CASE STUDY:

A TECHNICIAN DECIDES TO OPEN HIS OWN BUSINESS Since his childhood Ferenc has been crazy about cars and is always reading books about different types of vehicles. His father, Jzsef was a car mechanic. After Ferenc finished primary school he often helped Jzsef and wanted to follow the same profession as his father. During his time at secondary school, in the evenings and weekends, he helped fix cars at a friends garage. In this way he gained some experience and earned a bit of extra money. After finishing secondary school, Ferenc started to work in a car repair shop in Debrecen, Hungary. Ferenc liked his job and he was a very reliable, quick and ambitious employee. After two years, in 2001, when Ferenc was 21 years old, he got a job at Egres Klima (meaning Gooseberry Airconditioning Services), a company which installed and maintained air-conditioners. It was a small company with 12 employees, established in 1999 and with a turnover of 86,000 in 2001. When he started working at Egres Klima, he was attending vocational training courses specializing in airconditioning technology. All these classes were paid for by the company. After three years, he was awarded employee of the year and after a while he was promoted to interim boss. He had a very nice office and a good salary but he felt that he was the only one with much technical experience. He continually had to help his colleagues and sometimes was working day and night in order to finish the work. Egres Klima was managed by two people. There were frequent disputes between them and in many cases they could not agree on important decisions. Ferenc felt that he was always in the middle and he grew tired of the stressful atmosphere. He also noticed that except for two or three of them most of the workers were not motivated and they could not solve many of the technical problems that occurred. At that time, he began thinking of starting his own business but did not have the courage to leave his job and start something risky. There were 4 or 5 other players in the market, all of them small companies. Air conditioners were becoming popular but most people could not afford them. Having observed the market for a year he knew that the potential competitors (including the company he was working for) would not pose a big threat for him, so he decided to start his own business. At the same time Ferenc began secret discussions with three or four of his colleagues about them joining him. Ater a while, they all confirmed that they would work with him. In 2005 they left Egres Klima and founded a new organisation called Tlgyfa Klima (meaning Oak Air-conditioning Services). It was financed by a loan from the bank. In order to secure the loan, Ferenc had to take out a mortgage on his house. A small office building was rented on the outskirts of Debrecen with a meeting room and a small kitchen as well as a big warehouse to store the machines and tools. At the beginning there were only seven employees but then a good friend of Ferenc with management experience agreed to join him as manager of Tlgyfa Klima. Two secretaries were also hired. One was given the role of informing customers about the technical advantages of each product (customer relations) and the other person was responsible for the financial side of the business. Three technicians were part of the team as well. Tlgyfa Klima only targeted businesses as customers. Most of Egres Klimas business customers who already knew Ferenc and his professional background moved their contracts to Tlgyfa Klima. These were mostly big businesses. The services Tlgyfa Klima offered were mainly connected to ventilation technology and specialized tasks, such as assembly, full interior construction, repair and installation of car air-conditioners and refrigeration systems. After installing these machines, Tlgyfa Klima offered a maintenance service. The company had long- term contracts with many multinational enterprises and was responsible for the air conditioning and heating systems of most of the Hungarian subsidiaries of these big businesses. With time, there was also an increasing amount of work in Budapest, where most of the international companies had their headquarters. Tlgyfa Klima was expanding. In 2008 the company had long term contracts with 18 different international enterprises and a turnover of 150,000. As the work increased, additional staff were hired. Some of these were self-employed or subcontracted but most of them were full-time employees. Within five years 10 technicians had been hired in order to manage the workload. Also there were always one or two students working for the company on six-month contracts. The problems began at the end of 2008 when the economic crisis started to have an effect on businesses. With the exception of one multinational company, all of the business partners of Tlgyfa Klima had financial problems. As the maintenance of the air conditioning system was not their biggest concern, they did not pay the bills or could only pay in part. Because these businesses made up most of Tlgyfa Klimas customers the company was very dependent on them. There were also problems with management. The manager of Tlgyfa Klima left the company for personal reasons. Since Ferenc did not yet have the right skills to lead the company and was also busy with the technical work, they had to find somebody with good management skills as soon as possible. This was not easy. The previous manager was a good friend of Ferenc and so he was able to trust him completely. Ferenc decided to wait and take his time choosing the right candidate to replace him. Time was passing and even though he held many interviews there was no ideal applicant. Our customers could not pay their bills and neither could we. We had no cash-flow. I thought it was the end. I had to fire two or three persons and make contracts for payment in instalments with our biggest business partners. It was very stressful and we had to live on a day- to- day basis. Some of the smaller business customers went bankrupt so even though they owed us a lot of money, they could not pay the whole sum. We had to record it as an irrecoverable debt in the accounts. More and more of these appeared in the books and the only advantage of not having profit was to pay less tax, explains Ferenc. Tlgyfa Klima had to work out how to solve this cash-flow problem. The only feasible solution was to open their services to private customers in order to expand the customer base. However, the problem with private customers was that even though they were many, the company could not obtain as much profit as with business customers. The private services covered such as things as repairing air conditioning systems in vehicles, installing air conditioners in apartments etc. The turnover was not as high as in previous years. In 2008 and 2009 the business was making a loss and had to ask for extensions on the incoming invoices. There were many promises from the customers side to pay. However, most of them did not and some of them are still pending. Page | 35 Tlgyfa Klima continued to work for the multinational companies even without pre-financing. This was Ferencs decision. Once we thought we would have to close the company. But then in a couple of days one invoice was paid by a big customer and so we could pay some of ours. The cash flow was fluctuating wildly, says Ferenc. The only thing we could do was to wait until the crisis passed by, adds one of the workers. Meanwhile Ferenc was contacted by Pter, one of his friends who was a manager at a big company. He had the relevant background, with six or seven years of experience in managing a medium-sized company, and was looking for a job. Ferenc was very interested so he interviewed him and in the middle of 2009 Pter was hired as Tlgyfa Klimas new manager.. He was a very good manager. Many Excel sheets and new software tools were introduced. It was like a revolution in our system. As a person he was very friendly and knew how to be nice but also strict as our boss. It took a lot of work to change the administration system but it was crucial to do it, says Maria, the secretary. For example before Tlgyfa Klima introduced Excel sheets, data had to be inputed in three or four different files. Nobody recognised that with a link it could be more efficient and less time consuming to input data. Also the tasks and timetable of the technicians were written on paper and put in a table. Papers were often mixed up and left there even if the task had been accomplished. The old system was confusing for everybody. Pter changed this scheme to an online calendar which showed the planned tasks for each person for each day. It was updated by the staff whenever a job was finished or delayed. Pter was very committed to Tlgyfa Klima and Ferenc was satisfied with him. Pter tried to balance the risk by keeping only the most reliable business partners and including more private customers. Ferenc learned a lot of good practice from the new manager. Suddenly, at the beginning of 2010, Pter decided to leave Tlgyfa Klima because he received a very attractive job offer. Ferenc knew that Pter had done his best to improve the management of Tlgyfa Klima and was very thankful. He decided to manage the company himself as he had learned many things from the last two managers of Tlgyfa Klima. I made the right decision when I started the company. I had no business education so I decided to hire managers. Over time I have learned a lot from them and now I am able to manage my own business. I like being the boss and make decisions. Now I am planning to sign up for evening classes in management. I know the practical side but I am eager to learn more about the theoretical background, says Ferenc.

Q1: a) Do you think Entrepreneurial education is important for the success of entrepreneurial venture?

Q1: b) Reading case study what do you think characteristics required for an entrepreneur to be successful?