Haunt Venture Capital Organization?

[Evilution Unlimited]

If there is one thing I have noticed, it is that banks are not lending money right now. Not that they were ever inclined to lend money to an individual or company to start a haunt with to begin with, but now it is even worse. I applied for an SBA loan and was turned down (big surprise there). I have now begun the process of looking into other funding sources as I am broke as well as most of my friends and family. Venture capitalists want at least 5 times their investment paid to them in a 3 to 5 year period and Angel investors want 20% of your take (which is not much for a starter haunt thus are not interested)
.
This has lead me to the thought of why don’t haunters fund other haunters? There is money to be made here as we all know and if the haunt is not in your market, then why not? Now there is a 60% fail ratio in the haunt industry within the first 3 years so the investor would have to take a look at what the would be haunter had to offer in quite some detail. If the individual needed $100,000 or so then almost no one could lend the whole amount, but maybe 25 people could lend $4,000 with a 25% return on investment? You can bet that is better than the stock market right now.

Just throwing this out there to see what everyone thought, a haunted house venture capital organization?

[Jim Warfield]

Technology Could Help This.

Trust is a big, huge factor in business dealings but with the tech. today if all the on-line tickets from credit cards went into a bank account to be divided up later, maybe trust could be created or at least vastly enhanced.
I have met haunters who were promised a salary for building and managing someone else's haunt and got absolutely nothing.
And that "door" can sure swing both ways too.
I will not list the 300 things and reasons this could not work.
The idea could be really a good workable, successfull thing if some really knowledgable haunters were to look everything about the potential business over first, then it could be an excellant investment.
When money is easier to come by either as a loan or the money customers are handing you, then nobody has to work as hard. This whole thing would require many hours, phone calls, visits but after it was more figured out after the first season or two it could become streamlined and a procedure adopted .
There are many variables to consider, we all know that.

[Evilution Unlimited]

I would agree, trust would be a huge factor here.
It would have to be something along the lines of a limited partnership, that way there is some legal backing to the deal.

In terms of knowledgable haunters, that is where a very good business plan would come in (as it would with any venture capitalist). Take a guy like me for example, I have a degree in accounting and have went to haunts since I was in the second grade. I have gone to all of the Midest Haunters conventions, a few Transworlds (when I could talk my way in, not being an owner), and can tell you anything you ever wanted to know about the demographics of my area. I have two years worth of floor plans pre-done, a budget down to the cost per board, and a conservative profit projection for several years ahead.

What it boils down to is yes it is a risk (as there is with any investment that pays higher than 2%) but Haunts are not taken by the professional world as being a "real business" and this oppertunity is being overlooked.

[Terrorknight]

Yeeeaaah Right

I've been in the haunted house business for 15 years now and from my experience most haunters don't trust each other to pass out each others flyers to co-promote , not alone lead money for someone else's haunt. I don't care were it is in relation to there's. Now I'm not saying were not friendly and we don't hang out when we can, but money I never see happening.

[Evilution Unlimited]

That is why the investment needs to be small. I know you are saying $4,000 is not a small investment but when you think about it that is like two small animatronics or one medium sized animatronic. Will that animatronic single handedly double your investment in 5 years?

I think this idea is one an organization such as the HHA or IAHA should take into consideration. If they do it and it is successful, then maybe individual haunters will join in. This sort of thing will also help bring validity to the industry as a whole.

Also haunt owners that do trust each other reap the rewards. Discounted rate advertising is one, look up at New England for an example of that. Take trade shows for example also. In helping other haunters you can learn from them as they grow and improve your haunt. Look at the droping picture, some haunt owner figured this thing out and now you will be hard pressed to go to a haunt that does not have one.

[Greg Chrise]

In the real world of business opportunities even an Angel would want their money back plus their percentage fee showing a profit per year. It is done all the time, where people put products on a merchandisers shelf or in the hands of an installer but expect full payment in 30 to 90 days. That is still maybe a once per year cycle as opposed to 4 times a year, determined by the actual demand for the product.

Real intrest pretty much compounds to be tripple the money in so many years. And so the fear and worthiness has to do with the resource of the would be haunt owner. If they do not achieve a one year goal, they might have to have a decent enough income to cover the loan in a calendar year.

It has always been said to get credit you pretty much need to prove you don't need it. Somehow in your business chart having other people's money invested offers so much more return than if it was one person being a small business. However this is just one way of doing business. Some may yearly go through $100,000 or more in seed money and pay back every year that plus a percetage to so many people. It buys anything from advertising to rent which has no real refundable value. The bottom line is it occasionally works out and is repeated every year. Every year investors have been groomed to add more and more per year, and they get more and more in return. This style of operating however never becomes an independent entity that no longer needs investment capital.

