Entrepreneurship and Small Business

Assignment – 3

Entrepreneurship and Small Business

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Submission Date by students: Before the end of Week- 13th

Place of Submission: Students Grade Centre

Course Learning Outcome:

1. Demonstrate a solid understanding of the potential of entrepreneur in today’s competitive business world. (Lo 1.2).

2. Design a solid projected financial Plan and conduct a breakeven analysis for a small company. (Lo 2.5).

3. Demonstrate a thorough understanding regarding the importance of cash management for the success of a small business. (Lo 2.8).

Assignment Workload:

This assignment is an individual assignment.

Case Study

Students are supposed to read the attached Case 2- Able Planet. Based on your understanding of the case and basic concepts of Entrepreneurship.

Answer the following question:

1. Experts say that entrepreneurs who need between $100,000 and $3 million often face the greatest obstacles when raising capital for their businesses. Why? (1.5 marks)

2. How should Kevin Semcken raise the $1.5 million in capital that Able Planet needs? Be sure to consider sources of both debt and equity financing. (1.5 marks)

3. Write a short memo to Kevin Semcken explaining what he should do before he approaches potential lenders and investors to maximize his chances of getting the capital that Able Planet needs. (2 marks)

The Answer must follow the outline points below:

· Each answer should be within 200 to 500 range of word counts.

· Reference

Note: You can support your answer by the course book.

You can use secondary source available on internet.

Answer:

1.

2.

3.

 

 

Case 2 Able Planet

How can a small company find capital to finance an innovative new product?

Venture capitalist Kevin Semcken discovered Able Planet, a small startup in Wheat Ridge, Colorado, that produces head- phones with an imbedded magnetic coil to enhance sound quality, at a technology conference in Denver, Colorado. Semcken, who suffers from a hearing loss in one ear, was intrigued and tested the small company’s product by listening to Dean Martin’s “You’re Nobody ’Til Somebody Loves You.” “I was instantly a fan,” he says. Semcken invested in Able Planet and soon became the com- pany’s CEO and chairman. Two years later, the company’s unique noise-cancelling Linx headphones won an award for innovation at the Consumer Electronics Show, and orders began pouring in. In no time, the company’s annual revenue reached $2 million.

Semcken was pleased with Able Planet’s progress, but he had a bigger vision for the company. Inspired by stents, balloon- like devices used in medical procedures to clear blocked arteries, Semcken came up with the idea of earphones that incorporated an inflatable disk that could conform perfectly to the size and shape of a person’s ear canal. The result would be a set of earphones that fit snugly into the ear canal, stay in place even during strenuous activity, and block out ambient noise. He even had a great name for the product: Sound Fit. Semcken saw the potential for Sound Fit not only to improve substantially the performance of ear- phones, but also to revolutionize the design of other products, such as Bluetooth headsets and hearing aids. He had lined up 30 potential customers who were interested in learning more about the innovative earphones and had convinced them to sign non- disclosure agreements. What Semcken needed now was financing so that Able Planet could manufacture production-quality proto- types of the Sound Fit earphones and generate orders.

Then Able Planet’s banker called with bad news. The bank was changing the terms of Able Planet’s $2.5 million line of credit. Under the new terms, the bank would no longer finance the upfront cost of raw materials and manufacturing. Semcken was stunned because even though Able Planet was not yet cash flow positive, the company had always made its payments to the bank on time for the last 3 years. Without a flexible line of credit, Able Planet would not be able to purchase the materials and manufacture the headphones that its retail customers,

including Costco and Walmart, demanded. The credit line restriction came at the worst possible time. Able Planet was gearing up for the late-spring graduation season, its second biggest sales period of the year after Christmas. The company normally cranked up production for the crucial back-to-school and Christmas seasons (which account for 60 percent of its sales) during the summer, but the bank’s new restrictions on its line of credit put its most lucrative sales seasons in jeopardy.

Semcken met with Able Planet’s two board members, Rob Cascella and Steve Parker, both of whom are investors in the company. They advised him to put the Sound Fit earphones on hold for the time being and to focus on increasing sales of Linx headphones. Without a way to finance production of the head- phones, however, Semcken knew that opening new retail accounts and increasing production would be impossible. He needed $1.5 million to finance current operations for Linx, build the Sound Fit prototypes, and market both products to new and existing customers. Semcken traveled around the country to call on 15 different banks, but none of them was interested in making a loan. A crisis in the financial markets had all but slammed shut the lending window at most commer- cial banks. Semcken pondered his options.

