Industry sector: Leisure

Amusement arcade: Capital expenditure


Now that you have given further thought to exactly how your business will operate, you might like to revisit your estimates of capital costs to make sure that you have identified all of the items you will need and any other capital costs you will incur.

Rather than leasing them, you may decide to buy either new machines or secondhand, re-conditioned ones. Although the Gambling Act introduced new machine standards for gaming machines, you can still operate older machines - called legacy machines but they must have a sticker on the side saying what category of machine they are and they must comply with certain standards. It is very important that secondhand machines are only bought from a reputable dealer. As well as buying the initial batch of machines when you first open up, you are likely to buy replacements on a regular basis so that your customers do not become bored with your games. In many cases machines are replaced after three or six months, with the old machine being taken in part-exchange for the new one. (Another alternative would be to enter into a share basis with a supplier. This doesn't involve any capital investment from you - instead they will site the machines at your premises in return for a share of the net takings. A 50% / 50% basis is common. Although this type of arrangement is more usually found in businesses like pubs where the main activities are unrelated to gambling, you may consider it for your arcade, particularly in the early days.)

Don't forget to include any expenditure on your arcade such as sign writing, or having your logo and livery put on any vehicles. Make sure you have thought about the security measures you will put in place - you will be handling a lot of cash and will be vulnerable to theft.

If you are paying cash for all the items you are buying for your business, enter the amounts - including VAT - in the months when you expect to pay for them.

If you decide to buy some items on hire purchase, or with a loan, enter the deposit and the monthly payments in the months in which you will pay them. These payments will be made up of both capital and interest. Enter the capital here and the interest under 'Bank/finance charges and interest' in your cash flow. The agreement will identify the amount of interest payable annually - if you deduct this from the total amount you have to pay each year the balance is the capital.