THE MISSING PET - Case Study Example

THE CASE OF THE MISSING PET SUPPLIES Question #. Given the five keys to success, did Dwayne and Fred initially have a viable business model? Did thenumbers add up? Were any assumptions they made unreasonable? Answer #1. After reviewing the five keys to success, market suppliers, industry experience, accurate business plans and access to capital, it is clear that Dwayne and Fred have a decent business model. A viable business model is important for any business. This is especially so for a business that has a large market with existing service and product providers.

The market suppliers are very important for Dwayne and Fred’s chosen industry. Having suppliers ready and willing to provide takes out some of the leg work and allows for time to be spent on organizing other areas. Experience is also very important. Dwayne and Fred is both familiar with the industry so they are not going into the new business blind. The access to capital was their but could be more abundant. Capital is likely the least viable part of their business model. Numbers are very important in any business venture.

The numbers will show if there is even a need for the given business. The numbers for Fred and Dwayne are close but with what the bank is allowing it will be too far off. The projected sales are just not enough to keep inventory and have enough operating costs. If Dwayne and Fred want to keep enough inventory and be successful they will need to borrow more money to make it past the crucial first year in business. There are many assumptions made by Fred and Dwayne that are unreasonable. Yes, they had industry experience but it seems as if they didn’t really have in focus what it would actually take to keep the business operating smoothly.

It is unlikely that businesses are a huge success over night. This means that in the first year or so there will be many sleepless nights and new issues that need to be resolved. Question # 2. What were the ethical issues facing Dwayne and Fred in contemplating starting their business. Answer #2. There are many ethical issues that face Dwayne and Fred. They both work for an industry that is already successful. They are both going over the new owners head and secretly developing their own business that could potentially shutdown Garden and Pet Central.

This type of business approach is unethical in many ways. Question # 3. Build a simple income statement for Dwayne and Fred’s first year based on the numbers in the case. Based on the first years projected profit, is this business worth it? Why or why not? What additional information do you need? Answer #3. After building a simple income statement it is shown that operating costs for the year are $288,000. The potential profit is around $1,000,000.00. This allows for $712,000 to go toward building inventory and other unknown expenses.

The business can be worth it based on the numbers given in the case. If Fred and Dwayne can gather enough start up funds in case of unexpected costs, the business should work. There really is not enough information to run exact numbers. Advertising expenses, employee costs, etc.. are necessary. Question # 4. What would you recommend Fred and Dwayne do in regards to their current situation? What are their options? If at all possible how might they make this thing work? Answer # 5. Fred and Dwayne need to have enough capital to account for any extra expenses.

They need to be legally ready for any legal issues that may arise from their previous employer. It is important for Fred and Dwayne to go over the “what if’s”. In order to make this work, Fred and Dwayne need to finalize many parts of the business. 1. Getting contracts from retailers that wish to buy the product will allow for more accurate expected sales. They can then use past projections of sales from the given company and put that into a more accurate income statement. For example, if past projections are showing sales of $100,000 each month and after paying suppliers, Fred and Dwayne make $75,000.

This gives a more accurate business statement. 2. Fred and Dwayne can choose to start out a little smaller and then work their way up. 3. Fred and Dwayne can seek out investors to help with startup capital. 4. Fred and Dwayne can need to sit down and thoroughly run numbers of different types. They need to have a backup plan put in place for different monthly projections. 5. It may be beneficial to Fred and Dwayne if they hire an expert to help go over some things they may have missed. All of these things are very important when starting a new business.

Most business fail due to lack of planning and start up costs. Fred and Dwayne need to know that this is going to work and not just hope it will.