186. How to Turn a Hobby Into a High-Margin Business

0:00We built a business that runs 24-7 in 20-plus locations without a single employee on site. We started with a single ping pong table and now we're valued at$50 million and expanding into new sport verticals. Most people wouldn't think of ping pong as a startup idea, but that's exactly where today's guest saw an opportunity hiding in plain sight. After working in finance, David realized there was a huge gap in the market. People wanted a fun, accessible way to play, but their only options were either overpriced bars or rundown dojos. So he built something better and automated the whole thing. This is Ryan Atkinson and you're listening to the Upfit Podcast where we uncover the secrets of building and running successful businesses.

0:41David Silberman is the founder of PingPod, a self-serving ping pong experience that runs without staff, uses smart tech, and has grown to 20 plus locations, all while keeping overhead low and profit margins high. He's here to talk about turning your niche hobby into a business, building systems at scale without any employees, now how you can get started with your first business today. David, I am so, so excited to have you on the podcast today. Thank you so much for being here. I love this concept, So thank you for being here. Yeah, thanks so much, Ryan. I want to talk about ping pong, though.

1:09Not just as a hobby, but as a real business opportunity. I mean, take us to the Orange Store and to ping pong. Like, how did you guys come to be? How did this idea strike you? Yeah, basically, I have been playing ping pong my whole life. And I studied finance and came to New York, was working in a corporate job, but had a very simple observation that there were very few places to play ping pong. And the reason for that, as you astutely call out in your intro, is that, you know, you had your big format spin type of corporate event and booze location. And you have your, you know, basement style dojos, but nothing in between.

1:51And the reason for that is the unit economics simply would not work out. So I conceived of this concept of if you can use technology to replace labor costs, you could make the unit economics of a typical of a straightforward table tennis facility really flourish. And I met my two co-founders, Max Kogler and Ernesto Ebowin in 2019, and they fell in love with the concept and the three of us got to work. Oh, man, that's so interesting. So you identify this opportunity here. And what does getting to work mean? Do you go validate this idea? Do you just go launch it? I mean, what was that next step once you did have the idea in mind?

2:30The first thing that I did, even before meeting Max and Ernesto, my cousin and I took a U-Haul from his house in Long Island, and we took a table from his garage and brought it all the way to downtown Manhattan, where we opened up this garage studio type of ping pod MVP. And we sold for five or ten dollars some actual table tennis right off the street. We did it for about two weeks. And the response that we got from people wanting and kind of clamoring to play table tennis right off the streets of Manhattan was validation for us to take this to the next level. and that's kind of when I met my two co-founders and they saw the report that I actually typed up about how that whole thing went and they were bought in at that point.

3:23I want to ask you about those first two weeks and like launching and getting people actually into this like studio ping pong, like the MVP, like we're just putting flyers out on the sidewalks of Manhattan. I mean, how did you actually get people to pay for this? Yeah, yeah, I'll never forget. But going up to Chad's girlfriend's startup where I got to like the 40th floor, it was this whole bustling environment of like 75 employees and feeling so small in that moment. I needed to go there to pick up flyers for this ping pong pop up that we were doing. She was kind enough to print off, you know, 500 copies for me.

4:01and I just felt like this is I'm staring at the bottom of Mount Everest and I'm looking up at the peak and it just felt so small but you have to put one foot forward and that's what we did we disseminated flyers but that didn't really do much honestly it was people right off the street walking by and you know two weeks before I was in a suit and tie working in my important finance job and here I was selling ping pong, kind of saying, hey, step right up ping pong for five dollars. And it was kind of a crazy experience. But people just saw this pop up in the moment and they said, hey, I'm in the mood to play some ping pong right now before we work during lunch hours.

4:44Of course, after work was the peak time. And during weekends, kind of all hours, people came in and just wanted to play table tennis because in an urban environment like New York City, there just are very few places to play. No one has a stable in their apartment. You know, this is the crux of the ping pod concept. That is super interesting. Were you like, I know you were, you know, buttoned up at like this nice job and everything. I mean, were you working this just on the side? I would love to hear that as well, just to clarify for the audience, just so they can kind of frame this as well. Yeah, yeah.

