@IVEY | Publishing a W19655 SPEAK-ON: PROJECTING CASH BUDGETS FOR A NEW VENTURE ‘ifs wrote this case under the supervision of lan Dunn solah ion of lan Dunn solely to provide matoril for class discussion. The authors do not jntond to ilustate eth effective or inetective handling of a manesrel ng ‘authors m ulsod certain names a ere ect hang gore stuation, The authors may have cisgulsed cera This plain may not be ransmitea, photocopied, lized, or oorvisoroproduced In any frm or by any means without tho sion of te copyron! holder. Reproduction of this mater fs no covered under euifersaton by any raproducton rights faganzaton. To order copies or request permission fo reproduce meters, conf! Woy Publins oy bushes onoal, eee ersty, London, Ontoro, Canada, NEG ONT {) St6o07 sect aia caeee a a80s.com. fs fo publish Imatrls of the highest quay; submit eny errata o publisheasostieyion, eo MOV Our goal if p Copyright © 2019, vey Business Schoo! Foundation Version: 2019-11-27, In August 2018, Harsh Amari, a student at Westem University, was busy designing new themes for his educational game Speak-On when he received a call from his former high school teacher, Mrs. Potter. She informed Amari that the school thoroughly enjoyed the demonstration he had given at its professional development day the previous week and was interested in buying several Speak-On packs. Amari had not expected such a fast response. He was still in the throes of preparing for future demonstrations at schools throughout September and October. While the government grant he received at the start of the summer helped. to fund the prototype of Speak-On, Amari needed to determine how much cash would be required in the first year of business, once he incorporated on September 1. Furthermore, Amari was contemplating what to do once he graduated next year and wondered if Speak-On could grow into a full-time venture or whether he should focus on school instead. He knew the new venture would require a great time commitment. COMPANY BACKGROUND Speak-On developed from the idea that students, specifically in high school, were not being adequately prepared in communication and public speaking skills. When Amari was in high school, he was involved with an organization called DECA. DECA’s mission was to develop and help future leaders and provided Amari with an immense amount of practice with public speaking.' He had won several competitions at both the provincial and national levels. In preparation for these competitions, he would play games intended to improve his communication skills. DECA had provided Amari an avenue to develop his public speaking skills, but he realized that most students didn’t get this opportunity in high school. Education guidelines in Ontario described public speaking as an important skill to learn; many schools offered an optional public speaking course, but Amari felt students were still unprepared once leaving high school. Amari had developed the initial business plan for Speak-On ha while enrolled in Business 2257, an accounting and business analysis course at Western University. He applied for and received a Government of Ontario Summer Company Grant that allowed him to develop a prototype of the game, Home,” DECA Ontario, accessed September 10, 2018, http:/deca.cal. 15 “uments authorized fr use ont in Prot Lakshmi P's PRM4/Term ViNWorking Capital Management at Insttute of Rural Management Anand (IRMA) fom Jan 2025 to Ju2B, eee page? q be used in high school classrog s, It consisted of a paper card ¢ 'SPEAK-ON designed to an educational game, students e digs Exhibi e Ontario. The main vers tool (see Exhil zh schools in sion ing oo (Seat across high Se the deck, and speatine' te eat ™S to Speak-On was ‘communication and an online tracl I lating to cours ol ym, pic! oy 1 hy know ed eveg he front of the classr7ohrie allowed teachers to grade and give feedbagy tthe gt students ap to a minute. The digital 17> re development Amari hope syd the card for rogressio syidled- iit The tnstruction mi Praat (re enline ling tooo Tr version were DO ratio The initial vonage Speak dee ‘aiations on the standar jucation’s © . mari Mais nterated with the Mini eer usiness and grade 9 and 10 English Clas year perations were for gt : vere under devel, tose ist year of opconch, peography, and history decks w' lopment. chemistry, physics, _ CONSUMER ANALYSIS Private Schools dl his sales efforts on these sch : wvate high school and decided to focus Schools due to bop 4. to ae a tates and the financial flexibility these institutions had. Private Schools gen, his eee Tors for students to attend and therefore had more financial resources available? To help attract you i to send ther children to private schools, rather than free publie schoole sae american exceptional leaming experience* This led private schools to be early, adopts of ett experiential eaming tls and games. Ontario had approximately 700 private schools Itech ye procure a leaming tool for their students, a pool of money was available for use. The teachers would eet their department head, who had a budget of up to CAS!,500° to spend on leaming tools and games the departnent as wells an aditoual S200 far ach casiroom, New Teaming