STRATEGIC ADVENTURE PARK

In October 1989, Sue and Lisa reviewed the first operating season of their adventure park. Strategic Adventure Park, located 30 miles from a major maritime city, catered to young adults who enjoyed active war games. The partners were discussing future options and needed to decide on what action should be taken because profits fell far short of projected levels.

Sue and Lisa had started an outdoor adventure game called "Capture the Flag". The game was played by two 20-member teams of adults, and the object was to capture the opposing team's flag. Each team's flag was located in a specified area of the playing region; areas could vary from forested hills to open fields. The first team to capture their opponents' flag was the winner.

Team players defended their flag with CO2 powered paint guns which shot paint balls filled with water soluble dye. Players tried to shoot members of the opposing team, and the first team to eliminate all opposing players was declared the winner. Any player hit by a pellet and marked with dye, was out of the game. The player then returned to home base where he or she enjoyed refreshments while waiting 20 - 30 minutes for the next game to start. Home base offered music and refreshments to promote an atmosphere of fun and camaraderie.

Camouflage clothing, protective goggles, guns, holsters and face paint were provided. Each player was required to buy paint balls and CO2, as well as pay a playing fee of $25.

Adventure games were becoming increasingly popular in both the United States and Canada. The concept behind the games had been developed by three Americans. Charles Haines, an author of novels and screenplays, lived in New Hampshire. His friend, Bob Gurnsey, was from the same state. Prior to becoming the full time director of National Survival Games, Bob had owned a ski shop. He also sailed deep water boats and raced sport cars. The third man, Hayes Noel, was a New York stock and option trader who was a serious runner and who had been a college football player.


This case was prepared by Professor John D Kyle of Mount Saint Vincent University for the Atlantic Entrepreneurial Institute as a basis for classroom discussion, and is not meant to illustrate either effective or ineffective management.

Copyright 1990, for Atlantic Entrepreneurial Institute. Reproduction of this case is allowed without permission for educational purposes, but all such reproductions must acknowledge the copyright. This permission does not include publication.


There were at least a dozen adventure games operating in Eastern Canada and hundreds more south of the border. Participants played these games for a variety of reasons. For many, the games were a personal stress test or a physical workout that was also fun. For young, high-energy executives, an adventure game was an opportunity to relax or to enjoy a social outing. Game enthusiasts pointed out that a great variety of people could and did play - men, women, athletes, doctors and blue collar workers. Participants saw it as an ideal way to enjoy the outdoors with friends. Besides being fun, the games were a test of stamina and strategic skills.

The two owner-managers of Strategic Adventure Park were in their early thirties. Sue had spent a number of years in a resource-based industry before returning to university to complete a degree in commerce. Lisa's work experience had been in the tourist industry, and now she was also studying toward a business degree.

Another adventure game operated in the western part of the province, approximately 150 kilometers from Strategic Adventure Park. A similar game operated in Alberta. The owners of these firms reported that their players were between the ages of 19 and 50. Consequently, Lisa and Sue had directed their research to identifying the population in that age group who lived or worked in Strategic Adventure Park's catchment area. This information was incorporated into a comprehensive business plan (Exhibit 1).

Because adventure games were relatively unknown in the Maritimes, the owners believed it would be necessary to create awareness and subsequent demand for this type of leisure activity. The primary marketing area was identified as the entire region within a one hour's drive from the centre of the city. The marketing section of the business plan originally provided for $2,000 to be spent on advertising before the Park opened. $400 monthly was provided for after operations had begun. Lisa and Sue hoped to attract the "Yuppie" and business population. Their intention was to make personal calls on medium-sized and large businesses and try to promote the idea of setting up inter/intra company challenge events. They also prepared a list of individuals whom they intended to telephone to urge them to get a team together to play the adventure game. In their market research, the owners discovered that the affluent segments of the population were tending to buy experiences rather than possessions such as yachts and summer cottages. More and more, they preferred to travel, white water raft, sky dive, etc. This shift in life style would strengthen the Strategic Adventure Park's market position. Because of the proximity of several major military bases, Sue and Lisa also identified military personnel as a potential market, and planned to encourage and attract inter unit competitions. They also believed that the several universities in the area, with a combined student population of over 20,000, would provide another source of players. In order to increase business during slower work days, Strategic Adventure Park would try to attract company socials and sports teams to play "Capture the Flag". In addition, Lisa and Sue planned to set aside certain days for particular groups such as women's groups or stag parties. They would also encourage tournament play on slow days. Each of these distinct markets would require a separate advertising thrust.

