The Profitable Indoor Playground Business Plan: 5 Red Flags I Look Out For
Since I opened the doors to my indoor playground in early 2016, I have had hundreds of prospective owners reach out to me asking to “take a quick look” at their business plan. Now, not all of them have gone as in-depth as I did when creating a business plan, but most business plans are major documents that take a great deal of time to review.
While I no longer offer one-on-one consulting because I have chosen to dedicate my time and energy towards helping my Play Cafe Academy students achieve success in their businesses, I do still peek at the occasional business plan that comes across my “virtual” desk.
The reason I am still able (and willing!) to do this is because I can typically glance at some key areas and get a quick gauge on whether or not the prospective owner has done thorough research and if they have realistic expectations.
While I don’t review every plan in-depth (unless you’re one of my students), I wanted to share with all of the play-cafe hopefuls out there the few key sections I look at first and usually have some immediate feedback on.
SIDE NOTE: When you are opening any local business, it’s important to not just lean on industry-experts for advice but also other brick-and-mortar business owners in your area, even if they are not in your field. Your area will likely have unique challenges (maybe related to weather, demographics, local laws, etc.) that even the most experienced owner would not be able to anticipate unless they were local to you. So while the advice here on my blog and YouTube channel will certainly help you on your path, also try knocking on some doors and establishing a friendly relationship with business owners in your area to get an even clearer picture of what you can expect should you join their ranks.
1) Start-Up Cost Projections
As someone who went to school for Economics, the “numbers” are where my eyes tend to go first. While the cost of opening an indoor playground vary wildly, it usually comes down to these few different factors:
The geographic area. Some areas, like NYC, are just more expensive than others.
The type of play and age range the business hopes to accommodate. Large gross motor play structures tend to be more expensive than imaginative-type play equipment, and the broader the age range the more pieces will be needed.
While the exact location of a business is not usually yet determined in the business-plan phase, I can typically get a feel for the size of space a business owner has in mind, whether it be a 40,000 square foot large complex OR a smaller footprint play cafe like ours.
Of course, there are many other factors that play into the cost of opening this type of business, but these 3 have the biggest impact in my experience.
If the 3 factors don’t match up with the projected start-up costs, even in a ball-park range, I know right away that something is “off.” For example, if a business owner is hoping to open a 10,000 square foot space in Los Angeles with lots of high-quality wooden climbing structures for $200,000, I know that either the business owner has not begun researching real prices or they’ve done a poor job of getting estimates in their area. Or, perhaps, they have forgotten line items such as legal fees, insurance, construction build-out, marketing, etc.
The key here is to make sure you are getting estimates from REAL contractors in your area who are familiar with the business model and what you are hoping to achieve. If you need some tips on planning your space, I have another post about that here!
2) Core Strengths & Target Market
The first red-flag I notice about this section is that it’s often missing! The second, perhaps scarier, red-flag I notice is if a prospective business owner is attempting to make “every local parent” their ideal customer.
While it isn’t implausible for a wide variety of parents to find a space enjoyable, it’s also not realistic to expect to be everything to every family. I discuss this concept in more detail here, but choosing a clear focus for your business and who you hope to serve can be crucial to a businesses success, especially if there is competition in the area. Even if there is NO competition in the area, it’s very likely that there will be soon after you open. We, in fact, had several competitors try to emulate us within the first year or so alone!
If a business plans to have classes, camps, parties, open-play, memberships, etc. ALL as their “core strength” and focus, I often will urge the potential owner to think a little more strategically about what is missing in their area and what their “ideal customer avatar” is like. Will your core offering cater mostly to stay-at-home parents or working parents? Do the hours and prices reflect that choice? Will grandparents be able to comfortably enjoy the space? Will people in the area be willing and able to pay for an exclusive membership?
A great example of an indoor playspace that has chosen a specific “ideal customer avatar” is Wiggle N Work in California. Despite being in an area with very high competition, they are able to thrive because they have designed their space and offerings around one specific type of customer. Working parents flock there, purchase memberships, and return again and again because their needs are so well met. Had Wiggle N Work tried to open an “every family” play cafe in that area, they likely would have struggled because it is very hard to differentiate oneself in a saturated market without something to be known for.