tools and games would, fr only tt thee yeas as private schools were constantly innovating. Amari believed tha pubic eet ‘would start implementing these games and tools after they had been widely used in private schon, Students Students’ future personal and professional success was increasingly tied to their competence wih in conveying mn mote specifically oral communication skills.” Competent speakers were mare suechl coneying their knowledge, ideas, and opinions. This increasing importance had led to seven! counties Oni Cursum: Secondo wv. i meen "ou Bene ean lus le US — Market ” “Ibid, sed September 10, 2018, www, ‘ibisworld. ot nee lets ate eee ae a * "List of Ontario prvateacnoas tae Schook SAll dolar a fare Mlinisty of Education, January 27, 2012, accessed September 10,208 " Our Kids: The Trusted s, Canadian dottar h "ource, accessed September 10, 2018, www.ourkidsrnelonta unless specified othenw;. erwise, Disyateneano, and JanessarA’ ae 10,2018, ww tandtonan \- Bauer, "Why C is Imponant ATH t er, "Why Communication Education is Im Th tandtontine. convene 3909." Communication Educate 6a vo. 4 (tT) “Hedby/10.1080/03634523.2016.1265136?scroliopsne=!98198014 such as Germany, integrating public speaking into education standards.* Mastering public speaking was now Seen as a core competency for well-educated students. Interestingly, while the question of how to promote public speaking competence in pre-school to grade 12 and higher education had increased, research on higher Education had greatly outpaced research for elementary and high school students.’ When students were developing public speaking skills, research had concluded that authentic learning tasks, opportunities 10 practice, and self-assessment were best practices leading to positive effects." INTIAL YEAR OF BUSINESS ae aul = Sepe 170 ‘After developing the idea for Speak-On earlier in the year, Amari applied for a government fit through ‘the Ontario Summer Company program, The program was set up fo encourage students to become more centYépreneurial and gain valuable experience in running a company. Successful applicants seecived $1,500 ‘to help with upfront costs and a further $1,500 after meetin; all the program criteria. Af ‘applying in June, Rmmar received the Initial payment in July and completed the program requirements to receive the final payment in September. He planned to incorporate the company in Septemb: fat had already spent the jnitial $1,500 grant, Amari had also planned to invest $500 of his own savings alongside the second half of the grant payment in September. Serer. ‘Summer Company Grant The first year of operations had two distinct phases. Phase one consisted of prototyping the decks in classrooms, leveraging Amari's relationships with his previous teachers to better understand the consumer. ‘Once prototyping was done, Amari would start sales meetings in December. The sales process consisted of a one-on-one meeting with teachers at select private Schools Whee Binari demonstrated Speak-On and described the potential benefits to their students. If teachers wanted to make a purchase, they would ‘through their school procurement process and a sale would be completed one month after the sales meeting. Given his inexperience, Amari expected to convert only 20 per cent of. jes. meetings at first before ‘improving in future months. Amari assumed each teacher would buy an average affwo decks per purchase (see Exhibit 2). Logo and Website Development One of the first things Amari wanted to do was develop a permanent logo for Speak-On. The current logo ‘was a starting point, but Amari wanted to improve it. Logo Joy was a website that gave customers a multitude of basic logos to choose from and then allowed customization. The one-time fee for the website as $87, 10 be paid Senta. Aer the ogo was finished, Amari would then purchase a subscription fo Canva, a graphic design tool website, which allowed businesses to upload their logos to the website and design marketing materials. The,cost of the Canva subscription was $168 for. the year and gave the member access to the website. Payment was made in monthly instalments starting in September. Any marketing * Evelin Herbein, Jessika Golle, Maike Tibus, Julia Schiefer, Ulrich Traiutwein, and ingo Zetler, “Fostering Elementary School CChlgren’s Public Speaking Skils: A Randomized Controlled Tria,” Learning and Instruction 88 (June 2018): 158-168, $ecessed September 10,2018, won siencedect.con/cincelariepiiS095947821730020% a7 Med uments autrizd fo use ony n ro. Lakshm P's PRMAerm VIMorkng Capital Management at Insitute of Rr Management Anand (RMA) from Jan 2025 to Jul 20SB19B014 Page 4 ‘materials made through Canva would be at an additional cost, and Amari planned to develop business cards from Canva. The business cards would cost $60 and would be paid for in October. Initially, Amari had planned to design the website on GoDaddy, a website builder and domain hosting service, but then he discovered Fiber, which was a freelance ‘software and programming website that ed Fiber, : connected entrepreneurs with Website programmers. Amari had connected with «programmes during the summer and had contracted out the design of the Speak-On