5:13I actually quit my job right as I had the concept for ping pod, flew to Peru for a couple of weeks to create some buffer and get some mind space and came back. And that's when I took the table from Long Island with my cousin and did the pop up. So I really just kind of went for it without a harness. I wouldn't recommend that for all entrepreneurs. I don't think you need to quit your job. Plenty of entrepreneurs get started while keeping their day job. But I just took the plunge completely. And listeners, really tune in for this one because I'm curious on this one. advice for like actually knowing if this is a valid business idea.

5:50I know you had that report there, but how do you know like, oh, I had this hobbyist thing that I love to do. Like, is this actual merit behind it for you? I mean, what was in that report to say like, okay, this is a real business that we have here. You'll never know 100 % until you do it. There's just no getting around taking a plunge and kind of holding your nose and diving in and seeing what happens. that being said i felt relatively confident that we really had something on our hands that there's plenty of demand for this game and this sport called table tennis or more colloquially known as ping pong and the data supports that if you do a quick google search of how many people play table tennis in the united states you see some big numbers like 16 17 million people and And the thesis just really added up in my mind that, you know, New York is a big place.

6:43If one in, you know, even 100 people play table tennis, that's tens of thousands of people in New York alone who will play. And if you create supply for them, build it and they will come. And the MVP in that garage just kind of gave some qualitative and quantitative evidence that that was indeed the case. And of course, when we did open up in the Lower East Side in February of 2020, that was quite quickly proven to be the case. I mean, my ears perked up. I mean, February 2020, you're launching in real life, like, thank you. I mean, March 2020 comes along. We all know it happens there. I mean, talk to us about that moment for you.

7:20Yeah, that's exactly right. All this excitement and preparation and work that had gone into getting to a place where we were opening our doors, right? Signing a lease, negotiation, site selection, insurance, buying all the equipment, all of that stuff was pretty much dismantled. And obviously us and the rest of the world and small businesses, large businesses across the spectrum were shut down. Luckily, the core of the PingPod concept is that we run without any employees on site. So we were shut down for a couple of months, but I have been known to say that PingPod was one of the first non-essential businesses to reopen in New York because of the fact that there were no employees on site.

8:09So thanks to our contactless nature, we were able to gradually and thoughtfully open our doors and do so successfully. And that first summer, people really actually descended upon that ping pod because no pun intended, we were the only game in town. So it was a very interesting time, but we were able to prove our concept even in the midst of COVID. Most people spend months, sometimes years, just thinking about starting a business. But what if you could do it in just 10 days? That's exactly what the 10-day business launch plan is designed for. It's a step-by-step roadmap that takes you from idea to real operational business in just 10 days.

8:49Click the link in the description below and get ready with your business. And listeners, stay tuned because we are going to talk about that automation and self-service at scale here because I think everyone will be interested in that piece though. So real quick, actual advice, though, like what advice would you give to someone trying to figure out if their hobby has a real business potential to it? Yeah, I think that the most important economics lesson that I ever learned in school, the professor surveyed the class. They said, if you had a million dollars, what type of restaurant would you open up in Madison, Wisconsin, where I went to school?

9:20The bulk of the class, they say, you know, burgers and beer and cheese curds, right? Because that's where there's the most demand in Madison. The empirically correct answer, though, is to open like an ethnic restaurant, right? Something, a Peruvian restaurant, since I've talked about Peru, where you would be one of one in a city where there's no other supply, no other competitors, but there's going to be demand for South American food or for ethnic cuisine. So it's all about the spread between supply and demand. So even if you have an eccentric hobby that, you know, is not as popular as basketball, It's not mainstream.

9:57There's kind of a niche. Usually these niches are pretty big. If you go on Reddit, there's whole worlds of people who love esoteric things. And so long as you're opening physically in a place where there's not a lot of supply or whether it's digital or physical concept, it's all about that spread between supply and demand. Interesting. So just comprehending that is look within your local area. If you are wanting to do it, is there demand for it? And is there very little supply for it. I think that's economics 101 right there. So really good listeners. Take note of that. Let's jump back into what I kind of foreshadowed what we were going to talk about.

