PART ONE

PART ONE

The Information Age

CASE I: GARDENERS+

Mary Jones and Amanda Moreno had a problem. Like many others in their neighborhood, they had a need for simple gardening services that went beyond mere lawn mowing but fell short of the full landscaping projects developed by professional (and usually expensive) landscapers. Mary and Amanda, and other homeowners they knew, had questions about which plants would thrive in specific parts of their gardens, the potential viability of new plant- ings alongside the ones already in place, transplant- ing bushes and shrubs, clearing the garden of weeds, selecting the appropriate fertilizer or insecti- cide, and the proper amount of mulch to place in the flower beds. These services were beyond the capabilities of the neighborhood teenagers, but were of little interest to landscaping firms since they would not bring enough revenue to pay their pro- fessionally certified staff.

Mary and Amanda had long joked about convert- ing that problem into a business, but this time Mary was not joking: “I think that the problems of people like us can be solved by companies run by people like us.” Both were college graduates who had been

in the workforce before they became stay-at-home mothers. Now they were feeling ready and able to return to the workforce.

To begin, Amanda and Mary decided to have a brainstorming session. They invited Julian, a profes- sional gardener who had helped them with some of their projects, a few of their neighbors, and some friends with entrepreneurial business experience. The object of the brainstorming session was to (a) appropriately define the market niche; (b) get a few ideas on how to approach such a market; (c) estab- lish a price range that homeowners would be will- ing to pay for such services; and (d) determine how much startup capital they would need. The plan was to establish the business with existing resources, to operate from their houses, and to hire gardeners but no clerical help.

The market segment was clearly defined by Julian. “My customers keep requesting additional services that cannot be done by an inexperienced gardener. I don’t always have the knowledge and experience to do them, and even if they offer to pay The market segment was clearly defined by Julian. “My customers keep requesting additional services that cannot be done by an inexperienced gardener. I don’t always have the knowledge and experience to do them, and even if they offer to pay

Ed offered his services as CPA once the association client. I could go to work for a landscaping com-

started operating.

pany, but what I earn there in a day I can make in Mary observed that this open association reflected just two hours working for myself!” her initial idea, but Amanda said that she had been Ed Goldstein, a young CPA who lived a few

thinking of a more “closed” enterprise, one in which houses down the street, suggested an “open gar-

gardeners worked for her and she would pay them deners association.” An “open” organizational struc-

for their services. Julian said he felt that an open ture would allow each gardener to remain

association was more likely to succeed, since garden- independent. Each would still have his or her own

ers who had clients would not likely give them up for clients and charge their standard fees without pay-

an hourly wage. Furthermore, since Mary and

ing any commission to the association. The garden- Amanda could not be with the gardeners at all times, ers would only transact with the association when

they would always try to persuade the client to call referring a client to the association or getting a cli-

them directly in the future, instead of operating ent from the association. They would pay a small

through the association. That way they would both member fee, which would be credited toward any

benefit —the customer would pay less and the gar- fees owed the association for referrals. dener would keep it all. Nonetheless, Julian was will-

Under this arrangement, the cost to the customer ing to consider joining Amanda’s closed association would be the same with or without the association.

if he was to be the general supervisor.

This would minimize the potential competition Their market research suggested that the open between the gardeners and the association, but

association was more appealing to gardeners and to would offer the customer a reliable entity (the asso-

potential clients. They all agreed and decided to ciation) that could provide replacement or supple-

model the business with 200 customers. They devel- mental gardening services. At the same time,

oped two spreadsheets: one that assumed that the participating gardeners could assume additional work

200 customers had already been acquired, and one when available, and could also benefit from offers of

in which all customer acquisition costs were

work for which they don’t have the time or the skill— included. The idea was to evaluate the business all without the risk of losing any steady clients. from an ongoing point of view and to calculate the

Ed suggested that the association could explore startup costs. In a third spreadsheet they modeled renting gardening and transportation equipment to

the business assuming that they would purchase participating members. Amanda noted that the

and own all the necessary equipment (trucks and structure proposed by Ed could also incorporate

machinery). The results showed a viable business designers, architects, horticulturists, and

with 200 houses, but an acceptable profit margin landscapers. However, since these professionals

began with 600 houses.

tend to offer more occasional services, they might require a different commission model. Mary added

Assessing Business Needs that the model could also include snow removal. At the first meeting of all the partners, Mary,

Under the model suggested by Ed, the associa- Amanda, and Ed (who opted to become a partner tion’s revenue stream would consist of the mem-

instead of an outside consultant) made a list of all bers’ monthly fees and commissions, while the

the startup requirements. They assigned responsi- expenses would be the salaries paid to Mary and

bilities to each partner based on their business Amanda, phone costs, office rental, utilities, equip-

experiences. Mary had experience in marketing and ment amortization, and marketing. Since the plan

sales, Amanda knew how to implement information was to operate from their homes, use their current

systems in business settings, and Ed had expertise phone and equipment, and not hire any other in finance, accounting, and legal issues.

PART 1 THE INFORMATION AGE

They assigned tasks due in two weeks. Mary was plans for advertising and pricing their services. The in charge of the launch plan, while Amanda pre-

partners also included information and statistics on pared a basic information system that could track

the growing need for gardening services as well as a customers, gardeners and service suppliers, and

survey of existing service providers. The financial requests for services from customers, as well as

section detailed the projected revenues and expenses match service requests to service providers. Mean-

as well as the expected cash flow based on the

while, Ed would do all the legal paperwork needed spreadsheet projections. The partners explained that to create the association. they would perform their own clerical work to avoid additional fixed costs. They included a budget fore- cast, the estimated total gardening needs in the area,

Writing a Business Plan the market share that the association could capture, They based their business plan on the spreadsheet

the amount of required startup capital, and a plan for they’d developed to determine whether the idea