Reference no: EM132855261

CASE SCENARIO: Starting a New Business

This case scenario will help you review the chapter material by applying it to a specific situation. Kelly Lee and Noah Walker meet in a marketing class and recognize that they have two things in common. First, they enjoy working with animals. Kelly's family breeds Irish setters, and Noah works part time in a veterinary office. Second, they both want to be entrepreneurs. After some initial market analysis, they decide to collaborate on creating a pet daycare center, Pet Haven, that will offer daily workouts for the animals, hourly playtime and petting with individual handlers, and clean and roomy cages or containment areas.

To get Pet Haven up and running, Kelly and Noah realize they must persuade either a bank or other investors to give them a small business loan. Then they must persuade potential customers to use their service.

Persuading Lenders to Fund a Loan

When Kelly and Noah go to the bank to discuss a loan for Pet Haven, the banker is interested in the idea but tells them their interest rate will be very high because they have an insufficient credit history and no collateral for the loan. To secure a more reasonable rate, he suggests they ask relatives to co-sign the loan application. In other words, their parents would have to agree to repay the loan if Kelly and Noah could not.

Kelly and Noah decide they need to convince their parents that Pet Haven is a sound financial idea. To prepare for these meetings, they brainstorm a list of questions their parents might ask:

Question 1: Are you ready to run a business?

Question 2: What services will you provide? How do you know these are the right services? What will you need in order to deliver these services?

Question 3: Who is your customer base? Are there enough customers to support your business?

Question 4: What is the competition in your city? What will you offer to make your business stand out?

Question 5: Have these kinds of pet daycare businesses been successful in other towns?

Question 6: How will you market your services to your customers? How will you communicate and what will you communicate?

Question 7: What kind of licensing and credentials do you need?

Question 8: Do you have a location yet? What kind of space do you need? What kinds of equipment do you need?

Question 9: What will the start-up costs be for leases, employees, licenses, advertising, and equipment?

Question 10: What size loan do you need? How will you repay this loan from cash flow?