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The AFEE curriculum is used in its entirety at the Acton School of Business, based in Austin, Texas, an intense one year program taught exclusively by successful entrepreneurs. To learn more, visit www.actonmba.org. 04/2014

Monkey Ranch 1 Exploring the unit economics jungle… During the last four summers you have been building your lemonade stand business. It has been a great ride, at least most of the time. You’ve got a manager running 32 stands across the city, and you’re keeping almost $10,000 a year. Not bad! As a reward, you treated yourself to a whirlwind vacation—and encountered your first monkey. The little guy scampered up the table with a zany grin, eager to snatch a piece of cappuccino-soaked biscotti—and stole your heart. These gleeful grapefruit-sized primates are smart and lovable, and you are just dying to smuggle one home. As you sit in a sidewalk café gushing about your love for the monkeys, a government official overhears you and comes running over. “My dear sir. Let me introduce myself. I am Raheem Primatus—the first. Representative for the Government Office of the Overcrowding of Primates (GOOP). I am in charge of managing our monkey relocation initiative. It is a very important post. We have far more monkeys running around town than our urban habitat can sustain. The monkeys have become so used to tourists that they cannot simply be shipped out to jungle preserves and be expected to fend for themselves. It is too cruel. It makes my heart shudder.” He looks up at you under half-closed lids estimating the effect of his words. “I have been hoping to find a partner in the United States who would be interested in selling these monkeys as pets. Our government would be willing to send them to you for free, and my research shows that a U.S. partner would only have to pay $200 per monkey in import/export fees. Would you be interested in forming a relationship?” On the flight home you can’t stop staring at the business card the government official forced into your hand. $200 sounds dirt cheap for a cute baby monkey. And the thought of those monkeys being dumped in the deepest darkest jungle, far from everything they’ve ever known, sits like a sack of rotting lemons in the pit of your stomach. You can do something. With your business experience, you could not only save some monkeys but maybe even start up a really lucrative endeavor. You decide to look into the idea of selling monkeys as pets. You’re willing to invest up to $5,000 to cover expenses you might incur prior to getting paid for the monkeys. First, you check out the legality of the deal. GOOP’s for real and Raheem seems to have done his homework. While most primate species may not be imported into the U.S. as a pet, this particular species is permitted. The import/export fees Raheem cited cover quarantine time and all the shots the monkeys will need.

Monkey Ranch 1: Exploring the unit economics jungle 2

what do you think?

time to work those numbers...

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A visit to your local zoo, a few days later, leads to lunch with the zookeeper. It turns out that each monkey will generally eat $40 worth of bananas per month. He also explains that he is tired of the politics at the zoo and is looking for a new job. You think you can hire him away for $50 per day, and because he loves monkeys so much, he’ll work seven days a week. Encouraged by the zoo visit you make a few phone calls and find a rancher at the edge of town who will rent you a building for $500 per month. She tells you that you will also need to pay $100 in monthly utilities to cover your water, sewer, and electrical usage—but that she’ll throw in 10 monkey-sized cages for free as a sign-on bonus. Ten cages will hold ten monkeys, so that’s your limit on how many animals you can handle at one time. After calling the GOOP official and discussing your 10-monkey limit, he agrees to send ten monkeys to you every month. The monkeys will arrive on the first day of the month and you are confident that you can sell all ten by the end of every month. This project is starting to look viable, so you call your friend in the pet store business and pick his brain. You both agree that a sales price of $500 per monkey seems very reasonable.

If all goes as planned, what will your annual pre-tax cash flow be at the end of Year 1? Assume every month has 30 days, for the sake of simplicity. How many monkeys will you have to sell, per month, to break even? When will your $5,000 investment payout?

Once this work is done, take a moment and ask yourself the entrepreneur’s question: Is this an attractive or unattractive business? Why or why not? Use numeric evidence and logic to support your answer.

Monkey Ranch 1: Exploring the unit economics jungle 3

Excel Topics: Print Area and Page Set-up

• You should set the print area so that all of your work fits legibly onto no more than two pages (one page is preferred).

• Include the header “Monkey Ranch #1” and place it on the top left of the page • Include a footer that cites the file name on the bottom left, tab name on the bottom center,

and date on the bottom right. Use Excel shortcuts &[file], &[tab], and &[date] to do this. You should format all of your future submissions using the conventions noted above. However, based on the complexity of the assignment, you may need to use more than two pages to show all of your work. Poorly formatted submissions may not be accepted for credit.