BUSN315 Jennifer Clothing Store Part2

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BUSN315 Jennifer Clothing Store Part2
You are a small business consultant who has been hired by Jennifer to advise her on a business…

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BUSN315 Jennifer Clothing Store Part2

BUSN315 Jennifer Clothing Store Part2

A+ You Decide 

Scenario

You are a small business consultant who has been hired by Jennifer to advise her on a business opportunity. Your task is to provide Jennifer a written assessment of the opportunity, plus recommendations that can help her be successful. This is the second of two meetings that you have scheduled. In this meeting, you will focus on finance, operations, and business formation.

Your Role

You are a consultant newly hired by Jennifer to help her understand and provide expertise and research for her clothing store. As the consultant, you are being paid to provide specific and unbiased advice to Jennifer and her business partners. This is part two of a two-part You Decide. In part two, your consulting efforts will focus on finance, operations, and business formation. Please note that all of these topics have been covered in Weeks 5 through 7 of this course. Be sure to utilize the textbook and other research as necessary.

Key Players Jennifer Store Owner

Hello, thank you so much for coming to our second meeting. I really enjoyed your previous report. Understanding the social and ethical responsibility of running a business in the 21st century is critical to our success. Also, your report on marketing and human resources issues was helpful. In this meeting we want to focus on finance, operations, and business formation options; as such, we have two others present at this meeting who would like to talk with you. David Green, you met him last meeting, is our principal investor, and George Hendrick is our accounting and finance manager.

David Green Co-Founder

Thanks, Jennifer. I too enjoyed your report. I do not have much to talk about today, but what I am concerned with is critical for us both. Jennifer and I have talked about this company and know the clothing business, but we have no legal background whatsoever. We would like for you to recommend the legal form our business should adopt. Should it be a general partnership? Should we get an LLC? A corporation? We simply do not know and hope that you can do some research and give us some sound advice. Please be sure to tell us why you chose the legal form, because this will be important for us to understand. As I said, I have little to chat about, so I will turn it over to George to discuss the finance issues.

George Hendrick Finance Director

 Thanks, David. Now we need to talk about the accounting and finance issues of this firm. As you may already know, we estimate that Jennifer would need about $20,000 to get the store ready to open. This includes some painting, a sign, and store fixtures. One advantage is that Jennifer doesn’t need a complex payment processing system or cash registers, because she can check customers out using applications on a smartphone. This will save her several thousand dollars compared to a retailer who doesn’t use this technology. Jennifer also needs to buy inventory, but she’s uncertain how much inventory to buy. She could buy $10,000 of merchandise inventory, which would give her some basic styles in different sizes. However, she’s considering buying an additional $20,000 of merchandise inventory, which would give her several additional styles for customers to choose from, plus many popular accessories. In addition to the start-up costs, Jennifer will require some working capital to run the store until it becomes profitable. She has $35,000 in savings and has room on her credit cards for $20,000 more. The store’s projected expenses are $8,000 per month. The average article of clothing will sell for $50 and will cost her $10. Jennifer has observed that a store like hers typically sells between 150 and 350 articles of clothing per month, depending on how well the store is managed and marketed. But it typically takes 3 to 4 months before the store is selling at its maximum potential. The store will have three to four employees, who will work at minimum wage plus commission. The employees will likely be younger females who are just out of high school or in college. The last concern we have is about funding. What recommendations do you have for acquiring the capital needed to get this store off the ground? Should we look at equity financing or debt financing? And in either case, where should we look to find the funding? We realize this part is challenging, and your recommendations will be important for this start-up. That is all we have; we look forward to reading your report and we thank you for your time

100 Points: Demonstrates a strong grasp of the problem at hand. Demonstrates understanding of how the course concepts apply to the problem. Graphs are used to represent the financial issues.

Preview:

In the consultant’s second meeting with Jennifer’s Clothing Store, Jennifer and her colleagues discussed the other areas where they need help and advice.  In particular, they need advice on the legal form the business should take….

BUSN315 Jennifer Clothing Store Part2

BUSN 315 DeVry