What should I know about starting a small business?
December 21, 2003 8:44 PM   Subscribe

I want to start a small computer gaming place in Portland that also will house a "mini" brewery, where people can come in and play on computers while drinking beer. I have never owned a business before (although I had a self employed computer repair thing, wasnt registered) and I wanted to know what I should know right off the bat, before I walk into a bank and ask for a loan.

More information inside.

I am 20 years old, my family does not have money, and it is either this or school, although I could run it and go to school in the future.

I do not have credit. I have never had a credit card and have never owed on credit items. I think I have the ambition to make this dream a reality.

To further elaborate on exactly what i want to do:

25 to 50 computer systems fully networked and T1 Internet access.

Domestic alcohols served on premises, and this will lead to a self brewed alcohol that may or may not be brewed on premises.

I will look to employ 4 or more people, and be open all week, except holidays.

I want to make the brick and mortar side of things as professional as possible, and this may enquire a larger start up cost than a simple "jump in" plan.

Im sorry to be so vague, but anyones personal advice will be greatly appreciated. Also, could anyone recommend a good website or book that I could study to grasp everything that I should know?
posted by Keyser Soze to Work & Money (26 answers total) 1 user marked this as a favorite
Response by poster: *inquire. apologies to the word nazis.
posted by Keyser Soze at 8:54 PM on December 21, 2003

Small Business for Dummies

First and foremost, you need a business plan.
posted by mischief at 9:14 PM on December 21, 2003

I think it may be a very sound idea. There are brewpubs around, and I'm not sure they've got much interest for anyone who isn't currently brewing. This might round it out a touch. Best of luck!
posted by five fresh fish at 9:32 PM on December 21, 2003

I second mischief's comment. A business plan is absolutely fundamental to starting a business. And I don't meen a generic one, but rather a full on, detailed market plan, including all the annoying financial bits.

Business plans are hard. They're that way for a reason -- they help you see what's really going on.
posted by oissubke at 9:33 PM on December 21, 2003

After you develop the business plan, put some research into the SBA (Small Business Administration). If your business and plan qualifies and is accepted, they guarantee part of a loan that a bank makes to you. Typically, a bank won't provide funding for a business with no capital and/or experience in that field. The SBA takes part of the risk away from the bank and therefore, you're more likely to get funding that way than going straight into a financial institution.

Also, try getting funding through a local state-chartered bank, ("community bank"), as opposed to a federal bank (BofA, etc.). They're more likely to need credit for their CRA (Community Reinvestment Act) regulations and as such, may make riskier loans.

Good luck!
posted by cyniczny at 9:35 PM on December 21, 2003

I've never heard of a gaming place making much money, unless there was a dedicated clientele to help you pay the rent, so I don't know how much luck you'll have getting money from a bank (aside from the problem of being 20 and wanting to serve alcohol, which by the way takes months and months of effort to get a license to sell).

I say go to college and take economics and business classes, then start that business when you get out. You'll likely be able to avoid a lot of basic mistakes with the knowledge you gain at school.
posted by mathowie at 9:37 PM on December 21, 2003

Elaborating on something cyniczny said, Experience! Find a job as a bartender or network administrator or arcade attendant, something associated with the business you want to establish, maybe even work in a coffee house that offers wireless internet to customers.

Then, keep your ears open to potential investors. Also as in drezdne's case: Network! Network! Network!
posted by mischief at 9:43 PM on December 21, 2003

First step: Find someone to poke holes in your business idea. I'll volunteer. My email's in my profile for a limited time only if you choose to contact me. I'm a few months from a bachelor's in business from PSU and I've got a bit of experience with entrepreneurship.

For starters:

Look for competitors, Keyzer. I can tell you right off that your first competitor will be Backspace, which is in the Pearl district and is an Art Gallery / gaming center. They don't offer alcohol or much in the way of food, although they have plans to do so in the future. They *do* have a networked XBox with a projector screen, which is what makes them most of their income at the moment. It's about 60% that, and 25% espresso, (the offer stumptown), and 15% computer gaming & net access. The owner's kicking himself for only putting in one projector room and is furiously figuring out how he can turn some of his gallery space into projector rooms without it being too expensive or reducing his gallery footage. He's also not profitable at the moment, even with his mom doing his books and him sleeping in the place (shh, don't tell the development authority...) to save on rent.

