ES 250 (Rashmi Menon): Module 2 Police Prep Case Study PDF

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ES 250 (Prof. Rashmi Menon)...

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Module 2: Police Prep Case Study

Study Questions  What is causing the tension between the partners?  How could this tension be resolved? Be specific!  Who owns what?  Who gets paid what?  Does someone join the company full-time? How is this person compensated?  Does one partner buy the others out? If so, how is this structured?

Case Summary What problem is PolicePrep trying to solve? Agreement between three partners needs to be clearly established A marketing campaign proved costly and ineffective PolicePrep was a one-off sale, without further products to offer satisfied customers; This reduced potential income during first year What is the competitive environment? The police preparation industry could be classified as very young with a great deal of fragmented local providers in regions across North America

Few barriers to entry as no strong brand name had established itself as an expert in the field (no monopoly) Costs associated with starting up a firm were very low, and there were several different delivery formats that could exist for the material Tests could be added, but partners were reluctant to create exams for jurisdictions outside of Canada due to very slow sales in the United States What are potential areas of growth for PolicePrep? Marketing and sales Future products could be developed and offered (scaling) How many founders are there? What does each bring to the team? 3 founders: Jessop, Rathod, Cooper Deland Jessop is a police officer Adam Cooper, a classmate of Jessop’s, used to be an instructor at Kaplan, a company that taught people how to prepare for the GMAT Kalpesh Rathod, another classmate, was an expert in Internet development What is causing tension in the team? Both Cooper and Rathod have full-time jobs, while Jessop doesn't and has put in much more time and effort into the startup Agreement between the three partners are very loose, so it was unclear whether each partner would have signing authority and an equal share of the profits There had been no formal agreement on how Jessop would be compensated for his extra work, but both Rathod and Cooper had acknowledged that Jessop had performed a great deal more work and that compensation would be made This strained their relationship and made Jessop reluctant to pursue the company as a sole source of personal income

Group Exercise

What are each of your concerns? What are the goals for the business going forward? How will the company achieve these goals? How will the partnership be structured going forward? Who owns what? Who gets paid what? Does someone join the company full-time? How is this person compensated? Does one partner buy the others out? If so, how is this structured?

Response Next steps Compensate Jessop for his work so far Due to different levels of commitments Rathod and Cooper work full time jobs while Jessop doesn't), everyone needs to decide if they want to continue their company Bring in a neutral third party (eg. lawyer, attorney, consultant, business coach) to seek advice Bring in a marketing person to help if they continue the company Problem: Fairness Solution: Ownership stakes and voting rights stay the same, but profit shares differ Pros: People don’t give up equity/shares easily, so it is smart to keep those the same Cons: Profit shares/future stocks are hard to predict Problem: Jessop doesn’t have money to live on Solution: Jessop should look for other full-time job opportunities

Group Debrief

What alternatives were discussed for moving the business forward? What were the concerns for each of the partners? What methods did you discuss to resolve these concerns? Were you able to reach an agreement for moving forward? If so, what is it? If not, what is your plan?

What happened? Jessup found find full-time work and was paid a modest amount of cash by the other two founders for the work he had done About a year later, company starts to do well due to prior marketing investments and needs a full-time employee They all want to be that employee “Audition” to be the employee – Rathod picked due to tech skillset (despite Cooper being laid off at the time) Even though it was easy to rehire Cooper, they sat and discussed who was needed more Eventually all quit their jobs and joined the company – growing it into other verticals Now starting second venture...