Posted Wednesday, July 11, 2007 9:17 AM | Contributed by Jeff
Bankers involved in multimillion-dollar loans to Park City amusement park Wild West World said Tuesday that they're unsure how much the park's bankruptcy will affect them. But even in a worst case, they said they'll persevere. On Monday, Wild West World, owned by Thomas and Cheryl Etheredge, filed Chapter 11 reorganization bankruptcy, claiming more than $24 million in debt.
Read more from The Wichita Eagle.
Wednesday, July 11, 2007 9:20 AM
Two things stand out as problematic. The first is that the owners used too much of their own money to finance the project, and that was stupid. By "too much" I mean "all of it." The second problem is that they appear to have borrowed only for construction, expecting that they could simply operate on incoming cash. Anyone in the business knows that you have ups and downs depending on the weather, and you have to be able to account for that.
I think their feasibility study was correct in concluding it was a sustainable business, given its location, but they didn't think very hard about what it takes to start up. A lot of businesses borrow to finance the operation for several years before becoming profitable.
Wednesday, July 11, 2007 10:52 AM
My thoughts exactly.
Perhaps they just couldn't find the lenders for that cash. But a year of op costs would have been better than 60 days.
Wednesday, July 11, 2007 11:10 AM
I think AJ stated this elsewhere, although probably a little differently. MOST new businesses should plan on having no real income for *at least* the first year of operation. Start-up costs are high, it takes awhile to establish a customer base, cost overruns are virtually unavoidable, marketing plans can be expensive (and might include many deep discounts and giveaways)...then you're also hring NEW employees - many of whom might not work out. Poor "planning" all around.
On the banking side, I thought risky loans went away with the S&L scnadlas....kidding...kinda... ;)
Wednesday, July 11, 2007 12:14 PM
As far as the customer base goes, I'm guessing they thought they had that sewn up by being the only amusement park in the Wichita area. If it hadn't been for those 50 out of 60 rain days, they might even have been capable of carrying operations just on day-to-day cash flow.
This is almost like if one of us decided to start our own amusement park (okay, I know NOBODY on this site has ever thought of that) and just started buying rides. That's why it only rains for a few minutes in RCT. ;)
Wednesday, July 11, 2007 5:18 PM
To paraphrase Max Bialystock "Never, ever use your own money!"