Will this business succeed?

techs

Lifer
Sep 26, 2000
28,559
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For those who don't want to read the whole thing the short version is that in my town of about 8,000 people this company is setting up 15 gaming computers on the "main drag" where rents are highest in the belief that the "gaming center" will generate revenues and that people will be drawn into the center and then buy computers there.
Anyone seen or heard of any company doing this? Any opinions on its success?


The full story:
A local computer dealer is set to complete a major expansion that aims to position it as an online gaming hub for the region.
Optima Computers has spent the last few months renovating a storefront and office space at 843 Putney Road, and will open its new location on Saturday, Nov. 19. The new location is much larger than Optima's current store on Clark Street. CEO Josh Garza said he has not decided what to do with the Clark Street location, but it will remain open for now.
"Some companies move, and all they leave is a cardboard sign," he said. "For us, it's all about face-to-face interaction."
The highest profile part of the renovation, done at a cost of about $400,000, is a gaming center called "The Gaming Zone." It features 15 Internet-wired computers, all customized for gaming, and four flat screen televisions with a choice of video game consoles.
Optima's new location will feature an expanded retail space, which is also a wireless Internet hot spot, along with office and research areas. Every item in the gaming center will be for sale, Garza said.
Even the vacuum cleaner, a robotic model which can memorize the layout of a room, is available for purchase.
Optima will hire seven new employees to support the expansion. Some of them will work in the gaming center and retail, but others will work in office spaces.
One of the main reasons for the added office space is that Optima is branching out in their consulting capacity. They have hired a new graphic designer, and will have more manpower to create Web sites for customers.
Chief operating officer Gregg Noble said the goal of that part of the project is to make high quality Web design available to small business owners without a lot of capital.
The beauty of the project, Garza said, is it allows Optima to offer "one stop shopping," for computer and information technology needs without losing its conection to the local community.
"It all fits together here because its under one roof," he said.
Garza gave the example of a parent coming in to bring a child to the gaming center, which he said provides a much-needed space for kids and young adults to hang out.
While at Optima, the parent might take some time to ask about home or office computer equipment, or inquire about Web design, Garza said.
He predicted that the improvements would allow his company to compete with any other computer retailer in the region.
"There's a whole different level of service here," he said. "People know that the guy selling them a computer knows what he's talking about."


 

PlatinumGold

Lifer
Aug 11, 2000
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0
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that's a big investment. most of it unnecessary if you ask me. i think pc stores need to focus on consulting and services. the problem is, would i as a small business owner trust my networking needs to a store that has that much gaming gear? some might, but i'm not sure many would.

the margins with hardware are pretty small as most of you know. you can't make money if you focus on hardware/software.

 
Mar 11, 2004
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$400,000 for 15 computers, 4 TVs and consoles? I know things are getting expensive, but thats crazy. I hope the building was most of that cost. I wonder if the new employees salaries is taken into account in that as well.
 

PlatinumGold

Lifer
Aug 11, 2000
23,168
0
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Originally posted by: darkswordsman17
$400,000 for 15 computers, 4 TVs and consoles? I know things are getting expensive, but thats crazy. I hope the building was most of that cost. I wonder if the new employees salaries is taken into account in that as well.

i think it was $400k for renovation of the complete store including the PC's.

interior decorators etc.

but ya, he paid too much. i've been looking into opening a PC Store myself and I'm estimating about $90k turnkey. so if i went next door to this guy and opened a PC store for $90k. it would be tough for him to compete on price.

 
Mar 11, 2004
23,444
5,852
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Originally posted by: PlatinumGold
Originally posted by: darkswordsman17
$400,000 for 15 computers, 4 TVs and consoles? I know things are getting expensive, but thats crazy. I hope the building was most of that cost. I wonder if the new employees salaries is taken into account in that as well.

i think it was $400k for renovation of the complete store including the PC's.

interior decorators etc.

but ya, he paid too much. i've been looking into opening a PC Store myself and I'm estimating about $90k turnkey. so if i went next door to this guy and opened a PC store for $90k. it would be tough for him to compete on price.

Yeah, I figured it was total cost. I agree that that still sounds way too high. I don't see how he could offer enough service to make up for the costs.
 

PlatinumGold

Lifer
Aug 11, 2000
23,168
0
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Originally posted by: darkswordsman17
Originally posted by: PlatinumGold
Originally posted by: darkswordsman17
$400,000 for 15 computers, 4 TVs and consoles? I know things are getting expensive, but thats crazy. I hope the building was most of that cost. I wonder if the new employees salaries is taken into account in that as well.

i think it was $400k for renovation of the complete store including the PC's.

interior decorators etc.

but ya, he paid too much. i've been looking into opening a PC Store myself and I'm estimating about $90k turnkey. so if i went next door to this guy and opened a PC store for $90k. it would be tough for him to compete on price.

Yeah, I figured it was total cost. I agree that that still sounds way too high. I don't see how he could offer enough service to make up for the costs.

you figure you can bill $120 / hour for outside consulting services. lets say he has 10 employees (says he hired 7 more but some have to stay in the store) available 40 hours per week for consultations. lets say he pays each employee $20.00 / hour.

so his fixed costs for his consulting portion (not counting store etc, i'll let the hardware sales take care of that) is $3200 / week or $12800 / month, just to pay his onsite employees.

so at $120 / hour, he has to get at least 100 hours of onsites / month just to break even.

in store hours, he's going to charge $80 to $90 / hour. (using the same employees). you figure 200 hours of inside repairs / month.

there is a margin there, but not much. after paying his employees their salary, after paying rent, taxes etc. he's not going to have much left over.

