How to Start an Arcade Cabinet Business

Start an arcade cabinet business by following these 10 steps:

1. Plan your Arcade Cabinet Business
2. Form your Arcade Cabinet Business into a Legal Entity
3. Register your Arcade Cabinet Business for Taxes
4. Open a Business Bank Account & Credit Card
5. Set up Accounting for your Arcade Cabinet Business
6. Get the Necessary Permits & Licenses for your Arcade Cabinet Business
7. Get Arcade Cabinet Business Insurance
8. Define your Arcade Cabinet Business Brand
9. Create your Arcade Cabinet Business Website
10. Set up your Business Phone System

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.

Exploring your options? Check out other small business ideas.

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 will you name your business?
• What are the startup and ongoing costs?
• Who is your target market?
• How much can you charge customers?

Luckily we have done a lot of this research for you.

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.

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.

STEP 2: Form a legal entity

The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation.

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.

You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.

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!

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.

Open a business bank account

Besides being a requirement when applying for business loans, opening a business bank account:

• Separates your personal assets from your company's assets, which is necessary for personal asset protection.
• Makes accounting and tax filing easier.

Get a business credit card

Getting a business credit card helps you:

• Separate personal and business expenses by putting your business' expenses all in one place.
• Build your company's credit history, which can be useful to raise money 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.

Make LLC accounting easy with our LLC Expenses Cheat Sheet.

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.

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.

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.

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.

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.