For anyone following along with the frameworks document, it seems that the break even point is incorrectly listed as 24 fields. The interviewee in the video gets the math right at 44 fields. 2,200,000 / 50,000 = 44
This was an INCREDIBLY helpful video! I'm having my first case interview soon and this really helped me understand what it would be like and the type of thinking I should adopt! Great job :)
Would it more thorough if we calculate market-sizing via the same method but the no. of schools, colleges is calculated via identitying the age group (via population estimate) that would be at school,college divided by the an estimate of no. of people that are enrolled at a school or college at one time (which maybe a number a person can relate to) OR in such a case with multiple objectives it would be going over?
yeah there are a number of problems with this case solution - first, PlayWorks will need to capture at least 20% of the existing college football market (Rev less costs = $3.7m profit available) a year for the first 3 years just to break even. Furthermore, I disagree with the recommendation at the end because the case specifically states that the initial investment of $2.2m upfront is in order to do the RESEARCH i.e. pilot run included. So I'd say the small pilot run isn't a feasible option.
i dont know if using 4 minutes to present the strcuture is too much that would amount to fishing, do you guys think he can neglect some of that? I feel like the parts about joint venture or equity financed are a little bit redundant at the beginning stage
Hi Anna! David here, hope I can help to explained why the interviewee only using VC while calculating BEP. Breakeven Point means that our investment towards the business have paid off by the profit we gain from that particular business. And the profit we get from doing a business is actually a gross profit (unit*(price - VC)). That way to calculate BEP we use this formula: Initial investment/(#Unit sold*(price-Var Cost)) Regarding your questions about Fix Cost, I think in some case there are annual fix cost (eg. renting the distribution channel/warehouse/etc.), to handle that we should ask the interviewer whether this 'variable cost' is total annual cost per year divided by total unit sold or just cost of good sold manufactured.. if it is just cost of good sold manufactured, the formula to calculate BEP must elaborate the fix cost in to the calculation so the calculation of BEP will be something like this: BEP = Investment/Annual Profit from the Business =Initial Investment/[(#UnitSold*(Price-VarCost)) - Annual Fix Cost) Hope this help!
Wait a minute... Did I miss something? The math doesn't make sense to me. If each sqr ft has a 40 cent contribution margin and the break-even gross profit we need is 2.2m USD, we need to sell 22m/4 = 5.5m sq footage of astroturf. It's mentioned that astroturf is priced at $1.5/sq foot for colleges. 5.5m * 1.5 > $8.2m USD. That's almost 50% of the entire football segment which is $16.7m in size. Capturing near 50% in just a few years sounds infeasible, esp. considering a CAGR of just 4%.