Second, how will you keep people from spilling & damaging electronics? Beverages and computers are a bit like oil and water. Don't forget that some of your components are going to have to be good for people to have fun gaming. (MS FF2 joysticks, laser mice, good monitors...)

Third, no bank is going to offer you a loan unless you've got some collateral. You'd have to find a venture capitalist unless you own something of significant value.

Fourth, the Oregon Liquor Control Commission is one of the most restrictive organizations in the states. It can take a year to get a liquor license to even serve beer. One goof with a kid and a fake ID, and you get caught, and you're going to have to provide 'enforcement measures' ... i.e., bouncers. That gets expensive fast.
Don't forget that, by serving alcohol, you're a) not allowed to have the under-21 crowd (a significant % of gamers) even in the establishment.

In other words, go to college. ;)
posted by SpecialK at 10:01 PM on December 21, 2003

Note: Collateral should've read capital.
posted by SpecialK at 10:03 PM on December 21, 2003

Response by poster: Thank you all. I think I need to to some reading before going into this. The SBA advice is extremely appreciated.
posted by Keyser Soze at 10:11 PM on December 21, 2003

Oh, and one more thing that Tim Campbell, the guy who owns Good Dog Bad Dog, told me: Portland is the most over-restauranted major market in the US. Haven't checked this, but he said we have more restaurants per capita than any other city in the US. In other words, a business that expects to make money off of food is *probably* doomed to failure.
posted by SpecialK at 10:12 PM on December 21, 2003

Exactly what mathowie said.
posted by anathema at 12:03 AM on December 22, 2003

"a business that expects to make money off of food is *probably* doomed to failure" : This probably extends to other areas. A couple months ago, I read that only 25% of new restaurants in Atlanta survive their first year. Not turn a profit, just manage to keep their doors open, and Atlanta is considered a fairly decent area for new eateries.
posted by mischief at 12:07 AM on December 22, 2003

Funny, I've heard the whole "most restaurants per capita" claim for a number of cities. Turns out their are more than a few claims to the title. One of the cities that I heard this about, Portland, Maine, isn't even on the list.
posted by anathema at 12:09 AM on December 22, 2003

Response by poster: Does anyone think my credit may hold a factor to any of my business ideals? Such as: Startup money, and the ability to actively employ more than my girlfriend?
posted by Keyser Soze at 2:27 AM on December 22, 2003

The ability to sell yourself will be much more influential than your lack of credit.
posted by mischief at 4:59 AM on December 22, 2003

It's not a bad idea, but very expensive to implement i think...you'd always have to have very top-of-the-line equipment, and the space, and it would have to be cheap enough to draw people in or amazing enough to make it worth the cost...I suggest talking to the guy mentioned above, and to people who run something similar and successful (that Sony place in San Francisco?)...and of course, going to college while keeping this as a goal for when you graduate. It might be a better idea in 5-10 years, when more gamers are adults (with more disposable income, and old enough to drink).
posted by amberglow at 5:03 AM on December 22, 2003

You might also want to talk to people who failed at adult gaming/arcade things, and brewpubs, and find out where they went wrong.
posted by amberglow at 5:29 AM on December 22, 2003

One of the best resources I've come across is SCORE (http://www.score.org/), a "nonprofit association dedicated to providing entrepreneurs with free, confidential face-to-face and email business counseling." Most of the advice I've received there is golden. It's like AskMe for businesses.
posted by oissubke at 6:01 AM on December 22, 2003

Wait, weren't you the guy this close to joining the armed forces a couple of weeks ago? What happened to that? Is this your Plan B?
posted by briank at 6:13 AM on December 22, 2003

What you describe sounds a bit like Dave & Busters.
posted by mischief at 6:13 AM on December 22, 2003

I recently went through something similar (food + games, though mine was more card/board games). Here's what I found:

- Yes, you need a killer business plan. As people have pointed out, know exactly where you're making your money.

