Answer the following questions based on the Golfgamez case study above with your recommendations and projections for
Fantastic news! We've Found the answer you've been seeking!
Question:
Answer the following questions based on the Golfgamez case study above with your recommendations and projections for the business’s expenses. This paper should address the following:
- Identification and discussion of all startup costs associated with the venture. This should be based on the case and, as needed, any additional research.
- A description of the operating plan/model for the venture, including a discussion of operating costs.
- Articulation of assumptions undergirding the expense model.
- Presentation of the narrative for a best-case scenario, a most-likely scenario, and a worst-case scenario based on adjustments to these assumptions.
Transcribed Image Text:
For the past three months, 27-year-old Cal MacTavish had been exploring an idea for an innovative mobile application (app) called Golfgamez. At this point, MacTavish had twisted the ear of every one of his golfing buddies (over countless pints of post-round ale), received deep feedback on an impressive set of wireframes and prototypes that he had developed (on his own time, frequently working late into the night) and arrived at the conclusion that he was holding onto a potentially great idea. As he watched from his clubhouse balcony perch as another foursome arrived on the eighteenth green, MacTavish nervously pondered some critical looming decisions. How should he go about building, distributing and pricing the app? Should it be developed on the Apple iOS or Android platforms? What kind of start-up capital would be required, and where would he secure the funding? Would he have to risk his successful banking career and take a gamble on this new venture, or could he continue to develop this idea on the side ? REVENUE STREAMS Like several other golf apps already on the market, Golfgamez would leverage the global positioning system (GPS) technology built into smartphone hardware to provide high-resolution, satellite-based aerial views of tens of thousands of golf courses located around the world, allowing players to track and share detailed statistics about their games (e.g., clubs used, distances hit, shots, putts, greens in regulation and so on). MacTavish believed that building an attractive GPS-enabled scoring app was essential, even before attempting to introduce any value-adding differentiators. Without a competitive core offering, users would not be bothered to download the app. MacTavish was uncertain how to go about pricing the app. Prices for basic golf-scoring mobile apps ranged from free to $4.99. A few more sophisticated, GPS-enabled scoring apps were available; for example, the top-selling Golfshot app (by Shotzoom LLC) was sold on both the iOS platform (via the Apple App Store) and the Android platform (via Google Play) for $29.99. The revenue potential appeared significant, with an estimated 65 million golfers worldwide; in the United States, golfers were categorized as Avid (i.e., 28 per cent played 25 or more rounds per year), Core (i.e., 27 per cent played eight to 24 rounds per year) or Occasional (i.e., 45 per cent played one to seven rounds per year). MacTavish did not yet have a very clear sense about the proportion of golfers who owned smartphones, but there did appear to be a very high age/income demographic correlation (e.g., according to one report by Business Insider, 50 to 80 per cent of affluent Americans under 65 years of age already owned a smartphone*). Thus, for the purposes of estimating a baseline market size, MacTavish assumed that 50 per cent of golfers in the world already owned, or soon would own, a smartphone. Still uncertain about how much to charge for the app, MacTavish was determined that the basic Golfgamez app would meet or exceed the Golfshot user experience. Selecting a development platform was another important, complex decision that would have to be made quickly. Mobile apps developed for the Apple iPhone, which used the iOS operating system, were typically sold via Apple s App Store. Meanwhile, apps developed for the Android operating system (e.g., to run on Android smartphones manufactured by Samsung, HTC and Motorola), were typically sold on Google Play. Both the App Store and Google Play charged sellers a sales commission of 30 per cent. At the end of 2012, these two platforms accounted for 92 per cent of total smartphone sales -22 per cent for iOS and 70 per cent for Android. Moreover, selling prices were on average 50 per cent higher on Google Play versus the App Store. On the other hand, App Store sales continued to dwarf Google Play sales by an average factor of four to one. MacTavish pondered these data and wondered: Should Golfgamez be developed on Android first, iOS first or perhaps both concurrently? The top five globally downloaded iPhone and Android apps as of December 2012 are listed in Exhibit 1. In addition to the core GPS-enabled golf-scoring app, Golfgamez would be differentiated from competitor apps in two important, value-adding ways. First, golfers would be able to access and browse high-value discount coupons for local golf equipment and services. Rather than pushing these promotions on players (e.g., in the form of unwanted advertisements), the app would enable users to opt to click to review available deals, along the lines of Groupon s coupon offers. Thus, sellers would be approached to offer deep discounts to buyers (i.e., 50 per cent or more off retail prices), with the remaining 50 per cent of sales proceeds split evenly between Golfgamez and the seller. While the Groupon model had been