People are always coming up to me and asking, “How do you develop a successful project?” As my mentor Buzz Price would say, “you are asking how to play the violin!” Whether you have an idea for a new attraction, museum, performing art center or shopping center, it needs to be tested for market and financial viability.
Here are the 10 essential steps to follow when planning a new project:
1. Evaluate your site(s) in terms of access, location, visibility, surrounding land uses, physical constraints and other factors.
2. Study and know your market in terms of: a. Demographics/psychographics b. current sales history (retail/attendance) c. close-in populations d. current visitors (if applicable) e. other market parameters.
3. Know your competition inside and out – Survey local, regional and national analogues and competition gaining as much real data and insight as possible. Know their sales, customer base, market area reach, split between local and regional visitors, years to ramp-up, etc.
4. Conduct consumer research – This may include telephone interviews, intercept interviews, internet research, focus groups and other forms of customer input. Many clients skip this step. They should not! This type of research can develop market consensus or advocacy for your project and lead to market success or failure.
5. Project stabilized year attendance/sales etc., based on research conducted in steps one through four. Build attendance leading up to that year. You are predicting your piece of the pie.
6. Project design day attendance and peak on-site attendance. These parameters will determine how large your attraction, museum, or even shopping center must be, at a minimum. Design day attendance is the number of people visiting the project on any of the 15 busiest days of the year. This is the number you will build to, not the busiest day of the year.
7. Based on market comps and knowledge of the industry , project per capita expenditure for gate, food and beverage, merchandise, rentals, membership, and other revenue. Identify and quantify elements of expense.
8. Construct an operating pro forma including all sources of income and elements of expense with resultant with bottom line EBDITA (Earnings Before Depreciation, Interest Taxes and Amortization.)
10. Slot in financing assumptions and resultant return on investment. From the EBDITA, any financial parameter can easily be developed including current value, internal rate of return, return on cost, and return on investment.
Of course, this is just the beginning of an iterative process that will be ongoing until you open the doors, hopefully not too long after you complete the initial feasibility analysis.