Question

1. Mr. Fixits wants to open a lawn mower repair shop in a suburb of a major metropolitan area. The industry association estimates that 40% of mowers are repaired by similar service companies and that the average owner spends $150 per mower on maintenance each year. The census and local chamber of commerce data indicate that there are 35,000 mowers in the county. Seven other competitors exist within a 25 mile radius of the proposed business location. Based on a consumer survey, Mr. Fixit’s owners believe that they can capture 8% of the market in the first year of operation.

Based on this data, address the following requirements:

What is the potential number of lawn mowers likely to be repaired in one year?

What is the total potential mower repair revenue available in the market in one year?

How much revenue can Mr. Fixit expect to generate during its first year of operation?

Answer 1

Total Number of Lawn Mowers = 35000

Potential number of Lawn Mower likely to be repaired in one year = 40% of 35000 = 14000 Lawn Mowers

Total potential mower repair revenue available in the market in one year = 14000 * 150 = $ 2,100,000

Revenue expected to be generated by Mr. Fixits = 8% of $2,100,000 = $168,000