Veterans Take notice to the evolution....
by Frank Seninsky
Here are four proven, timeless strategies to make big money from a small investment -- or zero investment -- in today's industry. [Note that game revenue-share operators are always advised to protect their locations with exclusive contracts.]There is still plenty of money to be made in the amusements industry. What was true in the "good old days" 30, 40 or 50 years ago is still true today: operators, distributors and manufacturers can start with practically nothing (just enough money for a couple of used machines) ... and, if they work hard and work smart, aggressively taking advantage of their opportunities, they can grow a substantial and highly profitable business.
Success Strategy No. 1.
Keep the doors open ... and keep your eyes and mind open.
Keep the doors open ... and keep your eyes and mind open.
An important business mentor once told me,
"Remember, if you're out there in the market, you will get some
opportunities simply because you exist." I have found this to be true. If
people know that you're in the industry, at least some potential customers will
come knocking on your door.
Even if they don't, opportunities will present themselves to those who are paying attention. You don't have to wake up at three o'clock in the morning with a radical, off-the-charts new-fangled idea. All you have to do is keep attuned to the possibilities that pop up before your eyes, in the routine course of your day.
Even if they don't, opportunities will present themselves to those who are paying attention. You don't have to wake up at three o'clock in the morning with a radical, off-the-charts new-fangled idea. All you have to do is keep attuned to the possibilities that pop up before your eyes, in the routine course of your day.
For example: suppose you're a street operator. On a
regular visit to a location, you ask the owner or manager, "How's
business?" Nine times out of 10, the location owner will complain about
one or more of his suppliers (the people who sell him everything from napkins
to alarm systems). He will grumble, "They just raised their prices again
and their product or service is poor."
You may not realize it, but opportunity has just
knocked on your door -- very loud. When you get back to your office, take an
hour to check with several similar locations on your route. Find out if they
have the same problem. Some of your other location owners undoubtedly will
voice the same complaint.
Then you can spend a second hour researching the local market for that particular service or product. Learn who provides the best product on the market. Research prices, packages and options.
Then you can spend a second hour researching the local market for that particular service or product. Learn who provides the best product on the market. Research prices, packages and options.
Next, spend a third hour visiting that top supplier
(of alarm systems, napkins, or whatever). Make him a proposal: "Mr.
Supplier, if you give me a commission, I will bring you half a dozen good
locations as brand new customers ... with me, their amusements operator, as
your subcontractor or distributor."
Naturally, the more potential customers (locations)
you have on your list, the better deal you can get from the supplier.
Finally, you take the step where it all pays off. Go back to those complaining locations. Offer to replace their substandard old product or service with the best in town, at very attractive rates.
Finally, you take the step where it all pays off. Go back to those complaining locations. Offer to replace their substandard old product or service with the best in town, at very attractive rates.
Not every location will say yes, but I guarantee
some of them will. Even if the price that you offer is just marginally better
than what your locations are paying now, some locations will switch simply
because they know and they trust your service record. Others will switch
because they know that provider has a good reputation.
Congratulations. You have just launched a
profitable new line for your street route. Best of all, it can often be financed
100% by your locations or by the service provider. If you work it right, you
may not have to spend a dime of your own money. You simply have to invest a
couple of hours and a bit of sweat equity.
Several leading amusement routes around the U.S.
have used this tactic to build up "side businesses" that eventually
become at least as big and profitable as their "main business" of
amusement and music operations. When their game and music income dips (which
happens sometimes), these diversified operators have other income streams to
rely upon. This strategy works for restaurant supplies, security services,
bottled water, location furniture and furnishings, you name it.
These street operators have realized that their
best asset is not their machines, not their service (no matter how great), and
not a few square feet of floor space. The street operator's best asset is his
relationships with his locations.
Success Strategy No. 2.
Find a small -- but profitable -- niche and specialize in it.
Find a small -- but profitable -- niche and specialize in it.
Some of the most successful operators and
distributors in today's industry are those who specialize in a highly defined
niche. They focus on just one type of machine or one machine category. They
become experts in that niche and super-specialists in operating and/or selling
that particular type of machine ... very, very profitably.
Equally important, they don't operate machines that
drain the profits out of their company. They realize that it costs about
$25/week just to operate, maintain, and collect each game when labor, parts,
gas, insurance, yearly reconditioning and administrative overhead are
considered.
Often, these specialists choose a popular machine
that "typical operators" or "typical distributors" refuse
to purchase or promote the sale of. That's why a specialist can get their foot
in the door to locations in the first place (50% of operators do not have
exclusive contracts in place to prevent this) or find great new locations that
other operators are blinded from seeing because they are too busy chasing their
tail 24/7.
These specialists might say to their prospects:
"I notice you have music and games but you don't have dart machines."
Of course, instead of dart machines they might say "boxing novelty
games" or "an ATM" or "a photo booth" ... or any of
several other pieces of equipment including the new merchandise dispensing
machines.
The location owner is likely to reply: "Oh, is
that machine a good moneymaker? I don't have an agreement with my operator, so
if he doesn't want to supply it, I will give you a call."
That is the cue for the "specialist"
operator to make his pitch to the location. It may sound like this:
"Look, Mr. Location Owner, I specialize in
that type of equipment. Here are phone numbers for two other locations, very
similar to yours, where they are making X dollars per week with just this one
machine, supplied by me. Why not call them and ask them about it? If it sounds
good, let me try installing one here in your place."
