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Case Study Damon Damon White Party Promotions The Problem my own party. I did not know how to DJ, but The telephone rang. Damon White put on his I had friends who worked as professional DJs. headset and answered, "Good evening, Seattle I just contacted everyone I knew who could Teen Hotline. My name is Damon. How can I help help out and then made it happen. you?" The year was 2009. Damon had been work Damon decided to use all $700 of his personal ing as a hotline counselor at the Mayor's Youth savings to purchase services and supplies for the Committee for three years. Every night, from party. His intention was to earn this money back 6 to 11 p.m., he took calls from teenagers in the and also generate a profit, by charging a $10 ad- Seattle area, advising them on many different issues: relationships, family problems, school, mission fee. He thought $10 was a reasonable price, because it was about the same amount that and more. Damon had a natural talent for being a good listener. In fact, he listened so well that teens would typically spend on a weekend night to go out to a movie or play video games at the ar- over time he started noticing similarities in the cade. Damon knew he had to be careful about how types of problems young people were discussing on the hotline. Specifically, Damon observed that he allocated his resources, because a $700 start-up younger teens in the Cedar Park and Eastlake investment was not going to get him very far. neighborhoods did not feel safe going out on the weekends. Parents were also worried about the Getting Organized safety of their children and sometimes called to Damon's first step in planning his party was to ask whether the Youth Committee ever sponsored brainstorm a list of all the things he would need teen parties or other gatherings. Damon always to purchase and arrange. The list he created was felt bad telling parents that the Committee did not as follows: have the funds to organize these types of events. Damon liked helping people, but this was the kind Item Cost of problem he did not feel he could solve. Space Rental DJ Security Insurance Flyers Food Party Decorations He thought this was a pretty good list; the only problem was that he did not know how much each item would cost. Could he pay for these goods and services with his limited funds? He was not certain. First, he needed to do some research. Thinkstock/Getty Images Problems Can Lead to Opportunities But then, one day in October, Damon came up with an idea: Everybody was asking, "Is there going to be a Halloween party?" But there was not anyone who was throwing a party, so I said; I'll throw Damon Investigates His Costs Damon called his friend Janae, who worked as a professional DJ, to find out how much she would charge to spin records at the party. Janae nor- mally got $500 as a DJ at Seattle's hottest clubs, but she agreed to reduce her fee to $100, because she saw that Damon was trying to do something positive for the community. Damon then spoke with another friend, who worked as a security guard, to ask if he could or ganize a security squad for the event. The friend agreed to find four coworkers who could staff the party for $50 each This case is based on a real-life example, but selected details have been fictionalized Thanks to Stephen Spinelli and Alex Hardy for granting permission to adapt this roce from its riginal con $10.00 $3,000.00 $0.50 300 $150.00 Damon needed a large, centrally located nervous. He had never done anything like this venue where he could host the party. He remem before. What if no one showed up and he lost all bered that his friend Quinetta had once rented his money? The doors opened at 9 p.m., and by a dance studio in an old, converted factory. The the end of the first hour only 20 people had ar- studio would be perfect because it was located in rived. Damon realized that, at $10 apiece, that the heart of downtown Seattle, near the highway. was only $200. The room looked empty, no one He contacted the studio's owner and negotiated was on the dance floor, and Damon's nerves were a deal to rent the space for $200 for four hours. on overdrive. Suddenly, at 10:30, the party filled This rental fee included insurance, in case there up quickly and, by 11, Damon was amazed to see was an accident. that a line of kids had formed outside the door. Throughout the planning process, Damon The studio had a fire hazard limit of 300, and by leveraged his personal network to assemble 11:30 the party was filled to capacity. the necessary components for the party. He explained: Keeping Good Records If I had to go out and hire professionals, ! In the end, Damon's party was a great success, wouldn't know them. And the fact that I did personal and financial. When he sat down to cal- not have the money right then to pay full mar culate his revenue, he discovered that the party ket prices for people's services--but these peo- had generated $3,750. Damon tabulated his re- ple trusted me and said, "We believe in what ceipts and created the chart below, so that he you're doing, so we'll provide our services at a could see how he had accomplished this. discount." Selling Price Number of Revenue Damon's final step was to get the word out Item per Unit Units Sold Generated about the party to teens and parents. He called Admission 300 his friend John, who freelanced as a graphic Tickets designer, and offered to pay him $50 to design and print 300 flyers. By this point, Damon had Chips already committed $600 of his savings toward entertainment, space rental, security, and promo- TOTAL SALES tional costs. With his remaining $100, he decided REVENUE to purchase chips, soda, cups, and napkins. He figured that he could recoup his investment by It had taken Damon three long years of care- selling these snacks at a modest profit. ful saving to put away $700 from his part-time After making these arrangements Damon job at the hotline, so he was amazed that so much filled in the actual cost of each item on the list. money could be generated in a single evening. As he reflected on the experience, Damon realized: Item Cost Even if not many people had come to the Space Rental and Insurance $200 Halloween party, it would have been a success DJ because I put something together, and I prof- Security ited from it. Not only profited financially, but profited as an individual. It was something Graphic Design and Flyer Production deeper than just the money. You've got to go Food, Decorations, and Misc. Supplies into business because it is something you love TOTAL $700 to do and you want to create that indepen- dence. If you do something that you love, you Damon felt satisfied that he had managed always do your best. his limited resources effectively. He was finally ready for the party. All he had left to do was de- Future Possibilities cide on what costume to wear. As he drove home after the party, Damon's mind was reeling. He was thinking about the future and The Party what he wanted to accomplish. Maybe he would On the night of the party, Damon arrived early use some of the profit he earned to throw an even to set up. Despite weeks of planning, he still felt bigger party or perhaps start a party-planning Soda $1.00 600 $600.00 $3,750.00 100 250 50 100 business. He was not sure. After all, organizing the party had caused him a lot of stress. Or maybe he would put the money in his bank account so that he could save up for school. He had several possibilities to consider. Damon drove home and parked his car. As he got ready for bed, he resolved to think further about future plans in the morning. Case Study Analysis 7-21. Assume that Damon decides to start a party-planning business: a. Identify two ways he could assess the cost of goods or services sold for this business. b. Which costs, described in the case, would become part of Damon's operating-cost structure? c. Make a list of additional items Damon will need to purchase to get his busi- ness off the ground. Research the cost of these items. 7-22. One of the reasons why Damon earned a substantial profit is because he con- vinced his personal contacts to provide their services at a discounted rate. If he decides to grow his party-planning busi- ness, do you think he can continue to use this strategy? Why or why not? What would his costs have been if he had paid full price for everything? 7-23. Brainstorm three things Damon might have done differently in planning his party to increase sales revenue. 7-24. At the end of the case, Damon describes how he profited as an individual from the experience of throwing the Hallow- een party. What did he mean by this? Is it possible to profit from something on a personal level, even if you do not neces- sarily earn a financial profit? Can you think of an example from your own life where this happened? Explain