10:31And that's that automation and self-service piece, because that's really at the foundation of your model. Let's talk about implementing that and how you did so on the importance of a self-service and fully automated business model here. Yeah. So the key ingredients to running an autonomous facility, so to speak, is first of all, we decided and very thoughtfully to build our own software system from the ground up. So we made that conscious choice to build our own technology. And that allowed us to create integrations with third party systems that allowed us and enabled us to run without employees on site.

11:09For example, very importantly, the access control hardware. So like the physical mag lock that gets fastened to the front door that talks to our system so that when you have a reservation, you click a button on your phone and the door unlocks for you. Wow. At PingPod, our doors are by default locked and you have to have a reservation. And that, along with our security cameras, where we have a video monitoring team of, you know, real human beings that are watching our facilities 24-7, 365, these are the components that allow us to run without physical staff on site. And the truth is, we had no idea how robust that would be when we first started out.

11:53And our investors, our stakeholders, the landlord, people took a gamble on us. And within a few months, we knew that this is working and no one's folding up the table and rolling it out onto the street. It all works. And we proved the operating model quite readily. That is really, really interesting there. So I have to ask like cost wise. I mean, what are some of your largest costs? I mean, do you have employees at all? Are you paying anybody or is it like truly all automation here? So the variable labor component on site, that is the piece that we largely or wholly eliminate. So, you know, as with any retail concept, there are times during the day where it's completely empty, right?

12:36Two o 'clock on a Tuesday. I mean, you'd be surprised we have people really playing all day long, but there are times where it's empty. And at least you're not paying for someone to be there sitting, twiddling their thumbs. You're not paying that background costs. And we do have a full team of corporate employees, though. Right. We have at the corporate level a marketing director, an operations director, a head of coaching, etc. etc. And at the end of the day, it's a brick and mortar experience. So things break, things need to be maintained and repaired. So we have a team that goes around across all of the locations to take care of that.

13:17But you're not assigning full time employees to each and every location or a full team of employees, for that matter. So you're able to really reduce a lot of the unit costs. That's a phenomenal business model, obviously. And you talked about it like the very beginning, A lot of this basis was like, if it is hobbyist, it can get thin on margins, but completely eliminating the labor as you have done. I mean, not completely the labor. On-site labor, I should say, is a great way to be able to scale this and have those margins you need to succeed. That's right. I want to keep talking here about the automation piece as well.

13:50What did landlords say to this? It sounds like your true cost here is rent. Of course, you have corporate employees, but your big costs are the automation, the tech, and rent. I would love to hear you talk a little bit more about that as well. Yeah, no, that's right. Rent is for sure the largest cost component. If you look at the cost stack after that, I mean, we still have cleaning, contracted cleaning. We have general provisioning consumables and table tennis equipment, toilet paper, tissue paper, that stuff that needs to be replaced on a monthly basis, utilities. And the one variable labor component that we do have is coaching costs.

14:29So we hire a suite of independent contractors who are our coaches, and most of them work part time, they have a full time job. Some of our coaches are working full time as ping pot coaches and making a really good living doing it, by the way, and they get paid on a hourly basis. So the more they coach, the more that they get paid out, you know, for that individual lesson or lessons. So that would be another, you know, part of the cost stack that you kind of you can't ignore. Other than that, I'm trying to think about like my model, there's insurance costs, which is considered an operating expense on a unit level basis, marketing expense, right?

15:07We would recommend, for example, for our franchisees to have some budget for marketing. And that's basically the bulk of what you're looking at to run a location. So, so good. Let's dive into more about that hobby blend with this business decision blend here. What are some other like businesses or like games or other things that would work for something like this where you're at a location? It's fully autonomous. Do any come to mind for you right here? Well, it's funny you say that getting a little bit off topic. This is, you know, off the franchise topic. What we've done with our technology stack in 2023, we created a business called Podplay Technologies, where we turned our tech into a multi-tenant model and began licensing it to outside venue operators.