The location owner may reply, "But I told you,
I already have an operator."
The new operator has a simple answer to this
objection. He says: "Fine, I won't interfere with your regular operator. I
am not interested in running your music and regular games. But this new machine
could add incremental income to your whole place. Let's try it. If it doesn't
perform like I say, then after 30 days we'll take the machine out, no hard
feelings. What have you got to lose?"
Please note, the specialist need not become an
adversary of the location's game operator. Often, the specialist and the
existing operator can become allies. The game operator may know that many of
his locations would like to have a particular game, but he isn't in a position
to buy it -- so he can work with the specialty operator in a win-win-win deal.
The specialist places the game in the location and
agrees not to try to add any other games. The existing operator helps his new
ally in adding games to some of his other locations under the same terms. This
actually works much better than having both operators compete against each
other where one operator "smiles" when the other's game is out of
order.
Specialty operators who use this strategy often
start by purchasing a single machine. They try it out, learn the ropes, and
discover that the right brand operated in the right way makes tremendous money.
The profits from their first machine provide capital to invest in buying new
machines, and their specialty route keeps spreading.
Before long, they have built up a thriving business
based on a single type of machine. I have seen this happen many times. In fact
that is how my brother and I started Alpha-Omega Amusements: with one used
pinball machine placed in my college fraternity 42 years ago.
The refusal of operators to see these opportunities
is the major reason that these opportunities exist. In today's climate, this
also opens the door for manufacturers to operate. Remember, when a vacuum
exists, the laws of nature (and capitalism) dictate that it will eventually be
filled.
By the way, one of the counterintuitive categories
for this strategy is redemption games in street locations, sports facilities,
and everywhere there is high traffic. Ever since Innovative Concepts in
Technologies debuted its Cyclone game in 1995, I have always said an operator
could make money simply by installing a Cyclone (with three player positions
and no moving parts) in any decent location with a reasonable amount of
customer traffic.
To run redemption in street locations, you don't
even need a prize counter or even traditional prizes. Just give away the
business's basic product in exchange for 100 tickets. For example, a restaurant
could redeem tickets for a deluxe hamburger or two slices of pizza. A hockey
sports arena could redeem tickets for a hockey stick or brand-name football or baseball
glove. A bowling center, obviously, could redeem tickets for a game of bowling
on a slow weekday afternoon.
In my first example, I singled out Cyclone but the
same is true for many other redemption workhorses. One day, some smart operator
is going to approach 2,000 FECs who own their own equipment and say: "I
notice you don't have a Bay Tek Big Bass Wheel (or a Namco Barber Cut Lite, or
an Andamiro Winner's Cube). If you can't afford it, or if you just don't want
to take the chance, let me put one in. We'll share the revenues."
I am quite certain a specialized route like this would clean up.
I am quite certain a specialized route like this would clean up.
Success Strategy No. 3.
Less is more.
Less is more.
The "niche specialty strategy" points the
way to yet another approach that can generate significant profits: operate fewer
but better games. Get rid of the deadwood and concentrate on the winners. It
can be easier and more profitable to put one great machine in a location rather
than 12 so-so games.
I've seen many bowling centers with a dozen games
jammed into a small room with a single door, making $50 a week per game or
$600/week overall. The entire location's monthly gross could jump 500%, simply
by removing the 12 mediocre games and replacing them with three or four great
merchandisers with the right prizes and placing the games near the entrance.
Too many operators and locations seem to think that
reducing the number of games in a given site would make them look
"weak" to the competition. They should look harder at their bottom
line and worry less about what their competitors may or may not think.
In the long run, an operator who makes money with a
few strong games earns more respect than the operator who goes broke operating
too many weak games. The old "80/20 rule" certainly applies to our
industry: 20% of the games make 80% of the revenues.
Success Strategy No. 4.
Start small and grow.
Start small and grow.
The three success strategies outlined so far all
have one thing in common: they can be executed very cheaply. At most, all one
has to do is come up with enough money to buy one or two games. Experiment with
them. If they don't work, sell them and you've learned a valuable lesson for a
very little investment.
If the games generate a couple of hundred dollars a
week each, use the profits from the first machine or two to finance the
purchase of more machines of the same type, which can be either used or new.
Some of the largest, most successful game operators
and FEC specialists in this country began this way. The biggest jukebox route
on the West Coast started with a handful of used cigarette machines ... units
that the other industry pros of the time believed were worthless. Several new
operators started by placing LAI's Stacker when it first came onto the market.
This same patient approach -- "start small and
grow" -- is still entirely possible and can still be just as successful in
2011 as it was in 1930 or 1950 or 1975.
No, you probably won't get rich overnight. But you
can build a thriving business in just a couple of years. You just have to
follow those other two indispensable tactics: keep learning new things and work
hard.
No matter what the pessimists say, there will
always be an amusements industry. There will always be a niche for what we do.
We should all be smiling that we have had the opportunity to be a part of this
great industry.
Dan Fioramonti is President of
Gold Fusion Group, parent company of Digital Reveal a consulting agency;
a nationwide digital revenue sharing equipment provider; a
distributor of new and reconditioned games. Fioramonti can be reached at (828)
719-0933 or by emailing danielfioramonti@gmail.com