criticized as unsustainable for some types of sellers, MacTavish felt it would work in the golf industry considering frequent manufacturer incentives, significant retail markups on golf equipment and the attractive tied- selling and up-selling opportunities it would enable sellers to pursue. In short, he suspected golf retailers would be receptive to an idea that precisely targeted affluent golf buyers and drove them into retail stores. Yet another revenue stream idea involved enticing players to connect deeply with one another by wagering A bet is made for each match. For example, a 10-10-10 would indicate a $10 bet on the front nine, a $10 bet on the back, and a $10 bet on the entire 18 holes. • Skins: Each hole is a skin and has a designated value. The lowest score on each hole wins the skin. If net skins are being played it is typical to use 1/2 of individuals course handicap index. Groups typically buy into the skins game and the money gets split by the number of skins won. Bingo-Bango-Bongo: Bingo, Bango, Bongo allows players to be competitive regardless of the differences in handicaps. Each hole has three points available. Any monetary value desired may be assigned to each point. Points are earned as follows: Bingo - First ball on the green = 1 point; Bango- Closest to the pin after everyone is on the green= 1 point; Bongo - First ball in the hole = 1 point. Dozens of these sorts of side games had become popular among golfers. MacTavish s vision was not to develop graphically intensive mobile games but rather to create simple and highly intuitive interfaces Dozens of these sorts of side games had become popular among golfers. MacTavish s vision was not to develop graphically intensive mobile games but rather to create simple and highly intuitive interfaces enabling golfers, playing real games of golf, to manage their side games and to pay their side bets automatically. The point was to help golfers have even more fun while playing the game of golf. Wagers on these kinds of games were typically in the range of $1 to $5 per hole, but they could be for as little as pennies or as much as hundreds of dollars per hole or game. Although MacTavish was uncertain how frequently or for how much golfers played side games on average, in his own experience (as an Avid golfer) it was extremely common - he estimated that more than 50 per cent of his own play involved side bets of $3 to $5 per hole. For the sake of argument though, MacTavish conservatively imagined that Golfgamez users would use the side game betting features 5 per cent of the time, with an average spend of $1 per hole (i.e., $18 per round). In terms of monetizing these transactions, he discovered that online sportsbooks charged transaction fees in the range of 2.9 to 3.9 per cent.¹0 COST ESTIMATES MacTavish had assembled the following preliminary start-up estimates for his new venture: Capital expenses included leasehold remodeling ($4,000); office equipment and furniture ($2,500); computer equipment, network and phones ($7,500); software design and developer kits ($3,000); golf industry database (one-time fees) $12,500; rent pre-payments ($4,000); and licenses, professional fees and basic office supplies ($1,000). Monthly operating expenses included rent ($2,000); golf industry data fees ($1,200); marketing, public relations, tradeshows, ads and travel ($1,500); and telephone, Internet, utilities and service fees ($1,000). Hiring a full-time developer (i.e., to build the app on the iOS or Android platforms, including a client- side app with server-side integration to facilitate social interactivity) would not be cheap. Average Hiring a full-time developer (i.e., to build the app on the iOS or Android platforms, including a client- side app with server-side integration to facilitate social interactivity) would not be cheap. Average online developer salaries were approximately $91,000 per year, plus benefits of 16.4 per cent, resulting in a monthly salary cost of $8,827. • Hiring a full-time marketing manager (i.e., to develop the couponing business) would cost approximately $123,000 per year, plus benefits of 16.4 per cent, resulting in a monthly salary cost of $11,931.¹2 FISH OR CUT BAIT As MacTavish pondered these decisions, he almost failed to notice his pocket was vibrating. He managed to fish out his smartphone and answer before the call went to voicemail. It was his assistant, calling to remind him about his 3 p.m. client meeting. He returned his phone to his pocket and took a deep breath. His banking career had advanced rapidly, and he had been rewarded handsomely in the last year his salary had topped $150,000, and there were some great perks (car allowances, lunch budgets, vacation cruises... even the golf club membership he was now enjoying had been paid for by the bank). And he knew he was being groomed for more senior roles. Why, he could almost see the next 10 years of his career laid out in front of him, like a road paved in gold! But if Golfgamez was going to become a successful business, it would require some serious full-time leadership. Should he put his career on hold to pursue this entrepreneurial dream? How quickly could the new business return him to his old salary? Was his salary even that important? MacTavish had more difficult questions to answer. TOP FIVE GLOBALLY DOWNLOADED IPHONE AND ANDROID APPS, DECEMBER 2012 Top iPhone Apps Clear Vision (Arcade) WhatsApp (Social Networking) Fruit Ninja (Game) Minecraft (Sim Game) Asphalt 7 (Arcade) Top Android Apps Minecraft (Sim Game) FoxFi (Communication) Draw Something (Games) Swiftkey 3 (Productivity) WeatherBug (Weather) Price $.99 $.99 $.99 $6.99 $.99 Price $6.06 $6.96 $6.96 $4.53 $1.99 Downloads (1-month) 2,334,101 2,094,861 1,798,719 1,459,425 1,214,912 Downloads (1-month) 150,725 62,883 73,359 69,984 68,631 For the past three months, 27-year-old Cal MacTavish had been exploring an idea for an innovative mobile application (app) called Golfgamez. At this point, MacTavish had twisted the ear of every one of his golfing buddies (over countless pints of post-round ale), received deep feedback on an impressive set of wireframes and prototypes that he had developed (on his own time, frequently working late into the night) and arrived at the conclusion that he was holding onto a potentially great idea. As he watched from his clubhouse balcony perch as another foursome arrived on the eighteenth green, MacTavish nervously pondered some critical looming decisions. How should he go about building, distributing and pricing the app? Should it be developed on the Apple iOS or Android platforms? What kind of start-up capital would be required, and where would he secure the funding? Would he have to risk his successful banking career and take a gamble on this new venture, or could he continue to develop this idea on the side ? REVENUE STREAMS Like several other golf apps already on the market, Golfgamez would leverage the global positioning system (GPS) technology built into smartphone hardware to provide high-resolution, satellite-based aerial views of tens of thousands of golf courses located around the world, allowing players to track and share detailed statistics about their games (e.g., clubs used, distances hit, shots, putts, greens in regulation and so on). MacTavish believed that building an attractive GPS-enabled scoring app was essential, even before attempting to introduce any value-adding differentiators. Without a competitive core offering, users would not be bothered to download the app. MacTavish was uncertain how to go about pricing the app. Prices for basic golf-scoring mobile apps ranged from free to $4.99. A few more sophisticated, GPS-enabled scoring apps were available; for example, the top-selling Golfshot app (by Shotzoom LLC) was sold on both the iOS platform (via the Apple App Store) and the Android platform (via Google Play) for $29.99. The revenue potential appeared significant, with an estimated 65 million golfers worldwide; in the United States, golfers were categorized as Avid (i.e., 28 per cent played 25 or more rounds per year), Core (i.e., 27 per cent played eight to 24 rounds per year) or Occasional (i.e., 45 per cent played one to seven rounds per year). MacTavish did not yet have a very clear sense about the proportion of golfers who owned smartphones, but there did appear to be a very high age/income demographic correlation (e.g., according to one report by Business Insider, 50 to 80 per cent of affluent Americans under 65 years of age already owned a smartphone*). Thus, for the purposes of estimating a baseline market size, MacTavish assumed that 50 per cent of golfers in the world already owned, or soon would own, a smartphone. Still uncertain about how much to charge for the app, MacTavish was determined that the basic Golfgamez app would meet or exceed the Golfshot user experience. Selecting a development platform was another important, complex decision that would have to be made quickly. Mobile apps developed for the Apple iPhone, which used the iOS operating system, were typically sold via Apple s App Store. Meanwhile, apps developed for the Android operating system (e.g., to run on Android smartphones manufactured by Samsung, HTC and Motorola), were typically sold on Google Play. Both the App Store and Google Play charged sellers a sales commission of 30 per cent. At the end of 2012, these two platforms accounted for 92 per cent of total smartphone sales -22 per cent for iOS and 70 per cent for Android. Moreover, selling prices were on average 50 per cent higher on Google Play versus the App Store. On the other hand, App Store sales continued to dwarf Google Play sales by an average factor of four to one. MacTavish pondered these data and wondered: Should Golfgamez be developed on Android first, iOS first or perhaps both concurrently? The top five globally downloaded iPhone and Android apps as of December 2012 are listed in Exhibit 1. In addition to the core GPS-enabled golf-scoring app, Golfgamez would be differentiated from competitor apps in two important, value-adding ways. First, golfers would be able to access and browse high-value discount coupons for local golf equipment and services. Rather than pushing these promotions on players (e.g., in the form of unwanted advertisements), the app would enable users to opt to click to review available deals, along the lines of Groupon s coupon offers. Thus, sellers would be approached to offer deep discounts to buyers (i.e., 50 per cent or more off retail prices), with the remaining 50 per cent of sales proceeds split evenly between Golfgamez and the seller. While the Groupon model had been criticized as unsustainable for some types of sellers, MacTavish felt it would work in the golf industry considering frequent manufacturer incentives, significant retail markups on golf equipment and the attractive tied- selling and up-selling opportunities it would enable sellers to pursue. In short, he suspected golf retailers would be receptive to an idea that precisely targeted affluent golf buyers and drove them into retail stores. Yet another revenue stream idea involved enticing players to connect deeply with one another by wagering A bet is made for each match. For example, a 10-10-10 would indicate a $10 bet on the front nine, a $10 bet on the back, and a $10 bet on the entire 18 holes. • Skins: Each hole is a skin and has a designated