Reference no: EM133210088
Question: Zach has a technical background and makes microscopic repairs to electronic devices for a company called "Tech Know Fix". He is very good at making these repairs and now his friends are asking him to complete these repairs on their phones and tablets as well. Zach thought that it might be helpful to start his own small side business. He would like to start a sole proprietorship called, "Zach's Quick Fix". Zach thought that being in a mall would be a good location. There is high-volume of traffic and his kiosk cart could be placed near the cell phone providers. In addition, Zach thought about another option to buy used phones and refurbish them. Then he could resell these used phones to other customers. This means he needs to find a way to source old phones and sell them once they are repaired.
Option 1:
He needs to rent a kiosk cart in the mall which will cost $600 a month. In addition, there are marketing costs for signage and business cards, which have an initial cost of $1,200. Zach will also need to create a website, Instagram page and Facebook ads that will cost him $200 a month. To start the business, his tools would cost $500. The total repairs would include a flat rate of $30 for an assessment and another $100 to fix the phone. The supplies to complete each phone would cost $40.
Option 2:
Zach needs a way to source old phones from people who no longer need them. He would pay $50 for a used phone in decent condition and then refurbish it for $40. He would subsequently sell the device for $200. Zach would no longer need to set up a kiosk in the mall, but rather manage everything online. This means that he would need to create a website, Instagram page and Facebook ads which would cost him $200 a month. He would also need to spend $500 on tools to begin.
Based on the information provided, please complete the following:
a) Select a relevant way that he could choose a research method to understand his customers'
needs to help him select the best of the above two options.
b) Complete a breakeven analysis in units to assess option 1. Show your calculation
c) Complete a breakeven analysis in units to assess option 2. Show your calculation
d) Based on your two calculations and any other relevant information, which is the better option for Zach. Explain your reason(s) why it is the better option.