The other extreme is a guy wanting $4,000 to build his haunt walls, he may infact even with marginal effort see 800 people and make say $8,000. This scenario requires specific control of the ticket booth and verification of attendance. You may have made some percentage but, if you accounted for watching over the daily numbers you might have made $2 an hour rather than a return on your investment. Plus he really was expected to give his uncle some money for renting the property that exceeded this investment. Somebody loses.

Additionally if you are an investor and this return of your money is income, so much of it is chewed away by taxation. Some one opens a business and provides a product and service expecting to double their money. In other cases small business owners really don't get a pay check and survive off of 4% of the proceeds and this is considered a profit.

There are so many styles of business and so there are so many operating styles patterned after that as well in the haunted house field. There are too many opportunities for failure. Those intending to invest can even tell you what to do but, many times this advice is totally disregarded and failure is just as easily predictable. I have seen all sorts of business that actually operated on intended failure, providing a service they know will go to court to collect twice what the contract stated or attatch to property that over the years is accumulating in value. It is hard to get insurance because 30 years ago it was normal business practice to burn the place down for the insurance money. Then 20 years go it was the business take over, 10years ago the corporate merger to today where everyone has been called and has to show their cards and be accountable.

In day to day business a 12% loss rate is totally expected behavior. With so many even mentored startups expected to fail the rate is so much higher than that. Seasonal business have so many opportunities and life effecting scenarios that it is real easy to not open some season. Epic fail.

Any business venture has lots of faith involved and long term cultivation of customers. Even a bank is supposed to these days have so much cash on hand to directly cover any loans they have out. Trade commissions.

Just the other day I talked to a guy who put 10,000 into the stock market following the aspirations of people he says sit there and make $300 a day. In 7 years his 10,000 doubled and all at one time just now he lost in his diversified funds about $7,000. So he is now at $13,000 after 7 years. Thats $428 per year he made while feverishly and perhaps greedily watching his stack of cash grow. It is still 30% over a 7 year cycle. The cycle is perhaps wrapping up to be shorter periods of years.

If that same $10,000 was to have been put into inventory in his own existing business, he would have easily made $10,000 per year to the tune of $70,000. So why was he playing this gambling game rather than working for a living? It is a sickness. Everyone wants the easy money and it isn't really that easy.

I would imagine each knowledgeable haunter has lived this and realizes they are best to keep investing in their own playground. Those that are speculators will be the ones that don't have enough money to actually be a business owner themselves. A successful business owner has to match brains, knowledge, experience and marketing performance. The true assets of a haunted house or resale value of any equipment of any business are usually pretty low.

Your economic Hedge fund would in reality be more like 500 people have invested $200 to come up with $100,000 and each expect to make 25% per year. Because they don't have the actual playground, hence very low money to risk. In the haunt industry it might be tough to get 50 people to participate at the $200 level and that may be all there are that could or would speculate. So, you have really raised only $10,000 in cash which in fact might be enough to have an outlaw gypsy haunt or loan $100 to 100 actors to buy new costumes or make up. Not the grand vision everyone expected.

Still the final management comes down to spending so many hours with 50 people or 500 people and additionally being compensated for that. A bank can't afford to cash your check and those checks in the community unless they have 4 million is tangible assets.

Instead of it being a proud sponsor of some great haunt it ends up being micro loans of $25 where some indonesian guy can buy the tools to fashion sandels out of disgarded tires so he can feed his family. You might get your $25 back. You probably will with the burden that you can help somone else out equally with that $25. It would have to be in months and there is so much active mentoring that goes on that is uncompenstated for. It all becomes a mercy mission rather than after 7 years the hedge fund will have a corporate private jet, unless all the money just vanished. The total rewards would be that it had over 7 years genuinely helped 700 people get started in a new life. Nothing more. No big stacks of cash. Now there is nothing wrong with helping and being the guy that helps but, you need to know from the off set that that is what you are adopting.

The only problem with your vision is 5 year pay out. Any thing that does that is predatory lending that as you can see our current economy is the result of. Real successful business has 30 day terms or maybe 90 day terms. At the most one year terms. Just like the seasonal business might not open every season, the investor might not roll the dice every year as well.

With that all being said. Are you wanting money or have money to invest? There are already underground resources in undisclosed locations here doing either of those but, on a specific deal per deal basis. Some are predatory, some are pleasantly involved some are marginally irritated.

Would you forego your year of haunting to invest in someone else's potential opportunity? Would you work for years in a communty for free to insure that there indeed was a market for haunted houses and make sure people other than yourself got resources that hopefully would be available to some degree for you? That is indeed how many of these successful relationships develop as opposed to sign here, you own me $10,000 to $250,00 in Novemember no matter what.

These haunt markets take decades to cutivate and no one formula can pre gage it or demand it's end outcome. It takes decades of failures to even understand what to do over this great time specific to your location. Some times there is no viable market after decades of support. You can't dictate pay outs from these situations unless you are willing to collect in medical organ harvesting.

