How does an internet cafe make money?

gary the great

I was in a net cafe the other day and got thinking. There was 3 of us in there, on the computers for an hour and paying 2euro each. For that hour the cafe made 6euro and nobody bought any beverages.

How could they continue to take in so little cash when they have to pay for staff, computer maintenance, the internet connections, public liability insurance?

And there must be money to be made as they are popping up all over the place!

xha1r

You'll notice a fair few closing down too.

I don't understand why people would open up an internet café to be honest, but that's just me.

phantom_lord

I've always wondered about that.

I do remember being in the one a few weeks ago that was completely packed at least 50 people, even so the place isn't really making that much cash. how the smaller ones with only one or two people survive is beyond me.

fintan

Would they not make money from coffee, drinks, food, telephone calls, burning cds, scanning, computer lessons, pc repairs?

Also depends on location, somewhere with a high tourist count should have a good turn over

stepbar

I wonder too... makes me wonder the about the people who run these places. Smells dodgy..........

antoinolachtnai

Yup, the shop needs to be pretty big nowadays and everything has to be automated to make the economics work at all.

tHE vAGGABOND

Yea, look at the easy internets in the UK. Its all automated, prolly 1 or 2 people for 100's of PC's. If a PC breaks, **** it, leave it there and we will address it overnight when we are closed.

You just cant afford to have a couple of staff members for a small cafe of 10-20 PC's. TBH I think its a lousy business to be in, where [I would guess] a massive percentage of shops dont last 18 months to 2 years..

Random

Most places they're springing up these days is shops, which already have the staff/manpower in place. This encourages more people to do their morning shopping there, and uses up that bit of wasted space they have have.

Noticed blockbuster been doing it too ... no doubt a couple people are gonna rent some movies as a result. If not, they're giving chartbusters a little more money for very little on chartbusters part.

Sonnenblumen

gary the great wrote:

I was in a net cafe the other day and got thinking. There was 3 of us in there, on the computers for an hour and paying 2euro each. For that hour the cafe made 6euro and nobody bought any beverages.

How could they continue to take in so little cash when they have to pay for staff, computer maintenance, the internet connections, public liability insurance?

And there must be money to be made as they are popping up all over the place!

You might be confusing the woods and the trees.

dunkamania

Sonnenblumen wrote:

You might be confusing the woods and the trees.

Can you explain what you mean,please

the_syco

Worked for one in Dublin. 50 PC's, one staff member. PC broke, move person, restart machine (usually crashed due to heat). About €2 an hour, min charge of €1, I think. Most people were only on them for about 30 minutes. Usually a queue. On a Saturday, on a 9am to 6pm shift, I'd bring in a few hundred, maybe around the €500 mark, or more. Now, €500 * 4 (the weekend) would be €2000.

Staff were on minimum wage, so a weeks wwages, for everyone would work out at about €856 to €900. That leaves €1100. Proberly use that to pay the rent + bills. The rest of the week would be pretty busy, but not very busy, but still make at least €300 to €600 a day, I'd say.

So maybe, what, about 2 or 3 thousand a week? True, some would go toward the manager, and boss, but still leave a pretty penny left.

antoinolachtnai

The operator also has to pay 17 percent of his turnover as VAT, remember.

Sonnenblumen

dunkamania wrote:

Can you explain what you mean,please

These cos are not reliant on internet calls for rev, I'll say no more.

EKRIUQ

antoinolachtnai wrote:

The operator also has to pay 17 percent of his turnover as VAT, remember.

Its 21% in ireland 17.5% in the Uk unless there is some tax rate for internet cafe I did not know of

ThomasH

My mate looked into this as he believes that it is a very lucrative business.

He did a whole exercise on this and it was going to cost him €20 000 to start off for approximately 20 seats/PCs. Unfortunately, he did not proceed with this due to personal reasons.

He said the area where he would've made his money is on the stationary area - printing, copying, faxing, binding, refreshments, etc. He was going to work in it himself at the start so would've taken the minimum wage.

