Cybercafe Ventures: Why they fail

In the late nineties, cybercafé business used to be a very lucrative business with lots of abnormal profits. The market became contestable and lots of entrepreneurs entered     and …

1844
1844

CYBERCAFEIn the late nineties, cybercafé business used to be a very lucrative business with lots of abnormal profits. The market became contestable and lots of entrepreneurs entered     and exploited the abnormal profit and then it became a normal profit venture. Put   together 10-20 systems in a strategic location like a campus environment, with a dependable ISP then you are in business.

 In recent times, more than 70% of entrepreneurs that had cybercafés in the late nineties have either shutdown or sold their cafes, so why do cyber café businesses   fail?  I ran an Internet café for five years and as a   networking instructor in Aptech training institute I have provided consultancy services on how to effectively run a cybercafé

 There are three major factors that contribute to the failure of cybercafé   ventures among which are:  Power, inconsistent ISPs and then mismanagement. Most cafes generate their electricity with power plants. Instead of the power plants supporting PHCN, the opposite is the case. Some even run on power plants for days. Apart from daily expenditures on gas, within a short time the cafes have to replace the power plants due to over utilization.

 Also, the ISPs are not helping matters. Cafes cannot easily know what ISPs are selling to them. Some of the cafes pay for dedicated bandwidth, and they are unknowing placed on shared connection. The truth of the matter is that you can know exactly what the ISPs are giving you   because most of the speed meters online don’t give realistic readings. If you are on a shared connection, your contention ratio determines the speed of your connection. If other contenders are not browsing then you experience full bandwidth. For instance, if you are on 256kps connection with a contention ratio of 1:3 that means three other clients are sharing the connection. When everyone is browsing, you can only be guaranteed of about 85kps but when others are sleeping, you can have the full 256kps

 To start a cafe you need to   calculate the amount of bandwidth you need for the number of systems you are going to run and the type of traffic that needs to be transported like VOIP (Internet calls).  If you hear of ISPs selling bandwidth like a 128/64kps link then you should know that you are getting a 128kps download throughput and a 64kps upload throughput. People download more than they upload so you can afford to get lower upload throughput in your link budget. But in a cafe that you will need a VOIP and just normal browsers here is how you will calculate your bandwidth:

 If you are going to be having simultaneous phone    calls you will likely be using a G.729a technology it is an audio data compression algorithm voice that compresses voice audio in chunks of 10 milliseconds (8kb/s  codec).  The 8kbs will sample the 10 milliseconds of   voice per   frame. In the voice packet, there will be three headers involve IP  (20 bytes) UDP (8byte), RTP  (12 bytes), or 320 bits per packet.  The packet can contain a simple voice sample or a multiple voice samples. Now, lets   figure out   the bandwidth needed in say 10-system cafe with a maximum of 5 simultaneous calls.

 Firstly we need the number of voice sample per second:

Second / voice sample = no of samples

1000ms / 10ms = 100 samples

 Now figure out the overhead:

Number of samples x 320 bits = overhead

100 x 320 = 32 000 bits = 32kb/s

 Total bandwidth per sample:

Overhead + codec = total BW

32 Kb/s + 8 Kb/s = 40 Kb/s

 The busiest traffic is having 5 simultaneous calls that is 

 5 simultaneous calls x 40Kb/s = 200Kb/s

 So a client will need a minimum of 200kbs for Voice plus 10kbs averagely for each system in HTTP connection (10 x10= 100kbs)

 200kbs+100kbs= 300kbs minimum for smooth operation

 This sounds a bit technical, but determining the appropriate bandwidth is important to avoid wasting bandwidth. And sorry for the technical diversion.

 Also, there is a misconception over two networking terminologies: bandwidth and throughput. Bandwidth is the connection capacity like having a 128kps, but most times you don’t always get the 128kps so what you are getting at a particular time is called the throughput. Consider this analogy take the bandwidth as a big pipe of water going into a neighborhood   and smaller   pipes tapping from the big pipe into homes. The big pipe has big bandwidth and the small pipe have small bandwidth.  The more pipes tapping from the big the smaller the quantity of water each household will get. Most ISPs lure clients into paying for bandwidth, after paying, you are on your own. You will call for support   twenty   times. If you are lucky they pick your call, the lady will tell you it’s your local area network check with your system admin.

