Editor’s note: This article was first published in July 2010, when internet call shops were common in Spain. Its prices (1 euro per hour of browsing, an average wage of 8 euros per hour) and services such as phone booths, top-ups and DVD rental belong to that period.
Seven out of ten internet call shops or internet cafés in Spain close before their second anniversary. That doesn’t mean the business isn’t profitable; it simply means the entrepreneurs who opened them didn’t understand it. To understand this business, start from the idea that the profits are not in the computers. We explain below.
It’s worth pointing out that there are very few true internet cafés in Spain; the vast majority are internet call shops (known in Spain as locutorios, offering phone booths and computers). Most of those call shops had to close for these reasons:
1. Thinking that a small space with 5 computers and 4 phone booths can make a profit, which is far from reality. If that’s all you do, even if everything were occupied 12 hours a day, you probably wouldn’t even cover the rent on the premises. Most places I’ve seen charge 1 euro per hour of browsing. With only 5 computers, your maximum revenue per hour from them is 5 euros, while an hour of an employee’s time costs 8 euros on average.
2. Not creating side businesses is another major mistake once you’ve worked out the numbers. A simple coffee or drinks machine would be enough to boost revenue, but most of these places were so tiny that installing a soft-drinks machine would have meant removing a phone booth.
3. Not accounting for the fact that a single repair can wipe out everything a computer earns, especially if you have no IT experience and have to call a technician to fix the problem.
See also: How to manage a small business in times of crisis
Now that we’ve seen the mistakes that make the business unprofitable, let’s turn to the internet call shops that are profitable. How do they do it and secure a high income?
Your core business is not the computers or the phone booths; those are the extras. Did you know that selling 2 coffees or 2 soft drinks would earn you more than a computer does in an hour?
Whatever people may tell you, the internet call shops and internet cafés that do best are the ones with more space. In them you can find CDs, DVDs, printer ink, office supplies, soft drinks, a coffee machine, video game rental or sales, and so on.
One business that complements an internet café, even though it is not entirely legal, is phone unlocking.
They also usually sell mobile phone top-ups for every carrier and offer a repair service for phones, consoles and computers.
This means that even if nobody sat down at the computers to browse, you would still keep generating income, with the phone booths and computers acting as the draw for customers.
The more complete a business is and the more services it offers, the better. Then there are other details, such as complete customer privacy, with customers properly isolated or separated by side panels. We may not think it matters, but many internet café customers are either children who want to visit adult sites, and who would feel intimidated if someone saw what they were doing, or people who prefer to visit certain sites from an internet call shop because of the risk of viruses on their own computers.
In a Spanish city, on a very central and busy street, I know the most profitable internet call shop in the country:
- 125 computers running 24 hours a day
- 15 phone booths
- A range of vending machines built into the business
- Phone unlocking
- Phone top-ups
- Sales of computer books and manuals
- Computer repairs
- Film and game sales and rentals
- Rental of computer equipment, printers, scanners, etc.
They have achieved all this in premises of 270 m², and the owner himself has admitted that most of his profits, which are far from negligible, come from customers who never sit down to browse.
Clearly, a business still waiting to be exploited in Spain is a full-fledged internet café, where customers can have breakfast, enjoy a drink and use a computer.
Remember: a variety of products and services equals guaranteed profitability.
Featured image: Chuck Moravec, CC BY 2.0, via Wikimedia Commons.
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