So having spent 20 years in a region then hearing someone can work greater magic and is hopeful if they just get $4,000 is something heard before in many places. It may or may not carry any weight or opportunity.

[Terrorknight]

Also ...

And also to be real, if someone is already in the business and is working hard and doing it on there own other haunt owners are more then not, happy to help out that person because they are taking the same path that most of the people in this business have taken. Most old school haunters have risked there own money or family money to start there haunts , if now we ( as in older haunters ) are helping to fund these new haunts your are going to lose a large part of the respect that haunters have for each other and this will cause even bigger problems , as I see it , in our industry and we don't need that. And one fast food chain isn't going to give money to a small mom and pop chain to help them become there rival. And it's the same here... just my 2 cents.

[MDKing]

Where did you get your figures that 60% of haunts fail? I believe it, but just curious as to where that figure came from?

Thanks,
Allan

[Greg Chrise]

He probably got that "60% haunts fail" number directly from the guy who runs around telling 60% of new haunts how to have a haunt.

You would have to define fail and I don't think it is that high or all the trading posts would have tons for sale. It would be 24/7 like the haunted home shopping network.

[Evilution Unlimited]

Leonard Pickel at MHC last year so take it for what you will. 60% of all haunts fail in their first 3 years. Most do not turn a true profit for that amount of time also.

I do not think haunts should help fund other haunts in their market. That would be silly honestly. It would be more of a way to dabble in other markets without diving in head first, leaving the opperations and design to another owner while the investor would just rake in profit.

[Evilution Unlimited]

I can tell you as an accounting major and tax auditor that the #1 reason why MOST businesses FAIL is poor management.

In our industry there are people that go to attractions and wait in a long line. They begin to think to themself "$12 a person..." Next thing you know they offer a sub-par attraction because they do not know what they are doing and just want to take the money and run.

On the other end you have the Halloween fanatics that blow all there money on cool props but forget to advertise. They too will fail.

Truth be told you have to either have two people: one business minded and one haunt minded such as Ann Marie and Timmer of Morgan Manor or one person that has both skills such as Rich Hanf or Larry.

[Jim Warfield]

If There Was Enough Profit..

In the Haunt business, we could all hire a rack of professionals to do everythig for us and everything might fly much smoother all-around.
Just the knowledge and talents it takes to build and physically put a haunted attraction together is more than most average people will have in their real-world reseme. Add to this the physical ambition required to keep on keeping on when you are dragging, and of course when someone is way over the limits of their normal endurance is when the sawblades will bite and the lumber will bat you and unconnected wires will reach out from the universe to Zap you!
And after all of this you still have to entertain, impress people to create a "Show", which is a usually untangibly unmeasurable thing , an abstract combination of the senses and psychological/emotional items not usually worn as a badge for the world to easily read.
Baiscally you strive to make it a roller-coaster ride, anticipation, unexpected happenings with a resetting easy laugh then more weirdness....and there is more than one style of "Show" that can work.

[monsterwax]

Heck, if you need just $4,000, you should borrow it from the same Master I did. Master Card. One can usually get up to $8,000 credit from plastic without too much trouble. (They're always sending out applications in the mail.) You'll pay 15-20% interest if you pay late, but that's after a month when the bill finally arrives. If you're like me, the money starts running short in September as all the licenses, inspection fees, fire alarm updates, and insurance fees pile up-- plus newer contruction fees. Fortunately, by the time the credit card bills arrive, ticket sales have started to come in and they help feed the alligators. Credit cards are good for paying bills when you are confident you'll have the money to pay back soon. If you are not confident, then like any loan, they are unwise. But the biggest benefit is they are unsecured loans. You don't have to put your house or car up for collateral. Of course, your credit rating is held hostage, but that goes without saying for any loan.

The better deal is getting a line of credit from your credit union. I got $10K added to my bank account that wil kick in automatically if I need it, and I started that line this October, at the height of the current credit crunch. (They claimed they had used conservative loaning practices and were uneffected by the sub prime mortgage mess.) The rates for such lines are cheaper than credit cards. As it turned out, I didn't need to use it, because the tickets paid off the credit cards before the due date, but it was a good back up plan. (Credit cards can raise their interest rates if you're late on payments, whereas a line of credit is more stable.)

[Evilution Unlimited]

Sometimes credit cards offer you an introductory 6 months no interest.

[monsterwax]

True! Those six month "zero interest" deals give plenty of time to use the money and earn it back in October. It's only works for one season (when you first start it), but it could get you started in the biz. And for what it's worth, if you plan to spend a lot, remember DISCOVER refunds 1% of your bill back to you at the end of the year. (So that would be a whopping $40 on a $4K balance.) That will barely pay a late fee or two, but if you spend tens of thousands, it can certain rack up over time and it's better than getting nothing back.