Using a Business Plan to Redirect Live Game Business

By Bill Zender

(Article that appeared in Casino Enterprise Management Magazine, August 2006)
 

What is a business plan?

The strength of using a business plan, or at least a business plan format, comes from its ability to examine opportunities and disadvantages of the project, and contributes to the success of increasing table games, enter into a different promotion, or strategy for redirecting and developing different revenue flow for existing table games.  A business plan’s strength involves the analysis of the projects net value or strategic decision based on the needs or the organization and it’s business environment.  This format allows the casino executive to peer deeply into the primary issues that represent the dynamics that affect an operations chance for a successful implementation of their venture and/or the validity of the decision objective.  Primary issues that the business plan assists the executive and the assigned work team members to examine are;

·        Examines the business, casino executive, and working team member’s core values

·        Examines the project or department’s working team structure

·        An assessment of the business resources and assets needed to accomplish the objective

·        An assessment of the business environment

·        An assessment of relative business competition

·        Provides a SWOT analysis so business opportunities can be identified and risks can be mitigated

·        Allows the team to design a successful action plan

·        Allows the team to develop realistic financial projections and revenue metrics

A business plan allows the executive to view and analyze a business venture on paper before he or she becomes involved with spending assets and resources on a specific project.  In many cases the business plan will reveal problems and obstacles that are much easier to overcome at the beginning of a project then somewhere during the actual project implementation.  This mitigation strategy quite literally swaps hindsight for forethought, which lessens unexpected and unplanned costs, and greatly increases your projects chance for reaching and exceeding the projects established goals. 

Implementing a new game type on the casino floor

For example sake, let’s say that a General Manager of a Las Vegas resort has decided to market his casino to a greater portion of local and Southern California Asian gamblers.  To do so he has decided the casino needs to introduce the game of Pai Gow (dominos) onto the casino floor.  It is up to you as the VP of Casino Operations to come up with a plan to either successfully implement the games within the next several months, or to convince the GM to the entire project is unrealistic and needs to be rejected.  How can a business plan help you make these decisions?  Let’s apply the elements of the business plan with this example and see how it will help our decision making process.

First, we need to review the company’s core values to see if this project’s moral and ethical issues fall within those value.  In order to accomplish this step we need to examine the company’s mission statement, vision statement, value statement, and goals and objectives. For instance; the company’s value statement states that the company intends to provide their customers and employees with a safe business environment.  However, it is known that operating the game of Pai Gow may attract unsavory characters such as loan sharks and gang members to our establishment.  We might decide at this point that any economical gains from Pai Gow do not outweigh the risks bought on our employees and customers from attracting the wrong type of clientele.

Next, the business plan examines key members of the committee or work team that is involved with implementing the games.  Does the team contain the best personnel?  Is there anyone else in the organization that needs to be included?  Do the members of the team have the ability to plan and implement a project of this nature?  If the project is beyond the scope of the company’s employee’s ability this is a good point in the process to seek outsourced help and not during the implementation process when the project has reached the point of no return.

Third, does the casino have the resources and assets to complete the project?  Does the casino have the correct size tables to place on the floor?  Are their enough chips in the cage to supply several tables with enough chips or the best value chips?  Here’s another point that needs to be examined; do I have the dealers necessary to deal the games?  What about game supervisors?  And, it’s not beyond the executives’ scope to search factors outside their immediate department.  Does casino market have the proper resources for promoting Pai Gow to the oriental market?  Do they have employees that can communicate in a different language?  I remember running a slot tournament once when it was discovered in the middle of the tournament we didn’t have enough marketing employees to monitor the tournament players in a proper manner.

Next we need to examine our business market.  Is there a sufficient available market of Pai Gow players that we can attract and provide our casino with a positive rate of return on our time and assets investment?  Will the game of Pai Gow actually attract more Oriental business?  If it doesn’t look like there is a sufficient market base then we need to spend our valuable resource in another, more profitable direction.  One of the biggest mistakes I see made in the gaming industry is management’s failure to project the scope of the customer base for a specific project.  Take the expansion of poker for example.  The casino is planning to add a four-table poker room to their operation; however the business environment dictates the room should contain twice as many tables, then the game implementation plan needs to be reexamined and extended accordingly.  Reevaluation is better at the planning stage then six months down the road when any change will result in additional cost overruns.

Fifth, we need to analyze our market competition, both present and future.  Why would we want to put several Pai Gow games on the floor when we know all the competing casinos in our area provide the same player market base with a nicer facility, higher table limits, and more lenient credit terms.  Maybe we would be better off spending our resources expanding dollar slot machines to give our casino a better return on investment dollar.

