Summary of the opportunity
Business opportunities are rare, thus they should be embraced and capitalized whenever came across. Robert and Teresa are two entrepreneurs who came across a business opportunity that they thought could be highly profitable. They were faced with a big decision regarding the opportunity. First, Robert used to work at his father’s business. He was managing the painting business that was owned by his father.
On the other hand, Teresa was an interior design student when the two met at a college in the United States of America. In her childhood, Teresa helped her parents in their farming business, where she would do book keeping for them. After she completed college, she spent most of her time trying to develop her photography skills. At that time, Robert was working at Zellers after he had completed his college, as well. After two years, the pair went back to Brandon where their objective would be to take over the painting business owned by Robert’s father.
It is then that one-day Robert came across a retail shop called U-Frame-It when he was going to buy some paint and was attracted to go into it and look around and see how the business was like. He also decided to talk to the manager about the same. Noting that the store was extremely busy and the manager was highly enthusiastic about it, he thought that this could be a great business opportunity for him if he started the same in Brandon. He went back home and told his wife about the idea and she was highly interested. However, they had to make the decision on whether to leave the painting business and start their own framing business. After contemplating for some time, they decided to leave the painting business to start their own framing business.
Aspects of Robert and Teresa that could contribute to success in their picture framing store
Having some knowledge about doing business is always a positive factor that may contribute to the success in starting up ones own business. It is important in that it helps one understand the basics of doing business and the ways in which to manage and run the business. Robert and Teresa both had a number of aspects that would be highly positive in helping their business succeed. First, both had some basic knowledge on doing business in general.
Robert having worked and managed his fathers painting business, he had knowledge on how to manage their framing business. On the other hand, Teresa had helped her parents in their farming business while she was young. She prepared record books for them and this gave her a basic exposure on book keeping. She was also a designer and enthusiastic in doing photography. The framing business has much to do with design and photography and hence this is an aspect that would highly help the success of the new prospective framing business.
Positive things that Robert and Teresa done in investigating the feasibility of the new business
When starting up a business, the first step should always be collecting information and data that would help one make a decision on whether the business will be successful or not. Any data that is regarded as being helpful should be collected and analyzed carefully. This is a very important activity at it increases the chances of a business being successful. Robert and Teresa took some time to collect important data that would be very important in helping them make a decision and also in starting up the business. First, Robert talked to the manager of U-Frame-It and tried to gather some information about the business from the manager.
He investigated the level of activity in the business. From what he found out, the business is highly potential as U-Frame-It was extremely busy. He also contacted Professional Picture Framers Association in order to learn how much on average a customer spends in the framing stores. He also checked on the average costs in the store, U-Frame-It used as a case study. He also investigated to find out the number of people the store is able to serve.
He could estimate the profitability from that information. Teresa on the other hand was finding out the average number of hours a customer spends in the store and the times of the day when most customers would visit the store. She also collected data on what other activities in the store the customer would carry out while waiting for the available workstations and the glue to dry.
Despite collecting this information data, Robert and Teresa did not find out on the starting up costs. This is very important data that should have helped them project the required initial capital more precisely. It is due to lack of this information that they were not able to acquire enough loan from the back that could help be sufficient to start the business.
Evaluation of the business plan
A business plan is an important aspect in starting up a business. It is important in that it gives a guideline of what needs to be done and also increases the chances of success. The business owners are able to use a business plan as a benchmark to assess whether they are achieving what should be achieved and in the event that they go off the track they can determine easily what is not working as per the plan.
Robert and Teresa prepared a good business plan. It gave information regarding the target customers. This would help them in marketing their products and segmenting their market. It also gave information regarding the cost that was expected in starting up the business. This is despite the fact that this information was not very accurate. In addition, the business plan gave information regarding the future of the business in that they planned not to hire any employee until the business is up and successfully running. Layout, regulations and location were other parts of the plan that should always be included.
However, they did not include in the plan the future financial projections and growth of the business. They did not also include information about the expected profitability of the business. This is information that is very important especially when acquiring a loan from any financial institutions. Apart from this missing part of the business plan, the plan was generally good and included much of the information that it should.
Pros and Cons of operating a U-Frame-It franchise instead of staring a business
Operating the franchise would be advantageous to Robert and Teresa in that it could have saved them the hassles of acquiring the start up capital. In other words, it would be cheaper and easier to start as U-Frame-It could itself set up the business for them. In addition, the fact that U-Frame-It is an already known business would be easier for them as it would pick up faster. People already know about it and this would make it easy to run a franchise than to start a business.
However, running a franchise meant that the Normans would not be able to establish their own brand. They would be operating the U-Frame-It brand instead of operating their own. In addition, they would not be able to operate the business in their way in order to create their competitive advantage. Running a franchise meant that they had to run it the U-Frame-It way but not their way.
Evaluation of Norman’s initial approach to obtain financing for The Framemakers
In most start up business, initial capital is always the challenge and may lead to failure or success of a business. If one is not able to obtain enough capital, the business is likely not to succeed as they would not be able to put up some operations and meet some costs. However, acquiring enough finance is important and is the beginning of business success. This is due to the fact that one will be able to meet all or most of the important costs. The approach that one uses in acquiring the finance from any financial institution is always an important aspect in getting enough finance and easily getting it.
Norman’s, in acquiring their finance from the bank did not initially find out the process that should be followed. They therefore did not present information regarding the financial prospects of the business in terms of expenses and expected revenues and profitability. This made it difficult for them as they had to walk into many banks in anticipation that the information would not be asked for. Probably, this was one of the reasons as to why the bank manager was hesitant to give them the loan even after they brought the information. Secondly, the Norman’s did not have sufficient information to show the amount they would spend in starting the business and hence they did not get sufficient financing. This was difficult on them as it would not be easy to go back to the bank for an extra finance.
Evaluation of financial requirements and projections prepared by Robert and Teresa
Being a banker, it would be easy to determine that it was the first time Robert and Teresa were acquiring a loan from any bank. It was therefore not surprising that they missed some very important aspects of the process. The information about the financial requirements and projections they prepared was therefore likely to be not very accurate as they did it in a hurry in order to acquire the loan. They did not research on the projections.
Therefore, as a banker, I would be able to determine that the information was based on mere assumptions and that the preparation was just for the sake of acquiring the loan. However, due to their credit worthiness, I would also have given them the loan as it was highly likely that they would pay back.
Recommendation
In starting up a business, it is always very important to gather as much data as possible and to ensure that any aspect of data has been covered. This is very important especially when it comes to decision making and financing the business. Starting up a business is better than running a franchise but this only makes sense when one has sufficient or is able to access sufficient financing. Finally, any information regarding the prospective business should be presented to the financial institutions where one wishes to acquire a loan from.