Subscribe to RSSAre Obstacles Really Opportunities in Disguise?
Recently, I was in a Florida town to perform the wedding ceremony of my sister – a tremendous honor. While we were there, some family and I took a day trip to another small but lovely tourist town. We enjoyed seeing the various attractions, but the improvements the local government could do to support its greatest revenue generator – tourism – were painfully obvious.
After hearing me comment several times on these opportunities, my cousin asked if I should see the Mayor so that I could point these things out to him. We all had a good laugh, but it got me to thinking, “What would I say to a city official if I had the chance?”
The answer soon became very clear, and even more exciting than the frustrations experienced in those shortcomings. Instead of the criticisms of better signage or more efficiency, I would tell them that my firm could handle one of their biggest headaches – parking - and give them sizably more in revenue per year from it than they were making themselves. My only conditions would be for them to allow me to run it as I saw fit, I would have a long-term exclusive agreement, and the rest of the gains would be tax-free. In exchange, I would assume all costs of running the lots and pay them their current revenue plus a premium.
If they accepted my offer, here’s the opportunity I saw:
A commodity existed in this city – a shortage of parking for the tourism in the area. This town had very limited, government-run parking in its crowded city limits, particularly in its most interesting areas. There were two main lots, one of approximately 120 spaces, and the other of nearly 60. The lots were always full. The parking rates were insanely cheap – fifty cents ($.50) per hour.
The values of the parking spots were also grossly undervalued. A quick calculation shows that for 180 spots at full capacity at $.50 per hour for 9.5 hours per day equals roughly $855 per day in revenue, or just over $312,000 per year. The market for that parking, even without charging the premium due to the shortage of supply, is easily three times the rate, or $1.50 per hour per spot. Even then, it would be a bargain.
Even without discussing the other aspects of running a lot, like ticketing & the meter maid (also underpriced), to hours (only open from 8am to 5:30pm when shops and restaurants are open much later), to maintenance (probably overpriced due to no competition), to expansion (no strategy in business expansion to oversee this critical area, as the existing capacity is always fully utilized), to increasing efficiency through new technology (the meters were at least 10 years old), opportunity for both the government and business is clear: they off-load a headache and something they likely do not have time for, yet is a necessity, and also make a 10% premium per year for doing so. This would net just over $343,000 expense-free revenue the first year alone. Business, on the other hand, can serve that community better and make a gross revenue of $936,000 before expenses (~$593,000 after the main expense of paying the city their portion).
The bottom line is this: seeing the opportunity can often mean taking the problems, the inconveniences, and developing, then pricing, the correct solution. Even if its Parking Lots (not New Iron’s real area of business) to other assets needing monetized (which is). Now if you’ll excuse me, I have a letter to write to a certain city official…
Tags: capitalism, commerce, obstacles, opportunity