Next is the area of the business plan which I feel makes the biggest difference between a project being a success or a failure, and that through a SWOT analysis.  The acronym “SWOT” stands for the elements “strengths, weaknesses, opportunities and threats”.  The first two elements mentioned are strength and weaknesses of a business or project and represent issues that are internally control by the company.  What is our business strength and what is our weakness?  For example; our company strength could be that our marketing department is well versed in Asian marketing and will easily attract Pai Gow players, while our weakness in this situation falls on our live game staff because they do not have a good understand on the rules and game procedure of Pai Gow and it will be doubtful whether we can operate the game using our existing employees.

The second two elements are both external to our operation; market opportunities available to our company in this situations, and any threats to the success of the project perceived coming from sources outside of our organization.  For example; at the time of the business plan conception there are only a couple other casinos in Las Vegas that offer the game of Pai Gow; however, the other casinos are better positioned to provide their players with a better facility and more amenities.  The business environment will probably not stay static during the life of your project and this factor needs to be considered.

Once our business plan has honestly listed the SWOT elements we will need to identify all individual weaknesses and threats, and develop an additional plan to mitigate these risks.  Sometimes our businesses strengths and opportunities will overcome these risks; however this is the perfect time to identify these problems and create a strategy that will overcome these obstacles.  If our casino staff does not understand Pai Gow, this is the point where we schedule training and/or hire experienced help.  If we can’t provide our Pai Gow customers with the same amenities, maybe we need to reassess our intended market niche, or develop some type of value added incentives to attract and keep Pai Gow customers.

Once the following issues have been listed and analyzed then we need to establish a strategy for implementing the findings and get the project started.  This function is known as an “action plan”.  The action plan allows use to plan each step for placing the Pai Gow tables on the floor and start dealing the games to the customer.  It establishes timelines and procedures for licensing, training, ordering equipment and supplies, and marketing the game.  The action plan keeps the project inline and on time, and helps communicate and coordinate essential elements of the plan to the different departments involved in operating the game of Pai Gow.  Many projects become failures primarily due to the failure of the action plan.

This brings use to the last area of the business plan and that is calculations needed to establish realistic financial projections and to establish metric benchmarks that we can use to measure the progress of the project to determine whether we are reaching the goals that we have established at the onset of the project.  You notice I used the word “realistic” in the previous statement.  Many times a project is assigned a financial goal by upper management and these goals are so out of reach by the project that it is doomed to fail.  All expenses need to by accurately estimated to determine the cost of the initial project and use “realistic” numbers to project anticipated revenue figures.  In addition it might be wise to establish average, best, and worst case scenarios.  If average and/or worst case scenarios don’t return a positive rate of return after start-up cost and operating expenses, it might be prudent at this juncture to rethink the decision to go forward with this project.

Another problem area in business, especially in the gaming industry, is the planers failure to establish periodical metric goal levels to determine the success of the project.  This comes in handy when it’s discovered that after all your team’s planning your project is still not reaching its intended goals.  Being able to monitor the projects process through pre-established goals, management has the ability to change or alter the project to get it back on course.  Management also has the option to discontinue the project if the measurement metrics point to a costly failure if the project goes to term.

Conclusion

Using a business plan format in conjunction with any major project in the casino, whether it’s purpose is to redirect live game business or venture into new customer markets, will greatly increase your projects degree of long-term success and will significantly lower unexpected costs which can be incurred during the implementation stage.  It’s wise for the casino executive and/or working team members remember the following maxim, “failing to plan is planning to fail”.  Other points that need to be remembered are:

·        Always establish and review points and issues of a business plan HONESTLY

·        Be THOROUGH when establishing project expense; consider all costs big and small

·        Be REALISTIC when projecting future revenues.  If the revenue flow does not sustain a positive net present value (NPV) then it may be wise to redirect your assets and resource into a different project

·        Establish periodical project metrics (both for costs and revenues) to EVALUATE the progress of the project

·        Be sure to consider the project’s relationship with your company’s CORE VALUES.  Be sure all stakeholders in the project are on the same moral and ethical page

·        Don’t be afraid to make CHANGES to your project based on information derived from your business plan analysis

·        Don’t disregard the possibility that the project can be DISCONTINUED if the analysis does not indicate goals can be reasonably accomplished.  In most gaming operations available resources and assets are limited and need to be assigned to a project that exhibits the best chance of success with the best possible revenue return to the operation