Our client wants to invest his money in opening an amusement park in city X, should they do that?

Question

Hi all, so basically its a market entery case and here is my structure :

1- Market: - Market size? -Growth/ Trend?
2- Competition: - Who? - Their shares? - Advantages they have over us

3- Customers: -Who are we targeting? - Will we meet their needs? ( should I add customers within the market bucket instead of being a separate bucket?"
4- Profits: - Investment cost - Running cost -Revenue (should I calculate here payback period or profits are enough?"

please share feedback on my structure, I feel its a bit general and it needs to be more customized yet I don't know how can I do that. Also, are there any more buckets I should consider and add it to my structure or remove some?

Thank you all in advance!!!!

Answer 1

Hello!

You have a quite good list of factors to look into before making this go-no go decision.

However, you are missing the most important factor: verifying what the client target is with this!

When we have a prompt that sais "Our client wants to invest his money in opening an amusement park in city X, should they do that?", we don´t even know 50% of what we should know before starting this problem. Depending on what the client watns to get out of it, success looks very differently.

For instance, there could be two totally different and still plausible targets with that prompt:

Scenario 1: this location is one where the client could not yet penetrate, and they would like this operation to serve as a market opener. Hence, they are willing to take losses in this particular operation, since return will come in the long term
Scenario 2: we need to be profitable in 3 years, since this is a internal metric the company has

Only those 2 (and I could think of 50 more) make the approach totally different, and there is where you should start

Hope it helps!

Cheers,

Clara

Answer 2

Agree with Clara, you are missing some basic but important points.

What is the client's motivation? Do they have a specific return (ROI, ROE) in mind or do they expect a certain quantitative upside (x% CAGR revenue upside)?

Make sure you price in risks into your number 4 (there are unavoidable risks in most businesses that need to be priced in).

Make sure to verify that this indeed is the best use of the money and not some other even better investment option.

Answer 3

Hi there,

You're missing the point here! The other answers are sort of picking at the edges. However, you need a fundamental mindset shift here.

You can't just list Market, Competition, etc. and list a bunch of questions. You need direction.

So,

1) Market - Is this market fundamentally attractive? Is this a space we want to play in?

2) Competition - Is there a gap in this market? Is there a space here that needs to be filled, and that competition won't aggressively destroy?

3) Customers - This is a waste. It's covered in Market essentially (is there demand)

4) Profits - This is the entire question! But, reworded, it should be: If we enter this market, can we win? If we win, can we do so at a cost that results in a good ROI for us?

See what I mean? You need to be objective-driven. Listing out a bunch of things you've read elsewhere and just hoping it fits isn't the way!

Hope this helps, but please send me a message so we can work on this mindset shift further - it takes a lot of work!