One of the most important parts of any business set up process, are the financial projections that need to be produced. They provide a snapshot of how successful you expect your business to become and can instantly show the reader if all the important aspects to running a business are in line and on track.

Setting up a soft play centre involves a huge amount of work and normally incurs significant cost, and as such the financial projections play an even more important role to ensure all of that effort will be worthwhile. The downloadable financial template provides two examples of financial forecasts for an indoor play centre. They are specifically written for a 6000 and an 8000 square foot soft play centre, but can be adapted to suit each readers particular situation.

The article has been written by the Share and Compare team, and should only be used as a guide to help our community produce their own projections. Each individual’s circumstances are very different and this document will try to briefly explain the main points to consider when compiling your financial forecasts.

STEP 1; Where to Start

Producing your forecasts will take time and effort and should form part of the production of an overall Business plan for your business (please see our “How to Write a Business plan for a Soft Play Centre article” to be released soon). To be able to produce such a document, you will have had to complete a good deal of research and understand the basic principles behind your business before you can produce a worthwhile and accurate document.

There is help available for those that feel daunted by the prospect of producing financial projections. This is very often the case as many potential operators have no experience of this kind of work and also do not know where to start in regard to the figures themselves and ensuring they are accurate.

Your local Government Business Link provides some good advice and ideas in regard to Business Plans and Financial Projections. Although not directly related to soft play centres, it will help you understand the fundamentals behind the process. Also high street banks and some Asset Finance companies that specialise in the softplay market can provide good advise on the basics behind financial projections and the sort of document these institutions normally like to see when they have them presented to them. This advice is normally free and part of the service, so is always worth considering for any budding indoor play centre operator.

It is also advisable to speak with an accountant, who has expert knowledge of accounting principles and will be able to guide you through every step. Unfortunately this normally incurs significant cost, and not all accountants will understand the soft play centre business. However this is not necessarily a negative, as fundamentally the basics behind writing business plans and financial projections are the same for any business, and articles like this one have been produced to try and help you relate your work back to indoor play centres.

STEP 2; The Figures

One of the biggest problems potential soft play operators have is obtaining accurate information against which to base their projections. How do I know if the number of birthday parties I have predicted is accurate? Is the rent I am paying too high? Have I allowed enough money for the set up phase of the project? These are very common questions and quite understandable, as it is not easy to find information that is relevant to you.

You will find that some Play Equipment suppliers will help guide you in terms of projections, mainly through giving you access to some of their customers to explain their business to you, and this information can be very useful to help get you started. However it is wise to be cautious about some of these figures.

Firstly because you cannot assume that someone else's business reflects yours just because it is in a similar location or is a similar size. In the soft play industry it is not uncommon for these types of businesses to perform very differently from centre to centre, as there are so many parameters that make the difference between success and failure. This makes it very difficult to predict exactly how your business will perform based on another business, and although it is well worth getting the information, be sure to complete other research alongside it.

Secondly, many of these operators will run successfully operated indoor play centres, and have been chosen to help make you feel that your business will also become successful if you follow their advise. It is obviously in the interests of any Play Equipment supplier to try and make you feel as comfortable as possible about starting up your indoor play centre, as it ultimately leads to the purchase of equipment from them. This is not to say that soft play centres cannot be successful, on the contrary, many are run very efficiently and turn a good profit, or that the Play Equipment suppliers do not understand the business properly, as many are very knowledgeable and experienced in the industry. Simply make sure you use any information that you receive in the context of how it was given, and be sure to work with a supplier who has your interests at heart and provides advise that make sound business sense for you.

STEP 3; Overheads

When starting your financial forecasts, it is often wise to start from the bottom up, that is to understand each of your overheads first and then worry about the revenue figures after.

Your overheads comprise of fixed and variable costs, and are effectively all of the monthly costs you incur when operating your business.

Fixed costs are those that do not change from month to month, and will have to paid no matter how your business is performing and can include:

• Rent – This can be monthly, quarterly or in some cases annually, and should not be any higher than £8 per square foot (See our “How to Choose a Building for a Soft Play Centre Guide”).
• Insurance – Can be paid annually or monthly and is normally between £4000 and £9000 per year. (Compare insurance suppliers here).
• Loan Repayments – These vary depending on how much you borrow and it is advisable to not borrow more than 50% of the total project cost when starting up.
• Full Time staff – Often this may only be you as the operator, and it is wise to be cautious and see how the business is performing before taking on many full time staff. Also remember the national insurance contributions that go along with this and any benefits to be provided such a sick and holiday pay.

Variable costs are costs that change from month to month according to how your business is performing and allow you to have some element of control over them. They can include:

• Food and Drink – These will vary each month depending on what you sell in your café and you can assume that you will make a profit margin of approximately 50% on your average food and drink sales.
• Utility Bills – Although these are difficult to change dramatically month on month, being conscious of how much electricity, light and heat you are using each day can help to keep your bills to a manageable level. The monthly utility costs vary from play centre to play centre so it is difficult to put a figure on them.
• Part time staff costs – These should reflect how well the business is going and can move up and down month on month. It is very difficult to predict staffing levels because of the impact weather can have on the how busy a soft play centre is and it is very common for new play centres to over staff until they gauge how to operate the business. Overall staff costs should ideally be less than 25% of your total turnover each year.
• Marketing – This can be very seasonal as soft play centres only run marketing campaigns during certain times of the year. During the set up phase of the business marketing costs are likely to be high as you try to raise the profile of the business, but it is important not to forget to allow for some marketing throughout the year. There are also a number of Free marketing applications on the web that can be very effective marketing tools for play centres.

