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Medium Market Entry Profitability Analysis Breakeven Analysis

Chic Cosmetology

#Hospitality & Leisure #Education #For-Profit Higher Education
ProHub Comment

This is a classic market entry case combining breakeven analysis with market sizing and share estimation. The case tests the candidate's ability to build a financial model, estimate market potential, and synthesize quantitative and qualitative factors into a recommendation. A strong candidate will recognize that the quantitative analysis alone shows unfeasibility, but will probe deeper into alternative strategies and market dynamics.

Estimated Time 15 minutes
Difficulty Medium
Source Kellogg
50 / 100

Our client is a for-profit, specialty college named Chic Cosmetology University (CCU). Founded in 2005, CCU is a program for high school graduates seeking their professional cosmetology license. CCU is currently the market leader for cosmetology education with campuses in ten major metropolitan areas in the US.

CCU has capital to invest in a new campus and is considering Chicagoland as a location – should they do it?

Clarifying Information

  1. Goal: Achieve positive operating profit for the new campus two years after opening
  2. Format: Enrolled students take classes at a physical campus for one school year to earn degree (FY begins on 9/1)
  3. Reputation: CCU has the best campuses and equipment in the industry, and boasts strong job placement into top local slaons
  4. Growth: CCU and industry enrollments growing at 5% per year
  5. Competitors: 2-3 other large specialty colleges, and lower-cost community colleges
  6. Industry: H.S. Diploma and cosmetology degree required to enter the field
  7. Students: 98% of cosmetologists are women