The market plan was prepared for a period from May 20 to September 30, 1989. This covered the summer operating season. The game could also be played in the winter, with participants wearing white camouflage clothing when ground was snow covered. This scenario was not included in the initial market plan.

Lisa and Sue identified potential internal and external threats in the original business plan. The possibility of an accident involving a player was an internal risk which could not be ignored. Safety precautions had to be an important factor in day to day operations. They also recognized that there were external risks which had to be considered. For some of the external risks, preventative measures could be taken. For others, the owners could not influence the outcome. For example, there was the possibility that the county in which the Park was situated might introduce a law prohibiting the use of air guns. To minimize this possibility, the owners approached county officials before start-up, to acquaint them thoroughly with the nature of these games and the safety precautions which would be strictly enforced. Less could be done to prevent a potential competitor, who operated a successful flag game 150 kilometers away, from expanding his operation to a location near the Strategic Adventure Park.

The owners targeted a net profit after taxes of $10,000 but felt this was the minimum profit which they should realize. Two projected income statements were prepared for the business plan. The first was a pessimistic version based on a volume of only 1,200 customers, i.e. 12.5% of capacity. The second statement was based on 35% capacity, which would increase the customer volume to 3,320 for the season. The first scenario produced a profit of $4,943 after taxes and a partial repayment of the company's $12,500 start-up loan (Exhibit 2). The second scenario would result in a profit of $39,461 after taxes and the full repayment of the bank loan (Exhibit 3).

A list of assets, necessary to start operations, was prepared (Exhibit 4). These included a tent, which would serve as the main gathering place for customers when not playing the game, and a small trailer which would house the office. Forty-two air pistols and eighty units of camouflage clothing completed the list of major assets. Bids were solicited from five possible suppliers. Based on this survey, it was clear that an approximate investment of $25,000 would be needed.

The owners decided to incorporate their company in order to take advantage of limited liability, ease of transferring ownership, future expansion and the "permanence" attached to incorporation. Sue acquired 50% of the shares by investing $4,500 and Lisa 40% by investing $3,000. A further $12,500 in capital was raised through a loan with a local commercial bank. A $5,000 entrepreneurial government grant was also obtained. These contributions to capital were obtained from their respective sources after a careful review of the business plan prepared by the owners (Exhibit 5 - Opening Day Balance Sheet).

The target start-up date of May 20th proved to be overly optimistic. It was difficult to find suitable property. Many areas prohibited the use of air guns, and it was difficult to find terrain suitable for the adventure park. They needed about 40 acres of land with potential for parking. To properly accommodate the game, a combination of wooded and open terrain was needed. Lisa and Sue finally found a site that was within a 45 minute drive of the city. Another factor which contributed to the delayed opening was the "red tape" encountered at various levels of government. A building permit was also required for washrooms and food service. Power had to be brought in to the site. the location also needed approximately $1,000 of leasehold improvements and work before opening day. The park did not start operating until mid July, a delay of almost two months.

It was late June before Strategic Adventure Park finally launched its advertising campaign. To advertise the Park, newspapers in three towns near the proposed site were chosen as well as a Metro radio station. Advertising in the Metro daily newspaper was ruled out because space was too costly. Response to the local newspaper and radio advertisements was disappointing.

A delay also affected preparation of a colour flyer, which was needed before direct mail advertising could begin. The flyer was not ready until mid July. The printers required a telephone number for the brochure but the telephone company would not issue a phone number until the office trailer was located on the site. Because of the delay in obtaining a suitable site, and consequently in setting up the trailer, the direct mailing package to Metro businesses was almost two months behind the scheduled date. When finally completed, the direct mailing produced the greatest response of all advertising. Even so, the number of calls during July and August was small.

