Basic Questions for Opportunity Determination
1. Are customers reachable?
The reachability is the condition in which you can make contact with something or someone..
have access to something. Reachability requires good information from the customer in order
to improve the customer satisfaction and to increase profitability.
The location of Paintball Palace is really important to have a good reachability, it should be
affordable for customers to be efficient ! Paintball Palace takes place in Pennsylvania center
(in either Cumberland or Dauphin County) they said the ideal location for us would be at fives
miles of Interstate 81 or the Pennsylvania Turnpike. Infact, in this way it would be easy to go
there. Furthermore, this localization allows the most of suppliers to be on the spot by in a
three-hour drive. This site may seem offset, but however it’s only at a half hour drive of
several colleges like Penn State main campus and Penn State Mont Alto, Shippensburg,
Dickinson, and others.
Targeted customers : Hence in this case, Paintball Palace will focus on the students at these
universities and people around because they are near, so in the best position to come there
(Which gives an estimation of 49,420 potential customers).
Now concerning the access to the product and programs, we can notice that Paintball Palace
is able to offer a full retail line of paintball products (including paintball guns, goggles,
clothing, add-ons/upgrades, and accessories) Besides, let’s note the prices are competitive
but not really cheaper than renowned competitors, so in fact it’s affordable for a large class of
customers but when we compare it doesn’t seem so attractive.
Therefore, customers are reachable in this case, it’s less far than competitors but Paintball
Palace need to be better especially in their prices and their communication to be more
attractive.
2. Is the industry growing at more than 30% a year?
The industry has been experiencing continued growth since the game’s inception in 1981.
The number of participants has increased at an average compound rate of 90.2% and there
is year on year growth in the different segments (13% increase in those that play once a
year, 24.4% increase in those that play more than once, and a 78% increase in those that
play 15+ times a year). This means that not only is there a continued growth in those that are
playing the average number of times they are going is also increasing.
3. What is the time to break-even?
Breakeven for 2005, 2006 and 2007 will be 41 weeks, 36 weeks and 31 weeks respectively.
Here is the table with the projections which permit us to extract this conclusion:
Year
Total Fixed Costs
2005
2006
2007
769,517
767,189
773,926
Sales/visitor
55
55
55
Variable
Costs/visitor
20
20
20
Breakeven in
unique visits
21,986
21,920
22,112
Visitors/week
533
613
705
Breakeven in
weeks
41
36
31
4. Is the market structure imperfect?
Paintball Palace appears to have 5 competitors in the area. Their main edge is the fact that
they plan on offering both indoor and outdoor areas of play, with an emphasis on the indoor
during winter months. In fact they didn’t mention much about what they would offer in their
outdoor woods-ball areas. They claim that they will have the best of both worlds but it
appears that they are favoring the indoor air-ball paintball.
The 5 competitors are Paintball Adventure Park, Next Level Paintball, Paintball Sports Land,
Outlaw Paintball and Wanna Play Paintball. Paintball Adventure Park seems to be the largest
competitor due to its large customer base, semi-professional owner and ability to expand.
Out of all 5 places, 4 are outdoors only, which would indeed give Paintball Palace an edge in
the cold months.
The market structure here is slightly imperfect due to the fact that there is only 1 other indoor
paintball park, which only offers one arena, while Paintball Palace offers 5. Additionally, there
are only 5 total competitors within a very large geographic area meaning that if someone is
going to play paintball in this area they will most likely be required to travel an hour or more.
Since they are traveling so far in the first place they will most likely not mind traveling a bit
further to go to a place that is significantly better.
All of these places are offering the same basic product at relatively similar prices. To the
novice player (which is their target market), the small details really wont matter cause they
don’t really know what they are doing anyway. With that said, I believe that Paintball Palace
has a decent change at competing with these other Paintball places although some of their
Business Plan seems a bit unrealistic.
5. What market share could the new venture obtain after five years?
Paintball Palace wants to become a real actor of the paint-ball industry in United States. The
company aims to capture and maintain 10% of the market share. After five years if the
assumptions are true, our market share will be steady. With the company development
project and the grows of the paint-ball industry we can forecast that the market share of the
company will be increase as it’s show on the appendix.
Moreover, in order to follow this prediction, it’s important for the company to have a good
communication strategy. For example Paintball Palace have to advertise in prominent
magazine to develop a strong corporate image in this segment.
6. Is the ROI potential greater than 25%?
Capital requirements: 470,000
Net incomes in 2005, 2006, and 2007 are respectively $102,967, $239,623, and $386,767.
2005: 22%
2006: 51%
2007: 82%
This was a last minute fix, does not take into account the amount (50% the company wants
to reinvest) nor is a capital structure provided
7. What are the capital requirements?
Alex
The capital requirements are 470,000 $ for the startup costs.
Each of the four founders will invest $30,000 from their own resources. The other $350,000
in startup costs represents furniture, fixtures, and equipment that will be financed through
National Paintball Supply, Bauer Compressors, and an unknown Astro-turf company.
8. What is the free cash flow potential?
It is not clearly and directly indicated since the financial report (either income statement or
statement of cash flow) is not available in the material, we can only make estimation. Based
on assumption that the paintball business revenue is basically generated as cash (instead of
receivables) and according to the case the purchases of expensive facility and equipment
like Astro-Turf/artificial grass, prepackaged air-ball fields and air compressor are financed by
the suppliers with a certain interest rate at zero or low down payment for 5 to 6 years paying
period, which helps the company save the start up cash outflow. So the estimated free cash
flow potential should be good.
9. What is the sales growth potential?
The paintball company thinks to be able to capture 10% of the market in South Central
Pennsylvania. It means about 4942 persons.
We know from the Sporting Goods and Manufacturers Association International that the
wholesales of paintball equipment are growing up each year from 1991. ($170 million in
1999, $195 million in 2000 and $225 in 2001). It means that the number of player is also
growing up, and that the number of regular customer (more than 15 times per year) is
becoming higher (increase of 78% from 2000 to 2001). But the number of persons who play
once a year and more than once a year also increased a lot from 2001 in the same way that
the number of unique visits
For example, 3,1% of the total US population played painball at least once a year in 2002, a
13% increase from 2001.
It means than there are a lot of new consumers on the market.
The fact that people are becoming more and more familiar with the game, the changing in
law and the decreasing wholesales equipment price will increase the growth of sales for the
company. Also, the paintball is a new sport and so the number of participants will become
bigger and bigger in the same way that the number of times that they will play.
The fact that you can play indoors must increase the sales in the winter because it is a
service that only few company provide. The regular customers will probably at the end of the
winter be used to coming in this company that the other they used before.
10. What is the asset intensity?
Paintball Palace's assets are divided in 4 main categories:

Lease a 200,000 sq. ft. warehouse and surrounding, undeveloped, land at a price of
$3/sq. ft. This lease is accounted for as $50,000 per month rent expense. (Looking for
a one-year renewable lease, with a bargain purchase price after five years.

Purchase approximately 180,000 sq. ft. of Astro-Turf/artificial grass. This will cost
approximately $2.20/ sq. ft. installed and is included in our startup costs. This is to be
financed at 8.75% for six years with zero down.

Purchase and install 20 rolls of paintball-approved netting. This netting will be
purchased from National Paintball Supply (NPS) at a cost of $300 a roll. In addition,
we will be purchasing five prepackaged air-ball fields from NPS at a total cost of
$25,000. (NPS has agreed to allow us to finance these fields for three years, at 8.5%
with 10% down).

Purchase and install an air compressor and related equipment at a cost of $20,000.
(Seeking financing from Bauer Compressors for five years, at 7.5% return with 10%
down payment).
These 4 categories comprise the great investment in assets they have to make in order to
make Paintball Palace a successful and profitable business. If these are not able to meet in
the first run the business’ growth will not reach the expectations already stated as these are
the key factors to differentiate from their competitors.
11. What are the gross margins?
As a result of technological advances in the production of paintball equipment and paintballs,
wholesale prices are on the decline. This will allow Paintball Palace to purchase paintball equipment
for rentals and paintballs in large quantities at low prices. This obviously equates to lower prices and
higher gross margins for Paintball Palace.
Here are the gross margins synthesized:
Paint Sales – 50%
Field fees – 100%
Our high gross margin on field fees is the result of having no direct variable cost associated with
those fees.
Besides, we have an additional business (sell shirts, hats, etc.) with an estimated average gross
margin of 40%. However, since this is not our primary line of business, and we do not expect a
significant amount of revenue from these items, we have not included them in our financial
statements. We will also offer concessions in our own vending machines. These products will be sold
at a 50% gross margin, and they are included in the Other Income section of our income statement.
12. What is the harvest potential?
The estimate harvest potential of the structure equals 10% of a market composed with
49,420 potential participants. So, 4,942 people who will generate around 25,586 visits.
These visits would at least generate $818,752 incomes only taking the equipment and the
paint into account and for a player with his equipment buying the cheapest paint.
Net incomes in 2005, 2006, and 2007 is respectively $102,967, $239,623, and $386,767.
Paintball Palace is supposed to have positive net incomes in its first year of operation."
13. What are the competitive advantages?
Quality:

