Reference no: EM131463618

Question: Mike and Rhonda Hicks dreamed of opening their own bed-andbreakfast business after vacationing in cozy New England inns during one colorful fall season. The would-be entrepreneurs lived in Dallas, where Mike worked in the software industry. Although the two talked and talked about running a bed-and-breakfast, they didn't actually pursue the idea until pushed by Polly Felker, Rhonda's mother. Felker had retired to Hot Springs, Arkansas, and was working on an herb farm twenty miles out of town in rural Jessieville, at the edge of the Ouachita National Forest. After listening to her daughter and son-in-law kick around the bed-and-breakfast concept any number of times, Felker told them to get down to business. The couple sought permission to buy nine scenic acres from the herb farm. Then they hired an architect to design an attractive country inn with eight spacious guest rooms, an old-fashioned wrap around porch, and private quarters for the owners.

The Hickses estimated that purchasing the land, building the inn, buying furniture, and landscaping the property would cost nearly $600,000. The next step was to get financing for what would be called the Mountain Thyme Bed & Breakfast Inn. The entrepreneurs approached bank after bank, explaining their idea and showing their plans, but could not get their loan application past worried bankers. Was the inn located too far from the well-known spa town of Hot Springs? Would guests find their way through the back roads and down the secluded gravel driveway to the inn? What about the size of the loan? "When you're used to doing simple little home mortgages, funding a project with that kind of price tag was indeed a scary thing," Mike Hicks observes.

After eighteen months of searching, the couple located a financial institution in California that agreed to approve part of the funding as a Small Business Administration loan. The couple also was introduced to the Arkansas Certified Development Corp. (ACDC), part of the nonprofit Arkansas Capital Corporation Group, which specializes in financing small businesses within the state. When an ACDC loan officer drove to Jessieville to see the site of the proposed inn, "he thought it was a little slice of heaven and fell in love with it," Rhonda Hicks remembers. The ACDC allowed the Hickses to borrow the money they needed at a good rate-and construction on the inn finally could begin. Polly Felker joined her daughter and son-in-law as a partner in the inn. Chef Felker has been cooking up gourmet breakfasts and late-night treats since Mountain Thyme opened in 1998.

The inn's comfortable rooms, beautiful surroundings, and delectable food have brought it nationwide acclaim. Moreover, the owners have been listed among the Top 10 Friendliest Innkeepers in the United States. Now that their dream of operating an inn has come true, the owners host seminars so that others can learn all about the business of inn ownership. They're always improving the inn with new snacks, new services, new gift items, and more. Although the inn isn't always full, its occupancy rate is high enough to make Mountain Thyme a financial success-and to allow the three partners to take a little time off now and then. Despite the years of planning and hard work, Mike Hicks says, "There'd be no bed-and-breakfast" without the funding approved by the ACDC. "But other than the trouble we had finding some money in the beginning, it'd be hard for this to be working out any better." 16

For more information about this company, go to www .mountainthyme.com.

1. If you were a banker, would you have approved the loan the Hickses needed to build their bed-and-breakfast? Explain your answer.

2. How can establishing realistic goals and objectives, budgeting, and monitoring and evaluating financial performance help theHickses to manage the Mountain Thyme Inn?

3. Why would the owners need a capital budget for Mountain Thyme years after its opening?

4. Often, small businesses such as this bed-and-breakfast struggle to make ends meet. And yet there is no shortage of people who want to become entrepreneurs. After reading this case and how difficult it was for the Hickses to obtain financing, were the benefits of a small business such as this bed-and-breakfast worth the effort? Justify your answer.