The VR Zone

10 things to think about BEFORE you start a VR Arcade.

Every month we get hundreds of prospective operators contacting us with questions about starting a VR Arcade. A few months ago I wrote an open letter to the VR Arcade industry sharing my thoughts about this emerging sector. Two thirds of VR Arcades are at break even or better… but many are struggling. The following are lessons I’ve learned talking to VR Arcades around the world the last two years.

1. Know your numbers. Build a spreadsheet. (Or better yet, hire an industry consultant to do it for you.) Find a business-minded friend you trust and ask them to poke holes in your numbers. Very few VR Arcades are making bank right out of the gate. There is no free lunch. Retail business is tough.
2. Calculate a realistic utilization number. (Number of customers / number of hours you are open). Expect to be REALLY slow on weekdays.
3. How many headsets? Pack em’ in as much as you can. Weekends are your bread and butter. You need enough headsets to capture the weekend volume. Expect headsets and controllers to break. Buy extras.*
4. Rent can make or break you. You need enough space to handle volume on the weekends, even though you’ll be slow during the week and still paying for that same space. Rent is almost always negotiable. Most profitable arcades are NOT in malls.*
5. Labor. Employees are expensive. You also need them unless you want to be a solo-prenenuer forever.* Starting as an owner-operator is important so you can the learn the business and keep expenses low. But don’t fall into the trap of never hiring OR paying your employees too little. Otherwise your business will own you instead of the other way around.
6. Repeat business. It’s business 101 that it’s always easier to get someone to buy again compared to the first time. Building a loyal core of repeat customers should be something you’re always thinking about. Appropriate (lower) pricing, building a relationship with customers, changing up content and tournaments all play into what it takes to do this.
7. Watch your expenses like a hawk. As sure as gravity, expenses tend to slip. Little things add up quickly over time. Be ruthless early on.
8. Expect to spend $ on your store build out. You may think you can rent an empty space, throw in a couple stations and start printing money. That may work for a few months. To build a real business, you need to build a real space. And that means not just throwing up curtain dividers and sticking a sign on the door. Profitable VR Arcades find ways to build a beautiful space on a budget.
9. Figure out what it cost you dollar wise to acquire a new customer. Spend money on marketing. But don’t waste your money on TV, print or radio. #1 Marketing tactic for VR Arcades is a manned demo station. Demos sell VR better than any advertisement. A mobile demo station is even better. Get out to local colleges, schools, malls and events and put people in VR.*
10. Start with enough cash to ride out the mid-cycle business slump. Likely you’ll start with a bang and then see a slow period. The gap between when the novelty wears off and you hit your stride can kill you if you don’t plan ahead. It takes time to build a sustainable business and you need to prepare for the trench that lies between your big launch and winning.

*If you are interested in more specific recommendations and stats on what profitable VR Arcades are doing, checkout this whitepaper we recently published over at SpringboardVR in collaboration with HP.
*Or checkout this VR Arcade Open Business Plan.