Small Business Cases 3

AFTERSCHOOOL CENTRE FOR SOCIAL ENTREPRENEURSHIP S IVA KAMU V E TE R IN A RY HOS P I TAL ROAD BIKAER 334001 W W W. A F T E R S C H O O O L . T K

SMALL CASE STUDIES ON E N T RE P RE N E U RS H I P BO O K NO. 3 CASE STUDIES FOR THE STUDENTS OF SOCIAL ETREPRENEURSHIP PREPARED BY : DR. T.K. JAIN HONORARY CHIEF MENTOR, AFTERSCHOOOL © : AFTERSCHOOL CAREER GUIDANCE TRUST. NOTE : THE PURPOSE OF THIS CASE STUDY IS NOT TO SHOW THE RIGHT OR WRONG METHOD OF DOING SOMETHING. THE CONTENTS OF THESE CASE STUDIES ARE HYPOTHETICAL AND THEIR SIMILARITIES TO SOMETHING REAL IS BY CHANCE. THE PURPOSE OF THESE CASE STUDIES IS TO PROMOTE ACADEMIC DISCUSSION AMONG PGPSE PARTICIPANTS OF AFTERSCHOOOL. PGPSE IS THE PROGRAMME TO PROMOTE SOCIAL ENTREPRENEURSHIP THIS PROGRAMME IS AVAILABLE FREE OF COST FOR ANY PERSON WHO WANTS TO PLAY AN IMPACT MAKING ROLE IN SOCIAL TRANSFORMATION.

Small Business Cases TABLE OF CONTENTS

( R E A D A S P E R P G P S E P R O G R A M M E S Y L L A B US )

1. ARUN’S ICE HOUSE 2. RISHI’S EVENT MANAGEMENT COMPANY

3. PANKAJ’S LINUX ACADEMY 4. SWATI – THE BUSINESS CONSULTANT 5. VIJAY’S DILEMMA

ARUN’S ICE HOUSE

Fun and Joy are for every person. Arun thought of this as a business plan. He had a spare building lying in the centre of the city. He decided to organize this building as a place for fun and joy. He converted this building into ice house. The entire house was converted into an ice house. He installed very high quality cooling system in the house, which could bring temperature down to -25 degree. Thus it was like a great fun for a short period of time. The house had to be closed from all sides. The entrance of the house had very tight 5 gates, which protected the cool chill to emit out. The house had inside it lot of ice (formed due to temperature being less -25 degree). Entry fees for entry into the house was kept Rs. 200 per person. A person would be asked to take proper precaution before entering the house. He would also be given a kit of oxygen, if he finds any difficulty. Each person was briefed about the cold temperature precautions. Located in a desert climate, his city had a special charm for cold places. People flocked into to see the cold island. People in neighbouring cities also started coming in. However, the fees collected was not sufficient to meet the running expenditure of the Ice House. Arun was now thinking about other options to be added to make this ice house a profitable venture. He forumated a number of plans for this : 1.

20% of the revenue will go the the welfare of deaf and dumb, so the people get motivated to pay and he also get an opportunity to raise the fees and use the surplus for social welfare and development

2.

to start a restaurant near the ice house, so that people could get some refreshment and he could get some earning

3.

to have a tie up with international chain of tourist agencies so that he could get more revenue.

He was wondering about what to do. The number of visitors visiting his city daily is between 1000 to 10000. He wanted that every person who visits his city should also visit the

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ice-house. At present only 200 persons visit his ice house daily (on an average). This is a very small number considering the number of visitors to his city. He was not sure about how to go for it. Can you help him in making his creative plan work. His monthly electricity bill alone is Rs. 7 Lakhs. His other promotional expenditure are about Rs. 50000 per month. His other expenditure are Rs. 5 lakhs per month. What should be his strategy to reach BEP level at least. He has already invested Rs. 1 Crore in this project. A reasonable return should be about 18% on this project, which doesn’t seem to come in the near future.

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R I S H I ; S E V E N T M A N A G E M E N T C O M PA N Y

Rishi was discussing with Ravi about business possibilities. Ravi told Rishi that he was hiring stadium for 3 days, while he would actually need it for 1 day only. The rent of the stadium would be Rs. 50000 per day. The stadium had to be hired for 3 days, as he was not yet sure about the exact date, and if he would delay, the stadium would be booked by someone else during that time. Ravi immediately had a business plan in his mind. He thought of organizing some fair one one of the days in this stadium. He asked Ravi for providing the stadium to him for one day and promised to share revenues (if any with him). Ravi agreed. The stadium was booked from 10 to 13 October. It is the time near Diwali. Most people prefer to do shopping in this time. Rishi could sense for this time as the golden time for doing a trade fair. He immediately preparped an outline of one day trade fair. He listed down all the steps that would be required in the process. He searched the internet for important dealers in Delhi, Jaipur, Ahmedad, Rajkot, Chandigarh and other places, who might be interested in participating in the fair. The one day fair would be an opportunity for them to demonstrate their products in Bikaner. He mailed them letters to know about their response. He had kept different rates for different shops. The front shops were being offered for Rs. 20000, but the shops at the last were given in only Rs. 500. He wrote emails with design of the fair, with list of all the media partners and other partners, who were likely to be involved. In this process, he had to also move out to see other fairs going on and approach the firms displaying their products in those fairs. In all he approached 3000 firms through emails and letters. He also approached 20 media companies, and event marketing companies for partnering with him in creating publicity of this event. One month before the the event, he had prepared for daily news. Everyday he would give some or other news regarding the event in the newspaper.

