Covers the fundamentals of going into business. Topics include: 

• Reasons for going into business
• Hurdles
• The ingredients of a successful start-up
• Legal issues (basic business filings & business organization)
• Weighing Risk vs. ROI
• Dose of reality

Two women, employed outside the home, wish to open an antiques consignment store in either Lake Oswego, Burnside district or West Slope. Both are married w/small children. Current salaries are necessary to meet household expenses ($2,300 and $2,500 respectively). The family health insurance is through their present employers, not their husbands.'

These ladies want to work for themselves--they are tired of the daily grind, the commute and the daily stuggle to find reliable baby-sitters. One is tired of laboring in obscurity (the accounts receivable clerk) while the other is tired of constant 
abuse (the customer service rep). They want to do something fun. They have been planning this investment for 18 months.

They calculate they will need $50,000 to open & to operate for first year. When pooled, their funds include: $15,000 cash and $40,000 equity in their homes. They will need to buy the initial inventory; after that, will depend heavily on consignments. Will 
operate w/o employees for first year. Plan to care for their kids while they conduct business. They have no previous business nor management experience.
 

This is a 15 y.o. commodity construction supply company. It fullfils "take-offs" and delivers the construction material to job sites. Target market: independent contactors who build homes and small building no larger than 20,000 sq. ft.

Owner Jeff Rogers is in his mid-50’s and is a HS grad. A natural salesman & leader w/20+ yrs trade experience, he “just fell into it” after resigning a superintendent position with a large contractor. His reputation, skill, network and experience allowed him to start with a $6,000 investment!

Sales for 94, 95, 96, 97, 98 topped $1M. Confident, Jeff moved to larger location and added six employees, a second forklift and a third truck. Then, problems began: 1999 sales <$900K; 2000 sales <$750K; 2001 sales may not reach $500K.

Loyal clients quietly going bankrupt, folding or getting out of the business. The top 3 area employers are laying off workers. Jeff is experiencing strong competition from Lowes, HomeDepot, Parr Lumber, and TVBS. High transportation & sales costs
have decimated profits. Cash & collateral are tapped out. Bank LOC will be cancelled next month. Suppliers will put company back on COD. No perpetual inventory, only yearly inventory.

Jeff has been losing $3,000 per month for last 18 months. He is having difficulty paying fixed costs. To meet overhead and payroll, Jeff has sold his summer home in Bend and his boat. There are 24 months left on $4,000/mo lease.

A couple received $100,000 insurance settlement and quickly bought a small convenience & espresso shop. They had finally fulfilled their dream: to own a store and be their own boss! The couple has no previous business or management experience.

   Sunk costs

     $20K to buy existing business
     $30K leasehold improvements
     $30K equipment
     $20K inventory

Other sacrifices and opportunity costs: Pa quit good job to run store. Ma had to keep salaried job to pay household expenses & maintain health coverage. Settlement could have been invested in government bonds or T-bills.

The previous business owners had bad reputation, unkept premises & slow business. Lots of area competition along the main highway which by-passes the town 1.5 miles away. The shop is located on picturesque town square of a small town immediately adjacent to entrance of a national park. They hope to turn the business around and capitalize on the tourists attracted to the nearby park.

   After 2 years, here is their story:

The last quarter's balance sheet reported this entry: Additional paid-in Capital (APIC) = $20,000.Average daily sales are $350. They need "$1,000 days" to fully replace Pa's paycheck. Fourteen-hour days are common.

Since they did not negotiate the lease, they are losing $300/mo due to an escalation clause of "3 percent of gross". There are 3 years left on the $800+/mo lease. No perpetual inventory is kept, only yearly inventory. However, they feel shrinkage is up, mainly due to shoplifting. They have started restricting to 3, the number of unescorted kids allowed inside at any time.