3) Competitive Analysis
Analyzing local competitors should, of course, be a no-brainer when putting together a business plan. How this process is approached, though, does make a difference.
For example, if someone is choosing to focus primarily on birthday parties, I would not necessarily want to see a competitive analysis on every indoor play space. I WOULD, however, want to see an analysis of every place that offers parties similar to the ones they plan on throwing.
Since we focus on high-end birthday parties, our closest “competitors” actually aren’t other local indoor play places. Based on our ideal customer avatar, local country clubs, athletic clubs, painting studios, and even dance studios are those we most closely analyze.
And by “analyze,” I do not mean emulate. By observing what each of these places offer and to whom, it is easy to see gaps in offerings and create packages that really stand out and differentiate us.
Had I just focused on other indoor play centers that perhaps focus more on memberships than parties, I would have no idea how to price or structure my parties for the customers we planned to cater to. The other indoor play centers near us typically offer more budget-friendly, shorter, smaller parties-- and would likely not even consider our venue after glancing at our prices since it’s more than they want or need.
I also like to make sure that prospective business owners are looking at the strengths of local competitors in addition to their weaknesses. It is of course very possible for many businesses to thrive in the same local market IF they each have their own “secret sauce” or key attracting factor. Trying to replicate another existing, beloved space’s “secret sauce” is often a recipe for disaster, like I outline here. Try instead to find something YOU can be known for and be great at, so you can become the “go-to” in your area for whatever that “thing” is.
4) Payroll Expectations
While this is another factor that can vary wildly based on space, it’s fairly easy for me to estimate how many payroll hours a business will need based on how many sources of revenue a space will have (if there is going to be a full-service restaurant, for example, that will need to be staffed accordingly), the biggest thing I look for is how much the owner expects to work themselves. Of course, especially in the beginning, the owner should expect to be present on-site quite often. However, there is a big difference between HAVING to be there (filling a crucial cashier role, for example) and WANTING to be there.
If a business owner needs to work more than 5 or so hours (in-person!) a week in order to survive financially, that is a big red flag. If they have children, I usually tell them about my experience about working with my kiddos and how it’s NOT as easy as it seems!
I also tell them how much of a disservice it is to both staff and customers to take your energy away from innovation and continuous improvement by doing “all the things” at your location. The long-term strength of a business often lies in the owner’s ability to remain in the “visionary” role of the business and delegate other things to their team. If you want some tips about things I do NOT do as an owner (and some things I still do), click the links to read more!
5) Revenue Sources
While it is definitely important to maintain a clear focus for your business and have a primary stream of revenue, that does not mean you should forego all other sources. Though birthday parties are our main source of revenue, we also do drop-off hours, open-play, classes, events, and have a retail business to add to our bottom line and keep our bank balance healthy.
When I look at a business plan I like to not only see multiple sources of revenue but also that they are well thought out and have realistic numbers attached to them.
Having multiple revenue sources also helps businesses (especially in the indoor playground industry) be less susceptible to seasonality and other factors that can impact one area of business (open play, in the case of weather) but not others as much (like birthday parties in that scenario, since they are booked well before the forecast comes out).
In all, there are dozens of factors that banks and investors will example in your business plan. However, in my experience, those 5 factors have the most significant impact on not only the long-term success of a business but also the ability to get the project “off-the-ground” in the short-term.
Want some good news? I can help you craft the perfect business plan for your needs. Just download ny 22+ page indoor playground business template (the exact same one I used to secure over $200k in funding), and plug in your own numbers and analysis, and you will be well on your way to indoor playground business success!
Even if you plan on opening a slightly different concept, this plan WILL work for you. And don’t worry, you won’t just download and go. If you purchase my exact editable business plan template for $27 now, I will also send over a 70-minute video walk-though training to take you step-by-step through the plan so you can tweak and adjust as needed without having to wonder or second-guess.
This document will save you HOURS (and potentially tens of thousands of dollars!) by making sure no stone is uncovered in your research and planning process.
Best of luck in your indoor playground adventures!