How to Raise Funds to Open your Indoor Playground Business
Indoor playgrounds are a great business. They’re always in demand by families, they’re a fun way to make a living, and once they’re set up, the running costs aren’t particularly high compared to potential profits.
Most importantly, indoor playground businesses are the embodiment of the saying “find something you LUV to do, and you will never work a day in your life.” There’s nothing better than being surrounded by happy families every day, and knowing that you’re giving your community a safe, healthy place to have fun!
However, there is one thing indoor playgrounds are not: cheap to start. Which means many people need help with indoor playground financing. Let’s take a closer look at everything you need to know about funding your indoor playground business.
Your Business Plan
Whether you are starting a new facility and are looking for funding your FEC as a startup or you already have an indoor playground and you want to expand, the first thing you need to do is put together a very detailed business plan.
No matter how you plan to fund your indoor playground equipment and other costs, you will need to have a very solid business case to present to potential investors. Here are some of the important steps you need to take to complete this process properly.
Research Similar Businesses
Even if you don’t have any competitors in the area you plan to open your family entertainment center, you need to see what other businesses are doing.
Visit several competitors in your area, and make careful notes of what they are doing, and what they might be lacking.
Look at the kind of indoor playground equipment they have, as well as other attractions like arcade games or ride ons. What age groups do they attract? Do they serve food and beverages, and if so, what are the prices like? How much does it cost to get into the facility, and are there any special deals for families?
The more you know about what everyone else is doing in the industry, the better prepared you will be for everything else you need to do to create a comprehensive plan for yourself and for investors.
Research the Actual Costs
You might think you can estimate the cost of setting things up before you look at funding your indoor playground business, but you really have no idea what those costs will be until you actually do the research.
Spend some time researching the rental cost of the spaces you think might work for your business. Even if you don’t choose a location until you have indoor playground financing lined up, it will give you an idea of the going rate per square foot. This will allow you to calculate an accurate rental cost once you have designed the space.
Next, look into the regulations for staffing and safety for your area. There are many regulations related to running a family entertainment area, including how many people you need to have to supervise play areas, on site, first aiders and so on. Decide what your staff will earn and calculate what your monthly employment costs will be. Don’t forget to factor in taxes, any benefits you plan to offer, workers compensation and other costs related to employing people.
Find out what your city charges for commercial utilities in the areas you are considering for your facility, and what the average bill might be for the size of space you’re planning to have. Look into business phone and internet services at the same time. Most families will expect to have free Wi-Fi while they are visiting your play space.
Consider the cost of security for your facility if the landlord does not include it. Some business parks do include services like security, but others do not, so you need to factor that into your calculations.
Next, research the costs to set up the facility. You will need to factor in everything from furniture to paint and signage, the indoor playground equipment, any arcade games you want to have, safe flooring, stock if you plan to sell toys or offer prizes, uniforms for staff and more. Brainstorm everything you could possibly need to get set up, and then get quotes for all of them.
You can never anticipate every cost you will have to set up your facility, but the closer and more realistic your estimates are, the more likely people will take you seriously when you apply for indoor playground financing.
Crunch the Numbers
The next step you need to do before you approach anyone about funding your FEC is crunch all the numbers. Now that you know what the cost to set up your facility will be, and what other facilities charge, you can start figuring out how long it will take to break even and how much you might make per month.
Don’t base your calculations on the best case scenario either. While it would be great if your facility was full to capacity every day, you’re open, that’s probably not going to happen, and investors and financing companies will know that.
It’s better to underestimate your potential earnings and be pleasantly surprised than to overestimate them and spend your time scrambling to cover the bills.
If You’re Expanding Your Existing Facility
If you already have a family entertainment center that has indoor playground equipment and other attractions and you’re looking to expand or open a new location, you still need to do the same exercise. Creating a business plan for your expansion plan is a key part of the funding process, and anyone you approach will want to see all of these things for the addition of new facility you plan to open.