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He also starting organisisgn small competitions regarding the forthcoming one day trade fair through newspaper. Meanwhile, Ravi also finalized his dates, Rish was able to get the stadium for one day and when the date was fixed, Rishi could collect advance amount from all the participating companies. In all 120 firms agreed to participate in the trade fair. Rishi also approached the local media persons for extensive media coverage. Rishi purposefully contacted those firms, which didn’t have their presence in Bikaner, so that people from Bikaner have some attraction in comeing over to the fair. He purposefully contacted innovative handicraft workers, padmshree awardees (for their art and craft) etc. and offered some of them free entry. The purpose was to create excitement among people of the city regarding the event. He created a special cell in the last pandal of the fair, where he had asked the Padmashree awardees to display their art. This was the opportunity for the city to see exclusive art and craft of the greatest persons of this time. Rishi also contacted some firms from the neighbouring countries and asked them to display their products. This also created excitement amojnt the people. Finally the day came. It was a big crown. There was massive response. All the efforts of Rishi brought fruits to him. There was a huge turnout of the crowd. People wanted the fair to be extended. It waas not possible for Rishi to extend the fair. However, in the process, he was able to Give Rs. 150000 as share of profit to his friend Ravi. Ravi was now thankful to Rishi, as all his expenses were met out. You are required to critically evaluate the strategy of Rishi.

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PA N K A J ’ S L I N U X A C A D E M Y

Linux had started becoming popular in late 90s. It was like a new revolution. It was absolutely free software. While patent laws were becoming stringent, people were switching over to Linux. Linux was just like Windows. There were all the facilities which were available in windows. Making it absolutely free, Linux had made a big move forward. In India also, there were massive changes taking place. Pankaj was a student of PGPSE. Along with studies, he had to do some entrepreneurship project. He wanted to do a project which could give him economic rewards. He stuck upon the idea of promoting Linux products. There were many options for him – to start as linux trainer or to introduce linux software installation etc. Linux softwares were available with the magazine Linux for You. He got lot of CDs with this magazine and experimented with these CDs. Now he prepared a letter and went from office to office. The letter

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mentioned the importance of linux and its advantages vis a vis windows. He contacted 50 offices and institutions. He got mixed response. Some institutions asked him to give a demonstration on linux. Some offices asked him to install linux in their office. He asked for installation charges of Rs. 300 per system. He also asked for Rs. 2000 for training one person in Linux operating system. He got 3 clients to start with. Soon he was able to prepare a portfolio of his work. The three satisfied customers gave him positive recommendations and these recommendations helped him in securing more business. Pankaj was now having huge contracts and had to hire one assistant to help him in linux installation and maintenance in offices. He was lacking in time. His studies were getting adversely affected due to these initiatives. He was evaluated on multiple criteria in his classes. He used to score higher on project implementation, but his marks in other areas were getting lower. He also had to prepare and submit 4 detailed comprehensive business plans. He also had some business plans in his mind, which could give him lots of profits. He was thinking about different options. He got a surprise, when he received an email from a company from delhi. The company wanted him to work on Linux based software development. He had to hire some employees to develop softwares and promote linux based software. The company was prepared to give him authorized franchisee for this. His total investment would be just Rs 50000. He was expecting to increase his income from present Rs. 40000 per month to Rs. 100,000 per month. He was also expecting to get orders from other countries on linux based software development. He was also confused regarding what to do. Basically, he had a strong inclination to work in the field of capability development. He wanted to start an NGO to build skills of people from poor families. He also wanted to work with UNICEF for promoting nutrition among villages. All these things couldn’t be done simultaneously. Can you help him in deciding about his career options and help him in finalizing his career direction.

