Free
Arcade Business Plan
Obtaining Business Financing
When obtaining a business loan
for an arcade business, it is imperative that you have a properly structured
business plan that will assist you in showcasing how you intend to operate your
Arcade, how the business will operate, how you intend to market the business,
the anticipated financial results of your company, and how you intend to repay
your debt obligations. This sample loan business plan will provide you with the
framework that you need in order to acquire a business loan for starting or
expanding this type of business.
Executive Summary
Introduction
When obtaining a business loan
for an arcade, it is imperative that your business plan has a clear and concise
executive summary that provides an outline of what are seeking to accomplish,
how much capital you are seeking to raise, the management biography of the
business owner, and an overview of the anticipated profit and loss statements of
the business. Here is an example of how the title paragraph should be written:
Arcade, Inc. (“the Company”) is
seeking a business loan of $100,000 in order to launch the operations of an
Arcade business that will be based in
San Francisco,
California. The Company was founded in (Insert Year).
The business was founded by Mr. John Doe.
Products and Services
In the next segment of the
business loan and business planning document, you should showcase the products
and services that you will be providing to the general public. For instance:
Business Loan Terms
Now it is time to discuss the
anticipated terms of the business plan that you are seeking. An example
paragraph of how this is stated:
At this time, Mr. Doe is
seeking a conventional business loan in the amount of $100,000. The interest
rate, loan terms, and loan covenants are to be determined during negotiation.
However, this business plan assumes that the business will receive a seven year
business loan with a seven percent interest rate due on the outstanding
principal balance.
Management Biography
Now that the summary of the
business has been provided, it is time to provide a brief overview of the owner
of the business. An example paragraph summing up the owner is as follows:
Mr. Doe is a highly experienced
business person that has years of experience regarding the direct ownership and
management of business. He will be able to effectively bring the operations of
the
Arcade to profitability while
ensuring that the business loan’s payments and its covenants are met at all
times.
Financial Statements
The most important thing to
your lender when applying for a business loan is how you intend to repay the
bank. In this section of the business plan, you should provide an overview of
the finance’s of the business discussing the anticipated revenues, expenses, and
profits/losses. You can also discuss the applicable collateral within the
business plan that will be used to secure your business financing.
Expansion Plans
One of the most important
aspects of your business plan is how you intend to expand the business over a
three to five year period. Banks and finance companies always want to see that
the business will experience a moderate to strong level of growth. This is
especially true in business lending because as your business grows the cash flow
that secures your business loan will decrease proportionality against your
monthly credit obligations. An example of how this is stated is as follows:
The
Arcade will continue to expand through organic means including
increasing the Company’s advertising budget via the reinvestment into the after
tax cash flows of the business. Additionally, if the business is highly
successful then the Company may seek to establish additional
Arcade locations after the third year of operations.
The Financing
Use of Business Loan Proceeds
In this section of the business
plan you should focus on how the proceeds of the business loan will be used. An
example of this would be as follows:
-
Arcade Establishment - $50,000
- Video Game
Inventory - $10,000
- Working
capital - $40,000
Management Equity
In this section of the business
plan you should discuss the percentage ownership of the business among the
owners of the business. For example:
Mr. Doe will own 100% of the
Arcade.
Board of Directors
When applying for business
financing, the bank will also want to know who serves as the board of directors.
For small businesses, usually the owner serves as the director of the business.
An example of how this is worded:
Mr. Doe will be the sole
director of Arcade, Inc.
Exit Strategy
Any bank or financing company
is also going to want to know what you intend to do with the business over a set
period of time. Many business owners will develop and expand a business with the
intent to sell the company to a third party at a later time. When drafting this
part of the business plan you should focus on what you intentions are in regards
to potentially selling the business. This is often worded as:
Mr. Doe would most likely sell
the
Arcade to a third party for a significant earnings multiple.
Arcades usually sell for approximately one to three times earnings
given the financial strength of the business. In this event, the business would
be sold by a business broker and the business loan sought in this plan would be
repaid according to the covenants of the business loan agreement.
Products and Services
When developing a business plan
that is appropriate for obtaining a business loan or other business credit
facility you need to clearly showcase the services or products that you will be
offering to the general public. An example of how this section is worded goes as
follows:
The primary revenue center for
the business will be the ongoing usage of arcade games among the Company’s
patrons. At any given time, Management anticipates that the business will have
thirty to forty arcade game stations available for patron use. Each play of an
arcade game will generate $.25 to $1.00 in revenue for the business. These
machines will only accept
Arcade branded tokens, which will be used in lieu of direct cash.
Tokens will be provided from specialized change machines that will dispense
these coins. This practice is common among modern day arcade facilities. The
games that management will rent or buy from arcade machine wholesalers will be
popular in demand games that are well-known among the Company’s target market of
young children and adult arcade enthusiasts.
