Moves beyond the Business Basics class into the entrepreneurial venture giving an overview of business management and elements of a business plan. Covers: goal setting, management and marketing. "Your Business Plan" (included in tuition) contains financial worksheets on advertising, salaries, taxes, cash flow and more.
 

Avid chess player wants to market a 3-player chess game. "Invents" a chessboard with triangular cells.

Also "invents" several new moves to accommodate the new geometry. Brother and sister-in-law become involved and design a PalmPilot version that will work via the infra-red port. They spend over a year designing both board game and software game.

They spend $30,000 for an initial run of 2,500 board games. They also spend $10,000 for an initial run of 1,000 CD-ROMs for the software version. Want to patent devices. Plan to sell both versions at local stores & via own internet site.

   RESEARCH

   There are 2 German and 5 American patents on "triangular" cell chessboards.

   There are 2 published articles, in a German newspaper, on how to do-this-yourself.

   Industry standard in the PalmPilot software: Post software on the internet as shareware. Program self-destructs in 30 days if  "key" not purchased.

   In the toy industry, you need to hire an agent!

Just about every home in the US has a lawn. So, Jim Stine set up a small lawn equipment sales and service shop. He also sells and services chainsaws, weed wackers, leaf blowers, tillers and "push" snowplows.

After 3 ½ years and a $30K initial investment, he is thinking about calling it quits. In 6 months, the lease is up for renewal.

Large specialty and dept. stores sell more models, at better prices and terms than he can. However, Jim feels he offers personal service, a wealth of knowledge on the equipment, and how to best use it. He feels he saves his clients a lot of headaches and money by matching machine-to-user needs.

Although Jim sells many models below average retail price, he feels not many people buy from him. People simply buy elsewhere and come to him only for service and free advice. Also, too many people just junk their old model and buy a new one. He buys many of these machines for parts at garage sales.

While he is making an OK living from repairs, he hoped to be making more money from sales of new equipment instead of service. Ironically, sales of used equipment is actually more profitable than sales of new equipment!

Another problem is seasonality. The bulk of sales occur during the Spring and early Summer. This seasonality stresses his budget and keeps him from taking advantage of late Fall factory discounts. He has long been discouraged by his profits. With benefits, vacation & sick leave, his cousin Joe, a Teamster at a local plant, makes more.

The one question that Jim must answer in the next 6 months is, "Why risk bankruptcy and put in 60-hour weeks just for peanuts?"
 

Gil Garcia accepted an early retirement bonus from a mid-management position with the local phone company. Tired of high-tech, he decided to pursue his dream of starting his own restaurant. Over the years, Gil had attained quite a reputation as a chef of Tex-Mex cuisine. Frequently, he entertained guest with plenty of fajitas, frijoles borrachos, guacamole, fresh flour tortillas and plenty of Coronas. For the last 10 years, Gil had successfully managed several large (500+ guests) events for his employer and for a non-profit of which he was a board member.

In need of start-up capital and management talent, Gil approached his best golfing buddy, Rico Trevino, a retired major league baseball player. Over the years, Gil and Rico had discussed going into a "fun" business. While the area had many Mexican restaurants, they all served traditional southern Mexican fare. What these two men missed was northern Mexican and South Texas cuisine (more beef, less chicken; flour tortillas, not corn).

For the next month, Gil wrote a business plan. He researched the market and found (using 1995-2000 DMV data) that just over 15,000 area residents had recently moved here from Texas and New Mexico. He cross-referenced this data with US Census data and determined that two-thirds of these people had median incomes greater than $50,000.

The marketing plan included a web site, direct mail postcards and PR through several chambers-of-commerce. The Tex-Mex motif would differentiate their place from the other Mexican restaurants. Besides the obvious South Texas décor, the restaurant would offer televised sporting events featuring all teams Texan. This would include the Dallas Cowboys, the Texas Rangers, the Houston Texans, the San Antonio Spurs, the Texas Longhorns and the Texas Aggies.

Gil found three prospective rental sites. The first was immediately eliminated. While the mall location can be lucrative, mall management, quoting safety concerns, does not allow the use of natural gas for any purpose. For the remaining two locations, Gil performed a plan review at the city engineering department. Here, he found out about health codes, fire codes and ADA mandates prior to signing any lease agreement. To determine a construction budget, he contacted three contractors for bids on the prospective leasehold improvements.                                                      Back to top

After 2 months of investigation, negotiations, and $3,000 in legal fees, Gil and Rico were no closer to realizing their dream. The second location was rented "from under them." The landlord of the third location began to "play hardball." He refused to 
participate in the estimated $40,000 renovation of his property. Also, he refused to grant a grace period (from rent payment) during the construction phase. However, he had dropped his requirement for "triple net."

After a round of golf in the low-eighties, both men pondered their efforts. While their "war chest" of just over $200,000 was earning 5.2% interest in a money market mutual fund, Gil and Rico were beginning to doubt they could do anything according to
their plan. Everyone wanted the men to commit immediately. Landlords, contractors, suppliers and bankers wanted deposits, 3-year projections and personal guarantees. The government bureacrats wanted forms, more forms filled out; and fees paid
before permits could be issued. Permission for a 4' x 12' sign was going to take 60 days!

Gil remarked, "It's not the cooking that's driving me nuts, it's all this baloney negotiation, government paper work and personal guarantees. We haven't even started, and already it's no fun!"

Rico added, "Yeah. I don't know how people can 'just do it.' If we hadn't found out about that natural gas restriction at the mall, we could have lost our shirt. You can't cook decent Tex-Mex without gas. Also, I was shocked when we found out that
the location which was rented "out from under us" has an easement. In 18 months, the highway department plans to widen the street. That would have taken out half the parking lot."

"I wonder if we are being too cautious?" said Gil.

[Home]   Back to top