Alison Barnard Assessment - Case Study Example

Alison Barnard Case Study 1. Is this business scalable? Discuss the limitations and challenges. Yes, the business is scalable. This is because the business model of providing a select variety of jeans and t-shirts for ladies can be expanded quite indefinitely as explained next. To begin with, since this is an entirely new type of boutique, it can be replicated quite easily in other suitable locations. This will provide a basis for expansion of the business. Secondly, the business can grow in terms of sales and profitability as a result of increased market access and introduction of new products in the store. By doing this, the business will be able to grow in terms of the number of customers and sales in general. There are several limitations to the extent to which the business is scalable. To begin with, there is the problem of increased costs of operation for a business that is expanding. This means that a business can only expand to the extent to which its resources can cover for the increased costs of operation. Secondly, with scalability comes the challenge of managing the business successfully. Several management problems arise with increased size of a business. 2. What tasks and goals should Alison be focusing on at this stage of her venture? In general, she should be focusing on the management and strategy functions of her business rather than the day-to-day operations as is the case. This involves ensuring that the good performance of the business is maintained in the form of finances, sales, profitability and customer service. This approach is necessary because her business has managed to overcome the initial challenges of being a startup and is getting into the next phase of growth. Therefore, Alison should be concerned with tasks like ensuring that her employees are well trained and motivated enough to stay on at the business as well as ensuring that sales remain above the target. In addition to this, Alison should be concerned with the strategic functions of looking out for new opportunities for expansion in the market. Related to this is the need to ensure that the business remains ahead of its competition by developing strategies that will help it gain and retain more share of the market. This can be done by getting training on the high-end software inventory system which will help her to track the performance of the business accurately as well as manage the inventory in a more professional manner. 3. Discuss the signing of a lease prior to having the money. What was the risk? Alison decided to sign a lease agreement long before she had set upon the hard task of finding the start up capital for the store. To her, finding the right location was the most crucial part of the entrepreneurial process rather than sourcing for funds. Therefore, since she had landed on a location which she felt was ideal for a women jeans and t-shirt store, she decided to get into a lease agreement with the owner even before she had put in place the right financing plan for her startup venture. There were several risks in this approach. The first one is the possibility of a delay in sourcing for funds which would result into losses in the form of unused rent money. Although she had managed to get a few months for free, the possibility of delays in funds and the consequent loss of money remained a real risk. The second equally important but less likely risk was the possibility of failure of the business to take off altogether. This would have resulted to a much heavier loss to the entrepreneur. This would have been compounded by the fact that the deposit money for the lease agreement was obtained as a loan in the first place. 4. Discuss her fund-raising and valuation. If you were an equity investor, what return expectations would you have? Initially, Alison sought debt financing as startup capital for her business. This was expected to be in the form of a loan from a financial institution or a grant from relevant sources. However, this failed to materialize because many of the financial institutions she approached insisted on collateral which she did not have then. With that option having failed she resorted to equity financing. This was done in the form of six equal slots of $25,000 each. Potential investors were required to choose among three different arrangements: full debt, a combination of debt and equity and lastly, full equity. Every one of these arrangements for raising funds that was used by Alison had unique features. For full debt financing, investors would earn an annual interest of 10% on the sum invested in the business. For full equity arrangements, investors would acquire 6.25% equity in the firm. This valuation was based on the figures for projected sales for the first year of operation of the business, which was slightly over $375,000. Lastly, investors who chose the combined debt and equity arrangement would choose between the ratios of $10,000 equity and $15,000 debt or the other way round. Based on the projected sales and the resulting net profit, an all-equity investor would expect relatively high earnings from the investment. 5. If women are coming to Alison’s store from all over, how important is location? Discuss the implications for growth. There are several ways in which location is important for Alison’s store. To begin with, since she stocks a number of selected brands, the location of her business should be in such a manner that it is not too close to other stores stocking similar brands. This is based on the requirements of the manufacturers of the different denim brands that she intended to stock in her store. The second reason as to why the location of Alison’s store was important is that it was necessary to locate the business within an area that the members of the target market can easily access. To this end, Alison settled on a place that was close to Hanover Street as a way of taking advantage of the human traffic within the area. Also, as a way of choosing the location of her business, she was motivated by the desire to get a location that reflected the kind of ambience suitable for her business and attractive to the women clients who formed the primary target market. One implication that the location of the business has on growth is the possibility of expansion in the future. Since the choice of the location was motivated by the need to get a competitive place from which the business would grow, the prospects of expansion in the future will depend on the changes in the current lease rates for premises in the area. Read More