15:52So PodPlay is actually a big and growing business in its own right, where we are the tech provider for lots of pickleball clubs, for example. But we're in a bunch of experience verticals from soccer to baseball to cricket. And our PodPlay clients are using the software only tier or they're using our pro tier where we offer instant replay and scoreboard tracking tech, which is part of our original ping pod idea. And some of our clients are running autonomously just as PingPod does. And they're using our video monitoring services and the access control technology in order to do so. And some of our autonomous businesses include pickleball clubs running just like PingPod.

16:38And for a more esoteric example, a dog washing facility on the Upper West Side of Manhattan is running completely autonomously. People come in with their pet. They have these two stations. You wash and groom your dog kind of DIY and you walk out. So, you know, some other things like karaoke, I think would be fantastic for podifying, if you will. There's all sorts of kind of art or, you know, music studio or creative ideas that you can think of outside of just racket sports or sports or, you know, in the world of recreation or arts that can be run autonomously. So, so good. Yeah. I wanted to get people thinking more here about what some of these true like usage cases are.

17:21So let's talk about balancing, you know, ping pong fun. Like when I think of ping pong, like it's fun. It was started as a hobby for you, but like, how do you balance a hobby with like making those smart business decisions? I mean, do you have a story that you've had to do that before? I'd love to hear that. Yeah. With ping pod, we definitely aim to stay true to the sport itself. Like Nike, their whole brand was built on honoring the athletes and doing right by the athletes. We're definitely attempting to do right by the sport. And our ping pod facilities are really high quality. We have great equipment.

17:52We have good spacing at every table, great lighting and official rubber athletic flooring, for example. But what ping pod manages to do, which is different from your traditional dojo basement style training centers is we enable a space that is great quality for if you're a more competitive player, while also creating this comfortable, modern aesthetic that appeals to casual players. So kind of like a bowling alley, you have your more serious, you know, league players during the week. But after work and on the weekends, these bowling alleys or centers are dominated by casual everyday people who are just looking to blow off some steam.

18:34And even if you're horrible at bowling, it's funny because you're so bad or you put up the guardrails to make it fun. That's kind of what we've done for table tennis with Pinkpot is we've created a brand that really, for the first time, appeals to beginners and casual players and people walking off the street in their dresses and their jeans or their professional attire. So we straddle both sides of the market. Yeah, I love like the autonomous like location, like that whole language there. What advice would you give to someone that's afraid to like ruin their hobby though by turning it into like an actual job?

19:04Because there's always that balance of follow what you're passionate about, do what makes you money. You're kind of blending both of it here. I mean, what would you say to someone that's afraid to ruin their hobby by turning it into a job? You know, it's hard to answer that question exactly. I think every case is different. I think if you, you know, love table tennis and you are entrepreneurial and you want to try and make and generate income through that passion, And Pinkpot is a great way to do that. I mean, I suppose that if you don't select the right real estate or you kind of go off the rails and the location, just like any business or any concept, if it doesn't do well, that might sour, you know, your love of table tennis or you might feel like, you know, you're intertwining two things that, you know, aren't mixing well.

19:50But I think that, you know, if you're cognizant of that risk and all, you know, entrepreneurship and business formation comes with a level of risk, you can actually also do the opposite and augment your love. Your passion and your hobby or your favorite sport can now also be a source of wealth and income for you. So that's pretty cool too. That's why I think it's so cool about business opportunities and something like this is you can be super passionate about ping pong, about pickleball, about karaoke, and then really turn that into a business model that is fully autonomous, that allows you to scale, but also doing something that you do love, But is it ever hard with that blend of having being a hobby and having to be a business?

20:29I mean, has your love for ping pong evaporated by any means by doing something like this? No, quite the opposite for us. I mean, I think we're fortunate to have a really successful story and we have raised financing and we've opened dozens of company owned locations and we've created amazing communities all across the country. And now we've really flipped and turned into a franchise business so that we can continue to grow the PingPod brand across the country and keeping that alive, right? Remembering the feeling of opening that first location and now getting to recreate that time and time again for entrepreneurs, you know, that's a special thing.