Once you have an idea of your fixed costs, you will very quickly be able to determine your break-even point. This means when you reach a point each month/year where all your fixed costs have been covered by the revenue you have generated, and in theory means your business is viable.

This break-even figure should then help you to determine your pricing levels, so you can start to formulate your forecasts for the sort of revenue you expect to achieve.

STEP 4; Revenue

Traditionally soft play centres have generated 3 different revenue streams, and they were split into thirds in terms of what each revenue stream would contribute to your overall turnover. These traditional revenue streams are:

1. Admissions
This includes every person who walks into your soft play centre and pays to use the facility for a certain period of time. Most centres only charge for the children, but a few do charge adults as well, and the pricing varies from play centre to play centre. Your pricing should reflect the area in which you are located and it is not always wise to under cut the competition, as once you have set your pricing, it is very difficult to justify increasing it. You should also consider during certain periods, when your centre may be quieter, offering special deals on the admission prices. It is always better to have customers in your play centre spending money in other areas, than none at all, and special offers at the right time can have a positive impact on the whole business.

2. Party Takings
This includes every child that comes to your soft play centre for a birthday party. This is usually charged for on a per head basis and the parents of the birthday child will normally foot the bill for this. Again the price per head varies across the country but it is important to understand what your costs are per head before setting the price. A party often lasts for 2 hours and will include the supply of food and drink on your behalf, along with party bags and invites if you so choose, so ensuring that you achieve the right profit margin per head is vital. The party business is the corner stone to any successful soft play business, as this easily allows you to set your staff rota accordingly and with confidence. Most successful centres will average well over 20 parties per week, and it is important to spend a lot of time researching your competitors and coming up with a party offering that is both exciting for the children and good value and effortless for the parent.

3. Food and Drink
Every soft play centre worth visiting should provide a café for its customers, both to add to the experience for the children and parents, and too generate a large revenue stream in the process. The menu you offer can range from simple snacks and sandwiches to fully prepared dinners, but either way the pricing needs to be set according to your costs and the area in which you are based. Items such as coffee and sandwiches can have a profit margin as high as 80%, whilst minerals and confectionary can be as low as 30%, so getting the right mix of products is very important if you are to make a real profit from your café.

These are the three traditional revenue streams and quite often they each contribute a third towards the overall turnover as we mentioned. However, it is not uncommon for the café to provide a larger percentage than that, or for the admissions to drop below that figure. For the purposes of a financial forecast, using the thirds theory makes sense, but you must consider the market you are targeting and your competition and the affect that will have on any one particular category.

Also it is important to remember that there are a host of other revenue streams that your soft play centre can generate on top of the traditional. Remember you are destination centre that attracts both children and parents, and it is crucial to try and get every square foot of your soft play centre making money for you. Some additional revenue streams can include:

4. Room hire outside of normal hours
This can include linking up with local clubs such as dancing studios or karate schools and letting them hire your space each week to provide a regular income for you. It can also include running exclusive parties, allowing customers to book the whole soft play centre, and this can work extremely well at Christmas time with local companies.

5. Additional Activities
On top of your normal soft play area, it is often very wise to consider adding other activities for the children, and some of these will generate extra revenue for you. This can include; Battery operated Go-Karts that have proved to be a huge hit at most soft play centres and provide excellent revenue; Ceramic Studios to offer children and parents an educational and creative experience that can significantly increase the spend per head of each customer; Interactive/Kids fitness products that can be aimed at an older age group thus increasing your overall income as a result of providing for a different target market.

When setting up your soft play centre be sure to spend your money wisely, and think about the return on investment you will be getting from each purchase you make. Successful indoor play centres often have several revenue streams beyond those created by the soft play equipment, so think carefully about your budget for each activity you purchase for your centre.

6. Revenue Share Machines
Although not everyone’s cup of tea, these machines are often provided free of charge by the supplier, and can generate extra revenue for the operator every single month. It is important not to swamp your centre with these types of machines, but having one or two can prove to be a nice extra boost to your income.

7. Group Hire
There are often many groups within each community that are looking to find new fun and exciting activities for their members. These can be toddler groups, special needs groups, schools etc, and all can help to provide you with regular weekly income, particularly during the weekday periods, when you will be at your quietest. Be sure to try and make contact with as many organisations as you can and be prepared to offer a reduced rate, because as we have previously mentioned, it is better to have them using you regularly, even at a reduced price, than not have them at all.

STEP 5; Financial Templates

The following templates have been produced merely as a guide to help start you in the right direction. Please feel free to download the excel versions and use as a template, but be sure to enter your own figures based on your own research rather than using the data we have included. The templates are based on a 6000 and 8000 square foot buildings respectively, and have been produced using data received from a variety of soft play centres across the country. As such, although it will give you a good indication of the sorts of costs and revenues to expect, you need to apply to your own situation and make the necessary changes before using it as a guide to your own business

Please note:

This document is based on the personal experience and research of the author. It does not constitute advice and any information should be considered with regard to specific circumstances. All information is utilised at your own risk and should be followed up with your own research. See our full Terms and Conditions and Privacy Policy.