The biggest benefit you will have been that you will already have figures and a proven track record from your existing indoor play space to present to investors. It’s often easier to convince people to invest or finance your ideas if you’ve already got success and profits to prove the concept and your own skill in business.
Financing and Funding Options
Once you have all the facts, figures and calculations done, you know what you plan to do, you’ve chosen the indoor playground equipment and started to work on your logo, brand name and more, it’s time to take the whole plan out into the world and look for financing. This is possibly the most nerve wracking part of the process – because there’s a possibility you will hear no from some of the people and organizations you ask.
Never let that stop you.
If you’re sure that your indoor playground idea can work, and it’s something the families and children of your community want and need, you just need to keep asking until someone says yes.
You might need to scale back your plans if they’re a little too ambitious at first but do what you have to do to start your business and prove your idea. Success breeds success, and once you have proof that your indoor playground is a hit with families, it will be a lot easier to finance your expansion or even another location.
We’re going to look at several funding and financing options in this section, starting with private funding options, then looking at commercial funding for your indoor playground business, and finally, grants that might help with funding your FEC.
Always consider all of your options, and if one avenue doesn’t work out, never be afraid to try another.
Private Funding Methods
Most businesses don’t get outside funding when they are first starting out. Most of them start without commercial financing and work their way up, building credit worthiness until they can access the financing, they need to grow their company.
That’s not to say that you won’t get third part, commercial or grant funding for your indoor playground, but just that it might be a little harder than you think.
Which is why we’re going to give you some alternative ideas for private funding that you might also want to consider as you work towards your big dream. Here area few options to keep in your back pocket:
Your Own Money
This is the low hanging fruit on this list, and while not everyone has savings or equity in their home to invest in their indoor playground idea, if you do, it’s the easiest way to get started. The only person you need to convince in this scenario is yourself, but remember, you should never extend yourself so far that if your idea doesn’t work as you imagined (or takes longer to take off) you could lose assets like your home.
Consider funding sources like lines of credit and credit cards to fund some of your business idea too. Many financing options – even commercial banks and grant programs – will expect you to put in some of your own money even if they do finance your idea. So it’s always a good idea to review your finances and see what you have available.
Angel investors are private individuals with the money available to finance business ideas, who invest as silent partners, as a loan or in exchange for equity in your business.
While many people balk at the idea of giving away equity to investors, always remember that 100% of nothing is still nothing. So if you are offered a reasonable equity deal by an angel investor, it’s a good idea to at least consider it.
Sometimes, angel investors are people you already know like a wealthy friend or relative, but there are also professional angels who consider business proposals from people they don’t know. They’re usually successful entrepreneurs in their own right, who want to help others succeed, and they can often be both an investor and a mentor.
Usually, to make this kind of project a success, you need to have something unique or different about the idea, but then, there have been people who have raised over ten thousands of dollars to make potato salad, so you never really know!
If you believe that your community will support your indoor playground idea (and you’re prepared to make it worth their while by offering discounts for donors and other perks) you can use crowdfunding platforms like Kickstarter to try to raise the money you need.
Friends and Family
This option is last on the list because it should usually be the last option you try.
Unless your friends and family are very wealthy and won’t notice the money they invest in your idea, this kind of financing can be fraught with problems, and if things go wrong, you could lose important relationships because of it.
However, if you have a friend or relative who can afford to invest, and you have a solid plan that you are sure will work, consider presenting it to them and offering them a piece of the business. If they believe in you and your idea, they might just decide to back you.
If you do choose to get a friend or relative involved, make sure you have a very clear contract drawn up that stipulates what kind of involvement they have too. Unless you’re prepared for them to be hands on and involved, having someone involve themselves in your business could be very frustrating for all involved.
Commercial financing is funding that is offered by banks or finance institutions who are in business to make a profit. They usually offer loan financing and expect to have regular payments with interest.
It can be very difficult to get traditional commercial indoor playground financing, but if you have some collateral to offer, or some of your own capital to invest, you might find this option works for you. There are several options you could consider here.
Banks and Commercial Lenders
Banks and commercial lenders will require a very solid business plan, an excellent credit record and a big chunk of your own capital to invest in your idea if you want to get a loan.
