CASE STUDY - SUGAR BOWL

What challenges does Shelby faced:

1. During phase 1 (preparing for transformation)

2. During phase 2 (renovation and grand opening)

3. During phase 3 (2011/2012 operations)

Challenges faced by givens in each of the phases are as follows.

Phase 1:

1. Financial difficulties toward her ideas to renovate and upgrade the bowling alley.
2. Employees who needed directions and motivation to work hard to make the company
successful.
3. Shelby interest was to save cost due to which she took the wrong step by hiring
inexperienced contractor for the business.

Phase 2:

1. By hiring inexperienced contractor caused result in delaying of renovation which

pushed back the grand opening-City officials needed a walk-through and final design
orders that were needed to be placed.
2. Givens terminated the employees who did not matched up to the standards of the
company.
3. Givens dealt with inexperienced employees to save her costs up.

Phase 3:

1. Waiters were leaving the job as average spending was lower than expected by givens and
due to Gary absentees for maintenance its results Givens to bear an extra cost.
2. Givens got an attractive offer to sell her grandfather's business or not.
3. She also got a job offer which was tempting her to sell the business.
By the end of case, what was done by Shelby to address challenges?

List them as follows

1. Operations
2. Organizational
3. Financial
4. Tax liability

Givens did various measures to address the challenges she faced in different phases but all her
measures were short term focused. She didn’t address the problems permanently. Measures she
took in different scenarios where as follows:

Operational:

Given recruited smith as an operational manager for sugar bowl to continue her business and to
minimize the cost she recruited the west lake employees and hired inexperienced contractor

Organizational:

 Givens employed her previous West lake employees for as smith was recruited as manager to
avoid the cost of external hiring.
 She took risk of hiring fresh graduates from universities and an inexperienced contractor to
save her costs of recruiting.
 She employed Sarah petty offering $55000 and 3% equity stake to aid her in business.
 When machinery malfunctioned to address the issue givens hired a new employee while
smith was on vacation.
 When waiters quilted their jobs givens and Sarah petty themselves recruited ne staff which
costed them extra.

Financial:

 Givens raised two lack dollars in the form of convertible notes from friends and family and to
overcome shortage of funds she took loan from bank of four lack dollars on certain
conditions.
 To cut off her costs she hired new graduates from universities and inexperienced contractor
to overcome her limited budget.
 Givens offered Sarah petty 3% equity stakes as she could not afford her demanding salary of
$75000.
 Givens hired caterers from outside as she could not afford full time kitchen service.

Which measures were most successful and least successful? What recommendations would
you give?

Givens took the decisions which were more of short term then long term to address the issues,
some were most successful whereas some proved least successful in good decisions making.

Most Successful:

 Remain in the business of her grandfather’s then going toward job.

 Hiring of interns for work was better decision to save cost a lot and having them on board
as being ambassadors on their way back to colleges and universities of Sugar Bowl.
 Outsourcing of catering was a good decision.
 Holding private events and occupying 60% of space was huge win for the decision after
implementation.
 Recruiting a part time book keeper was a good decision.
 Becoming a partner with dating business was successful decisions
 Being featured on 2 television programs and 1 radio show was successful decision.

Least successful:

 Taking decision without going through detail study was the first wrong decision by
Givens.
 Hiring of inexperienced contractor was a bad decision which results in bearing more
expenses and delay in opening of sugar bowl.
 Going for bank loan and agreeing on terms with higher interest rate and attainment of
70% of revenue within a year was somewhat shady.
Recommendations:

 Given could have used the legacy of Westlake as theme of Sugar lake by not changing
the theme of business and having technology installed for lanes, it wouldn’t have
eliminated the legacy of west lake.
 Given should provide certain offers for customers in order to made them permanent
customers who can visit on a daily basis such as free coupons, discounts and giveaways.
 She could have hired a consultant as she was not a cost and financial expert.

What are implications of taxation on small business, advantages and disadvantages how
can they be protected?

Small businesses are vital to the success of the economy. Not only as they provide the success
stories of the future, but also because they meet local needs like hair dresser, grocery shops,
emergency plumber etc. Small businesses have many ways to look after the tax implication
arising due to their decision about capital investment and expenditure. In determining the
business income and deductions, small businesses must be careful about deductions because it is
the only way they have to reduce the tax base of their business. As we can see in the case, it was
a small and sole proprietor business run by Shelby Given and the renovation and transformation
exceeded the amount available in cash and for which loan has to be taken on 8% interest, which
does provide tax shield as well as is one of the reason to be in continued loss due to which tax
credit can be attained. Coming to the expenditure for events and large group gathering and new
lanes plan all ads up to expenditure which must be deducted to reach taxable income for the year.
Almost all the expenditure was incurred by Shelby Given in the period of Oct 1 to September 30.
Depreciation is to be added back after calculation of taxes as it is non-cash expense of the assets
incurred gradually with time period due to wear and tear. Self-employment tax also has to be
paid by Shelby Given and use of tax credit as well as taking Sugar Bowl loss for compensation
would be enough to have low tax bill for the year.
Advantages:

 Sole proprietor (Shelby Given) is the sole owner and by this she has the entire obligation
to deduct all the expenses she made for the business.
 In sole proprietor expenses and gifts can be treated as the deduction from business
income.
 Tax Payable percentage for Small business is lowers than the corporate tax percentage.
 Transformation/Renovation expense in Small business (Sugar Bowl) amounted to huge
sum of dollars for a single person and it plays vital role for lowering the tax bill.

Disadvantages:

 Use of tax shield is not amounted to a huge as of corporate and Partnerships.

 Carrying forward the losses and self-employed taxes has complications for small
businesses.
 Dealing with IRS and obligations for paying taxes are not possible if small business
owner’s lacks information.
 IRS has rules governing and conventions restricting and guiding the ways of using
depreciation which a lay man having no knowledge of expertise required face difficulties
to cope up with.