Wondering how much it costs to start a video game business? Not to worry, here is an article on how to start a gaming business in Nigeria?
As long as having just one or two sources of income is not enough for you, then this article is meant for you.
There are lots of opportunity in this business, if you don’t know … you better ask somebody.
Let me not waste your time, lets dig right into how to start a gaming business in Nigeria.
How To Start A Gaming Business In Nigeria
Overview Of Starting A Gaming Business In Nigeria
The video gaming business is a very profitable one if you know your way around it.
While it may not be the ideal relaxation and fun center for the seniors in Nigeria, there is no doubt that the younger population finds it very entertaining, and these are the groups a gaming lounge usually targets.
The ideal age and demographics for gaming businesses are between 7 to 25.
There are several outliers of this range, but you will find most gamers in this population.
This article is dedicated to showing you all you need to know to successfully start a gaming business in Nigeria.
The thing is, while you may have an idea of the gaming business, successfully establishing one is another ball game entirely, and ill-informed understanding could make everything go south pretty quickly.
On the bright side, you can, without any technical knowledge, simply open a game lounge for an instant in a day, considering you have all the tools, so the problem that you would encounter isn’t really from the hardware set up.
After all, anyone could connect the Play Station and Xbox game consoles and start his or her business.
However, this is only a surface success bound to crash within few months to a year if the necessary homework before starting the business was not properly set up.
This business guide will help you prepare properly before starting your business and how to ensure that operation is sustained all through.
Please note that if you are going to approach the banks or meet any financial institution, or even talk to family or friends for financial support, then you may need a comprehensive video game business plan that you will submit to them.
You’d be lucky if they don’t ask you!
However, you can browse online for gaming café business plan sample, they are all over the internet.
Study The Environments And Trends
This is 2021, and it is important to understand that it is no longer funny how expensive life has become in Nigeria.
This means that you have to be more careful and thorough with your analysis before putting any major work in place.
These are some of the things you would need to take into consideration before getting the video business started
Gaming Business Location
Location is one of the most important keys in determining whether your business will be a success or not.
Years back, gaming lounges were mostly patronized by kids, but following updates of new game consoles, the trend has moved towards the older populations.
This is due to the subsequent increase in cost and the enchanting real-like graphics that make it irresistible.
The issue, however, is that not all adults play games, and you would need to know where to locate the target population to make your business a success.
Adults in metropolitan cities or at least urban areas are major targets, and you could get this set of people from every State in Nigeria.
All you need to do is focus on the busy cities.
Fixed and Operational costs
Whether you decide to open a single lounge or have branches; hire assistants, or run it with family (not advisable); you must understand that you will part with a significant amount of cash.
You need to consider the operational costs of running the gaming business daily before diving into it. You would have to consider how you intend to run your lounge.
Which electricity source would you depend on?
How do you intend to update games to keep with the trend?
Do you plan to have almost all game sets available, or would you rather stick to dinosaur sets like FIFA franchises?
You also need to consider rental fees that you will need to handle yearly.
These calculations are very important as updating game sets can be very expensive.
For example, the cracked version of the ePES 2020 was over ₦20,000, and this is a supposedly cheaper football franchise to FIFA, and you would need to update these games yearly.
The Right Game Providers And Games
You have to understand that why there are hundreds of video games that you can pile up in your lounge, Nigerians have favorites, and fortunately, these favorites are pretty much generic.
Some of the popular game sets are FIFA, ePES, God of War, GTA, and some other few.
You have to know the games that the Nigeria space loves and make sure you have them available. You could add others as popular ones like Mortal Kombat, W2k series, and so on
Register The Gaming Business
This is not negotiable as it saves you a lot of stress when it comes to dealing with enforcement agencies and other elements.
The Corporate Affairs Commission (CAC) is the accredited business registration commission in Nigeria.
Is Gaming Business Profitable?
Rough Cost Analysis
Yes, it is, and with a great business plan having a three-year revenue analysis, you could build an empire out of it.
Previously, there was a time when a 10-minute football match was only ₦50.
Now, that same time frame costs as much as ₦100 to ₦200.
Under the assumption that a video game costs ₦100 and a 100 game set is played daily, then you should have ₦10,00 for the day.
If you run a 6-day weekly business, you would have ₦60,000 for the week.
