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Hi folks!
This will be part 1 of 2. On this post I want to write about the experience of launching an Escape Room establishment in our area (Bethlehem, PA, USA.) I'm half using this as a way of jotting down all my thoughts that I've gathered over the past 5 months to see the progress my partner and I have made, and also to share with the awesome community of r/entrepreneur. Will try to keep it as brief as possible.
--Idea
It was around January of this year that a friend of mine approached me about an experience that he had. Him and a couple of his friends went to an Escape Room in Philadelphia after hearing about it from a close contact. None of them had any idea what the concept was and what to expect. I also had no idea what it was when he reached out to me after his experience, but as he started describing the concept it grabbed my attention. He was looking for someone he could partner with to potentially bring this to our area since there wasn't one at the time.
For those that don't know, an Escape Room is a game concept were a group of friends/family/coworkers have a time limit (often 60 minutes) to solve the puzzles and clues in a room. This could be figuring out a code to deactivate a device, finding an object, or unlocking a door.
I let him know that I'd do a little research so I can learn more about it. I found two key things during my research:
a) The concept was blowing up across the US, and had been a tremendous success in Europe, Asia, and Canada. b) The business model appeared rock solid and very profitable.
After doing some quick math I figured that we would need about 15% utilization in the weekends to break even if it was 100% owner run. Anything past that was money in our pockets. The overhead also seemed low - all we would need to handle was rent, utilities, and insurance. During my research I saw that basically every competitor was 100% booked during the weekends.
I very quickly decided to go ahead and start it up. My thought process was that if we only do 15% as good as everyone else, we would break even and it would be a tremendous learning experience, and we would go down as the worst business people in the history of mankind. Not bad for breaking even.
--Ownership
Next was figuring out ownership. As you know the concept was initially brought to me by my friend as an idea, and he informed me that there were a couple others potentially involved that were in the initial group that did the Escape Room in Philly. By the time we had our first owners meeting, there were 7 people, all friends. I'm sure you can see where this is going already.
We initially started by figuring out the structure we would use to pay ourselves. We decided to go with an LLC (partnership) with 7 owners, dictated partly by $ invested and % time contribution. This proved to be a challenge to nail down. We settled on a number that we required to get the business started, and we discussed the $ commitment from each member, and reran the exercise with time. There was a high variability and distribution of available $ and time depending on the owner, so attempting to come up with a fair % share of the company was very difficult.
As we moved towards getting that settled, I began work on creating a Business Plan, as well as social media, marketing, website, and all that other jazz (and a name of course.) As we got closer to signing on the dotted line, 3 out of the original 7 members dropped out due to various inabilities to commit, all legitimate. This is a much better outcome than people signing up and not being able to carry their weight with the company.
Ultimately we came to a disagreement. One of the remaining 4 members wasn't able to put forth a $ commitment, but he had time available to be invested. I made the tough (and potentially unfair) decision to not want to partner as an owner if this person was involved due to it causing an imbalance to how ownership would be dealt. I figured that it would be very tough to justify true value of time if a lot of the tasks this person would be handling were during hours that we had little to no revenue (this person was tasked working on weekdays, but Escape Rooms have a huge percentage of their revenue come thru during weekends.) It made no sense to me, and so I communicated my thoughts and made a final decision. Unfortunately, another member (the same one that initially brought the idea to me) was very close to this person, and decided that if he wasn't able to be part of membership, that he wouldn't in good faith be able to be part of the company, so he pulled himself from the company (along with his money).
Since I did a tremendous amount of the legwork to get the business started (close to 90% of the work) I had little issue with taking the concept and company forward. The phrase "don't do business with friends" has been uttered many times, but unless everyone is able to completely separate friendship from business, feelings will get hurt and there will be fallout. I find it an unfortunate part of business, but in my eyes its necessary to prioritize the health and well-being of the company first and foremost.
I do have left-over guilt and heartache about this since the idea was brought to me initially, but since I did all the work required to make this a reality, I felt it was within my right to continue forward. We've talked very briefly since but our friendship is not what it used to be. I look forward to mending this in the near future.
--Making it real
Now there were two. My partner and I decided to reach out to a couple close friends (previous lesson potentially not learned?) for the remaining funds needed. I made it very clear from the beginning that I was simply there for their money. If they trust me, they can hand it over and I'll try to get them a return. The condition was that they had absolutely no say in any decisions whatsoever, and would purely be acting as investors with no ownership rights to the company. This was a quicker sale than anticipated, which perhaps I shouldn't have doubted. They are both business savvy people, so I'm guessing this helped them become comfortable with the idea. Not only that, but they seem to trust me, and this meant quite a bit to me. Now it was my job not to lose their money (and if I did lose it they were OK with it being gone forever. I'm sure I would owe them drinks for years to come however.)
Once we locked down the funds, we went on search for a facility. After a couple months we were able to lock down a space that was almost tailor built for our concept. It was well within budget, and there were no needs for renovations, was in a good location, and had all the amenities we were looking for. It was almost a little too-good to be true (our landlord is awesome to boot). I'm still bracing for the other shoe to drop. We signed the lease and started doing work for prep.
In the meantime, I purchased booking software (Acuity), accounting (QuickBooks), decided on our preferred website builder tool thing (Squarespace), set it insurance, get a business license, get zoning approval (which in itself was an adventure since none of the townships had any idea how to categorize an escape room), and set up inspections for a certificate of occupancy.
During that time, I started doing a ton of research on best ways to market the concept. There were three primary ways that I found were most important:
a) SEO: Search engine optimization is obviously a huge one. Escape rooms are mostly (if not all) booked thru a website portal. It was super important for us to show up very clearly on any website searches related to Escape Rooms or "things to do." So far we have keywords related to "escape room" in our area locked down, and are working on getting better visibility for stuff like "team building", "stuff to do", and things like that. I'm still a newbie when it comes to SEO so I continue to read up on it on a daily basis. This subreddit has had a ton of useful information around the concept which has helped me a great deal.
b) Google Adwords Express: I have a small monthly budget that I use for adwords on google. I was initially working on getting a regular Google Adwords account set up, but it seemed like way too much work (and I was having a tough time grasping the concept.) I came across Adwords Express which made it WAY simpler for me to set something up. I'm still not 100% sure how effective the tool is, but it does show that I get about 10-20% of my traffic from that tool, so for the time being I'm keeping it open. However, as we rank better on Google I may scale back or completely remove the budget for Adwords.
c) Facebook: By far the most effective. Setting up ads in Facebook was an eye-opening experience. I fully understood the value of Facebook after running a couple of ads on there. I was able to set up a location radius around our facility, and target specific age groups, genders, and interests. I've found that running multiple ads and weighing the effectiveness of each has helped me narrow down the best variables to choose when creating an ad for our business. Also, videos get about twice as much interaction as pictures on Facebook. Learned this over the weekend.
--Where we stand now
As of today, we have officially opened our bookings for first date available on June 24th. We've gotten some very positive response on Facebook. Our traffic has about tripled in the last week since we officially opened bookings (about 70% of it coming from Facebook), and have generated about $400 in revenue in the past 5 days. We are basically millionaires (in reality though, having that first booking come thru was one of the best feelings ever.)
We are finalizing a couple concepts in our rooms and preparing for testing. We also have a couple outstanding items we need to address to that we receive our certificate of occupancy, but we will be able to rectify any needed work well within the time that's left.
In part 2 I will write about our experience as we go thru the actual process of running the business with the general public, as well as an overall lessons learned (and stuff that needs address.)
Hope this was a good read for y'all. Let me know if you have any questions and I'll be happy to respond!
Website for those interested: www.humanvsroom.com
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