Entrepreneurial Small Business 2nd Edition by Jerome Katz , Richard Green

Exercise 16

THE COMPUTER GURU: A ONE-MAN SHOW OR AN EMPIRE
Juan De Jesus, of San Antonio, Texas, earned a computer science degree from The University of Texas in 1994. Upon graduation, Juan was hired as a sales and service technician for one of the large national computer corporations. That job provided him with a tremendous amount of experience in the small business sales and service sector. Four years later, he left the company, deciding to go it alone as an independent computer consultant.
Juan set up an office and computer-testing lab in his home and worked hard to grow the business. He was able to take advantage of some of the relationships and contacts that he established during his tenure at his last job that resulted in several immediate clients. His wife Conchita helps with some of the office work on a part-time basis.
The business grew rapidly thanks to Juan's excellent work and reputation. He has the ability to install hardware and software systems, including industry-specific software, is very effective at training, can fix almost any computer, and is readily available by phone to answer questions and solve problems that occur after the installation and training.
Four years into the business, Juan finds himself charging $100 per hour and earning nearly $150,000 per year for his services. He is good at what he does, and people want him-his phone is ringing off the hook. He also feels that it is time to take a step back to reevaluate his current position, his business options, and his personal goals.
Juan recalled the internship program that is offered at his alma mater and arranged to have three current business students conduct a feasibility study on his behalf. The project began with an interview at his home office. The highlights and key points of that interview follow.
Juan reported that he is making a good living, currently billing about 1,500 hours per year at $100 per hour. He actually works about 60 hours per week, however, with the addition of travel time, seemingly endless phone calls, searching for and ordering parts, office paperwork, and attending classes and seminars to remain current with new technology. Conchita works about 20 hours per week in the office. She indicated this to be her limit, as she has another part-time job and is expecting the couple's first child in a few months. She plans to give up the second job and to continue working with Juan at their home office.
Juan is concerned about the fact that his entire business is just Juan. He gets paid only when he works. He sells no actual products, just services. If he is sick or if he takes a vacation, he earns nothing. He wondered out loud whether he had already reached his maximum potential. He is worried about the fact that there are no growth opportunities under his current setup. He is not sure whether he should just keep doing what he is doing or whether he should change.
The conversation then turned to "the building of an empire" as Juan put it. He wants the student team to take a close look at some other business options that include:
Hire an additional computer technician or two and grow the existing business.
Open a retail computer store as a complement to his current services. If he were to establish a retail store, should he rent, lease, or buy the building
Hire an outside salesperson or two to generate new business either as part of the retail store or as an extension of his current business.
Establish a Web site rather than a retail store as a complement to his current services.
Consider new and related ideas generated by the student team.
Do nothing.
Juan indicated to the students that he likes the idea of building an empire, but that he feels as if he is wading into new waters that he is unfamiliar with. For example, if he were to open a retail store, could he possibly compete with the Circuit Citys and Best Buys of the world He wants his success story to continue and wants to make more money while working fewer hours. He also wants to earn money when he is not working.
Juan is not sure about the best product mix and about the pricing of those products. He is very concerned about the very rapid product life cycle that is inherent to the computer industry and is afraid of getting stuck with suddenly obsolete products. Juan is also accustomed to getting paid very quickly for his services and has not had to deal with credit and cash flow issues.
Form small groups and brainstorm and develop a strategic plan for Juan. Compare and contrast each group's plan and gain consensus as to the best.