Virtually everything I have ever read advises against using credit cards to aid in the startup of ANY business!
As all haunted house owners and enthusiasts know, getting financing for a haunted house start-up business is no easy task. What do you think about starting up by use of credit cards as an alternative option?
Virtually everything I have ever read advises against using credit cards to aid in the startup of ANY business!
Assuming that you qualify for the amount of credit that you would need to get those big of credit cards, that is still a bad idea. If you take out say $5000 and gamble on making that back that is one thing, because odds are you will get 500 people to come at $10, but to finance the whole project on something that could potentially be charging you 20-30% interest that is not good. If it rains, snows, etc. and nobody comes you would be out all of that money plus that high interest and it would just keep compounding. Just keep saving until you have enough to start something small and slowly build your way up. We saved for almost 10 years until we had enough to do a pro haunt the way we wanted to, now we are adding attraction 2 this year and trying to steadily grow without taking on much debt.
If you walked down to your local branch of whoever, you could probably get a home loan for 4% on a fixed 30 year loan if you had excellent credit. If not excellent credit, then at least you'd get close. It would go up a few percentage points, perhaps, but at least you'd be done in 30 years, or earlier if you made additional payments to principle.
With a credit card, you're paying 29% out of the gate (and out the wazoo) on a debt you will probably never pay off.
You also need to ask yourself some serious questions at this stage of the game, the first being, what do you actually need the money for? Seriously.
I'm guessing it is probably for rent on the location, but in general, you need to make a serious reckoning of what you think you'll specifically need the money for, and how much.
People like Greg Chrise, Allen Hopps, or JB Corn back in the day, can take $5K and make an excellent haunt that could turn a profit, or at the very least break even on, and then they would own an asset they could build on each year and improve. Granted, it won't have all the bright and shiny "bells & whistles" that we think we'd like to have, but it will do the job, and they'll make money with it in the process.
However, the minute lots of "free money" enters the picture (or this classic:"the bank's money", as in "hey, let's play with the bank's money, make a ton of money on our haunt, and put it back before the bank even asks for it!") - and we start thinking in terms of 3000+ patrons our first year, at $20 a ticket (more like 800 patrons in some markets) - then suddenly we think we're rich before we've even started, and we start spending money on paper that we don't have, and may not have for several seasons (if we're even that lucky). Suddenly we want to buy up the entire catalog of Unit70, ScareFactory, and FrightProps. Of course, we congratulate ourselves on how fiscal-minded we are by just getting the "cheap" animatronics and props at $2K a pop (and not the $10K a pop animatronics) and think we're real haunt pros and businessmen. But ultimately we are spending money we don't have, and if this is your first year haunting you have no idea what kind of return you can realistically expect see in your market in even ideal conditions.
You also won't realistically be looking at $20 a ticket. More like $10 a ticket.
So, for every purchase we make or dollar we spend, that's X number of tickets we have to sell. That's X number of dollars we won't be seeing in profits. That is a cold, hard, unforgiving form of accounting indeed. I've seen people talk about paying $2000 ("wow, what a deal! I could have spent $10K!") for an "animatronic" that they could actually have made for less than $200 (or even less than $100 with some dumpster diving) and get an animatronic that is twice as good as what they could have bought. But instead, now having paid that $2000 for that one prop, they now need to sell 200 tickets at $10 a pop just to amortize its cost. That's no way to run a business, but that's how a lot of "business minded" first-timers go about it.
Oh, but the good news is that they did mention that $2000 prop in their "business plan".
Based on your previous posts, I'm guessing this is for rent. How much is rent? You are renting out a local rodeo venue? Based on all of the "outside" questions, does this rodeo not have a roof? The local Mesquite Rodeo here in DFW does.
So, how much is the venue going to cost you in total, and if this is a non-profit haunt (for charity, perhaps?), can you get certain costs donated?
Last edited by BrotherMysterio; 06-29-2012 at 03:39 AM.
About what became a very famous haunt that was started by maxing out a stack of those plastic cards,,, and it was never all paid back. The owner hid out from creditor's phone calls all of his life.
Many "forces" beyond a haunt owner's control can cause many unplanned expenses too.
Most assumed the haunt in question was very successful and in many ways it really was, but not financially.
I know a lot about the personal satisfaction part of haunting. I'm not open every night of the year for just the munny!
I have so much fun here! It can be highly contagious, my patrons often catch it from me, but don't complain.
I would not use credit cards for more than $10,000. that also needs to be the first money you pay back. Also try to spend the $10,000 on real items you will keep as opposed to intangibles like marketing.
Sure, is that what they are calling it this week? Instead of "The Olde Shell Game"?
It's like hitting a moving target in the dark with no starlight scope and half of your ammo are dud rounds!
THE only thing that brings people is a excellant experience their friends or relatives have suffered within your haunted enterprise., but if you like to just spend money and the momentary rush associated with the draining of a Bank balance, then go for it!
The ways in which our society communicates has changed and is changing almost constantly. $3.90 worth of spray paint on a rest room wall worked advertising The Rocky Horror Show in New York MANY years ago... but.
25 years of asking new customers how they discovered Ravens Grin, it has never been an ad I paid for or a billboard, or a nice article in even a major city's newspaper," but last week my friend was here and he said...."
We each get one chance to make a good first impression and that first impression can make all the difference in the world.
There are all kinds of "credit" offerings that require no intrest at all like exchanging a percentage of the ticket for rent payment. It could be less than the space usually gets or it could exceed all expectations and pay more than the space would normally raise but the credit comes with no strings, no monthly payments and no accumulating intrest.