- Be prepared to front 15%-50% (figure on 35%) of the startup capital yourself. Any investor will expect this, particularly in the food industry where the failure rate is so high. Otherwise, you can walk away from the business if it fails without any loss.

- Get some deep experience, or better yet, hook up with someone who has the experience who's willing to sign on with you. Any investor will be looking for this. It's not enough to have a great idea- you need to demonstrate that you can carry through on it.

For now, I'd say if you're serious, get a job at a bar. Learn the industry. So much of the food + liquor industry runs outside the "rules" people set down, and you have to be an insider to really know how much things "cost". Good luck!
posted by mkultra at 6:44 AM on December 22, 2003

Your fixed costs are too high and you do not have an estimation for the demand.

Do not use expensive computers but cheap one, or, better, XBox and PS2. Do not buy them, rent them each month. You also need a fail safe plan: how to get out if it does not work.

How many customers will you get? Do a simple marketing study. Who knows, you might find out that people want something else.
posted by MzB at 6:49 AM on December 22, 2003

I think the best way to go about this is to start saving up a downpayment and start looking for a profitable coffeeshop to purchase. Shouldn't be difficult if coffee is as popular in your town as in mine.

You can then begin a year-long process of (a) getting to know the business and (b) making small changes towards achieving your final goal. Bring in board games, get the ball rolling on the liquor license, bring in entertainment, set up a computer, etcetera.

In the end, if you're firing on all cylinders, you should have a thriving coffee shop business that is everything you want sans brewery.

And it will serve as a source of capital and collateral for starting up the brewpub business.
posted by five fresh fish at 10:19 AM on December 22, 2003

Being 22, a gamer, a non-drinker, an Oregon (eugene) resident, and a small business owner, I can tell you that owning a business is hard. There are plenty of problems that I can see with this plan - and plenty of cool things about it as well. One of the main problems that I've found in the two business ventures that I've tried is actually getting people to fork over their cash.

Putting asside your problems with the OLCC, the venture capital, finding the location, getting liability insurance, registering a name, getting the right employees etc... pretend for a moment that you've actually got everything up and running.

Is this place a bar that happens to have computer gaming, or a computer gaming center that happens to serve microbrew? Will your patrions come primarily to play games, or primarily to drink? Is this a place that they will hang out at if they aren't playing, or is it very game focused. These decisions influence how you charge. In most gaming establishments, the participants pay per hour of time on the machines, and drinks cost extra. In most bars, you don't pay per hour on the stool or in the booth, but you pay more per drink. At some bars you may pay a cover charge of a couple bucks - but they justify that cost - live bands or live DJs etc.

It sounds like it could be a cool place to hang out if it were done correctly. Feel free to email me with questions, or put me on the list of people who review your business plan before you take it before anyone you hope to get $ from.
posted by woil at 12:32 PM on December 22, 2003

Speaking as a brewer: Oregon has a whole lot of breweries. Fewer then they used to, perhaps, but still plenty, including some excellent pub chains. Add to that, producing beer in your establishment requires you to have an additional (potentially very sizeable) outlay of capital, and if you're not producing for a package market, the brewing operation could be a money loser which you'd need to make up in restaurant sales. Plus you'll need a brewer, and while it shouldn't be too hard to find one in the NW, it's specialized knowledge that you're going to have to seek out. The days when a few homebrewers could open a commercial operation and watch the beer sell itself are long over. Which is not to say you shouldn't learn to make your own beer, once you're old enough to drink it.

My main point is, it sounds to me like the smart move in this case would be to have some beer brewed under contract. You can re-label it and sell it as your own and let somebody else deal with owning the brewery and all that hassle. You can probably even get them to brew your recipe for you, or just serve one of their beers with your own label on it (I know at least one Oregon craft brewer has an arrangement like this with some hotels in the area). But with the money you're already going to need for electronics, contract brewing is almost certainly the way to go. If you have other beer-related questions, you're welcome to drop me a line.
posted by nickmark at 1:57 PM on December 22, 2003

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