Question

To Do or Not To Do (An Entrepreneurial Case Study)

Dave was the chief real estate appraiser for a large financial institution (Bank A) that had just been bought by another large financial institution (Bank B). The “buying institution” did not need another chief appraiser and gave Dave a severance package with their blessings for his success in the future. The local chief lending officer of Bank B indicated that, if Dave went into business on his own, he (Dave) would receive considerable work from the new merger. Dave considered going into business on his own but was also approached by another financial institution (Bank C) in the same city to join their appraisal staff. Personnel at Bank C knew Dave for over thirty years and trusted his work. While a salary had not been solidified at Bank C, likely it would have been $60,000 plus or minus a few percentage points plus the usual fringe benefits of vacation time, sick time, a partial contribution of a retirement plan and some future stock options. It looked like a pretty good deal for Dave and the offer of employment was firm after three meetings between Dave and Bank C. Guaranteed, so to speak. But, Dave knew, to be an entrepreneur, you have to have an acceptance of no guarantees. But Dave was not sure if he really wanted to go corporate again. He did realize the benefits of being corporate but he wanted it to be “his” corporation which he had been considering even before Bank A was purchased by Bank B. What he had not considered was an offer by Bank C. Dave now had a choice between joining an established corporation as a staff appraiser or forming his own company. He was basically making a choice between being “on staff” or an entrepreneur. He knew that being an entrepreneur meant that he would need to have a tolerance for risk taking. Financially, Dave was personally OK with either option but liked the freedom of working on his own schedule, which would be the entrepreneurial route. But, there are downsides to the entrepreneurial route as opposed to the corporate offering he had received. Dave prepared a 2 “decision table” to assist him in making a quantitative decision. He realized that, whatever the quantitative decision table results were, his own personal feelings would likely be what he did unless there had been an overwhelming indication from the decision table. Entrepreneurs have to make tough decisions. Dave had to structure his decision table such that it would be free from his own biases so he met with two other company owners, in separate luncheons, and asked them about their positive and negative factors in owning their own business. Dave knew these two other appraisers since he worked with them before going corporate and the other two appraisers had no problem knowing Dave may soon be one of their competitors. Dave prepared the following decision table, based on these meetings.

DAVE’S DECISION TABLE

No. Factors Become an entrepreneur Accept the corporate position

1 Possibility of failure-an entrepreneurial negative X

2 Income potential limitless-entrepreneurial positive X

3 Giving up corporate opportunity. X

4 Extended work hours-if a negative factor X

5 Responsible for own health insurance X

6. Responsible for own FICA X

7 Current availability of equipment X

8 Current availability of potential clients X

9 Acceptance of uncertainty X

10 Desire to be his “own boss” X

11 Freedom to choose assignments X

12. Freedom to pursue other income sources X

13 Potential “Corporate Power” in future X

14 Stability of fixed guaranteed income X

15 Having income when there is no work    X

16. Potential for personal expansion X

17. Office location X

18. Entrepreneurial business structure X

19. Potential entrepreneurial start-up partners X

20 Personal confidence in ability X

...................... Dave felt that the ability to pursue other income sources to be important which include teaching real estate courses through one of the largest real estate schools in the state located in Orlando. If he had been a staff corporate appraiser, these assignments would not be available to him. As an entrepreneur. Dave could take on these other income assignments. The successful entrepreneur will make himself or herself available to diversity of income streams. 4 Dave did not consider the “Corporate Power” structure as being particularly attractive to him but it would lead to deciding on the corporate position if it had been. Stability of fixed income and having income when there is no work is definitely an advantage in the corporate world. When there are no assignments, as an entrepreneur, there is no income. Generally, when there is no work in the corporate world, there is still a payday especially if the bank (like Bank C) does their own internal appraising for loans from their own customers. It is like a guaranteed income. The successful entrepreneur has to have a high degree of acceptance of uncertainty. The potential for personal expansion does not mean Dave would be trying to expand his business rather his personal expansion factor would be he would be expanding his experience to being appraiser, review appraiser, bookkeeper, marketing director, public relations director, and many other jobs. The successful entrepreneur is a self-starter. He liked the idea of not having to be the human resources director since the business would include only him. At least at the onset of the entrepreneurship. A corporate office location is nice but not necessary for entrepreneurship. In the real estate sales or appraisal business, the professional goes to the client’s property as opposed to the client coming to the professional’s office. Dave had enough equipment and room in his own home for his office so this was a positive for the entrepreneurial decision. Selecting an appropriate entrepreneurial business structure was important but Dave knew how to form a corporation and that would be the least of his concerns at start-up. Finally, Dave had a high degree of personal confidence in his professional abilities and this is perhaps one of the foremost considerations in going into business for one’s self as an entrepreneur. If you are not confident that you can be successful, with the skills you already possess—not those you plan to learn---you are destined to fail as an entrepreneur. Dave made his decision after carefully considering his decision table, speaking with other entrepreneurs, and having faith in himself. While it appears that most of the choices in the above decision table favor entrepreneurship, some are not as important as others in the corporate position. An example is health insurance and almost guaranteed income. So, Dave did not make a decision based solely on quantitative, but rather both quantitative and qualitative decision making criteria. Given all the factors, Dave had to decide which were the most important. Dave’s decision was to open his own business and become an entrepreneur. 5 Please prepare a paper addressing the following questions. While specific answers to each question are not required, these questions are a guide to the elements in your paper. They should all be considered.

