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How to do a "make vs buy" decision when you have zero data.
aka "What running professional paintball tournaments at Disney World taught me".
A thread.
aka "What running professional paintball tournaments at Disney World taught me".
A thread.
So back in the mid 2000's, I was the General Manager for a professional paintball league called Paintball Sports Promotions (PSP).
To give people a sense of scale, here is a picture of our biggest event in 2006, the World Cup:
To give people a sense of scale, here is a picture of our biggest event in 2006, the World Cup:
Some other numbers:
- 10 fields
- 200 teams
- 3,000 players
- 200+ referees and part time staff
- Estimated 40,000 spectators over the course of a week
- The parking lot on the right was 1 of 3 of the available lots
- Total budget for the event was north of $600K
- 10 fields
- 200 teams
- 3,000 players
- 200+ referees and part time staff
- Estimated 40,000 spectators over the course of a week
- The parking lot on the right was 1 of 3 of the available lots
- Total budget for the event was north of $600K
Everyone LOVED having the events at Disney for many reasons:
- great venue
- cheap hotels and house rentals (event was in Nov in Florida which is the off season for tourists)
- great weather
- lots of stuff to do for people (Disney, Universal etc etc)
- great venue
- cheap hotels and house rentals (event was in Nov in Florida which is the off season for tourists)
- great weather
- lots of stuff to do for people (Disney, Universal etc etc)
There was one (perceived) problem:
Disney charged, IIRC, $40K upfront. Most of the other venues, while not nearly as good, usually charged about half.
So the league owners asked: "Can we do events that are just as good but for less money?"
Disney charged, IIRC, $40K upfront. Most of the other venues, while not nearly as good, usually charged about half.
So the league owners asked: "Can we do events that are just as good but for less money?"
Now, those of you with a business background are probably recognizing two things:
- This is a classic "build vs buy" problem
- Problems like these are usually relatively easy to answer b/c you just do an analysis of past numbers and get the solution.
- This is a classic "build vs buy" problem
- Problems like these are usually relatively easy to answer b/c you just do an analysis of past numbers and get the solution.
Unfortunately, there was zero past data on previous events and what they cost to run. Well, maybe not zero but the numbers were very high level e.g. "Event X cost $ Y" with no detail on line items for things like fencing, equipment etc.
There was a reason for the above though:
There was a reason for the above though:
Just like in every professional sport, you through phases where there is only one national league e.g. the NFL. Then, some people get upset and want to try something different so a new league starts e.g. the AFL.
The same thing happened in paintball!
The same thing happened in paintball!
The other league was called the National Professional Paintball League and they were being run by guys in England who had experience running big music shows.
There tournaments were like rock concerts and they had them in amazing locations like the beach in Huntington Beach, CA.
There tournaments were like rock concerts and they had them in amazing locations like the beach in Huntington Beach, CA.
Because the NPPL was doing so well, the owners of PSP had thought that PSP's days were numbered so they had kept it on life support just to see what would happen.
Cue when I arrive on the scene. My boss had decided to go head to head with NPPL and we had to turn PSP around.
Cue when I arrive on the scene. My boss had decided to go head to head with NPPL and we had to turn PSP around.
Back to our build vs buy problem.
First things first, I decided that we should just start writing down what everything cost. It's hard to make decisions with no data and to quote @donttrythis "The difference between science and screwing around is writing things down."
First things first, I decided that we should just start writing down what everything cost. It's hard to make decisions with no data and to quote @donttrythis "The difference between science and screwing around is writing things down."
Keep in mind: I had never run any kind of big event before. All I had was some experience with college paintball events and an MBA and an Economics/Computer Science dual degree.
I also had years of playing Sim City and Civilization which, surprisingly came in very handy.
I also had years of playing Sim City and Civilization which, surprisingly came in very handy.
I distinctly remember having conversations with the CFO (my boss's wife) like this:
CFO: This guy wants $2/ft for fencing
Me: Uh, ok.
B/c I:
a. had never done this before
b. each event was in a different place so things never cost the same
CFO: This guy wants $2/ft for fencing
Me: Uh, ok.
B/c I:
a. had never done this before
b. each event was in a different place so things never cost the same
But we kept writing things down in a big spreadsheet broken down by line item (e.g. fencing) and event (e.g. Austin)
Fast forward to later that year:
CFO: This guy wants $2/ft for fencing
Me: Wait, every other place is $1 to $1.50/ft, what's the deal?
Fast forward to later that year:
CFO: This guy wants $2/ft for fencing
Me: Wait, every other place is $1 to $1.50/ft, what's the deal?
CFO: Well, he seems to be the only fence guy within 2 hours of here so we are basically paying monopoly prices for him.
Me: Guess we go with this guy then.
And so on for everything from food to water to ambulances to diesel to grandstand rental etc.
Me: Guess we go with this guy then.
And so on for everything from food to water to ambulances to diesel to grandstand rental etc.
It got to where I could walk around an event and you could point to some random thing and I could tell you:
- why it was there
- how much it cost
- lessons learned about using it
- etc
e.g. I knew nothing about generators but back then I could rattle off stats on all of them
- why it was there
- how much it cost
- lessons learned about using it
- etc
e.g. I knew nothing about generators but back then I could rattle off stats on all of them
Which brings us back to Disney.
Remember when I said that they charged us $40K?
Turns out to duplicate roughly 80% of what we got from them cost: $100K!
In hindsight, not surprising given their infrastructure, people and culture.
Remember when I said that they charged us $40K?
Turns out to duplicate roughly 80% of what we got from them cost: $100K!
In hindsight, not surprising given their infrastructure, people and culture.
That being said, we never would have known if we hadn't started writing things down and actually looking at the numbers.
Moral: Total Cost of Ownership is a thing. But it's useless if you don't:
a. make sure you have all the data
b. write things down
c. review what you wrote
Moral: Total Cost of Ownership is a thing. But it's useless if you don't:
a. make sure you have all the data
b. write things down
c. review what you wrote
