CASE STUDY: BETH BUYS A BAKERY

Beth Smith, a faithful part time Corner Bakery employee was offered to take over the ownership of the bakery due to the owner’s terminal health. The owner, Nancy Jackson operated the successful family retail business as a sole proprietorship for more than twenty years. Unfortunately, due to Nancy’s unexpected health condition in August 2009 she was encouraged by her physician to sell or close the business. Beth and her husband, Bob saw the potential of operating the bakery with the family support-two college aged daughters and two sons in high school. Beth and her husband had many discussions concerning business ownership risks and rewards before committing to the Jacksons’.

Both families agreed to set January 1, 2010 as the date for transfer of ownership. This provided five months for Beth to prepare financial planning, marketing and other arrangements to be made. In the months prior to the Corner Bakery opening under Beth’s management she committed time to writing a business plan with the owners’ assistance since Nancy had years of experience.

 

FINANCIAL RISKS/FINANCIAL REWARDS

It was Beth’s idea that they use this opportunity to inform the four children of the risks and rewards of business ownership. Secondly, she thought it provided opportunity to teach them about personal and business finances. Family planning sessions after evening meals provided the parents an opportunity to explain that every aspiring entrepreneur must understand that there are no guarantees. None! A new business start up offers financial risks as well as financial rewards. The parents carefully instructed the children of both.

DAD TEACHING 4 CHILDREN AROUND THE TABLE

Business ownership rewards:

  1. Opportunity to increase household income: Additional income will be needed since the two older children were attending the local community college
  2. Work ethics - the children will be assigned responsibilities
  3. The children will learn fiscal responsibilities
  4. The parents will have an opportunity to include family members in the decision making
  5. The children will be learning risk taking first-hand
  6. The children will develop financial literacy skills

Business ownership risks:

  1. The Smith’s will be opening the new business in January 2010 during an economic downturn in the local economy
  2. Beth and Bob are pledging all their life savings to guaranteed the bank loan
  3. Beth who is the aspiring entrepreneur has no experience in business ownership
  4. Beth’s parents’ assets are at risk also since parents co-signed the bank loan
  5. Banker who loans the money may ‘call in’ the loan in the first year if sales are drastically lower
  6. The new owners were planning increase revenues based on the market research that may fail
  7. Competition: Nearby new Panera store under construction that will open in April 2010
  8. “Regular customers” who patronized the previous owners bakery may not continue
  FAMILY PLANNING MEETINGS AN OPPORTUNITY TO TEACH FINANCIAL LITERACY