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Petoskey Tech Support

Claire Kelly is getting desperate about her new business. Shes not sure she can make a go of itand she really wants to stay in her hometown of Petoskey, Michigan, a beautiful summer resort area along the eastern shore of Lake Michigan. The areas permanent population of 10,000 more than triples in the summer months and doubles at times during the winter skiing and snowmobiling season.

Claire spent four years in the Navy after college graduation, returning home in June 2019. When she couldnt find a good job in the Petoskey area, she decided to go into business for herself and set up Petoskey Tech Support. Claires plan was to work by herself and basically serve as a for hire computer consultant and troubleshooter for her customers. She knew that many of the upscale summer residents relied on home computers to keep in touch with business dealings and friends at home, and it seemed that someone was always asking her for computer advice. She was optimistic that she could keep busy with a variety of on-site servicessetting up a customers new computer, repairing hardware problems, installing software or upgrades, creating a wireless network, correcting problems created by viruses, and the like.

Claire thought that her savings would allow her to start the business without borrowing any money. Her estimates of required expenditures were $7,000 for a used SUV; $1,125 for tools, diagnostic equipment, and reference books; $1,700 for a laptop computer, software, and accessories; $350 for an initial supply of fittings and cables; and $500 for insurance and other incidental expenses. This total of $10,675 still left Claire with about $6,500 in savings to cover living expenses while getting started.

Claire chose the technology services business because of her previous work experience. She worked at a computer help desk in college and spent her last year in the Navy troubleshooting computer network problems. In addition, from the time Claire was 16 years old until she finished college, she had also worked during the summer for Eric Steele. Eric operates the only successful computer services company in Petoskey. (There was one other local computer store that also did some on-location service work when the customer bought equipment at the store, but that store recently went out of business.)

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Eric prides himself on quality work and has been able to build up a good business with repeat customers. Specializing in services to residential, small-business, and professional offices, Eric has built a strong customer franchise. For 20 years, Erics major source of new business has been satisfied customers who tell friends or coworkers about his quality service. He is highly regarded as a capable person who always treats clients fairly and honestly. For example, seasonal residents often give Eric the keys to their vacation homes so that he can do upgrades or maintenance while they are away for months at a time. Erics customers are so loyal, in fact, that Fix-A-Buga national computer service franchisefound it impossible to compete with him. Even price-cutting was not an effective weapon against Eric.

From having worked with Eric, Claire thought that she knew the computer service business as well as he did; in fact, she had sometimes been able to solve technical problems that left him stumped. Claire was eager to reach her $70,000-per-year sales objective because she thought this would provide her with a comfortable living in Petoskey. While aware of opportunities to do computer consulting for larger businesses, Claire felt that the sales opportunities for her services were limited because many firms had their own computer specialists or even IT departments. As Claire saw it, her only attractive opportunity was direct competition with Eric.

To get started, Claire spent $1,400 to advertise her business in the local newspaper and using Google Ads. With this money she bought two announcement ads and 52 weeks of daily ads in the classified section, listed under Miscellaneous Residential and Business Services. The ads from Google Ads appeared when locals searched for computers, tech support, or computer repair. She also listed her business under Computer Services at Craigslist for Northern Michiganupdating this notice and information once a month. Further, she built a small website with just a basic home page, a page with her picture and experience, and a third page that lists the services she offers. She thought about creating a Facebook page and blog, but she hasnt done that yet. She put magnetic sign boards on her SUV and has waited for business to take off.

At the end of three months, Claire had a few customers, but much of the time she wasnt busy and she was able to gross only about $300 a week. Of course, she had expected much more. Many of the people who did call were Erics regular customers who had some sort of crisis when he was already busy. While these people agreed that Claires work was of the same quality as Erics, they preferred Erics quality care image and they liked the fact that they had an ongoing relationship with him.

On occasion, Claire did get more work than she could handle. This happened during April and May, when seasonal businesses were preparing for summer openings and owners of summer homes and condos were ready to open the cottage. The same rush occurred in September and October, as many of these places were being closed for the winter; those customers often wanted help backing up computer files or packing up computer equipment so they could take it with them. During these months, Claire was able to gross about $150 to $200 a day.

Toward the end of her discouraging first year in business, Claire Kelly is thinking about quitting. While she hates to think about leaving Petoskey, she cant see any way of making a living there with her independent technology services business. Eric seems to dominate the market, except in the rush seasons and for people who need emergency help. And the resort market is not growing very rapidly, so there is little hope of a big influx of new businesses and homeowners to spur demand.

Evaluate Claire Kellys strategy planning for her new business. Why isnt she able to reach her objective of $70,000? What should Claire do now? Explain.