Reference no: EM133855408

Problem

Case Scenario

Steve's Dilemma

Steve was a real craftsman when it came to being a machinist. Steve had learned almost all that he knew from Daniel, his first and only employer. Steve was married and had three young children. He was 33 years old and had worked for Daniel ever since he finished his tour in the Army. In 12 years, Steve had polished his skills under the watchful and critical eye of Daniel. Daniel was quick to recognize Steve's talent for the trade. Steve had a positive attitude about learning and displayed a drive for perfection that Daniel admired. Daniel's Machine Shop was a successful small business. Its success was based mostly on the reputation for quality that had been established over its 42 years in operation. Daniel had come to this country with his new wife, Sarah, when he was in his late twenties. Now the business was a success, but Daniel remembered the early years when he and Salmah had to struggle. Daniel wanted the business to continue to produce the highest quality craftsman products possible. On a Friday evening, he called Steve into his office at closing time, poured him a cup of half-day-old coffee, and began to talk with him about the future.

"Steve, Sarah and I are getting old and I want to retire. It has been 42 years of fun but these old hands need a rest. In short, Sarah and I would like you to buy the business. We both feel that your heart is in this craft and that you would always retain the quality that we have stood for." Steve was taken back by the offer. He, of course, knew Daud was getting older, but had no idea Daniel would retire. Steve and his wife, Tina, had only RM4,200 in the bank. Most of Steve's salary went for the normal costs of rearing three children. Daniel knew Steve did not have the money to buy the business in cash, but he was willing to take a portion of the profits for the next 15 years and a modest initial investment from Steve.

Steve had, for the past four years, made most of the technical decisions in the shop. Steve knew the customers and was well respected by the employees. He had never been involved in the business side of the operation. He was a high school graduate but had never taken business courses. Steve was told by Daniel that even after deducting the percentage of the profits he would owe under the sales agreement, he would be able to almost double his annual earnings. Steve would have to take on all the business functions himself because Tina had no business training either.

Source: Entrepreneurship Case Study homepage (accessed December2022)

A. Explain any four entrepreneurial characteristics that may be important to Steve's success.

B. Describe any four ways Steve can fund his purchase of Daniel's Machine Shop.