However, he did say the same as xha1r that a lot of them close down very quickly after opening because of miss-management and cash flow.

antoinolachtnai

BingoBongo wrote:

Its 21% in ireland 17.5% in the Uk unless there is some tax rate for internet cafe I did not know of

I am glad BingoBingo is not making my VAT returns for me.

The proportion of an Internet cafe's turnover which is VAT is (100 / 121) * 21 = 17.3553719.

antoinolachtnai

Sonnenblumen wrote:

These cos are not reliant on internet calls for rev, I'll say no more.

Are you trying to say that these are money-laundering outfits?

I can tell you with certainty that not all Internet cafes are money-laundering outfits, although it is certainly true that small ones are going to have a tough time making money.

antoinolachtnai

ThomasH wrote:

He did a whole exercise on this and it was going to cost him €20 000 to start off for approximately 20 seats/PCs. Unfortunately, he did not proceed with this due to personal reasons.

He said the area where he would've made his money is on the stationary area - printing, copying, faxing, binding, refreshments, etc. He was going to work in it himself at the start so would've taken the minimum wage.

It's hard to see how he would have gotten this to work, unless he had very good passing trade (which would mean a higher rent). As for printing, etc., it was a good business when kinko's got into it, but now anyone can buy a colour printer for 200 euros in Argos or get it free with their Dell computer.

However, he did say the same as xha1r that a lot of them close down very quickly after opening because of miss-management and cash flow.

How can management really help? No matter what you do, if you are employing 3 people (more if you stay open late or at weekends), making payments on computers and paying rent, there is just no way you can make money charging 1.65 euros an hour plus VAT for internet access on 20 computers plus the odd few bob for nicknacks.

How could cashflow be an issue? There are no debtor days and no bad debts. The bank will finance the computers. The VAT man gives you a free finance facility. The problem isn't cashflow, it's profitability.

ThomasH

It's hard to see how he would have gotten this to work, unless he had very good passing trade (which would mean a higher rent).

Really? Did you have your own internet cafe or did the same excersize? How come other internet cafes do so well?

As for printing, etc., it was a good business when kinko's got into it, but now anyone can buy a colour printer for 200 euros in Argos or get it free with their Dell computer.

Not everyone buys a new Dell computer or a printer for €200 just to do a few small jobs every once in a while. You forget that there is 1000's of foreigners coming into the country and they usually would like to print/copy CVs, documents, etc. for job interviews/bank accounts. They don't simple just go and buy a Dell PC or printer for €200 to do it.

How can management really help?

How can it not? Every successfull business needs good management, regardless if it is a internet cafe, etc. If you let all your friends and family use/play on the PCs for free and free drinks to everyone then in my opinion that is bad management.

No matter what you do, if you are employing 3 people (more if you stay open late or at weekends), making payments on computers and paying rent, there is just no way you can make money charging 1.65 euros an hour plus VAT for internet access on 20 computers plus the odd few bob for nicknacks.

How come there is internet cafes still running after 5/6 years in Dublin (that I've seen) How do you think they make money?

Why not show me a PNL to proof him (my mate) wrong?

How could cashflow be an issue? There are no debtor days and no bad debts. The bank will finance the computers. The VAT man gives you a free finance facility. The problem isn't cashflow, it's profitability.

Are you serious? Cashflow not an issue? Any successfull business needs good cashflow, otherwise how will you buy stock, pay rent, pay wages, expand your business. Not all new businesses are profitable at startup and therefore require good cashflow to carry them to the next month.

You have a point with the profitability but if you don't plan for the unexpected then there will be no profits.

antoinolachtnai

ThomasH wrote:

Really? Did you have your own internet cafe or did the same excersize? How come other internet cafes do so well?

I know the business, if that's what you're asking.

Which cafes do so well? Can you point me at a single Internet cafe which is really making a lot of money in Dublin (or anywhere else)?

This is a business whose heyday has well and truly passed.

The big ones do ok because there are benefits of scale. Some of them certainly don't pay tax, they just aren't legit businesses. Others are further along the legality continuum, as has been suggested before.