 

techs

Lifer
Sep 26, 2000
28,559
4
0
Originally posted by: PlatinumGold
Originally posted by: darkswordsman17
$400,000 for 15 computers, 4 TVs and consoles? I know things are getting expensive, but thats crazy. I hope the building was most of that cost. I wonder if the new employees salaries is taken into account in that as well.

i think it was $400k for renovation of the complete store including the PC's.

interior decorators etc.

but ya, he paid too much. i've been looking into opening a PC Store myself and I'm estimating about $90k turnkey. so if i went next door to this guy and opened a PC store for $90k. it would be tough for him to compete on price.


My first thought was that it was a typo. It seems 40,000 is more like what it would take to get started. Compared to your 90,000 it seems reasonable since:
1) it is being done in Vermont where everythings cheaper
2) the money is for the hardware and renovation only. since they already have an up and running other location they probably have all the other stuff they need. Plus they would need about 35,000 alone for the first years rent and salaries, insurance, etc if they were a new business to get them started.
 

dartworth

Lifer
Jul 29, 2001
15,200
10
81
Originally posted by: techs
the money is for the hardware and renovation only. since they already have an up and running other location they probably have all the other stuff they need. Plus they would need about 35,000 alone for the first years rent and salaries, insurance, etc if they were a new business to get them started.

do you know all this for fact...

$35K doesn't go very far...

that is only $3k/month and that could be used up by rent and utilities alone...
 

Fritzo

Lifer
Jan 3, 2001
41,920
2,161
126
About three companies a year open in our area that do this, and I don't think any of them say open more than 6 or 7 months.

Of course, they're usually ran buy skater looking kids that look like they'd be better off opening a tatoo shop. But no...not much chance of success.
 

DurocShark

Lifer
Apr 18, 2001
15,708
5
56
I've wondered about those... Even Wizards of the Coast couldn't make a go of theirs at the Block in Orange, CA.
 

0roo0roo

No Lifer
Sep 21, 2002
64,795
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gaming rooms not popular in the us. gamers esp pc gamers are mostly penny pinchers.
 

techs

Lifer
Sep 26, 2000
28,559
4
0
Originally posted by: Genx87
8000 people doesnt seem like enough to generate an income.

I actually just found out there is about 12,000 population. Not much difference but I am striving for accuracy. Also, Within a 20 mile radius there are 25,000 people. Though I don't know how many people will drive 40 miles on a semi regular basis to visit this type of place. Not many, I think.

Sigh. I had hoped that Optima computers would stay in business. My town really needs another computer repair shop. When I am the only shop I get swamped and have to turn away customers. I have seen about 12 shops come and go in the 7 years I have been in business. Every one thought they would make money selling new computers and every one went down the tubes. Most within a year.
Now with this business model I don't think they will be around a year from now.
 

Acanthus

Lifer
Aug 28, 2001
19,915
2
76
ostif.org
Ive always wondered why people dont run "dive" lan centers instead of these hyped up ultra modern ultra expensive businisses that seem to go belly up in a few months time.

Get a fiber line to a small warehouse, buy lots of tables and chairs, buy networking gear and a couple low end servers for games, run it BYOPC and serve alcohol, charge a flat fee for tournaments, make money on food/drinks/booze. Youre talking MAYBE a few thousand bucks to get an operation like that going.



Instead people go investing hundreds of thousands of dollars on inventory that depreciates faster than anything else known to man.
 

SKORPI0

Lifer
Jan 18, 2000
18,500
2,426
136
Originally posted by: techs
I have seen about 12 shops come and go in the 7 years I have been in business. Every one thought they would make money selling new computers and every one went down the tubes. Most within a year.
Now with this business model I don't think they will be around a year from now.
I've seen about 4 computer stores open and close within the last 5 years in my area. Here today gone tomorrow.

 
Mar 11, 2004
23,444
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Originally posted by: Acanthus
Ive always wondered why people dont run "dive" lan centers instead of these hyped up ultra modern ultra expensive businisses that seem to go belly up in a few months time.

Get a fiber line to a small warehouse, buy lots of tables and chairs, buy networking gear and a couple low end servers for games, run it BYOPC and serve alcohol, charge a flat fee for tournaments, make money on food/drinks/booze. Youre talking MAYBE a few thousand bucks to get an operation like that going.



Instead people go investing hundreds of thousands of dollars on inventory that depreciates faster than anything else known to man.

I don't think the point of this business is gaming. Thats just what they're using to pull kids and teenagers in with. Sounds like the bulk of their business might be repairs (usual virus/malware crap, replacement parts, help setting up stuff, and all that stuff that most of use do for free for family/friends) and other things.
 

Rapidskies

Golden Member
May 27, 2003
1,165
0
0
Man this looks like a horrible idea. The huge flaws being:

They are trying to bring in teens with games but sell business IT solutions. I think they are missing their core customer base unless "Bobby" routinely needs web portal services setup.

Poplulation base is way to low to support this type of business model. A 1/2 million dollar investment just so you can host "Pizza Pete's" website isn't going to pay the bills.

If they want to be taken as a serious IT shop then lose the games. I can see their ads now "Will include free xbox gamepad with any VPN multi site solution!".

At least people will get some good deals with the forth coming "going out of business" sale.
 

skyking

Lifer
Nov 21, 2001
22,796
5,967
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I've seen two gaming stores fail in my area in a couple of years. The hourly rate for gaming is not even close to sufficient to support an attendant, let alone space rent, etc.