Same thing with key people that need to be paid, pay day is in November when the reciepts have all been accounted for.
Materials can be from genuinely helping someone get rid of three trailer fulls of 3/4 inch plywood and stacks of 2x6s that were left on a property and now are a haven for possible rodents and a fire hazard. In other words work by you equals free.
Focusing on paying cash for only raw materials instead of buying turn key props, literally picking things up on trash day like odd furniture and file cabinets that might be a lab scene. Sort of having a predetermined idea of what can fit into scenes and things that can be repurposed into things that look like other things.
It is a little easier if your day job has you traveling all over the place seeing what the disposable society is wasting. Being around contractors that over buy building materials and would rather give stuff away than have a never ending storage bill for things they may never use again. Most real construction jobs want the new stack of materials dropped off by a truck because the customer paid for it. They aren't into recycling stuff that has been in storage for a year or waste labor on trying to get the nails out of things.
It is an entirely different mind set. I'm not saying become some weirdo hippy dumpster diver that also managed to stock up on 6 months worth of food that way too but, there are opportunities everywhere.
There are also lots of new haunt start ups where they bought $125,000 worth of crap and marketing and everything is for sale at 20 cents to 30 cents on the dollar that can be transformed with left over paint and a tint kit. So you do indeed spend some money on gas, trucks, 2 meals a day, mass quantities of coffee and dog food. Some dollar figure per day that in the real world might be considered poverty. You do end up with monthly storage bills where others just refused to do that. So you don't have an outdoor kitchen but you have a sustainable business.
Your time is worth money. That is the goal of how many customers need to show up, not some payment that needs to be met. If you use credit or get a loan, that 20 to 30% income is going back to someone else and not you. Generally in any business that is the total percentage of profit actually available and some one else wants it. You get nothing. There is no reason to buy expensive things and expect to turn a profit 3 years down the road. BY finding some opportunities it is the same as getting paid now by saving money. If a free 2x6 can be ripped on a table saw and become the lumber for a whole wall, you just saved $7.50. Well, you just earned $7.50 in about 20 minutes. You find materials on craigs list $1 a sheet of plywood or $3 a sheet or some whacky deal where you have to take all kinds of crap and sell what you don't want or can't use. Trade it for labor to help move things around or screw things together or paint base coats on things. You are making/earning money.
Anyone can spend money but very few know how to make money. If everything was free, the pressure is totally off. Even if only 50 people show up you profited because everything was already paid for. Don't quit your day job but afford yourself the time to look around a bit. The other mistake everyone does is it will happen by such and such date. Bullshit, it will happen when all the stuff is here and there is nothing better to do than open the booger up. Once you have all the tools then others get excited about what opportunity can really be. People that have stuff and see your stuff as something they would have to spend a small fortune on. And typically they don't have the time or the skills to do all of this. So you get paid.
There is no rhyme or reason to how and when exactly a certain thing gets built, it comes when the deal is there or the materials become available. You get entirely out of the consumer society. Those are the people who buy tickets to escape the daily grind. Credit is something created to make you a better consumer. Not really a business owner that can just pay for things and be able to do exactly what your said you would do.
Look at all the things around you and see things in a different perspective. Haunts are the best thing in the word because everything is supposed to look damaged and old anyhow. Try not to bring home termites but, why take brand new stuff and spend so much time making it look old.
Any topic you want to bring up, lighting, sound equipment, computers, everything has demanded the newest tech every 2 years and as a non consumer who cares if a prop is actually running on an atari 600. It is the same damn processor, always has been as the you program it fancy boards for $550. Someone is using that as a door stop right now somewhere.
How did people make things before there were all of these fancy things in cans and bottles at the big box stores to be convieniently purchased by Joe the consumer and his family. You just made something in the future on prices from the past. Your brain just took 1968 prices and times ten happens and you get paid the difference. You don't have to go all the way back to the 1500s but history and science helps.
Not just haunts or haunting things, I watch people all the time go rent a building, buy all the crap they think should be in there and buy all the special tools, all top grade stuff before they even really know how to do what it is they think is their business of a lifetime. Then they find out no potential customer is as excited about what ever it is and the rent is still due every month and the work they do get, they find out is is work they are doing to pay this rent. Then it isn't fun for some reason. They shut down and don't want to do any challenging work and would rather shut down and stop because it wasn't magic. There is always an excuse, they didn't get the second loan, the locations wasn't right, they found out you had to pay people you hired before youself and fill out all kinds of forms. Instead of just going to work to begin with and earning everything at a pace that you can not lose with.
The collection plate will be coming around soon, dont be skimping.
I just came up with a new hobby. I'm going to start asking homeless people if I can review their business plans. They all look better groomed, better rested than I do.
I read somewhere that at least half of new small businesses are financed at least in part with credit cards. The number goes up and down depending on the economy and how tight banks are with new loans. I have struggled with this decision myself. And as everyone has pointed out, it should be a decision not to be taken lightly.
My wife and I compiled a larger credit card balance than Mr Hopps suggested when starting our non-haunt related business. I have to say it was not as risky an industry, and after 7 years have finally gotten to the point it will be paid off soon. In the end it was DEFINATELY worth it. Obviously, I can only say that because our small business has been successful even in this crappy economy. I have seen many others fail, and I'm sure they are not glad they ran up their credit card debt.
Like the others have said, you have to be frugal. There is great temptation to burn through money you have yet to earn, and it's probably one of the most dangerous aspects of our modern society. It is the source of many heartbreaks, divorces, and failures... but it has also been the way many people have been able to reach their dreams. There is much truth in the old phrase: "It takes money to make money." Tread lightly!
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