Read the case below and answer the problems that follow.

Case study –Planning to Fail

Three years ago, Alvin left the Polytechnic after being qualified as a mechanic. Encouraged by his friends and backed by his parents, he decided to open a small auto-mechanic workshop. The project was completely funded out of family savings. Similar to many new entrepreneurs, he didn’t bother about surveying the neighbourhood to have a sense of the market and preparing business plan.

In the early life of the small business, Alvin had five to eight customers per week and these weren’t sufficient for him to break even. He supposed that, like most of the new ventures, sales will pick up by themselves as customers will communicate the service to others by word-of-mouth. In the meantime, he borrowed money from some of his close friends to mop up losses.

After one year, given that revenue generated was still not enough to recoup costs; Alvin thought that his services were perhaps high-priced. He therefore decided to decrease the price in expectation that sales would raise. However, his attempt had limited success.

Sales actually picked up but were still not enough to match the costs. He tried a number of other things like enhancing after-sales service but these never worked. Subsequent to two years of losses and being overly in debt, Alvin decided to close the business.

problem 1: What are the causes of Alvin’s failure to continue the small business?

problem 2: Examine and describe some of the entrepreneurial steps Alvin could have taken at different points of time to maintain and ensure the success of small business.

problem 3:  You have been contracted to counsel young entrepreneurs like Alvin. Prepare a note on “The Essence and Elements of a Business Plan” which you could distribute to them.