that you are going to need to open a corporate bank account.

Business Financing

After you have determined the corporate structure of your business and have acquired the necessary licensure to launch you operations, it is time to find capital. Typically, most children’s entertainment center companies require a minimum investment of $100,000. In most instances, you may be able to obtain a loan for all of the tangible assets that you will own. Banks, lenders, and private investors love to place money with children’s entertainment centers due to the high gross margins generated by these businesses. This should be one of the foremost facts that you highlight as it relates to raising capital from a private investor in regards to starting a children’s entertainment center if this is applicable to you. On a side note, if you are raising capital from a private investor then it may be in your best interest to work with an attorney to determine which documents that you will need in regards to this matter. In many instances, especially if you are raising capital from a number of private individuals, then you will need to have a private placement memorandum.

Returning to our discussion in regards to raise capital from private sources, then you should be aware that you may need a Private Placement Memorandum (often referred to as a PPM) is a legal document that is often used in the venture capital raising process. It is the legal and binding agreement between a business and a potential investor. When looking for venture capital, you may or may not be required to have a private placement memorandum. A PPM not only serves the contact between an investor and a business, but it also apprises a potential funding source of risks related to the business, the intention of how investment funds will be used, the governance of the business, and other legal issues that need to be addressed when raising or looking for venture capital or other forms of equity capital.

Usually packaged with the private placement memorandum is the subscription agreement. In situations where capital is being raised privately, this document serves as the signatory portion of the investment agreement. In some situations, the subscription agreement may have certain questions that need to be answered by the funding source participating in your capital raising. This is to ensure that the individual or organization participating in the financing meets the required standards set forth by the SEC to make the investment. Again, only a qualified attorney can assist you making these determinations and guiding you through the capital raising process.

Children’s entertainment center angel investors are easy to come by due to the fact that there are very few risks associated with operating this type of business. The need and the demand for low cost kid friendly entertainment remains strong in any economic climate. As such, when you are finding an angel investor for your children’s entertainment center you should find minimal issues among individuals that want to provide capital for this type of business. As always, you should have appropriate legal counsel in place when you are finding angel investors. These advisers will be able to effectively assist you when it comes to remaining within the letter of the law regarding the sale of securities as well as helping you determine a fair valuation for your future children’s entertainment center.

A certified public accountant as well as an attorney can assist you substantially in determining the valuation of your business before it launches given the market in which you intend to launch your children’s entertainment center coupled with how much equity you will need to give up as a result of raising capital from a private investor. As such, you should thoroughly stress the economic stability of your business through any documentation that you have developed that will be presented to a potential private investor. You should also thoroughly discuss the highly tangible assets that will be held by your company as you progress through your business operations.

As such, you should thoroughly stress the economic stability of your children’s entertainment center through any documentation that you have developed that will be presented to a potential private investor. You should also thoroughly discuss the highly tangible assets that will be held by your company as you progress through your business operations. The economic viability of your children’s entertainment center business requires that you showcase a substantial amount of industry research that is focused specifically on this market.

As it pertains to the type of investors that can invest in your children’s entertainment center, an accredited investors are typically high net worth individuals that are seeking to make substantial capital investments into small and medium sized businesses within their respective markets. As such, you should always ensure that the individual or firms that you deal with fall under the definition as provided by the Securities and Exchange Commission. At this time, an accredited investor is an individual with an income of $200,000 per year or more (with the expectation that they will make a similar income in each of the next two years) or a married couple with an income of $300,000 per year with similar expectations. An exemption to the income rule is that these entities have a net worth of $1,000,000 or more. In the event that a business, bank, trust, or other business entity provides your business with capital then they need to have total assets exceeding $5,000,000.

Again, you should consult with your attorney in regards to the rules that regular the definition of an accredited investor coupled with ensuring that you comply with all blue sky (or state laws) that are related to the operations of raising capital specifically for children’s entertainment center. Since you will not be dealing in the sale or trading of securities, there may be a number of exceptions that you qualify for as it relates to working with an investor for your new company.

You should always provide any accredited investor funding source for complete resume of your abilities to operate your business on a day-to-day basis. This is especially true if you have had extensive experience operating a retail facility on regular basis. One of the most difficult things when raising capital from third parties is to provide to a potential investor that you are going to be able to effectively manage the complex accounting, general business management, sales, and marketing that will relate to your initial children’s entertainment center location.

These advisers will assist you as it relates to producing the necessary documentation, including a children’s entertainment center business plan (as included in this package) that will be required of you. One of the other things that you should clearly focus on is your ability to generate extremely high gross margins that are related to the demand for low cost kid focused entertainment services in any current economic climate. In fact, certain studies have shown that moderately priced kid’s entertainment centers services typically remain stable due to the fact that people want to have a place to take their children during difficult economic times. In any documentation that you provide to these investors you should heavily focus on the tremendous amount of tangible assets that are held by the business so that an investor can be secured in their investment. Of course, you should always provide your potential business investors with an in-depth view of your profit and loss statement, cash flow analysis, and balance sheet that is associated with your children’s entertainment center.