1: Was Dave’s decision table a legitimate way to make an entrepreneurial decision?

2: Do you think the factors adequately relate to a decision between being an entrepreneur or accepting the corporate position?

3: What factors do you think should not have been included? Why?

4: What additional factors do you think should have been included? Why?

5: Do you think a decision making table is a valuable tool? If not, why not?

6: What would you have decided if you were Dave given only the information in the decision making table?

7: What are some characteristics possessed by entrepreneurs which were included in this case study?

Answer 1

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1: Was Dave’s decision table a legitimate way to make an entrepreneurial decision?

If I was to make a life changing decision it would not be made so quickly. Based on the table that he produced, Dave did not do too well of a job identifying truly what he needed to make the entrepreneurial decision. Sure, you need to identify the pros and cons, but what about the approaches he needed, the financial recourses, the financial return on the time spent. He should have also simplified this table by first identifying what was most important to him and then listing the factors that related to it. Yes, he identified a few of them, but he didn’t seem confident in his own approach.

2: Do you think the factors adequately relate to a decision between being an entrepreneur or accepting the corporate position?

If I was to make a life changing decision it would not be made so quickly. Based on the table that he produced, Dave did not do too well of a job identifying truly what he needed to make the entrepreneurial decision. Sure, you need to identify the pros and cons, but what about the approaches he needed, the financial recourses, the financial return on the time spent. He should have also simplified this table by first identifying what was most important to him and then listing the factors that related to it. Yes, he identified a few of them, but he didn’t seem confident in his own approach.

3: What factors do you think should not have been included? Why?

Relating the information on how it correlates with entrepreneurial and corporate positions, there was not a lot of detail that was provided. For example, the first one says “Possibility of failure-an entrepreneurial negative”. Corporate positions can fail also, but it’s all about the work that you put into it. The work you put into it is the work that you will get. There are a few desires that were described that I believe helped broadly keep him align to determine what he felt, but I feel as if detail was lacking.

4: What additional factors do you think should have been included? Why?

I feel like a few of the factors that should have been left out were aesthetically pleasing ideas that came to mind, like your personal office or corporate office or Power in corporate. Is it all about looks or power or is it truly about learning, growing, and success? Leaving factors in that had “uncertainty of acceptance” or any doubts are pointless because not only are they leaving you in the wrong mindset, but they are setting you up for failure. “Having personal confidence” in your own ability is a must! Why is this even something we must classify in this list? The list of factors does not go in depth, but only scratch the surface. Ultimately, the mindset that Dave has shown that he cares about himself rather than his employees, inventory, stocks, business acumen, access to resources like people or the internet.

5: Do you think a decision making table is a valuable tool? If not, why not?

I believe that a decision making table is a valuable tool and in order for it to be effective you need to begin, by planning out exactly what your vision and goals are. After that has been decided, I believe that it is super important that you must align some of your factors with those goals or values so that way you can stay on track. I believe that talking to other people — that you admire in both roles or has experience in those roles— about your personal visions, goals and factors will help establish a solid foundation.

6: What would you have decided if you were Dave given only the information in the decision making table?

I was a little undecided at first because I felt that there was more to identify what I was planning on accomplishing, but after going over his list I would choose entrepreneurship because of the beneficial pros that he described. Dave ultimately favored entrepreneurship and as was stated in the case study there was a lot of irrelevant information regarding corporate.

7: What are some characteristics possessed by entrepreneurs which were included in this case study?

Here are a few of the characteristics that were described in the case study and I quote:

“Entrepreneurs have to be creative. As an entrepreneur, it is necessary to have at least a working knowledge of several business disciplines. The successful entrepreneur knows when to accept or decline a possible business venture. The successful entrepreneur will make himself or herself available to diversity of income streams. The successful entrepreneur has to have a high degree of acceptance of uncertainty. A corporate office location is nice but not necessary for entrepreneurship. Entrepreneurs are not confident that they can be successful, with the skills they already possess—not those they plan to eventually learn---they are destined to fail.”

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