The Company will also have
several arcade games that provide customers with tickets for redemption at the
Arcade’s prize counter. These machines are often carnival style
games that provide a certain number of tickets based on the score or outcome of
each play. The Company will provide items such as small toys, candy, and other
items enjoyed by children which can be obtained by redeeming tickets. This
aspect of the business is specifically geared towards the children’s section of
the arcade.
Industry and Market Analysis
The
Current
State of the Economy
It is important to let your
financial institution know that you are well apprised of the financial situation
of the general economy when you are applying for a business loan. This is
especially true in today’s environment where lending has become more difficult
and will remain more difficult in the foreseeable future. Specifically, you
should gear this section of the business plan analysis towards the industry that
you are operating within. For example:
The current economy has
remained difficult over the past few years. However, Arcades tend to fair well
during difficult economic climates as the pricing points for the services
offered through the
Arcade are low in comparison to other forms of entertainment. As
such, the business will be able to remain profitable and cash flow positive at
all times.
The Arcade Industry
In addition to providing your
business loan officer with an understanding of the general economy, it is
important that you showcase that you have an equal understanding of the industry
in which you are operating within. As such, you will need to provide you
business loan institution of a brief overview of your industry and any potential
changes that may affect the way that your company does business. An example of
how an industry overview is as follows:
The arcade industry generates
approximately $1.5 billion dollars a year among 2,700 companies that operate
retail arcades. These revenue numbers does not include amusement parks, casinos,
or resorts that provide arcade machines as a value added benefit to patrons. The
industry employs more than 30,000 people and provides aggregate annual payrolls
of $350 million dollars.
As stated earlier, the arcade
industry is mature. The expected continued growth of these businesses is
expected to mirror the general population growth plus the rate of inflation
Target Market
In this section of the business
loan application and business plan analysis, you should focus on the
demographics of your localized market (or national market if applicable). This
section should discuss how many people live in your area, the anticipated number
of people that would require the use of Arcades, the median household income of
people living in the area, poverty line statistics, and any applicable laws that
would apply to your operation of Arcades.
Competition
Many people that are developing
new businesses or expanding existing businesses often feel that their business
does not have any competition or limited competition at best. However, this is
almost never the case. Unless you have re-invented the wheel – you will have
competition. When applying for a business loan, you should clearly showcase your
competition in your business plan. This is especially important to your banker
as they will be able to gauge your ability to be successful in your targeted
market. Many business loan underwriters will aggressively confirm that
competitive nature of your local market and your local industry.
When drafting this section of
the plan you should heavily discuss the competitive advantages that you intend
to have over your competition.
Marketing Plan
In addition to all of the above
information that we have covered, your business loan officer is also going to
want to know how you intend to market your business to the general public. Most
people do not quite understand how to effectively market their business outside
of prominent signage or flyer distribution. When applying for a business loan
(again in this difficult lending climate), your banker is going to want to see
that you have a clear methodology of how you intend to market your services or
products to the general public. In this section of the business plan – we will
overview how to showcase your services/products to the general public.
Marketing Overview Example
- Develop an
online presence by developing a website and placing the Company’s name and
contact information with online directories.
- Implement a
local campaign with the Company’s targeted market via the use of flyers, local
newspaper advertisements, and word of mouth.
Marketing Strategies Overview
Additionally, you will be
required to further drill down (in your business plan) how you intend to
implement your strategies when you launch or expand your business’s operations.
In this section of the business loan and business plan documents, you should
amplify the bullet points from the section above. For instance:
Management intends on using a number of advertising and marketing
channels to promote traffic to the
Arcade. The Company primarily intends to use a broad based
advertising campaign that will raise the awareness of the retail location among
the targeted young child and adolescent demographic.
To that end, Management will place a number of advertisements in
locally based newspapers and advertisements from the onset of operations which
may include discount coupons or coupons for free arcade tokens. This will create
an immediate draw to the
Arcade’s location.
The Financial Plan
Beyond any other part of your
business loan application or business plan, the financials section of these
documents are what matters most when applying for a business loan or any other
type of credit facility. Ultimately, this section of the business plan showcases
not only what your anticipated profitability will be, but also how you intend to
repay the funds that you have borrowed through your business financing facility.
An example of how this section is structure is as follows:
Assumptions
- Arcade, Inc.
will have an average annual growth rate of 10% per year.
- Mr. Doe will
acquire $100,000 through a business loan in order to launch the operations of
the business.
Proforma Financials for a
Business Loan
Now it is time to showcase how
you intend to repay your loan, generate a profit, and increase the book value of
your business over a three to five year period. BusinessPlansForLoan.com has
developed an easy to use financial model that you can use when drafting out the
financial model for your business plan and business loan application. Through
your business loan application, you will be required to have the following:
- Profit and
Loss Statement for your
Arcade
- Cash Flow
Analysis for the
Arcade
- Balance Sheet
for the
Arcade
- Business Loan
Amortization Tables
Please see images below