 Another catastrophic factor responsible for the failure of cyber cafés is mismanagement. Because government officials get rich overnight, people in the private sector tends to emulate them. Once you employ a person to manage a café   for you, immediately he or she will start strategizing on how to get rich overnight. So next time you are doing a cost benefit analysis on opening a café you have to assign a figure to mismanagement and build it into the cost.

 Internet service is still expensive in Nigeria; as a result the outreach is small. The more cafes we have the better for the market and the browsers but the fear is that technology is   fast changing.   Cafes mostly use Very Small Aperture Terminals (VSAT) or point-to-point   antennae.  These days people browse on their smart phones and laptops wirelessly and this is a threat against café business.  Cafes located in academic environments do well because it is a necessity for the inhabitants there to browse. But outside the academic environment most cafes rely on scammers to survive. They are the only ones that can buy bulk time of 10-20hrs daily, so indirectly it is scam money   that is sustaining café out there.

 When making   a   feasibility   study on opening a café, the first thing to consider is location. You need a strategic location to survive in the market, say an academic environment or busy junction in an elite dominated environment. And you need to be very careful when selecting    an ISP. Any day anywhere I will recommend SimbaNet, Mweb or Cobranet, they have never   failed me. The first time you visit an ISP tell them you need to meet some of their clients, from their clients you can know a lot about them. You can ask of how good their support is and things like their   migration policy.

 And finally, these days you cant afford to sell only Internet service in your café; you have to sell a lot of other things because the Internet will create traffic for the things you sell in the café.  You can include these in your growth strategy:

 SHORT TERM GROWTH STRATEGY

 (I) Introduce more products for sale such as:

 DVD rewritable

DVD recordable

CD recordable

Flash drives (128MB, 512MB)

IPODS

CARDS (NECO, WAEC, JAMB etc); charge WAEC and NECO registration, apply to secondary schools to register their students online

Recharge cards (MTN, GLO etc)

 Digital camera & picture printer for passport, picture printing and American visa lottery

DVD writer for DVD burning

2 or 3 webcams

 (II)          Credit Card transactions

        Options:  Master card

                 Global merchant account                

                 Third party credit card processor (clickbank, ibill etc)

                 E-gold account

           Charge 10% of every transaction at =N=140-150 per $

 Expected client uses: Visa process payment

                                Hotel reservation payment

                                Admission process payment (tuition fee) etc

 (III)       Organize short-term Internet training or weekend computer training on selected systems.

(IV)        Sell Bulk time at discounted rates.

(V)            Expand to wireless network so that clients can buy time and stay outside your café or in their cars to browse. There are facilities in your access point to monitor them.

 LONG TERM GROWTH STRATEGY

 (1.) In future you have to develop a website   for your cafe. Development and hosting for a year is as cheap as   =N=30,000. You can sell your products and services through your website and also sell for others with commission charges. 

 (2) In future you have to use part of your internet bandwidth for IT outsourcing jobs (transporting IT jobs through the internet), I visit sites like www.yahoosmallbusiness.com, www.directfreelance.com  for IT  outsourcing jobs

 The use of inverters to support generators. The inverter can give 10-12 hours support daily.

 RECORD KEEPING:  An employee should be dedicated to the sales of storage media. When you buy say 2000 copies of DVDs just give him 500 copies, and only restock him if he can account for the first 500 copies

 PRINTING

 An account book should be dedicated to printing services and every printing incident should be recorded (pages and amount) and summed up at the end of the day, therefore when a rim finishes you can   calculate the lost with the aid of a print manager installed on your server. You can also refill your ink or toner cartridges.

 Customer satisfaction

 Open a suggestion box

Arrange for a television

Frequent use of air freshener

More sits at the balcony for waiting browsers

Watch the way your employees treat browsers, especially there interactions with ladies-they tend to give them more attention which will consequently lead to free browsing time in future.

 Remember: a café is not just a place meant only for browsing it is also a joint.

                 Keeping a client is 10 times harder than getting one.

              Success in business is 80% attitude and 20% aptitude. And please don’t   forget to pray    after all the planning.

In this article

Join the Conversation