An internet café/cybercafé or gaming café is a place where one can play online games, surf the internet and email friends and family. Users pay a fee, usually per hour or minute. Internet Cafés have blossomed in South Africa because of broadband availability. Nevertheless, there is still not enough access to the internet in remote and impoverished areas of South Africa.
Gaming and Internet Cafés
A popular variation of the Internet Café business model is the addition of a gaming centre, which is generally used for multiplayer gaming. Gaming is another way to increase profits and services that can be offered to clients.
The Internet Café industry is an unregulated industry with no official industry association. One has to be careful to ensure that start-ups are dealing with reputable suppliers. However, there are municipal regulations that apply. By-laws change from area to area, so it is advisable to check applicable regulations with your local municipality.
Make contact in person
Now that you have decided that you are going to start an Internet Cafe, make contact with a business owner in a similar business. They’ll have a good feel for the industry and specifications that are needed, and can assist in terms of where to acquire skills, which suppliers you can trust and what you can expect to pay for software and equipment.
Do your own surfing
Most industries have business associations that hold regular meetings, have newsletters, blogs and websites that are important to the industry. You can contact business owners through the internet and through various blogs. Visit www.search.co.za/Computers-Internet/InternetCafes, which is packed with local Internet Café’s all offering something different.
The right stuff
You’ll need professional billing, monitoring, and management system software for the Internet Café. There are guides available which will help you to determine what to charge for computer time, what software and what type of computer equipment to purchase and most important which wireless network to select that will work most efficiently in the location that you have chosen to set up your business.
How to Get Started
What happens next?
If you are going to be a business owner, you need to update skills in these areas:
- Business skills to understand finance
- Technical skills regarding product and service
There are companies and internet sites that can help optimise the research and development cycle, help with marketing, operations and finance. Contact the Department of Trade and Industry (dti) or the Small Enterprise Development Agency (seda).
Once training and research is complete, the next important step is to put together a comprehensive business plan. Without a business plan, you’ll be unable to find funding. It’s important to remember that a business plan is more than a means to money; it’s also the blueprint of the business and the best way to test whether or not the business is feasible.
A business plan is your safety net! Don’t panic if you don’t know how to create a business plan.
The Dti or Seda can refer you to a Business Mentor. Mentors are experienced business people who volunteer to help entrepreneurs through the start-up period, giving advice and helping with business plans, accounting, cash-flow projections, financial planning and budgets, financial viability, marketing, advertising, planning and merchandising.
Register the business
When starting a business you will have to decide if you will operate as a sole trader (under your own name) or register the business under its own name (as a close corporation, partnership, co-operative or company). For more information talk to the Companies and Intellectual Property Registration Office (Cipro)
Don’t forget to pay tax
If you run the business as a sole trader you will pay income tax on your earnings as an individual because business earnings are regarded as your personal earnings. If your business is registered as a close corporation, company or co-operative, then the business has to pay tax on its profits.
You also need to deduct Standard Income Tax on Employees (SITE) and Pay as You Earn (PAYE) from your employees’ salaries, and pay this to the South African Revenue Services.
Finding a good position for the business is crucial. If you go the shopping mall route rentals are high, but prime positions offer an advantage that there is a lot of foot traffic that automatically creates awareness. The other issue to consider is that property owners usually require a big deposit upfront and often won’t conclude an agreement for a lease less than 3 years. A business of this kind needs passing traffic to ensure that it gains customers.
For example if a business is set in the middle of nowhere with little pedestrian traffic, customers will be low. But if the business is located in and area where there are a lot of younger people and schools, collages or universities, then there is a better chance of attracting the right customer, which means higher rate of sales and eventually growing a bigger profit for the business.
How will you create awareness in your target market? It is very important to know your market. You need to reach out to potential customers and find out what they are thinking. Do people need the product or service you are offering? If so, how many people need it? Which services are important to potential clients and which are not? What price would customers be willing to pay, and why?