Sometimes, they will defer or lower payments for your first year of operation, but when you have to repay your bank loan, you will need to keep up with those payments in full, or risk losing everything.
Banks are businesses, and if they think they might lose out on the deal they have made with you, they can and will repossess or seize your assets. So you should only consider this option for funding your indoor playground business if you are absolutely sure you will be able to make your payments from the very first month, they are due.
SBA Funding Loans
SBA or Small Business America is a government organization that exists to help people to start and grow small businesses. So, while they offer funding options like loans and loan guarantees, they’re often a little more lenient than banks, and willing to work with people who have an idea that they believe in.
SBA doesn’t loan money directly – instead, they provide lenders with a loan guarantee, which helps to reassure commercial lenders that they will get their money back even if things don’t go according to plan.
You still need a solid business plan and a good credit score to get an SBA backed loan, and you usually have to own your own home with some equity in it to qualify.
While an SBA backed loan is less of a risk to your personal financial situation than going directly to a bank, it’s still a loan, it still needs to be repaid, and you still stand to lose financially if you default. So make sure you’re absolutely sure your business idea is rock solid!
Because SBA loan guarantees are government backed, they often also have the most flexible repayment options and lower interest rates. So if you can qualify for this kind of financing, it’s well worth going this route.
Venture capital funding or VC funding is a type of commercial funding where professional investment companies “bet” on startups by investing money in exchange for equity. The gamble is that the idea will take off, make lots of money and when the business is sold (or bought by the owners) they will make a big profit.
In most cases, however, venture capital funding is not available to ideas that need less than a million dollars in funding, and even then, these firms tend to invest in innovative ideas with IP or intellectual property that makes them harder to compete with.
That’s not to say that you will not be able to find a VC investor for funding your indoor playground business, but it will be very difficult, and your idea had better be unique, different and something no one has seen before!
If you can’t find funding for your whole indoor playground business, you might have to think outside of the box, and consider funding different things from different sources.
For instance, you might be able to access some money by taking a second mortgage or withdrawing equity from your home, or from your own savings.
You could then approach specialist financing companies like Ascentium Capital, who provide funding for commercial indoor playground equipment, and who many of our customers at Indoor Playgrounds International use to fund their equipment. This allows you to pay off the equipment itself over time, so you have less upfront startup costs.
You might also be able to access a personal line of credit or loan that you can use to make up the difference.
Again, you might need to scale back your plans if you have to piece together funding for your indoor playground from different sources, but it’s better to start small and grow than never to be able to start at all!
Grants, Contests and Sponsorships
When it comes to funding your indoor playground business, the idea of “free money” might seem completely impossible, but actually, it’s not.
While it’s not easy to get grants or sponsorships or win business contests, it’s not impossible, so you should definitely have it on your funding options list.
The first type of funding you should consider here is grants. These are a type of financing offered by governments, non-profits and other organizations to businesses. Some offer money, others can fund equipment or services you need, but most importantly, they’re non repayable – so they’re like free money for your business.
You need to have a solid idea to apply for a grant, and you usually need to prove that your idea will help your community or the local economy in some way. Here are a few of the grants that might help funding your indoor playground business:
- The Home Depot has a program called Building Healthy Communities that offers materials and volunteer labor to make playgrounds and similar facilities more accessible to disabled and differently abled people.
- The Christopher and Dana Reeve foundation also funds grants for accessibility modification and equipment for facilities that families use.
- Local, state and federal government – many government departments offer different kinds of grants and funding for different types of business – some are available to specific groups like women or people of color, others are geography specific, and some are based on the type of business you plan to open
Grants are not easy to find, and harder to qualify for, but if you can find one that can help you with funding for your FEC, even if it’s not the full amount, you will be one step closer to the dream, and you won’t have to repay this money!
Sponsorships are another option that might help you to raise funds for indoor playground financing.
This kind of funding is often used as a form of advertising for a local business or organization.