Not everyone buys a new Dell computer or a printer for €200 just to do a few small jobs every once in a while. You forget that there is 1000's of foreigners coming into the country and they usually would like to print/copy CVs, documents, etc. for job interviews/bank accounts. They don't simple just go and buy a Dell PC or printer for €200 to do it.

Yup, for sure. But how many of these foreigners are there who don't have access to a computer, really? And how much can you charge per page? How much can you really make? Ten euros per person, maybe 20? If they only get this done a few times, you won't make that much money. You can get all your copying done in reads for 3c/page. Not a lot of profit in that unless you have big scale.

There used to be money in the bureau business because small business people would use your services on a regular basis. No more, alas.

And to get the scale, you need the location. Good leaseholds are expensive in Dublin now. There just isn't the margin in Internet cafes.

How can it not? Every successfull business needs good management, regardless if it is a internet cafe, etc. If you let all your friends and family use/play on the PCs for free and free drinks to everyone then in my opinion that is bad management.

First of all, the drinks business and the computer business don't really mix.

Loading on an extra 50 grand for professional management will only make the whole thing even less viable.

No matter how well you manage it, if you only have 20 pc's and a crap location, you can never possibly take in more than 20 computers x EUR 1.60 x 100 hours = 3200 euros in the week, around 160,000 euros per year. And more realistically, you are going to make about half that. To cover the hours, you have to have six employees, and you have to pay rent.

How come there is internet cafes still running after 5/6 years in Dublin (that I've seen) How do you think they make money?

Scale. Noncompliance. Diversification.

Why not show me a PNL to proof him (my mate) wrong?

Why not show me a set of accounts to prove your mate right? I have a set of management accounts here somewhere for an Internet cafe, but I'm not really at liberty to flash them around. The long-and-short is that it was a great business when you could charge 6 euros a spin, but it's not such a great business now.

Are you serious? Cashflow not an issue? Any successfull business needs good cashflow, otherwise how will you buy stock, pay rent, pay wages, expand your business. Not all new businesses are profitable at startup and therefore require good cashflow to carry them to the next month.

First, there is no 'stock' in an Internet cafe.

The reason cash is an issue for many profitable growing small businesses is that a significant proportion of the profit ends up tied up in the stock. This is not the case with an Internet cafe. If there is profit, it will manifest itself as cash.

If there is a shortage of cash in an Internet cafe, it is generally because of an absence of profitability (or else incredibly bad financing or insufficient cash).

You have a point with the profitability but if you don't plan for the unexpected then there will be no profits.

You can plan and manage all you like. Even planning for the best of all possible worlds (20 computers fully occupied for 100 hours a week) it doesn't look too good. If the figures don't work, you can bring McKinsey in to plan it and half of Oxbridge in to manage it, but it still won't work. Believe me, I've seen it attempted.

If your friend is still convinced that this is such a great business, then he should put the word out that he is interested in buying a 20-seat Internet cafe and see how many people start calling him.

BigEejit

There are many places that do all sorts or computer related activities ... buying and selling stuff on ebay, fixing pc's, computer training, LAN gaming, refreshments ... its not all just "charge punters x for using d'internet" ... and i would guess that a lot of the smaller ones are owner operated and would not have as many employees

tom-thebox

the_syco wrote:

So maybe, what, about 2 or 3 thousand a week? True, some would go toward the manager, and boss, but still leave a pretty penny left.

So 3k a week, 12k a month, 144k a year, i know IT companys with 20 staff and 3k over heads on rent in a fancy biz park not making that sort of profit. They are badly run IT companys of coarse :P

thebusinessshop

From dealing with them, the most successful ones tend to be ones that enhance their service to include not just Internet access (which proves very popular to people wanting to email back home), but also offering printing facilities and facilitating online network gaming including having gaming events at weekends.

Sonnenblumen

thebusinessshop wrote:

From dealing with them, the most successful ones tend to be ones that enhance their service to include not just Internet access (which proves very popular to people wanting to email back home), but also offering printing facilities and facilitating online network gaming including having gaming events at weekends.

Nudge, nudge, wink wink, know what I mean, know what I mean, eh?
Saynomore, saynomore!!:D