Decorative Interiors Inc.

...

operations, move the business to cottage country or hire professional help to run DI

effectively.

Rocco Rapini has an offer of $538,167 (Exhibit 1) for the entire business and operations of DI. Selling out

the business would free him from the work related stress which would be in line with the doctor’s orders.

However, such a decision might not be able to provide adequate financial stability to his family in the long

run. Also, Rapini does not like to spend his time lounging at home. Moreover, a customer has agreed to

pay $450,000 for the shopping unit as demanded by Rapini.

DI can also convert back to home-based operations which would reduce the sales by 30 per cent,

amounting to $265,120. The cost of goods would rise by 2 to 5 per cent, varying from $130,560 to

$134,400. Such a set up would provide flexibility in terms of operations to Rapini. Also, the total operating

Page | 2

expenses would reduce to 35 per cent of the sales, amounting to $92,792 (Exhibit 2). However, this

business would only be able to compete with home based operators in terms of revenue. There is also

uncertainty in the future operations of DI at home as the revenue is very low.

Moving the business to a cottage country would reduce competition in the market and hence the

subsequent workload on Rocco Rapini. This would bring down sales by 30 per cent to $265,120 initially

which would eventually improve to $340,868 by 2008 (Exhibit 3). The operational costs of working in a

new area would rise and further distract proper management. Rapini would have to find a person to sew

drapes for the new location. Once the operational issues are sorted the sales would improve to 90 per cent

of the sales of 2005. Rapini has options of shifting to the towns of Meaford or Thornbury with an uncertain

customer base. Also, moving to a cottage country could add further family stress to Rapini as his daughter

plans to stay at home in Vaughan while attending college for the next four years.

Further analysis reveals that DI can hire professionals to take advantage of the successful brand already

established. This will help reduce Rocco Rapini’s involvement to supervisory roles in DI and improve the

sales back to 2004 levels in the best case scenario. However, DI has had negative experiences of hiring

professionals in the past and there have been issues, like that of Morris stealing clients of DI, which could

happen again in the future.

Page | 3

THE PROBLEM STATEMENT

Decide the future course of action for Decorative Interiors Inc. that would allow a change in lifestyle for

Rocco Rapini as advised by the doctors.

THE OPTIONS

There are four courses of action possible:

1. Sell the business: Sell off the whole business to the client offering 7 times net income or sell off

the unit separately to the person accepting Rocco Rapini’s asking price of $450,000.

2. Convert to home-based operation: Revert to earlier approach of home-based operation in place of

the current showroom run operations.

3. Move the business to Cottage Country: Leave Vaughan and move the entire business north to small

towns of Meaford or Thornbury.

4. Hire professional help: Hire qualified sales manager and part time installer to run the business

and reduce Rocco Rapini’s involvement in DI

CRITERIA FOR EVALUATION

In order of priority, the criteria for evaluation are:

1. Degree of involvement and time spent by Rocco Rapini in DI.

2. Monetary income for Rocco Rapini and his family through DI.

3. Future prospects of business for DI

Page | 4

EVALUATION OF OPTIONS

Option 1: Sell the business

a) Degree of involvement and time spent: Selling the business would free up all of Rocco Rapini’s

time allowing him to lead a stress-free life. Rocco Rapini does not enjoy too much of free time,

and this would leave him dissatisfied as he would not be doing what he has cherished doing for

the past 18 years.

b) Monetary income: After paying off the mortgage, the deal would result in Rocco Rapini receiving

$439,468, which would only be sufficient for his family for nearly 6 years, considering their

current annual income through DI (Exhibit 1).

c) Future prospects of business: The money received is not so much that Rocco Rapini can start a

new business leaving no future prospects of business for Rocco Rapini and his family.

Option 2: Convert to home-based business

a) Degree of involvement and time spent: Converting to home-based operation would allow Rocco

Rapini more flexibility in terms of hours of operation and would reduce his degree of involvement

in DI.

b) Monetary income: It would result in a fall of revenue to $265,120 from $378,743 in 2005. The

operating