The renting would work as follows, each person would have a special card and number, when they want to rent, and the person will give me the card and the box of the film or game. I will then register it in my computer and the person will then have the film or game for the time allocated. When they return the game or film, I will show that they have returned it on the computer. If a film or game is not returned in the required amount of time, the computer will show me this and I will write to them asking for it back. This looks very hard to make but, using Microsoft Excel it is very simple and wont take very long. When they join, they will need two things proving there address and there name so I know that they aren’t going to steal from me.
I asked at three shops about how much rent they paid. One told me and the other two didn’t.
The shop that told me that they pay £1000 a month rent. I don’t think this is accurate, and perhaps they told me this just to get rid of me so I am unsure on the rental price. I have decided to keep it at £1000 as I haven’t been told otherwise. I will also presume that the shop comes furnished and with a simple computer that has Microsoft Office so I can set up my record of people.
The results from my Questionnaire (see appendix A) were always roughly the same. Most people agreed on a price and most people rent the same types of films and games. However, I will buy more of the film and game types that got more votes so I don’t have lots of games that are not going to be rented.
There are approximately 2000 children who would use a rental shop where I live and due to competition, I would expect to get about half. However, it may take a few months for my shop to gain a reputation and be known by people before I get half of the customers, so for the first month I will presume I get a quarter of the customers. (See appendix B). This is why I have decided to spend about £400.00 on advertising.
My advertising would mainly be leaflets posted through doors and perhaps an advert in the local newspaper, this would help me get known and attract new customers. I would spend £200.00 on leaflets and £200.00 on the newspaper advert.
I have decided to buy the games, videos and DVDs from a high street shop because it will be very difficult to buy from a warehouse. The game prices average at £39.99, videos at £12.99 and DVDs at £16.99.
I will supply games for the most common consoles. They are as follows (most common console first.) PC, PS2, PSone, X-BOX and GAMECUBE. I will supply more games for the more common console as they are more likely to be rented.
The prices I have chosen to rent the Games at is £3.99 and for three nights. I have decided each game should cost £3.99 because on my Questionnaire (see appendix A) the most people said that it was the most reasonable price, and also, I did some research at my local rental shop and the games were also at this price. However, the older games were cheaper to rent as they wouldn’t be as popular. To keep the results simple I will presume that they are all new games hence all cost the same amount. I decided to make the maximum amount of nights three because my research showed that other rental shops have three or less. My questionnaire results showed that most people wanted the game for more than three nights. I thought this was really unrealistic and that they decided to select that because they would have more time at a cheaper price.
The videos are priced at £2.50 for two nights, because that received the highest amount of votes in my Questionnaire (see appendix A) and it is about the same at other shops.
The DVDs will cost £2.99 as it got the most votes in the Questionnaire (see appendix A).
If I stick by the above, this is the amount of times I need to rent the games e.t.c. to break even:
For every one video bought I will need people 5 to rent it so break even
For every one DVD bought I will need 6 people to rent it to break even
For every one Game bought I will need 10 people to rent it to break even.
I worked the above out by dividing the original cost of the film or game by the price I will rent it at.
I have noticed that in other rental shops, new films cost the most, and people are only allowed one night to watch the film, to insure people come to my shop instead of my competitors I have decided to keep the price the same but increase the amount of nights allowed.
To start up my business I will need a loan of £4200.00 this would contribute to the rent, purchase of stock, wages, electricity and telephone (Fixed and variable costs of the first month). In the first month I have worked out that I will make a loss of £6,048.00 this would be because of the additional costs of setting up the business and because of the fact that my business wasn’t known by the possible customers. After that, I have predicted, if there is still only the one competitor I would make a profit of £400.00 a month, (excluding my wage). (See appendix C)
I worked out how much profit I would make my using this formula:
Profit = Revenue – Total costs
Profit = total money in – total money out.
Revenue is the money that I will receive from my sales / renting.
Total costs are the sum of the fixed and variable costs.
If I make £400.00 a month, it will take 11 months for me to get the original money invested back, (if all the profit was spent on paying the debt.)
Every month I have decided to buy 20 new games, videos and DVDs. This way, I will be able to buy all or most of the films and games that come out over the month. If I have any money left over, I will buy older films and games to increase my stock number which will help me attract business as I would have a larger range of films and games.
Conclusion
I found out that my business would be quite successful but when starting up, I would be in a lot of debt which will take about a year to clear if I used all the profit on paying it, which is unlikely as I might need to hire a new worker or if a lot of new films come out I might need to buy them.
If I did get the rental price wrong, (which is likely) I might make less profit than is expected, if the rental price does increases by more than £400.00 I would not make any profit.
I also think that my prediction on the amount of business I would get slightly inaccurate, as the local rental shop is Blockbusters and has chains all over the country; they would have a large amount of films and already have a good reputation, they are very likely to take the majority of the business available. Blockbusters is also an economy of scale i.e. they buy in such bulk that the films and games become very cheap.
I also didn’t get a license, so if this business was to get up and running, I would have to pay for it, which may cost me quite a lot which would perhaps result in the business failure.
After considering all these factors, I think that a Game film rental shop can be a successful business if it survives its first year in which it would have a lot of debt, from the rent of the shop and from the games and films originally purchased, however, you must aim at a big market (e.g. not just at children) and have a large selection of films and games to attract customers.
Bibliography
Blockbuster game and film rental price leaflet.
Nuffield Business and Economics for GCSE text book.
GAME price leaflet.