21:09Yeah, that is so, so special. If someone does have that like niche hobby they love, I mean, what's like one question they should ask themselves before turning it into a business? I think that, you know, as we discussed at the top of the call, thinking about the supply demand dynamics, you know, thinking through whether there's a real business case to be made and, you know, what do the economics look like? If you happen to have some, you know, basic Excel skills or, you know, modeling abilities, you can just go right to Excel and, you know, you're going to be able to model your costs side pretty accurately, especially, you know, if rent is the biggest component, you can get data points by calling brokers or asking landlords what, you know, their commercial real estate is going for and, you know, having a decent sense for all those other operating expenses.

21:56And then just thinking through, you know, all revenue for retail brands comes down to price times utilization or volume. Right. So if you can have a sense of what you would charge and you can get that data point pretty readily by, you know, making good assumptions and by looking at comparable concepts, for example, in your local geo and then making assumptions around utilization. If you get 20, 30, 40, 50 percent utilization, what does that revenue look like? And at what point do you start covering your fixed costs? And what do operating profit margins look like in various scenarios? Someone might be listening to this, though.

22:38And David, I have no absolute idea what I should price this at. I have no idea what the utilization would be, I mean, how do you walk them through that formula? I love that formula, but how do you like really walk through someone? I think that, yeah, I mean, just going back to trying to make assumptions around like the price side, you can get a sense of, for example, with Pink Pod, we looked at SoulCycle, we looked at Rumble, we looked at bowling alleys, we looked at axe throwing, right? So using a comparable methodology to get a sense of what are people in this geography willing to pay for a recreational activity, a sporting activity, or whatever it might be, and then making adjustments accordingly.

23:16If you think that your business is generating more value than some of those other things or less value, then you have to price that accordingly. For example, I knew that ping pong could not garner the price points that tennis could. And a big reason for that is people just think of ping pong differently. Like people grew up with tables in their homes, or there is a table out in a park that you play for free. And also the size requirements are much lower for table tennis versus tennis. So even though at the end of the day, you're still playing an hour of some racket sport in some urban area, you have to also take those considerations into effect.

23:54And then when it comes to utilization, I mean, you can literally just take 10 % intervals and model those out across, you know, between 10 and 90 % utilization or 100 % utilization and kind of make an educated guess of, you know, for example, with ping pod, our rule of thumb is that once you hit 20 % utilization, you're just about at a point where you're breaking even, you know, more or less. And that, you know, varies by location and metro area and all sorts of things. But keep in mind that most ping pods are also open 24 seven or open at least 20 hours a day, let's say so you know, that utilization rate might be a little bit lower as a result of that larger denominator.

24:34But, you know, people can look at what you get at 20, 30, 40 % utilization and then make assumptions around how easily they'll be able to get to those utilization rates. I love that breakdown. And I think that just speaks like the finance mind in you there. So I really, really like that. Before we dive into our last segment of our fan blitz questions, what has surprised you the most about scaling a niche ping pong idea to, you know, 21 locations now? The most kind of surprising and fun part of the business is just growing communities, right? And I always say that at this point, we have hundreds of thousands of reservation hours under our belt across six different states and all these different, you know, specific ping pod locations.

25:14If not for ping pod existing, that would be hundreds of thousands of cumulative hours of people playing more video games or watching more Netflix or being on social media or, you know, doing some other activity, perhaps. So just creating something that, you know, creates and agitates so much change in the real world is such a rewarding and gratifying feeling. And then when you go and play ping pong yourself in your own facility, for example, just feeling like, you know, a member of the community and, you know, just being a part of it is a very special feeling. Such a good feeling. Let's dive into our FanBlitz questions here.

25:52And these are questions submitted from our community listeners. If you want to join in on world-class entrepreneurs, go to www.youtube.com slash upflip and submit your questions there. David, ready for our last five here? Let's do it. What's one business tool or app you can't live without right now? Slack. I like it. What's the weirdest or most unexpected thing that's happened at a ping pod location? A director of a movie walked in and started playing ping pong and we forged a relationship with that director and that director is now making a movie about ping pong, which is coming out in December of 2025.