When the anticipated minimum volume of players did not materialize, there was no money left to advertise further. Besides advertising in the media, Lisa's and Sue's business plan called for direct telephone selling or another means of reaching potential customers. However, little direct selling was actually undertaken. Lisa discovered that neither she nor her staff had the time to carry out this activity. People who were interested in playing the game telephoned the Strategic Adventure Park number but, unfortunately, were seldom connected with a knowledgeable employee. Commonly during the month of May, and frequently during the rest of the season, staff members were unavailable to answer the telephone because of outdoor work which required their attention. Callers were asked to leave a message on the answering machine. Either the manager or one of the owners would then call the potential customer back to try to make a firm booking. Many telephone callers would not leave their number. This arrangement was unsatisfactory, but sufficient funds were not available to pay an additional staff member and thus correct the situation. A full page article in the Metro daily newspaper appeared at the end of August. It created a great deal of interest and bookings improved substantially after this.*

As the operating season progressed, a pattern developed. Almost without exception, games were played only on weekends. It was found that the optimum number of players per team was 20 (minimum number of players required was 10). Because "no shows" could result in a game being cancelled for lack of sufficient players, a deposit was required to help prevent this from occurring.

During the summer, four more adventure games opened in the catchment area. These games were similar to "Capture the Flag". The playing fee and the amenities were also very similar. However, the Strategic Adventure Park site, by all accounts, was more attractive and challenging to the players. The terrain offered more variety and contributed to a more interesting game. It was difficult to assess whether the new competition had a significant effect on retarding the growth of the business. Nonetheless, Lisa, the "on site" partner was badly demoralized by this turn of events. She did not attempt to revise the marketing plan.

Neither owner-manager was available for the entire operating season. Sue was involved in another business located in Ontario and, consequently, was unavailable to participate in day to day operations. Lisa worked full time in the city at another job and could therefore give the business her full attention only on weekends and in the evening. Because of these other commitments, the owners budgeted for, and hired, a full time manager for $1,800 per month beginning in May. There was also a full time worker hired at the $4.25 per hour minimum wage. Since it took three staff members to run a game, the owner-manager who resided in Metro had to be there on weekends.

The staffing situation was marred by friction between Lisa (the owner who was available part time) and the full time manager. By the end of August, the relationship between the two had deteriorated to the point that the manager had resigned and Lisa became personally responsible for much of the work previously done by the manager.

* September and October weekends were fully booked.

The original business plan was based on the staff running two games a day. After gaining some experience by operating a few games, it became clear that the same staff could not safely run two games in this time period. The owners decided that there was not sufficient cash flow to add more staff and that the low volume of players did not justify the extra expenditure.

At the end of the season when Sue, the absent co-owner, returned to Metro, the two sat down to discuss and evaluate the business. Strategic Adventure Park had not attained its target profit of $10,000 The company broke even only by ruthlessly slashing expenses when it was evident that start-up was going to be delayed (Exhibit 6). For example, the full time manager's salary was cut in half after the first month's operation. Part time staff hours were reduced. Advertising expenses were slashed from a projected $1,600 for the season ($400.00 per month) to an actual $400 for the season. Both owners felt that, as the season ended, it was necessary to identify why operating results had fallen short of projections so that corrective measures could be taken, and to decide whether they should continue operations through the winter.

The issue of the company's longer term prospects also had to be addressed. Sue and Lisa felt there was cause for some optimism. They believed that because of the game's success on the September and October weekends, it was reasonable to assume the twenty-two weekends of the 1990 May to September season would be fully booked if aggressive marketing was begun before the May start-up. Taking into consideration long weekends, and estimating that an average of 15 players would play each game, the owners forecast that 1,380 players would participate in the 1990 summer season.

Sue and Lisa were determined to fully utilize their business' full potential. They started by analysing its past performance.


EXHIBIT 1

STRATEGIC ADVENTURE PARK
BUSINESS PLAN
TABLE OF CONTENTS

exh173.jpg (30005 bytes)

EXHIBIT 2

PROJECTED INCOME STATEMENT
(Period from May 20 to September 30, 1989)
Budgeted for only 40 people/day for 30 days (1200 people)

exh174.jpg (42355 bytes)

EXHIBIT 3

PROJECTED INCOME STATEMENT
(Period from May 20 to September 30, 1989)
Budgeted for 3320 people

exh175.jpg (44078 bytes)

EXHIBIT 4

STATEMENT OF ASSETS

exh176.jpg (29754 bytes)

EXHIBIT 5

OPENING DAY BALANCE SHEET

exh177.jpg (25281 bytes)

EXHIBIT 6

ACTUAL INCOME STATEMENT AS OF SEPTEMBER 30, 1989
(May 20 - September 30, 1989)

exh178.jpg (31570 bytes)