value. The lowest score on each hole wins the skin. If net skins are being played it is typical to use 1/2 of individuals course handicap index. Groups typically buy into the skins game and the money gets split by the number of skins won. Bingo-Bango-Bongo: Bingo, Bango, Bongo allows players to be competitive regardless of the differences in handicaps. Each hole has three points available. Any monetary value desired may be assigned to each point. Points are earned as follows: Bingo - First ball on the green = 1 point; Bango- Closest to the pin after everyone is on the green= 1 point; Bongo - First ball in the hole = 1 point. Dozens of these sorts of side games had become popular among golfers. MacTavish s vision was not to develop graphically intensive mobile games but rather to create simple and highly intuitive interfaces Dozens of these sorts of side games had become popular among golfers. MacTavish s vision was not to develop graphically intensive mobile games but rather to create simple and highly intuitive interfaces enabling golfers, playing real games of golf, to manage their side games and to pay their side bets automatically. The point was to help golfers have even more fun while playing the game of golf. Wagers on these kinds of games were typically in the range of $1 to $5 per hole, but they could be for as little as pennies or as much as hundreds of dollars per hole or game. Although MacTavish was uncertain how frequently or for how much golfers played side games on average, in his own experience (as an Avid golfer) it was extremely common - he estimated that more than 50 per cent of his own play involved side bets of $3 to $5 per hole. For the sake of argument though, MacTavish conservatively imagined that Golfgamez users would use the side game betting features 5 per cent of the time, with an average spend of $1 per hole (i.e., $18 per round). In terms of monetizing these transactions, he discovered that online sportsbooks charged transaction fees in the range of 2.9 to 3.9 per cent.¹0 COST ESTIMATES MacTavish had assembled the following preliminary start-up estimates for his new venture: Capital expenses included leasehold remodeling ($4,000); office equipment and furniture ($2,500); computer equipment, network and phones ($7,500); software design and developer kits ($3,000); golf industry database (one-time fees) $12,500; rent pre-payments ($4,000); and licenses, professional fees and basic office supplies ($1,000). Monthly operating expenses included rent ($2,000); golf industry data fees ($1,200); marketing, public relations, tradeshows, ads and travel ($1,500); and telephone, Internet, utilities and service fees ($1,000). Hiring a full-time developer (i.e., to build the app on the iOS or Android platforms, including a client- side app with server-side integration to facilitate social interactivity) would not be cheap. Average Hiring a full-time developer (i.e., to build the app on the iOS or Android platforms, including a client- side app with server-side integration to facilitate social interactivity) would not be cheap. Average online developer salaries were approximately $91,000 per year, plus benefits of 16.4 per cent, resulting in a monthly salary cost of $8,827. • Hiring a full-time marketing manager (i.e., to develop the couponing business) would cost approximately $123,000 per year, plus benefits of 16.4 per cent, resulting in a monthly salary cost of $11,931.¹2 FISH OR CUT BAIT As MacTavish pondered these decisions, he almost failed to notice his pocket was vibrating. He managed to fish out his smartphone and answer before the call went to voicemail. It was his assistant, calling to remind him about his 3 p.m. client meeting. He returned his phone to his pocket and took a deep breath. His banking career had advanced rapidly, and he had been rewarded handsomely in the last year his salary had topped $150,000, and there were some great perks (car allowances, lunch budgets, vacation cruises... even the golf club membership he was now enjoying had been paid for by the bank). And he knew he was being groomed for more senior roles. Why, he could almost see the next 10 years of his career laid out in front of him, like a road paved in gold! But if Golfgamez was going to become a successful business, it would require some serious full-time leadership. Should he put his career on hold to pursue this entrepreneurial dream? How quickly could the new business return him to his old salary? Was his salary even that important? MacTavish had more difficult questions to answer. TOP FIVE GLOBALLY DOWNLOADED IPHONE AND ANDROID APPS, DECEMBER 2012 Top iPhone Apps Clear Vision (Arcade) WhatsApp (Social Networking) Fruit Ninja (Game) Minecraft (Sim Game) Asphalt 7 (Arcade) Top Android Apps Minecraft (Sim Game) FoxFi (Communication) Draw Something (Games) Swiftkey 3 (Productivity) WeatherBug (Weather) Price $.99 $.99 $.99 $6.99 $.99 Price $6.06 $6.96 $6.96 $4.53 $1.99 Downloads (1-month) 2,334,101 2,094,861 1,798,719 1,459,425 1,214,912 Downloads (1-month) 150,725 62,883 73,359 69,984 68,631
Expert Answer:
Answer rating: 100% (QA)
Answer the following questions based on the Golfgamez case study above with your recommendations and projections for the businesss expenses This paper should address the following Identification and d... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0132162302
1st edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Posted Date:
Students also viewed these accounting questions
-
Compute the following: (1) current ratio, (2) acid-test ratio, (3) days' sales uncollected, (4) inventory turnover, (5) days' sales in inventory, (6) debt-to-equity ratio, (7) times interest earned,...
