ENTR 510 Week 1 Case Study Assignment: Alison Barnard (GRADED A)

Week 1 Allison Barnard Case Study Entrepreneurship and New Ventures Is this business scalable? Discuss the limitations and challenges. Alison Barnard’s boutique jean shop In-Jean-Ius was creat ed out of a passion for serving an underserved market and fashion. Allison leveraged her passion when she completed her grad degree from Babson, and cultivated her idea for her upscale jean shop. Once she graduated it was about gaining practical experience in the industry and learning as much as she could. In-Jean-Ius, as a retailer is a great idea because it is centered around the customers experience in a niche market. The quality and variety of product of In-jean-Ius is another big benefit to its customers. To the question of the business being scalable one would need to consider if the foundational elements of the business are repeatable. The biggest consideration is for a niche boutique would be suppliers. With In-jean-Ius being an upscale jean retail shop its suppliers are extremely sensitive to oversaturation. Additionally the market segment that is willing to pay premium price for jeans is limited to large city’s; like New York, Boston, Philadelphia, Los Angeles, Chicago, San Francisco, Miami, Atlanta, Houston and Dallas. This limits the scalability of the business due to higher cost of entering the market in such city’s as well as supplier exclusivity, more competition. Finally, Alison’s In-jean-Ius is very much a business built around her personality and passion for fashion. In order to scale the business she must separate herself from it. It must be able to have success based on its value prop of providing great service, product variety, and the best fit. From a marketing standpoint she is the face of the brand and for a retailer that isn’t the most ideal marketing plan. In order for In-jean-Ius to be scalable the marketing of the brand should revolve around the staples of the business, product variety, quality, and fit. Because Alison is at the forefront of the business in terms of its operations, marketing, sales training and design that makes it extremely difficult to replicate as a franchise. In a 2014 article for Director magazine entrepreneur Darren Fell wrote, “Many a business has been caught out by a sudden lack of elasticity when faced with increasing customer demand. To build a scalable business you must be able to do just that... scale. If you have grand designs it is absolutely crucial to ensure you lay the right foundations down.” Meaning to scale your business one needs to build that foundation into the business from the beginning. What tasks and goals should Alison be focusing on at this stage of her venture? Alison’s business is doing extremely well at this stage in terms of sales, she is surpassing her monthly revenue goals. Alison needs to focus on long term planning, possibly expanding the current location or moving into a newer larger location. Alison should be focused on marketing In-jean-Ius, continuing the upward sales trend is essential and utilizing the full compliment of her communications strategy plan will be key to growing the business. Additionally Alison needs to develop a more sustainable training platform for her sales team. Currently the training is too dependent on Alison and her methods, there is no documentation to support the training efforts. Alison must have a staff that can compliment her passion and expertise from a service perspective, but also feel empowered to carry on the service quality that Alison demands. Alison should also be focused on expanding her supplier base. Bringing in new brands that will add value to her customers will be highly effective in garnering sales from her target segment. Additionally building relationships with her current suppliers will solidify the relationship and could potentially help with wholesale pricing and help with purchasing product on credit. Discuss the signing of a lease prior to having the money. What was the risk? In signing the lease prior to having the financing in place, it was extremely risky. First, Alison could have easily found herself in a situation where her investors didn’t come through. She was extremely fortunate that she had a family that fully supported her dream and invested early into the business. With her not being able to secure the funding on her own through SBA loans and bank financing she could have been on the hook for a 3 year lease worth more than $30,000. By purchasing the lease before actually having the financing Alison could have jeopardized her entire business and stopped it before it ever got started. Alison could have used the three months free rent to negotiate terms with her investors or obtain a co-signer for the small business loan as well. While signing the lease was risky it was a calculate one, she needed the lease to show investors that 1 she was serious about her business and 2 she had done her homework and was ready to make her dream a reality. Discuss her fundraising and valuation. If you were an equity investor, what return expectations would you have? Evaluating any business is a challenge but especially for a new business. Valuation is the future financial outlook of a company. Alison evaluated her business with first year- projected sales of $325,000 and a startup cost of $125,000. Alison original went the private route before deciding to offer equity; she approached a local conservative Boston bank and was turned down due to lack of a co-signer. She wanted to obtain the loan on her own. She also went the SBA route but was turned down as well for lack of collateral. Finally she offered full equity/debt/equity or debt with an investment of $25,000 with six slots. Alison’s father invested for one share at all equity, and a former coworker was in for 12.5% equity at $50,000. If I were an investor in Alison’s business I would not be concerned with a return in the first several years of business, as I would be looking more long-term at the investment. Any profits should be reinvested into the business for additional product, location expanse, location build out, and hiring employees. If women are coming to Alison's store from all over, how important is location? Discuss the implications for growth. Alison’s current location is in Boston’s historic and pricey North End, which draws visitors from all over the world. The location is extremely important to the success of In- Jean-Ius. The North End draws crowds of tourists and locals alike, there is ample foot traffic and many independent shops and restaurants. The market research that was created for In-Jean-Ius focused on a major metropolitan city with a median income of $54,000. Location matters in retail, especially for a specialty shop. Traffic drives sales, and the North End boasts visitors from everywhere. The sales for In-Jean-Ius reflect the benefits of location. Additionally sales would have suffered had the location not reflected the tonality, look and feel of the store or catered to the market. In-Jean-Ius is a trendy retail shop and as such needs to be in an area where their customer base would be. For a new retail business this is key. For instance if Alison’s store was located in Concord Mass., sales would be entirely different, location matters. In terms of growth, In-Jean-Ius is well position to expand it’s current location or find a larger location in the same area because they are one of few boutiques in the area but also not too far from other retail boutiques. They get much of the foot traffic but less of the competition. Conclusion While I don’t believe Alison’s business is scalable I do be she can expand into a larger location that can expand on her product offering to potentially include men’s jeans and possibly children. Additionally I believe she underestimated her valuation of the business and affected the business foundationally because had the valuation been hiring she could have obtained investors at a higher investment that would translate into a larger location and she would be better positioned to expand. Show Less