So, for instance, a local politician who wants to connect with families might offer sponsorship for your indoor playground in exchange for a plaque and a mention in your monthly newsletter to families.
Or a business that does family friendly food might sponsor your business in return for the exclusive rights to sell food on the premises for a fixed amount of time.
Sponsorships could come from almost anywhere, but you need to offer the sponsors something in return. So make a list of everyone you can think of who might be willing to help you start your business with a sponsorship, figure out what you can offer in return, and start dialing for dollars.
Another potential source for funding your indoor playground business that is a little out of the box is business contests.
These contests, also called entrepreneurship contests or startup contests require you to enter your business idea, which is usually reviewed by a panel, and if you are selected, you might be asked to pitch to a selection committee.
These kinds of contests are held by various organizations. Some are run by incubators and small business associations. Sometimes they’re run by chambers of commerce hoping to boost the local economy, and sometimes, they’re run by big corporations – including banks.
It’s not easy to win a business competition, but you have as much chance as anyone else, so if you’re confident in your idea, start searching and send out those entries!
After You Get Funding
Getting indoor playground financing often feels like a marathon, and unless you’re very lucky or very well connected, it could certainly take some time to work out the details. However, getting funding for your facility and indoor playground equipment is really only the start of the process. Once you’ve got the money in the bank, the real work starts.
While there’s a lot that goes into getting an indoor playground off the ground (and that’s definitely the subject of another article) there are a few things you might need to do that are funding related.
Keep Detailed Records
There are many reasons you need to keep detailed records of the money you received and how you spend it, including business and potentially personal taxes. If you don’t already have a professional accountant or bookkeeper to help you keep detailed financial records, you should hire one before you do anything else.
Unless you have financial management training, this is not something you want to try to do on your own!
Report to Investors
Depending on where you got indoor playground financing, and how hands on the financier is, you might need to provide regular reports to the people who put money into your business. This usually applies when you’ve received funding from an angel or VC investor, a sponsor or a family member or friend.
Most commercial lenders aren’t too worried about how you are doing – as long as their payments come in on schedule!
If you won a business contests or received a government grant, the people involved might also want to follow up periodically, so they can share information about your business with their networks.
Prioritize Debt Repayment
If you got a loan for funding your indoor playground business (otherwise known as debt financing) your first priority is to make sure you meet your repayment obligations. There’s a good chance you might have to start repaying your loan before you open your facility, so make sure you have a plan to cover those costs while you work towards opening day.
If you can, and if there are no penalties for early repayment, try to pay a little extra on your business loans every time you make a payment. You will reduce the time you have to repay the loan and could cut your loan interest dramatically.
Eyes On the Prize
Once you have the money you need to start your indoor playground in your bank account, all of your focus should be on getting the facility ready to open to the public.
The longer it takes before you open your doors, the more it’s going to cost you, so getting your indoor playground up and running is your biggest priority.
Make smart choices, decide if you can open partially before you have completed all the work you need to do so you can start earning sooner, and start marketing! The sooner you can start building buzz about your indoor playground, the better you’re likely to do when you’re ready to welcome families.
Happy to Help
While Indoor Playgrounds International doesn’t offer financing on our indoor playground equipment systems directly, we have partnered with Ascentium Capital to make it easier for qualifying customers to purchase equipment on a repayment plan that suits their business needs.
We’ve also been in the industry for a very long time and have been involved in setting up many indoor playground businesses. So our team has a lot of experience and knowledge about the process. We’re always happy to offer advice, direct you to resources if we have them, and help you to work towards your indoor playground dream.
The good news is that usually, indoor playground financing is the hardest part of this process. This is a fantastic business to be in, and most of the playgrounds we work on go on to be a huge success and make countless families happy.
So if your big dream is to open a family entertainment center, don’t let the struggle of funding your indoor playground business stand in your way. As you can see, there are many ways to get the financing you need, and if it was easy, everyone would be doing it!
When you do succeed, and you’re ready to buy the indoor playground equipment for your facility, we’ll be here, ready to provide the safest, highest possible quality commercial indoor playground equipment you need.