-
Tank Top Menswear, Ltd. reported net plant and equipment of $ 1,600,000. These assets cost $ 2,500,000 with accumulated depreciation taken to date of $ 900,000. Based on recently assessed negative...
-
Find all predicate logic sentences for the statement "the product of an odd and an even number is even." O O O O O Vx (Odd (x) Even (x - x)) Vx3y ((Odd (x) Even (y)) Even (xy)) VxVy (Even (x- y) A...
-
Modify HashST to use a resizing array so that the average length of the list associated with each hash value is between 1 and 8 .
-
There are many running shoes on the market of varying degrees of quality. Long-distance runners require a shoe that provides a significant reduction in impact shock compared to the standard running...
-
Refer to the diagram above in Study Exercise 6, but now suppose this is an open economy where financial capital is internationally mobile. Compared to the response to Study Exercise 6, describe the...
-
The Buffalo Insurance Agency received the following notes during 2010: Requirements 1. Identifying each note by number, compute interest using a 360-day year, and determine the due date and maturity...
-
The unemployment rate for 18-to 34-year-olds was reported to be 10.8% (The Cincinnati Enquirer, November 6, 2012). Assume that this report was based on a random sample of four hundred 18- to...
-
Actual results for the the year ended 2021: Activity level (units) Materials Labour Production overheads Administrative overhead Selling overheads 9,000 RM 61,000 90,000 90,000 32,000 8,500 Required:...
-
Solve this in python. **[70 pts]** You will be writing code for recording the menuitems and daily sales of a lemonade stand. It will have theseclasses: MenuItem, SalesForDay, and LemonadeStand. All...
-
How does social stratification intersect with the provision and allocation of financial aid or scholarships, elucidating the differential impact of socioeconomic hierarchies on access to and...
-
Multiply the following polynomials, as indicated. (5x + y) (x - 3y)
-
Express p x p in index form and show that the product is a vector. Finally find the y component of the vector.
-
How do the media influence the president, Congress, and the courts, ac- cording to Jillson? Explain how the media deals with these institutions in the framework of conflict and the horse race, and...
-
In 1905, the twin islands of the Republic of Pacifica gained independence from the Republic of Dyland. Mataso and Tisikia are the two islands that make up Pacifica. Mataso has a population of over 5...
-
Multiply: 21 1/1 and write your answer in reduced form. 25
-
1. What responsibilities might you have for ambulatory (Holter) monitoring? 2. Why is a diary a necessary part of Holter monitoring? 3. What does real-time monitoring mean? 4. Why should the patient...
-
What is an access control list?
-
What should the total acquisition cost of a long- lived operating asset include?
-
What defines a company's profitability?
-
Using the information from BE10- 13, prepare the journal entry to record the write- down to market for the Stain Resistant model under both the direct and indirect methods. Assume that Count Clothing...
-
Several sources of GAAP consulted by an auditor are in conflict as to the application of an accounting principle. Which of the following should the auditor consider the most authoritative? a. FASB...
-
In the opening paragraph of the standard audit report, auditors acknowledge their responsibility to a. Conduct their audit in accordance with generally accepted auditing standards. b. Evaluate the...
-
The auditor's standard report should be titled, and the title should include the word a. Standard. c. Independent. b. Opinion. d. Audit.
Study smarter with the SolutionInn App