Well- trained referees


High quality paint and equipment
Changing field layouts
Training



Teach first time users how to properly load and shoot a gun
Give advice to those seeking it
Point out dangerous behaviors (if needed)
Service:

More opportunities to play (compared to competitors)
o Four to five indoor fields operating at one time
 Limit downtime between games
 Keep customers satisfied
o Indoor fields: two small air-ball fields and two large air-ball fields
 One with bleachers
 One “concept field”
 Designed like a street corner- several old cars, dumpsters,
mailboxes, trashcans, etc.
o Outdoor Fields: one small and one large air-ball field, and two to three woodsball fields.
 One woods-ball field: a village and a castle with a second floor
o Layout change of the air-ball field: every other week
o Layout change of the woods-ball field: every month
Affordability

Competitive pricing
o Sponsorships to decrease cost of supplies
 Suppliers will receive free advertisement, reduced rate for play and
use of facility for promotional events
o Affordable yet aggressive against competitors
 $15 players can use facilities for the entire day and receive all of the
propellant needed.
 $10 equipment rental fee
 $17 for 500 paintballs
 $30 for 500 paintballs (this must be a typo I think it would be 1000
balls) (see page 6)
 $50 for 2000 paintballs
Summary

Paintball Palace plans to decrease the overall cost to customers by introducing
partnerships that will allow for benefits to both parties. The supplier will be able to use
Paintball Palace’s facilities for corporate events, free advertisement and reduced rate
of play. Additionally, Paintball Palace will keep the game interesting by changing the
structure of both the indoor and outdoor fields. In order for Paintball Palace to be
competitive they also offer; advice, well-trained referees, and high quality equipment.
14. What control over costs exists?
Variable cost: purchase paint in bulk from National Paintball Supply at a price
of $25 per case
Fixed cost: The bargain purchase option at the end of the five-year term on the lease of land
and warehouse.
15. What are the barriers to entry?
Chris
-High cost of real estate for such a large complex
a. $50,000 per month lease with an option to buy after 5 years
-Constructing the playing fields and barriers
b. $396,000 for astro turf, paid over 6 years, financed at 8.75% with 0% down
c. $6,000 for paintball approved netting
d. $25,000 for NPD pre-packaged air-ball fields, paid over three years at 8.5%
with 10% down
e. $20,000 for air compression equipment, paid over 5 years at 7.5% with 10%
down
f. What about outdoor woods-ball fields? What about the indoor concept field
that will look like a street corner?
-Heat and electric prices for winter months
-Purchasing large amounts of paint and always having enough on hand
16. Is the management team sufficient?
Denise
As a start-up company we believe it is not necessary to have too many people running the
business. The costs of wages increase and the amount of work is not that much at the first
stage of a start-up. As the business grows the company will require by itself more people to
integrate the management team because of the increase its work. Therefore, we think that
the management team is sufficient for the first stage of "Paintball Palace". It has the
Management, Accounting and Information Technology areas which are the most important in
a start-up company.
It is important to mention that the management team has lack of experience as “real
managers” in the business world as most of them have just received their Bachelor degree
and one of them is about to receive it. This factor leads a level of uncertainty and risk when it
comes to start and run a business, however we think that the minor experience they have got
from their jobs will take them on the right path to manage this new start-up company.
Nevertheless, in our opinion we will change the name of one of the areas stated in the case
study, this is the Information Technology department. It will be best if this area changes its
name to either Logistics or Operations, this as a result of not only the activities the person
(Alicia McCool) will perform but also the task required by this type of business and industry. It
is also important to take into account the experience and knowledge/abilities this person
possesses.
17. What is the strategic differentiation?
Paintball Palace offers a wide range of fields from air-ball to wood-ball style layouts. One of
the main differentiators between Paintball Palace and its competitors is its offering of climate
controlled indoor fields. These indoor fields can be used to capture customers from
competitors that do not offer indoor play during the colder months and can also be
instrumental in building a customer base during this time.
Open Questions
1. Is this a good business opportunity? Why or why not?
yes, market growth, competition, location all seem to be favourable.
2. What specific advice would you give the group about his business plan?
become more professional, a great deal of trust is needed before someone gives you
almost half a million dollars to play with. Also, even more important the plan is really
dependant on a lower purchasing cost than competitors have, you must be able to
show a binding agreement on this.
3. What improvements would you make in the group’s business plan?
tailor it to the investor’s needs: I want to know how much you need, what I will get in
return, how you will be able to pay me, when you will pay me and what you will pay
me. Also I want to know how the business is financed.
4. Would you invest in Paintball Palace?
No, see previous answers