Mini Case Chapter 2 Scott's Expansion Plan

Facts and Recommendations for Scott’s Expansion Plan.

Background

Nepean Boards is a small manufacturer of snowboards in Ottawa, Ontario and currently has one store in Ottawa. The company was founded and is currently managed by Scott Redknapp. Nepean Boards was originally financed by Scott and his friends and family. The company has been a success with revenues increasing to $300k in 2012 and net income of $49k. Scott is now contemplating opening another store in Calgary and distributing his boards to other sellers.

Facts

Nepean Boards is making good income, carries good brand and reputation.

Cash flow is okay; would be improved without dividends and by eliminating the sales of boards on credit as evidence by the increasing receivable balance.

Recommendations

Even though, Company’s revenue is healthy and growing and his boards are getting popular among professional boarders by word of mouth. It is important for him to be realistic about the chances of a second store actually succeeding; especially, he has no marketing strategy in order to expand to Calgary. Therefore, opening another store in Calgary might not be Scott Redknapp best choice for business expansion due to lack of his business experience and not being able to maintain proper financial records.

Scott shall prepare a business plan for his expansion which would include a 5 year forecast of revenue, income and cash to evaluate. Since, he does not have enough equity and he is also paying out significant amount of dividends; he will definitely be taking a huge risk and diluting the existing investors by bringing in additional investors might not be good idea for his company. Most likely, debt will increase and possibly put extreme financial strains on the store that could eventually lead to failure. By expanding his business to the market; especially different province would also be very difficult for him to manage. Scott must improve his cash flow on his first store before...