Questions

1. Experts say that entrepreneurs who need between $100,000 and $3 million often face the greatest obstacles when raising capital for their businesses. Why?

2. How should Kevin Semcken raise the $1.5 million in capital that Able Planet needs? Be sure to consider sources of both debt and equity financing.

3. Write a short memo to Kevin Semcken explaining what he should do before he approaches potential lenders and investors to maximize his chances of getting the capital that Able Planet needs.

Sources: Based on Jamie Kripke, “Case Study: Able Planet,” Inc., July–August 2009, pp. 58–61; “About Us,” Able Planet, www.ableplanet.com/ aboutus.html.

812

 

  • Cover
  • Title Page
  • Copyright Page
  • Contents
  • Preface
  • Acknowledgments
  • SECTION 1 The Challenge of Entrepreneurship
    • Chapter 1 Entrepreneurs: The Driving Force Behind Small Business
      • What Is an Entrepreneur?
      • How to Spot Entrepreneurial Opportunities
      • The Benefits of Owning a Small Business
      • The Potential Drawbacks of Entrepreneurship
      • Why the Boom: The Fuel Feeding the Entrepreneurial Fire
      • The Cultural Diversity of Entrepreneurship
      • The Contributions of Small Businesses
      • Putting Failure into Perspective
      • How to Avoid the Pitfalls
      • Conclusion
      • Chapter Review
      • Discussion Questions
  • SECTION 2 Building the Business Plan: Beginning Considerations
    • Chapter 2 Strategic Management and the Entrepreneur
      • Building a Competitive Advantage
      • The Strategic Management Process
      • Conclusion
      • Chapter Review
      • Discussion Questions
    • Chapter 3 Choosing a Form of Ownership
      • The Sole Proprietorship
      • The Partnership
      • The Corporation
      • Alternative Forms of Ownership
      • Chapter Review
      • Discussion Questions
    • Chapter 4 Franchising and the Entrepreneur
      • What Is a Franchise?
      • Types of Franchising
      • The Benefits of Buying a Franchise
      • Drawbacks of Buying a Franchise
      • Franchising and the Law
      • The Right Way to Buy a Franchise
      • Franchise Contracts
      • Trends in Franchising
      • Franchising as a Growth Strategy
      • Conclusion
      • Chapter Review
      • Discussion Questions
    • Chapter 5 Buying an Existing Business
      • Buying an Existing Business
      • How to Buy a Business
      • Methods for Determining the Value of a Business
      • Negotiating the Deal
      • Chapter Review
      • Discussion Questions
    • Chapter 6 Conducting a Feasibility Analysis and Crafting a Winning Business Plan
      • Conducting a Feasibility Analysis
      • The Elements of a Business Plan
      • What Lenders and Investors Look for in a Business Plan
      • The Pitch: Making the Business Plan Presentation
      • Conclusion
      • Chapter Review
      • Discussion Questions
  • SECTION 3 Building a Business Plan: Financial Issues
    • Chapter 7 Creating a Solid Financial Plan
      • Basic Financial Reports
      • Creating Projected Financial Statements
      • Ratio Analysis
      • Interpreting Business Ratios
      • Break-Even Analysis
      • Chapter Review
      • Discussion Questions
    • Chapter 8 Managing Cash Flow
      • Cash Management
      • Cash and Profits Are Not the Same
      • Preparing a Cash Budget
      • The “Big Three” of Cash Management
      • Avoiding the Cash Crunch
      • Conclusion
      • Chapter Review
      • Discussion Questions
  • SECTION 4 Building a Business Plan: Marketing Your Company
    • Chapter 9 Building a Guerrilla Marketing Plan
      • Creating a Guerrilla Marketing Plan
      • Market Diversity: Pinpointing the Target Market
      • Determining Customer Needs and Wants Through Market Research
      • How to Conduct Market Research
      • Plotting a Guerrilla Marketing Strategy: Building a Competitive Edge
      • The Marketing Mix
      • Chapter Review
      • Discussion Questions
    • Chapter 10 Creative Use of Advertising and Promotion
      • Define Your Company’s Unique Selling Proposition (USP)
      • Creating a Promotional Strategy
      • Selecting Advertising Media
      • How to Prepare an Advertising Budget
      • How to Advertise Big on a Small Budget
      • Chapter Review
      • Discussion Questions
    • Chapter 11 Pricing and Credit Strategies
      • Pricing: A Creative Blend of Art and Science
