MT209 Unit 8 Growth Analysis Example

Fourteen Schools in Six Weeks: A Unit 8 Growth Analysis of a District Apparel Contract

[Student Name]

Purdue University Global

MT209: Small Business Management

Unit 8 Growth Analysis

[Instructor Name]

[Date]

Northfork Print and Stitch, the school district, the contract and every figure are composite and illustrative; bracketed figures stand where the bid documents and the shop's records would supply the numbers; the sources cited are real.

The Opportunity

The district's request for bids covers three years of team and spirit apparel for its fourteen middle and high schools. The district estimates annual purchases of about [$180,000], or roughly 28 percent of Northfork's current sales. Bids are accepted by lot: a fall lot covering football, cross-country, volleyball, soccer and homecoming, about [70] percent of the volume, and a spring lot covering track, baseball, softball and graduation, about [30] percent. The district pays by purchase order on its standard terms, which the shop's experience puts at about fifty-two days.

Winning the contract would also make Northfork the default supplier for coaches and booster clubs at schools it does not currently serve, a benefit the owner values as much as the contract itself. The district's bid documents also require a performance bond of [$10,000] for each lot, proof of general liability coverage of at least [$1 million] and delivery to each school's athletic office rather than pickup at the shop. Delivery alone would add a van route the shop does not currently run, about [two] hours a day during the fall rush.

When the Work Arrives

The district's past orders, published with the bid, show that about [70] percent of the volume arrives in August and September, with most orders due within three weeks of approval. That timing matters more than the total. Spread evenly, [$180,000] a year would be about [$15,000] a month, which the shop could absorb. Concentrated, it adds about [$63,000] of work to each of the two busiest months.

Capacity Test One: The Press

The job log shows the automatic press booked for nearly nine of every ten available hours in September. The fall lot would add roughly [180] press hours across August and September, more than the press has free. Meeting it would require a second shift for about eight weeks, with two seasonal operators at about [$19] an hour, plus the senior operator's time to train them and to mix school colors for both shifts.

The second shift is possible but fragile. Seasonal operators would need about two weeks of training before they could run the automatic press without close supervision, which means hiring them in July, before the work arrives. The Unit 3 interview found that only the senior operator can mix custom school colors, and a second shift would either run without him or require him to work both.

Capacity Test Two: The Cash

The Unit 5 projection showed the shop drawing about [$40,000] of its [$50,000] credit line at the end of September. Rerunning it with the fall lot added, blanks for the district orders, about [$29,000] across August and September, would be paid before the district paid for the finished shirts, and seasonal payroll for the second shift would add about [$12,000]. The September draw would reach about [$100,000], roughly [$50,000] past the line, and about [$60,000] past it in the worst week.

Churchill and Mullins (2001) showed that a company's ability to fund its own growth depends on how long cash is tied up in each sales cycle, and that firms with long cycles can be pushed into a cash crisis by growth alone. Northfork's cash is tied up for about eighty days on school work, from buying blanks to receiving payment, which is why a profitable contract would empty its account.

Capacity Test Three: The Owner

The operations review found the owner working over sixty hours a week in the fall, with about eighteen of them on quotes and approvals. The district contract would add fourteen schools' worth of art approvals, size changes and delivery coordination in the same weeks. Even with the order coordinator planned in Unit 6, the owner would also have to recruit and supervise a second shift. Penrose (1959) argued that a firm's growth is limited by the managerial capacity available to plan and carry it out, since experienced managers cannot be hired and made effective overnight. In Northfork's case, the managerial capacity is one person.

The contract is worth $180,000 a year, and almost all of it would arrive in the six weeks the shop has no press time, no cash and no owner hours to spare.

Alternatives

Four options are realistic. The first is to bid on both lots and take the full contract. It brings the most revenue but fails all three capacity tests in its first fall. A failed first season would also be public: fourteen athletic directors would see late shirts at the same games, and the district could end the contract for poor performance.

The second is to bid on the fall lot only with a partner shop, subcontracting about half the printing to a larger shop across town. That solves the press problem but not the cash problem, since Northfork would still buy blanks and wait for payment, and it shares the margin.

The third is to bid on the spring lot only. The spring lot, about [$54,000] a year, arrives in March through May, when the press runs at about half capacity and the shop's cash is at its strongest. It would use idle capacity, cost no new shift and test the shop's ability to serve a district contract. It would also place Northfork in front of all fourteen schools' coaches.

The fourth is to decline both lots this cycle and prepare to bid in three years, after the order coordinator, the cash changes and a documented color process are in place.

Recommendation

Northfork should bid on the spring lot only. It adds about [$54,000] in annual sales at the shop's existing margin, uses capacity that sits idle in spring, adds no fall cash strain and builds the relationships that make a future fall bid credible. Before the next three-year cycle, the shop should complete three conditions that would make a fall bid feasible: an order coordinator trained and handling quotes, a documented color mixing process that a second operator can follow, and a larger credit line or deposit terms that cover a fall draw of about [$100,000].

Churchill and Lewis (1983) described the decision to grow beyond the owner's direct control as a turning point in small firm development, one that requires delegation and systems before the growth arrives. The spring lot lets Northfork build those systems on smaller, slower work.

References

Churchill, N. C., & Lewis, V. L. (1983). The five stages of small business growth. Harvard Business Review, 61(3), 30-50.

Churchill, N. C., & Mullins, J. W. (2001). How fast can your company afford to grow? Harvard Business Review, 79(5), 135-143.

Penrose, E. T. (1959). The theory of the growth of the firm. Wiley.