 

 
 

 

Employee Issues


Next, you’re going to want to focus significantly on the employee issues that you will have as it pertains to your business. Every children’s entertainment center operation needs to have a number of employees including a location manager, shift managers, general employees, and a bookkeeper. As such, you’re going to need to develop a highly focused employee manual, procedures and protocols, sexual-harassment policies, as well as many other things that come along with operating a business that has 7 to 10 employees or more. As such, you may want to hire a specialized lawyer that can put together an appropriate employee handbook so that a substantial amount of the liability that is associated with the business is substantially reduced. Of course, you can never fully remove any bit of liability from a business, however, by having all these things in place prior to launching your business operations you will be able to know exactly what to do should an employee issue a rise. Additionally, you can always work with an outsourced HR consultant that can advise you properly on how to not only develop the documentation discussed above, but how you can handle specific employee issues as they come about. From time to time you are going to need to fire an employee, they often employee, or have a specific issue as it pertains to someone stealing from you or related issues. As such, it is extremely important that you take a look at each of these matters on an ongoing basis and figure way that you’re going to deal with them as they come about.

Market Research

 

Next, you’re going to want to focus significantly on your target market. Here, you’re going to want understand the number of people in your target market, as well as the household income, median family income, population density, as well as the competition in your face as you progress through your children’s entertainment center business operations. As it relates to your target market, you want to make sure that you’re opening a new children’s entertainment center that will be in demand among consumers. For instance, in the household income in your area is somewhat low then you don’t want to open up a high end center that charges  approximately $30 per visit. You should structure of your pricing as such so that your services are affordable by a vast majority of the people that are located within your target market. Additionally, if you intend to operate your children’s entertainment center in any area that has a high net worth population for a high amount of tourist traffic, you may want to go to local Chamber of Commerce is about how to start a children’s entertainment center as it pertains to be demographics of people that frequent the area as travelers. It is extremely important, on a side note, to understand when the busy seasons are as it pertains your business. As time progresses, having an understanding of the ebb and flow of the number of people coming into your area will assist you with making inventory purchasing decisions and dealing with other matters as it pertains to potentially hiring additional staff so that you can handle the traffic coming to your children’s entertainment center.

In regards to children’s entertainment center marketing, you should focus substantially on providing discount flyers, enrolling your business in Yellow Pages, establishing an Internet-based website, and how you intend to effectively plan your business within your local market so that younger individuals can use your services on an ongoing basis. As it pertains to marketing, you may also want to discuss how you intend to offer prizes for individuals that are successful at the games they play at your children’s entertainment center retail location. If you are able to do this successfully, you’ll not only be able to generate a substantial profit for yourself, you’ll also be able to showcase to your SBA loan banker why this business is economically viable and why they should provide a loan to you. Again, when structuring your thoughts as it pertains to how to start an children’s entertainment center, it is imperative for you to continually focus on how you intend to finance a business via a SBA loan, equity financing, while other form of financing that is common among small businesses. Of course, we’ve provided a number of articles as it relates to children’s entertainment center financing and how you can properly develop a business plan that is structured specifically for a SBA loan.

In regards to additional marketing – as many people now conduct preliminary searches for specialized services, like children’s entertainment center, you are also going to want to focus heavily on developing a nice looking website that showcases your business’s fees, hours of operation, contact information, and your ability to provide children’s entertainment. The cost of having this website will run from $300 to $700 depending on the “bells and whistles” that you will want to have on your website. Most importantly, you want to make sure that your local address is displayed prominently throughout the website as you will list higher in search engine optimization results as it relates to your operations. You should heavily think about how you intend to market your services based on the demographics that are associated with your target market. Most importantly, you should focus on the target market population, the number of people that fall into the demographic analysis that you’ll create, and household income, median family income, and the market radius in which your business. Typically, the most children’s entertainment centers, you should be able to draw people from a 15 mile radius if you offer a number of children’s entertainment center games and birthday party services are in demand among the local population. As such, when you’re thinking about how to start an children’s entertainment center, is very important for you have a certain demographic analysis so that you’re able to show this to your SBA loan banker that also determining whether or not your children’s entertainment center it is an economically viable business.

Conclusion

If you do decide to open children’s entertainment center, and when you are structuring your concept of how to start a children’s entertainment center, is very important for you to have a very well-developedfinancial plan. Within this financial plan you should have a well-developed profit and loss statement,cash flow analysis, balance sheet, breakeven analysis, as well as the general assumptions that were used as you formulated you were children’s entertainment center business plan and called on how to start a children’s entertainment center.

Once you have become profitable and the demand for your services increase then you may want to begin to expand your business. Foremost, the expansion of your children’s entertainment center should be relatively easy once you are profitable and cash flow positive. As per our discussion above, banks and financial institutions like to lend to entertainment businesses that are profitable due to the highly recurring streams of revenue generated by these businesses. It is important that if you are seeking expansion capital for your business, you may want to focus on obtaining a working capital line of credit rather than a business loan so that you can have greater control of your expansion as time progresses. Additionally, due to the fact that children’s entertainment centers are able to generate high gross margins you may be able to effectively self finance the expansion of the business rather than taking on additional debt or raising equity from a private investor. As we have discussed throughout this document, the costs related to developing and expanding these businesses is relatively low and as such, you can aggressively expand your business usually with only one round of capital.

 

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