      • Three Powerful Pricing Forces: Image, Competition, and Value
      • Pricing Strategies and Tactics
      • Pricing Techniques for Retailers
      • Pricing Techniques for Manufacturers
      • Pricing Techniques for Service Businesses
      • The Impact of Credit on Pricing
      • Chapter Review
      • Discussion Questions
    • Chapter 12 Global Marketing Strategies
      • Why Go Global?
      • Going Global: Strategies for Small Businesses
      • Barriers to International Trade
      • International Trade Agreements
      • Conclusion
      • Chapter Review
      • Discussion Questions
    • Chapter 13 E-Commerce and Entrepreneurship
      • Benefits of Selling on the Web
      • Factors to Consider Before Launching into E-Commerce
      • Ten Myths of E-Commerce
      • Strategies for E-Success
      • Designing a Killer Web Site
      • Tracking Web Results
      • Ensuring Web Privacy and Security
      • Chapter Review
      • Discussion Questions
  • SECTION 5 Putting the Business Plan to Work: Sources of Funds
    • Chapter 14 Sources of Equity Financing
      • Planning for Capital Needs
      • Sources of Equity Financing
      • Chapter Review
      • Discussion Questions
    • Chapter 15 Sources of Debt Financing
      • Sources of Debt Capital
      • Nonbank Sources of Debt Capital
      • Federally Sponsored Programs
      • Small Business Administration (SBA)
      • State and Local Loan Development Programs
      • Internal Methods of Financing
      • Where Not to Seek Funds
      • Chapter Review
      • Discussion Questions
  • SECTION 6 Location and Layout
    • Chapter 16 Location, Layout, and Physical Facilities
      • Location Criteria for Retail and Service Businesses
      • Location Options for Retail and Service Businesses
      • The Location Decision for Manufacturers
      • Layout and Design Considerations
      • Layout: Maximizing Revenues, Increasing Efficiency, and Reducing Costs
      • Chapter Review
      • Discussion Questions
  • SECTION 7 Managing a Small Business: Techniques for Enhancing Profitability
    • Chapter 17 Supply Chain Management
      • Creating a Purchasing Plan
      • Legal Issues Affecting Purchasing
      • Chapter Review
      • Discussion Questions
    • Chapter 18 Managing Inventory
      • Inventory Control Systems
      • Just-In-Time Inventory Control Techniques
      • Turning Slow-Moving Inventory into Cash
      • Protecting Inventory from Theft
      • Conclusion
      • Chapter Review
      • Discussion Questions
  • SECTION 8 Managing People: A Company’s Most Valuable Resource
    • Chapter 19 Staffing and Leading a Growing Company
      • The Entrepreneur’s Role as Leader
      • Hiring the Right Employees: The Company’s Future Depends on It
      • Building the Right Culture and Organizational Structure
      • Communicating Effectively
      • The Challenge of Motivating Workers
      • Chapter Review
      • Discussion Questions
  • SECTION 9 Legal Aspects of Small Business: Succession, Ethics, and Government Regulation
    • Chapter 20 Management Succession and Risk Management Strategies in the Family Business
      • Family Businesses
      • Exit Strategies
      • Management Succession
      • Developing a Management Succession Plan
      • Risk Management Strategies
      • The Basics of Insurance
      • Chapter Review
      • Discussion Questions
    • Chapter 21 Ethics and Social Responsibility: Doing the Right Thing
      • An Ethical Perspective
      • Who Is Responsible for Ethical Behavior?
      • Establishing Ethical Standards
      • Social Responsibility and Social Entrepreneurship
      • Putting Social Responsibility into Practice
      • Conclusion
      • Chapter Review
      • Discussion Questions
    • Chapter 22 The Legal Environment: Business Law and Government Regulation
      • The Law of Contracts
      • The Uniform Commercial Code (UCC)
      • Protection of Intellectual Property Rights
      • The Law of Agency
      • Bankruptcy
      • Government Regulation
      • Chapter Review
      • Discussion Questions
  • Appendix: Sample Business Plan: My Friends’ Bookstore
  • Cases
  • Endnotes
  • Index
    • A
    • B
    • C
    • D
    • E
    • F
    • G
    • H
    • I
    • J
    • K
    • L
    • M
    • N
    • O
    • P
    • Q
    • R
    • S
    • T
    • U
    • V
    • W
    • X
    • Y
    • Z

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