Trent Johnson opened his lawn care retail business nine months ago with $33,000 in cash and...

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Trent Johnson opened his lawn care retail business nine months ago with $33,000 in cash and a longing to be a small business owner. Many of his friends thought he was crazy leaving a stable job, but he was determined to start his own business. Trent had five years of experience selling lawn care products and he understood a lot about the lawn care business. He also knew that many people around town spent a great deal of time and money on their lawns, particularly in the upper-middle-income sections of town. Therefore, Trent wisely opened his store in a small shopping center in just such a section of town. The store officially opened on May 1. For the first couple of weeks, business was moderately slow. By the end of the month, however, Trent was doing a booming business with May sales of $18,000. • In June, he did $27,000 in sales. • • • July and August brought in $30,000 and $35,000 respectively. However, in September, operations began to slow down dramatically, and sales fell to $19,000. During the next three months, sales were $16,000, $15,000, and $14,000 (specific product sales numbers provided in "additional items" below) Trent's gross margin and monthly expenses are as follows: • Total gross margin on sales is 40 percent; therefore, on the $156,000 of revenue for June through December, the gross margin was $62,325. • Rent, store maintenance, and interest expenses on his purchased equipment, total $8,000 monthly. • Trent has taken a monthly salary of $6,000 Trent is extremely upset with sales over the past four months. He also is concerned that his initial $33,000 of cash seems to be almost gone. Yesterday, Trent spoke to a local banker to see if he could get a loan. The banker listened quietly as Trent told his tale of woe. When Trent was finished, the banker said that she would be willing to consider a loan, but she would need more information about the business. "Do you have a business plan I can see?" Trent admitted to her that he did not: "When things started off so well, I didn't see any real need to draw one up." The banker nodded her head and said, "That's typical, although you should put one together before you started the business. Did it ever occur to you that you were opening your store just as the lawn care business was entering its big season? You were starting off with your best months and should have planned for the slower winter months. If you had done a business plan, you would have picked this up. In any event, if you want a loan, I need from you a business plan with clear financial projections. In particular, I'd like a projected incomed statement for the next 12 to 18 months." Trent agreed with everything the banker told him. He also promised to draw up a plan. "I don't know how much money I'll need, but I hope to know when I've done the plan," he told her. I'll be back to see you a week from today. Trent walked out of the meeting excited, but nervous as he lacked the ability to put together a business plan. He immediately called you to ask for help o Give your recommendations to Trent on the following specific areas - 25 pts: What product line should he focus on growing top line growth? • . Which product (or products) should he consider adjusting the gross profit? How should he plan to spend any additional funds he requests from the bank? Provide him an estimate of how much money he should ask from the banker in the form of a loan. Justify your reason for the loan amount. Trent Johnson opened his lawn care retail business nine months ago with $33,000 in cash and a longing to be a small business owner. Many of his friends thought he was crazy leaving a stable job, but he was determined to start his own business. Trent had five years of experience selling lawn care products and he understood a lot about the lawn care business. He also knew that many people around town spent a great deal of time and money on their lawns, particularly in the upper-middle-income sections of town. Therefore, Trent wisely opened his store in a small shopping center in just such a section of town. The store officially opened on May 1. For the first couple of weeks, business was moderately slow. By the end of the month, however, Trent was doing a booming business with May sales of $18,000. • In June, he did $27,000 in sales. • • • July and August brought in $30,000 and $35,000 respectively. However, in September, operations began to slow down dramatically, and sales fell to $19,000. During the next three months, sales were $16,000, $15,000, and $14,000 (specific product sales numbers provided in "additional items" below) Trent's gross margin and monthly expenses are as follows: • Total gross margin on sales is 40 percent; therefore, on the $156,000 of revenue for June through December, the gross margin was $62,325. • Rent, store maintenance, and interest expenses on his purchased equipment, total $8,000 monthly. • Trent has taken a monthly salary of $6,000 Trent is extremely upset with sales over the past four months. He also is concerned that his initial $33,000 of cash seems to be almost gone. Yesterday, Trent spoke to a local banker to see if he could get a loan. The banker listened quietly as Trent told his tale of woe. When Trent was finished, the banker said that she would be willing to consider a loan, but she would need more information about the business. "Do you have a business plan I can see?" Trent admitted to her that he did not: "When things started off so well, I didn't see any real need to draw one up." The banker nodded her head and said, "That's typical, although you should put one together before you started the business. Did it ever occur to you that you were opening your store just as the lawn care business was entering its big season? You were starting off with your best months and should have planned for the slower winter months. If you had done a business plan, you would have picked this up. In any event, if you want a loan, I need from you a business plan with clear financial projections. In particular, I'd like a projected incomed statement for the next 12 to 18 months." Trent agreed with everything the banker told him. He also promised to draw up a plan. "I don't know how much money I'll need, but I hope to know when I've done the plan," he told her. I'll be back to see you a week from today. Trent walked out of the meeting excited, but nervous as he lacked the ability to put together a business plan. He immediately called you to ask for help o Give your recommendations to Trent on the following specific areas - 25 pts: What product line should he focus on growing top line growth? • . Which product (or products) should he consider adjusting the gross profit? How should he plan to spend any additional funds he requests from the bank? Provide him an estimate of how much money he should ask from the banker in the form of a loan. Justify your reason for the loan amount.

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1 What product line should he focus on growing top line growth Trent should focus on growing the lines of products that are most popular in his area s... View the full answer