website Tor ari had negotiated for the payment to be due once the website was functional in November. Once the initial build of the website was ‘complete, Amari would spend several months uploading specific content about the business. He had taken several computer sciences courses in school and felt comfortable with the process. Even though Amari did not design the website on GoDaddy, he was still going to purchase the domain name SpeakOn.com through the website and pay for a membership. Claiming the domain name required a one-time fee of $10 to be incurred in September with membership Tees of $5 per month also starting in September. Card Design ‘Amari had already designed Speak-On decks for English and business classes in high school. He was currently designing a wider range of topics and purchased a membership to Component Studio. Component ‘Studio was essential in card development by helping to format images for cards, and Amari estimated he would use the site more frequently as he developed new decks. The monthly cost was $20, and he had_ started that subscription in July. Banking Fees and Insurance Incorporating the business was an easy process that would take only a few minutes. Amari would register with the Government of Ontario under the name of Confidence Games Canada. The cost of a business registration was $68 to be paid in September. Amari would also need business insurance. Insurance would ‘Gost $138 Tor ihe Hist three months due in September and then revert to a monthly payment format. On the ‘Same day of incorporation Amari would go to his bank and open a separate bank account for Speak-On. His bank had told him monthly fees would amount to $20 per month and would be charged to his account on the first day of the niontl following service. Inventory ‘Amari had initially purchased prototype inventory in the summer, but he realized he would need to have a supply ready before the sales process started in December. The supplier of Speak-On decks and Amari negotiated 20 decks to be delivered in December. Further pilfchases of 70 decks in February and 40 decks in May would ensure enough inventory for the busy spring season. All decks would cost $20, and payment Was due in the month of delivery. are Line of Credit Speak-On would initially run based on the government grant and Amari’s investment. However, with future investments required before sales could begin, more financing could be needed. Amari had been approved fora line of credit with a $10,000 limit. The line of credit had an annual interest rate of eight per cent based, On the outstanding"balance at the end of each month. Payment would be due the next month. If more ~ 18 hs document is authazed fo use only Pol. Lakshmi Ps PRMAA/Term ViWerking Captal Management anette of Rural Management Anand (RMA) fom Jn 20884, ; e 5. cing was needed above the line of credit, Amari was unsure where it would come from as his own personal ‘finances were stretched thin with school payments, other Options write Amar believed he was conservative with his sales projections, he also wanted to perform sensitivity Marys on his calculations, The quick reaction and sales request from his old high School was unexpected and Amari wanted to see the effect on his cash balance if he started the sales process earlier than projected. ‘amari assumed the same sales levels for September, October, and November as was projected for ter For his supplier to deliver Speak-On decks in September, Amari would be charged.anush fee of feck ordered. Amari estimated an additional purchase of 35 decks in September, Additionally, more _ $5 per deck order SSF cards would be needed, and the expense would ise 7 S60 ‘Amari also needed to see the negative effect slower sales would have on the business and the eed of a credit line. ‘Amari assumed if other teachers were Jess receptive than his old high school t less than projected. With a decrease in sales, he iahase order could not be changed, Amati ‘However, potential m Piher, the number of decks sold would be.50.per Mould nat Fequire as much inventory. While the D Wold reduce his February and May orders by 35 and 20,decks, respectively. CONCLUSION Amari understood the impact Speak-On could have on high school students and their public speaking skills. onceded to determine his financing requirements and project ‘cash budget for the first year of operations. Upon analysis of the results, Amari needed to ort do whether to continue to invest his time and money in bHenew venture or focus on school and the upcoming Employment recruiting experience. If Amari decided tnvontinue, he needed to choose whether to start selling ther or continue with the original plan. With the school year about to begin, difficult choices needed to be made.pit 4: SPEAK-ON DECK Hl What do you think millenials Look for in a coffee shop? EXHII a) (2) SPEAK-ON ‘Source: Company file. EXHIBIT 2: SALES ESTIMATE FOR FISCAL 2018 Dec [J Meetings per Month 20 [19 Mat Apr {way {ie vi 0 paw) Sales Conversion Rate [20% | “40% [WA [40% | WA} ane a0 2 fs Notes: Speak-On decks were sold for $50 each, ‘Source: Company files, L 20 acument is authorized for use only in Pro. Lakshmi P's PRMAA/Term VIWrking Capital Mananamnen