Start an arcade cabinet business by following these 10 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your arcade cabinet business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
Check out our How to Start a Business page.
STEP 1: Plan your business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening an arcade cabinet business?
While it is not necessary to invest in a storefront location, you will need enough space to work on several projects at one time. If you do not have enough square footage to create a home workspace, scouting out the right location will be your first order of business. Once a deposit has been put down, you will need to purchase all the materials needed to build the cabinets you plan to offer. Upon completion, photographs of completed works should be taken. These will be used for marketing materials and your website build. While your site doesn’t have to cost tens of thousands of dollars, it is important that it is informative and that customers are able to “build” their custom cabinet with ease.
Additionally, it is recommended that you meet with a licensed professional to identify your business insurance needs. Be sure to inform your agent that products will be shipped to customers, as many business policies exclude coverage for products once they have the establishment.
What are the ongoing expenses for an arcade cabinet business?
Ongoing business expenses include rent and utilities, materials, website maintenance, insurance, payroll expenses, and marketing. Businesses shipping nationally and internationally should carefully research shipping expenses and adjust prices accordingly.
The gaming industry is ever-evolving, making it important for business owners to remain abreast of new and emerging trends. Owners are encouraged to commit to continuous research and education, attending conferences, and networking events whenever possible.
Who is the target market?
For many years, arcade cabinet business owners had a small pool of people to cater to, serving older, wealthier consumers willing to pay top-dollar for the nostalgic factor. The rebirth of the arcade, however, has changed all that. Arcades are now popping up all over the country. Most now offer something for everyone, including a variety of gaming, food, and beverage options. This expanded target audience allows new business owners to choose a target market that best fits the goods and services they offer.
How does an arcade cabinet business make money?
Arcade cabinet businesses generate revenue through the sale of each cabinet sold. Money brought in from the sale of each cabinet varies depending upon the specifics of each order. Many have realized significant success in selling DIY arcade cabinet kits. The cabinets are sent in pieces, with instructions for the customer to follow, reducing the business’ time and cost.
How much can you charge customers?
Prices will vary from product to product. The average price for basic kits is $850. Upgraded kits that include joysticks, buttons, encoder options, trackballs, and LED inserts sell for approximately $1,100. Most cabinet companies offer additional options for custom and pre-printed artwork, adding up to $400 to the price tag. Arcade cabinets that include gaming software range in price from $1,500 to almost $30,000.
How much profit can an arcade cabinet business make?
If you sell one basic kit and two upgraded kits per month, this will generate a gross annual income of over $36,000.
How can you make your business more profitable?
Entrepreneurs looking to increase annual profits should consider expanding the goods and services they offer. In addition to selling full cabinets, your website should include basic parts and adapters, a variety of gaming software options, and downloadable cabinet plans that consumers can purchase and print at home. Repair services and cabinet installations would also help make your business more profitable.
What will you name your business?
Choosing the right name is very important. Read our detailed guide on how to name your business. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your arcade cabinet business is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.
Open net-30 accounts
When it comes to establishing your business credit, net-30 vendors are considered the way to go. The term "net-30," which is popular among vendors, refers to a business credit arrangement where the company pays the vendor within 30 days of receiving goods or services.
Net-30 credit terms are often used for businesses that need to obtain inventory quickly but do not have the cash on hand.
Besides establishing business relationships with vendors, net-30 credit accounts get reported to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our guide on the best net-30 vendors so you can start building business credit now, so you never have to worry about cash flow in the future. Keep in mind that poor cash flow is the #1 reason businesses fail!
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate an arcade cabinet business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
STEP 7: Get business insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
How to promote & market an arcade cabinet business
When defining your target market, you will need to determine if you want to limit your services to the local community or sell on a national or international level. Locally, your marketing campaign should begin with personal visits to arcades, skating rinks, movie theaters, and bars. A social media presence and advertising in targeted printed and online publications should also be a part of your marketing strategy.
If your market includes national and international consumers, these strategies will work, but you will need to research what websites and publications are popular in each area you’re targeting. The American Amusement Machine Association (AAMA) is an excellent resource for all your gaming needs.
How to keep customers coming back
Consistently delivering exceptional service and a quality product that you stand behind with a warranty will help you gain the traction needed to build a name for yourself within the gaming community. Remember, word travels fast, and customer feedback can make or break a business, particularly in its infancy years.
Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use.
Recommended: Find the best phone system for your business; check out our review of the Best Business Phone Systems 2021.
Start An Arcade Cabinet Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
Have you dreamed of becoming your own boss, setting a schedule that best fits your personal needs? Does your love for both classic and modern video games run deep, calling you to share that passion with others? If so, launching an arcade cabinet business may be the career change you have been looking for.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
What happens during a typical day at an arcade cabinet business?
Whether your focus is on modern video games, the classics, or a combination of both, you will need to balance a number of responsibilities each day:
- Address customer inquiries, tackle any issues that arise in a timely manner and follow up with customers once their order has been fulfilled
- Work with the customer to identify their needs, issue work orders, and prepare and ship orders
- Build cabinets or manage the production team
- Maintain relationships with vendors and network within the industry
- Research new and emerging trends
- Manage marketing strategy
To ensure long-term growth and success, business owners lacking the necessary skills to perform any of the above functions will want to hire experienced professionals.
What are some skills and experiences that will help you build a successful arcade cabinet business?
Your customers are investing a significant amount of money in your product and will expect a higher level of customer service. Business owners and their teams should be dedicated to ensuring a positive customer experience, answering all questions and concerns in a timely manner. The ability to communicate across various socioeconomic backgrounds will help connect with potential clients, ensuring a deeper level of customer service.
Whether you plan to complete the work yourself or hire a team of technicians, a sound understanding of both new and vintage games, cabinets, and their inner workings would prove beneficial. This will not only help the customer feel more at ease with their investment, it will assist you in the development of your business plan and projected financials.
If you do not possess the basic knowledge necessary to launch and manage a startup, industry leaders recommend taking a basic business course online or at your local college. Additionally, a marketing background would prove beneficial. If advertising and marketing aren’t your strong suit, consider hiring a marketing agency or an in-house marketing team to help you develop and manage a targeting marketing strategy.
What is the growth potential for an arcade cabinet business?
While many arcade cabinet businesses start out on a local level, the opportunity for growth is significant. Because arcade games are enjoyed across the globe, businesses can work with consumers from all backgrounds.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting an arcade cabinet business?
When launching a business that targets a niche audience, it is critical that you develop a thorough business plan. A well-thought-out and developed business plan is a roadmap that defines short and long-term goals and provides a clear understanding of what is necessary to achieve those goals.
How and when to build a team
If you possess the necessary skills to fulfill each order, it may not be necessary to hire employees when first starting out. Once the business takes off, however, you will need to plan and hire accordingly. New employees should be hired to ensure you operate at a higher level of customer service. New hires should be knowledgeable, passionate about their work, and properly trained.