Profitability and financial plan of terrestrial Internet cafe

One of the modern and popular business ideas in our time is the opening of a terrestrial Internet cafe. And for such project to be successful and profitable, a businessman must first evaluate its effectiveness and make a reliable business plan.

You need not only to consider the target and age category of clients, geographical competition, a list of services or pricing policy, but also to calculate the profitability of the Internet cafe.

Profitability is a relative indicator, comparable to the efficiency: how many cents of profit arrived from each monetary unit invested in the business? Accordingly, the indicator depends on the profit and revenue in different variations for each type of business. Below are the main financial aspects that should be taken into account in calculating costs and profits for the owner of the Internet cafe.

Capital investments:

  1. Buying a property
  2. Signboard, decoration of the hall, repair facilities
  3. The connection to the provider
  4. Furniture
  5. Equipment and machinery
  6. Staff training

In the assets structure, investments in fixed assets occupy a significant part and can take about 60%. Finding a good location with the maximum number of target customers may force you to change more than one place, so it’s better to start from a hall rent with a subsequent right to buy it out and invest accordingly in reliable start. If you start a business with the purchase of a new premises, in which you are already confident, it will be the most significant item of capital expenditure.

Recurrent costs

  1. A) Operating expenses
  2. Rental of premises
  3. Salary and personnel costs
  4. Utility costs
  5. Operation: maintenance, cleaning of premises and territories
  6. Protection of premises
  7. Property insurance
  8. Advertising, marketing, management
  9. Property tax

Depending on the project, the share of this type of costs can be 20-40% of gross income, and in the period of repair, takes up to 50%.

In particular, it is reasonable to spend up to 2% of gross income on protection, and 8-15% for utilities and maintenance costs. If your premises are not autonomous but located in a shopping center, this percentage can be even halved.

The share of advertising costs reaches 10% only in case of very active promotion in a given period of time.

  1. B) Regular payments for the period
  2. Maintenance of information systems purchased for business
  3. Depreciation
  4. Utilities
  5. Advertising
  6. Communication services, Internet provider services
  7. Repair and maintenance of machinery
  8. Bar products or other consumables

The most prominent articles in this section should reasonably be salaries of skilled personnel and depreciation, as a regular reimbursement of capital expenses.

Profit = Income – Costs

After subtracting all costs from the total income, we can calculate the profit of an Internet cafe. If you choose a cash method of work, the income in this case will consist of:

  1. Direct revenue, as payment for services provided to visitors.
  2. Collected penalties from competitors, if any.

The cost should necessary take into account interest payments to financial institutions, in case you have issued a loan for your company.

It is very important to predict and timely correct the maximum possible theoretical and practical revenue from the hall for a day and a month, monitor the optimal number of computers and gaming terminals and their average load.

According to the experts, it is possible to recoup the major expenses for organizing a gambling establishment in one to two years, if you prepare a reliable financial plan of Internet cafe, invest sufficient efforts and ensure at least 50% of the expected number of visitors.

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