If running cost is about ₦15, 000 – ₦20, 000 (highest possible running cost when there are unexpected repairs) weekly, you would have ₦40,000 to ₦45,000 weekly
40, 000 X 4weeks = 160, 000 monthly
160, 000 X 12 months = 1,920,000 Gross profit
Ideal Operation-Fixed Cost Include:
Rent = 20,000 monthly X 12 months = ₦240,000 annually
Miscellaneous yearly expenses = ₦ 100,000
Net Profit = 1,920,000 – 340,000 = 1,580,000.
You are still a millionaire at the end of the month.
Note, however, that this analysis is on the ground that there are at least two game sets available, and the lounge would be open from 8am to 8pm.
Also, it is possible to make more money in the long run if you decide to open other branches.
You should also note that this would affect the supposed income of the year if a new branch were opened.
Gaming Business Break-Even Analysis
Before break-even analysis is discussed, below are examples of starting fixed costs. These costs are very important in computing when you will achieve break-even:
Gaming Business Starting Fixed Cost
- Business registration
- Game Consoles (PS2 OR PS3, XBOX360, and many more)
- TV Sets
- Step-down Adaptors.
- Tables and Chairs.
- Generator power Set
Starting this business from scratch means you will need to get some tools to work with.
While it is possible to have some of this equipment, this analysis will be computed under the assumption of the opposite.
A break-even analysis is a prediction cash model that predicts how long it will take you to recover all the expenses in setting up the video game lounge assuming all expenses remain the same.
Mathematically, it is,
Break-Even Analysis = year where total profits- total expenses = 0
Once a break-even has been achieved, then that is when you really start to make a profit.
The section above discussed a possible cost analysis, and the expected annual cost was a total of ₦340,000.
This should be called the yearly running cost.
To know when you achieve break-even, you will have to calculate the setting fixed costs of setting up the lounge and add it to the yearly cost of running the business.
Then subtract these from each year’s profit.
The year where subsequent yearly profits exceed the starting fixed cost and the yearly running expenses is the year break-even has been achieved.
See an example for elaboration:
Suppose it took you 1,000,000 to get the starting fixed costs handled, then automatically, you already have an expense of that amount.
For your business first year, if you had a yearly running cost of ₦ 340,000 and made a profit of ₦900,000 due to the fact that it was the first year, then your break-even analysis would be:
B.E analysis = 900,000 – 1,000,000 – 340,000 = -440,000
This means that while you were able to cut down on your expenses of one million for the first year, you have still not made any real profit, and in the real sense still running at a loss.
For year two, if you have a running cost of ₦340,000 and a yearly profit of ₦1,000,000 then:
B.E analysis = 1,000,000 – 440,000 – 340,000 = 220,000
This calculation means that you were able to break even in the second year, and you have your first real profit 24 months since opening your lounge at the sum of ₦220,000.
The break-even analysis help people know if a business is worth going into or not.
Advice On Gaming Business
As an extra tip, you should understand that the environment or country that you run a business might have a significant effect on your business, which is the case with a gaming business in Nigeria.
Naturally, a game business should be just like every normal legal business, but the public perception of gaming lounges makes it seem like an illegal activity which on an honest scale is extremely wrong.
The biggest problems that you would likely encounter in your business are having to deal with parents of gamers and unlawful police raids.
This section is targeted to handle these two major problems so you have a successful business free from unnecessary loss.
The tips will be divided into two general sections, one targeted at addressing parents and the other at handling the law enforcement agencies.
Tips To Tackle Parents Issues
It is not uncommon to see parents burst into gaming lounges to demand refunds after their kids or wards play games in these lounges.
You can have a strong ground by setting the following rules:
- Ensure that you have a written rule prohibiting school uniformed teenagers from entering the lounge.
- Prohibit teenagers and kids between the age of 8 to 18 from accessing your lounge during school hours.
- Have a written and signed non-refundable policy for games played
- Have a written statement that emphasizes that you run a legal profit-yielding business, have the right to operate without any restriction, and will not bear responsibilities for customers’ game spending.
- Make sure that all of the rules above are printed in a signed document with headings “RULE OF ENGAGEMENT” and ensure that it is easy for lounge visitors to see them.
Tips To Tackle Police Issues In Gaming Business
Make sure your business is registered with the Corporate Affairs Commission and always have the documents in your lounge to tender in case of any raid.
Try as much as possible to restrict dubious personalities like well-known cultists or area boys from accessing your lounges as these elements easily draw security enforcements to themselves.
With these tips on how to start a gaming business in Nigeria, you are good to go. Cheers!