Sugar Bowl Case Study

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For a major part of the restructuring, Givens was concerned about keeping costs low. However, the overwhelming burden on her for the restructuring process as well as managing the day-to-day business causes her to delegate her duties to someone competent. Her mentor recommended his former staff member whose salary was affordable to Givens. However, Givens negotiated with the potential manager and found that they could agree on a reduced cash payment with extra benefits can make for the lost compensation for the new manager.

Givens tried to keep track to the number of customers in the facility per night. However, with time, operations showed her that historical data is useless in predicting activity in a particular day in her industry.

Givens prioritized loyalty and courtesy over performance and job requirement against the sound business practices. However, Givens learnt that courtesy could to save an already diminished relation with a staff member and all Givens had to do was to accept the change and move on. Givens succeeded in attracting talent that was fit for the company at a compensation that was suitable. Givens later strengthened this relation by a competence rewarding compensation rate.

Shrinkage posed threat to cost strategy of the business. Givens formulated a strategy to manage such risks by increasing controls of material and cash handling. Management has to carry out a daily cash audit, while the employees must require authorization of material request of more than a set limit.

Phase III

The first two quarters of restructured business were especially difficult. The revenues were low and the compensation of wait staff suffered as the customers declined. Business lost a loyal worker because of harsh circumstances. However, this loss turned profitable when business replaced the worker with a good fit. The new marketing manager earned the business new contracts only on his previous connections.

Givens concluded after attempting to understand the pattern of sales volume, that Givens could not precisely predict the sales volume for any given date. However, to create a steady flow of income, Givens later entered partnerships that provided the business with steady flow of customers.

Most Successful Actions

The most important action that turned around the fate of business was deciding upon transforming the whole business’ outlook. The business turned losses in the last quarters of 2010 and these loses were taking the business down. However, with the successful implementation of restructuring plan, Givens could show profit within a year. Furthermore, givens succeeded in keeping the cost of capital which Givens obtained for restructuring low. Givens did so by offering her relatives convertible bonds thus ensuring them that the success of the business will mean their financial growth.

Givens sought help from industry guru. Their help not only enabled her to work on her dreams but also introduced her with a knowledgeable staff member. The staff member gave her valuable insight of the market and supported her in keeping costs low.

Least Successful ActionsTo keep costs low, Givens contracted an un-established contractor. Although he was enthusiastic about the restructuring, he lagged in his schedules and resulted in thousands of dollars in lost revenues and costs.

Viability of Sugar BowlSugar bowl doesn’t seem to be a viable business in the long term. There are several factors which are decreasing the industry’s potential to grow or remain profitable after some decades.

The most important factor that may cause distress to this industry in the long-term is demographics attached to this industry. As the industry now attracts aging population, the youngsters don’t feel attracted towards it. Furthermore, with every passing year the population size that used this facility is decreasing. It may not have enough target customers to attract the business it needs to survive.

The volatility of the sales volume put mark on the short-term stability of the industry. The volatility results in sky-high profits in one day and rock-bottom losses in other. This volatility may also hamper the business over a course of few months in a year during inactive seasons.

2011 Q3 Break Even Point

Income for the Quarter 3 2011 = $582,451

Variable Cost = $344,407

Profit Margin percentage = $(582,451 - 344,407)/$582,451

= 41%

Average income/ customer = $40

Average profit margin / customer = $40 x .41

Total cost = $314,313

BEP = $314,313/$16

= 19645 customers

2012 Q1 Break Even Point

Income for the Quarter 3 2011 = $1,179,360

Variable Cost = $547,946

Profit Margin percentage = $(1179, 360- 547,946)/$1179,360

= 54%

Average income/ customer = $52

Average profit margin / customer = $52 x 54%

= $28

Total cost = $340,138

BEP = $340,138/$28

= 12147 customers

League Bowling versus Exclusive Band Rights.League bowling will generate more revenue in the short term. However, as the league bowling is facing decline, this revenue may not remain stable in long run.

Financial Perspective

While evaluating the proposal, Givens must analyze the growth potential of her business. The main indicator of success would be net present value (NPV) of the future income streams. However, as the income of the business is not predictable, Givens will have to rely on information provided by the income it receives from the private events and partnership.

The business women should also consider the probability of not being able to repay loans or offer enough growth in business that the creditors opt for conversion of loan notes to equity instruments. The future of bowling industry will give a deep insight into how much growth the business will see in coming years.