The cost of market research
The cost of market research depends on how it is done. If you approach owners of similar businesses to gather data, it would not cost much except in terms of your personal time. You can run your own surveys and approach people and ask them relevant questions such as if they would be interested in using the cybercafé and what they would be prepared to pay and what they would expect to find in term of games and hardware.
Premises and Equipment
Buy or lease
When setting up this kind of business you have to decide whether it is better to buy or lease equipment. Computers eventually become obsolete. If you lease the hardware, you pass the financial burden of obsolescence to the equipment leasing company. With a lease, you have a pre-determined monthly payment, which can help you budget more effectively. Many small businesses struggle with cash flow and must keep their coffers as full as possible. Because leases rarely require a down payment, you can acquire new equipment without tapping much-needed funds.
Equipment leases generally require that the leasing company maintains the equipment and if their service isn’t good, it could be bad for your business. When you buy the equipment outright, you decide who will maintain it. If you go the lease route, make sure you understand how long the lease is for. Usually, leases for computer equipment run 24, 36 or 48 months. The longer your lease, the lower the monthly payment.
Check if the lease includes insurance. If not, make sure you insure equipment. Without adequate insurance, your business could be crippled. There are other costs that also must be considered other than rent, the lease or purchase of hardware and that is the money you will need for software, set-up costs for networking the hardware and overall insurance for the business.
Have you worked out what you’ll charge – what the market is willing to pay?
You should have a good idea of what you will charge for the services that you offer from the research that you have done through talking to similar players in the industry and by visiting their gaming venues. One of them most important details of working out your financials is to determine the break-even point. The break-even point is the volume of sales required so that the expenses of the business are equal to the income received. To work out your breakeven point you will need to establish your fixed costs and variable costs.
What are fixed and variable costs?
Fixed costs (or overheads) are costs, which you will incur regardless of your level of sales. Examples rent, electricity, rates, wireless access, interest on debt, insurance, repairs and maintenance, stationary, licenses, and salaries. Variable costs are typically goods or services sold sales commissions, sales or production bonuses, and wages of part-time or temporary employees.
The finer details of starting an internet café
What is an ISP?
ISP stands for “internet service provider”. An ISP is a company that collects a monthly or yearly fee in exchange for providing the subscriber with Internet access.
Choosing a provider
When looking for an internet service provider, your most important consideration is the type of access you need to run a successful internet café. You need to have the fastest service at the best possible price. To achieve this you will have to shop around. ISP services range in price according to the package offered and type of service. Dial-up is least expensive but slow, and perks vary greatly between ISPs.
Reliability is the single most important factor in choosing an ISP. Go for an ISP that offers services such as strong technical support and hosting. Choose a service provider that is known for excellent service and who updates equipment regularly. Some services providers offer a 30-day guarantee so that you have recourse if you are not happy.
Make sure that when you select a service provider, that there is a cancellation clause that is in your favour. Make sure you know exactly what is included in the package you sign up for.
Questions to ask
One of the best ways to test an ISP’s reliability and speed is to use the most comprehensive test – word of mouth. Ask these questions:
- How does the ISP address queries
- How responsive is the ISP’s tech support
- How long have you been with the ISP
- How often is the service unavailable
The responses to these questions should help you decide the ISP provider that’s best for you.
You can test ISP for performance and security simply by downloading and installing free applications which you can find on the internet such as PingPlotter. PingPlotter enables you to collect data to pinpoint where problems may be occurring. You can also test your ISP’s performance online
Talk to others in the same industry
Make contact with a business owner in a similar business. They’ll have a good feel for the industry and specifications that are needed, and can assist in terms of where to acquire skills, which suppliers you can trust and what you can expect to pay for software and equipment.
NETucation, one of South Africa’s leading experts regarding the Internet Cafe industry conduct workshops on how to set-up the Internet Cafe from scratch. Everything is covered in this eight-hour workshop from hardware, software, renting vs. buying, technical support, becoming a reseller, staff training, wireless hot spots, additional revenue streams, business plans, online marketing and more.