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S WAT I – T H E B U S I N E SS C O N S U LTA N T

Swati (PGPSE from AFTERSCHOOOL) identified her core competencies as being innovative, creative, and futuristic. She had undertaken 4 years work experience as entrepreneurial trainee with an advertising firm. Then she started her firm to provide business consultancy. Her business is a new type of business. It is to provide complete business solutions. Here she undertakes complete business planning for small and medium enterprises. Under this she prepares following for the business enterprises : 1. logo and business communication planning 2. campaign and marketing planning 3. business communication designing including website and overall business presentation. She has designed her business in such a way that it requires more of imagination, creativity and desiginign skills. She has hired 2 employees to assist her in technical work. These employees undertake desiginign work on Corel and Photoshop. They also use webhosting solutions for designing websites for the clients. Swati relies on outside firms for all her activities. She has a small office at prime location in the city. In terms of infrastructure, she has 2 computers, 1 laptop and 1 deskjet printer. She has got her office designed from her elder sister, who is also an interior designer. The office gives an auro of a great office. Swati spends most of her time in dealing with her clients and in understanding their problems. Once she understands their business model, she is able to prepare suitable designs, which are then prepared by her two assistants. In terms of cost, she doesn’t have much worries. Her running expenditure is not much. The office is in a premises, which belongs to her brother and therefore she doesn’t have to pay any rent. She doesn’t have to worry about any fixed expenditure – other than salary of her two assistant (which is also partly variable). She has so far contacted with 40 parties and has been able to secure 3 business contracts. She occasionally gets small business contracts also,which are for small amount. The three big contracts that she has got, will fetch her Rs. 9 lakhs (Rs. 3 lakhs per annum per client). She will also be getting some other revenues from these contracts. If she is able to publish their advertisements, she would get commission of 15% from the media company, out of which she would be able to retail 3% with herself.

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Thus she expects to have earnings of Rs. 10 lakh in the first year of her business. She has now 3 options for herself : 1. enter into business for large clients also 2. expand business in other cities 3. expand her business by hiring more employees 4. spare time for helping children from poor family in their education (which is her dream). She is in confusion about how to align her time well and undertake all these activities. What do you suggest to her.

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V I J AY ’ S D I L E M M A

Vijay is considering the following options and you have to help him in selecting the best possible option: 1.

2.

in the first option, he has the plan to buy wheat, and other such grains direct from farmers and sell it direct to the retailers. The average rate of wheat in the market is Rs. 35 per KG, while, he would get it @ Rs. 20 per KG from the farmers. Similarly, for other grains. In this case, he has to hire some persons to do the task of purchase on his behalf. The margins in the case of wheat are less than other commodities. In other commodities, the margins would be as much as 50%. Thus he expects to get a lot of profit out of this business. He already knows many persons in different mandis (places where farmers come to sell their crops). He can contact those persons to undertake this work. In this process, he has already requested Mohan to start this work. Mohan’s relatives have a shop in Sriganganagar Mandi and Mohan can easily sit in that shop and start the tasks for Vijay also along with brokerage work for other traders. The advantage in this work is that there is no wastage in this process. Vijay has to buy from one side and sell in other side – at the most on a credit of one month. His working capital would be for maximum one month’s sales worth. Vijay expects that he would be able to have business transactions of 20000 KG per week in this business. Wheat and these grains are fast selling products and can be easily sold to any retailer in any part of the country. the second business possibility is the business to deal with large business houses in commodities segment. Here he has a plan to meet the requirements of the large business houses. He has requested one executive in NCDEX to help him about various business possibilities regarding this. He has got one business possibility here to set up large godown for NCDEX. In this case he would get rent @ Rs. 1 per bag per day. He plans to set up a large godown of size of 300 feet by 900 feet. He would get finance from NABARD for this purpose. NABARD would give him finance upto Rs. 1 crores for this purpose. He has a friend who can become his partner in this business. His friend has land, which can be used for this purpose. This business is safe business – as there is no credit here. There is no possibility of bad – debt here. Another advantage here is that the value of the building will continue to appreciate over a period of time. He

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3.

can also expand this business by extending the size of the godown and facilities & surroundings. The 3rd business plan is with regard to use of his old agricultural land. He is no longer using his agricultural land. The land is lying unutilized. However, that land can easily be used for making bricks. The prices of bricks are increasing constantly. Brick making is one such industry, which will never face any competition from MNCs. Small entrepreneurs can continue to run this business for many years to come. In this business, the advantage is that there is no credit here, payments received promptly, margins are huge and business possibilities are immense. Construction industry is booming, and with that the demand for bricks will increase manifold. Most of the persons in this trade are illiterate and therefore Vijay has the advantage that he can undertake branding and marketing. He can also make higher quality bricks (super A class bricks) and sell them at premium rate. The disadvantages would be that he would be using the fertile land in this process.

Vijay is confused between these 3 options. All these 3 optiosn would enable him to remain in touch with the villages and village life – which he wants the most. All these plans are having huge profit possibilities, but it is becoming difficult for Vijay to determine the social benefits also. Apart from financial profits, Vijay wants to look at the ultimate social impacts that his business can generate on the society. He wants to go for the business with positive social contribution also. Can you help him?

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